Interest rates have been extremely low since the Global Crisis. This column surveys the recent debate over whether they will remain low, or return to normal. While an unequivocal answer is not possible, the evidence suggests a significant decline in average real rates – perhaps to as low as 1%.
John C. Williams, Thursday, November 26, 2015 - 00:00
Ricardo Caballero, Emmanuel Farhi, Pierre-Olivier Gourinchas, Thursday, November 5, 2015 - 00:00
Interest rates are near zero – or moving towards it – in major economies worldwide. This column introduces a new theoretical framework that helps to organise thinking on how liquidity traps and slow growth spread across the world. It stresses the role of capital flows, exchange rates, and the shortage of safe assets. Once rates are at the ZLB, the imbalance between the supply and demand of safe assets is redressed by lower global output. Liquidity traps emerge naturally and countries drag each other into them.
Sir Charles Bean, Friday, October 23, 2015 - 00:00
Interest rates are at historic lows in advanced nations around the world and markets expect them to stay low for years. This column introduces the 17th CEPR-ICMB Geneva Report on the World Economy, “Low for Long? Causes and Consequences of Persistently Low Interest Rates”. Written by four world-renowned macroeconomists, the report suggests that real interest rates will eventually return to more normal levels, but in the meantime deflationary traps are more likely, as are financial boom-bust cycles.
Stefano Neri, Stefano Siviero, Saturday, August 15, 2015 - 00:00
EZ inflation has been falling steadily since early 2013, turning negative in late 2014. This column surveys a host of recent research from Banca d’Italia that examined the drivers of this fall, its macroeconomic effects, and ECB responses. Aggregate demand and oil prices played key roles in the drop, which has consistently ‘surprised’ market-based expectations. Towards the end of 2014 the risk of the ECB de-anchoring inflation expectations from the definition of price stability became material.
Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, Sunday, August 2, 2015 - 00:00
Does monetary policy really face a zero lower bound or could policy rates be pushed materially below zero per cent? And would the benefits of reforms to achieve negative policy rates outweigh the costs? This column, which reports the views of the leading UK-based macroeconomists, suggests that there is no strong support for reforming the monetary system to allow policy rates to be set at negative levels.
Simon Wren-Lewis, Friday, January 30, 2015 - 00:00
Valerie Ramey, Sarah Zubairy, Friday, January 23, 2015 - 00:00
Dirk Niepelt, Wednesday, January 21, 2015 - 00:00
Jean-Pierre Landau, Tuesday, December 2, 2014 - 00:00
Eric T Swanson , Saturday, November 8, 2014 - 00:00
Olivier Blanchard, Friday, October 3, 2014 - 00:00
Karl Walentin, Thursday, September 11, 2014 - 00:00
Philippe Bacchetta, Kenza Benhima, Sunday, August 24, 2014 - 00:00
Among the various explanations behind global imbalances, the role of corporate saving has received relatively little attention. This column argues that corporate saving is quantitatively relevant, and proposes a theory that is consistent with the stylised facts and useful for understanding the current phase of global rebalancing. The theory implies that, while the economic contraction originating in developed countries has pushed interest rates towards the zero lower bound, the recent growth slowdown in emerging countries could push them out of it.
Coen Teulings, Richard Baldwin, Wednesday, September 10, 2014 - 00:00
The CEPR Press eBook on secular stagnation has been viewed over 80,000 times since it was published on 15 August 2014. The PDF remains freely downloadable, but as the European debate on secular stagnation is moving into policy circles, we decided to also make it a Kindle book. This is available from Amazon; all proceeds will help defray VoxEU expenses.
Viral Acharya, Richard Portes, Richard Reid, Wednesday, July 3, 2013 - 00:00
Many central banks have recently employed unprecedented expansionary monetary policy, keeping interest rates at near-zero levels for an extended period of time. Quantitative easing interventions have been employed to affect asset prices directly, most notably in government-bond and mortgage markets, in order to keep sovereign and mortgage borrowing costs low. CEPR recently organised a conference to discuss existing theory and empirical evidence on the implications of an extended phase of unconventional monetary policy. This short column outlines the key issues and also includes a Vox Views video summary of the event.
Charles Wyplosz, Monday, October 14, 2013 - 00:00
Exiting from unconventional monetary policies is a key challenge facing policymakers in advanced nations and a key worry for everyone else. This column introduces the new 'Geneva Report' on the subject, Exit Strategies, by Alan Blinder, Thomas Jordan, Donald Kohn and Frederic Mishkin. The report considers what the post-exit world will look like, how we can get there and the long-run impact on central banking.
Jesús Fernández-Villaverde, Juan F Rubio-Ramirez, Pablo A Guerron-Quintana, Monday, November 7, 2011 - 00:00
The authors of CEPR DP8642 offer a reminder about the usefulness of supply-side policies when the constraints of fiscal consolidation and the zero lower bound limit the macroeconomic-policymaking toolbox. A wealth effect from supply-side reforms could boost aggregate demand and help pull an economy out of the doldrums.
Jesús Fernández-Villaverde, Juan F Rubio-Ramirez, Friday, November 11, 2011 - 00:00
With nominal interest rates in many western countries at or approaching the zero lower bound, economists are calling for more quantitative easing or greater fiscal expansions to generate inflation, reduce real interest rates, and rejuvenate the economy. But what if these policies fail? Or are no longer possible? This column outlines a third way: supply-side policies.
Andrew Levin, Friday, November 26, 2010 - 00:00
Andrew Levin of the Federal Reserve talks to Romesh Vaitilingam about his research on optimal monetary policy at the zero lower bound. They discuss the effectiveness of forward guidance, the use of non-standard measures and the interactions between monetary and fiscal policy. The interview, which was recorded at the annual congress of the European Economic Association in Glasgow in August 2010, represents Andrew Levin’s personal views.<i> [Also read the transcript] </i>
Martin Bodenstein, Christopher J. Erceg, Luca Guerrieri, Monday, September 13, 2010 - 00:00
CEPR Discussion Paper 8006 analyses how foreign demand shocks impact home economies when monetary policy is constrained by the zero lower bound. The authors find that even in relatively closed economies like the United States and the euro area, ZLB-constrained monetary policy amplifies the effects of foreign shocks.