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
Refet S. Gürkaynak, Troy Davig, Wednesday, November 25, 2015 - 00:00
Central banks around the world have been shouldering ever-increasing policy burdens beyond their core mandate of stabilising prices. This column considers the social welfare implications when central banks take on additional mandates that are usually the domain of other policymakers. Additional mandates are shown to worsen trade-offs faced by the central bank, while distorting the incentives of other policymakers. Central bank ‘mandate creep’ may be detrimental to welfare.
Jakob de Haan, Wijnand Nuijts, Mirea Raaijmakers, Friday, November 6, 2015 - 00:00
The Global Crisis revealed serious deficiencies in the supervision of financial institutions. In particular, regulators neglected organisational culture at the institutional level. This column reviews efforts since 2011 by De Nederlandsche Bank to oversee executive behaviour and cultures at financial institutions. These measures aimed at identifying risky behaviour and decision-making processes at a sufficiently early stage for appropriate countermeasures to be implemented. The findings show that regulators can play a larger part in securing the stability of the financial system by taking an active role in shaping institutional cultural processes.
Carin van der Cruijsen, David-Jan Jansen, Jakob de Haan, Sunday, August 23, 2015 - 00:00
Central banks have typically targeted their communication at financial markets. Increasingly, however, many have started actively communicating with the general public. Using Dutch survey data, this column finds that the public’s knowledge of monetary policy objectives is far from perfect, and varies widely across respondents. Those with a greater understanding of ECB objectives tend to form more realistic inflation expectations. Central banks seeking to target the general public must take account of discrepancies in households’ knowledge of and interest in monetary policy.
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.
Clemens Jobst, Stefano Ugolini, Tuesday, June 23, 2015 - 00:00
Central banks today provide liquidity exclusively through purchases of (mostly) government bonds and through collateralised open-market operations. This column considers the evolution of liquidity provision by central banks over the past two centuries, and argues that there are alternative approaches to those that are focused on today. One such alternative is a revival of the 19th century practice of uncollateralised lending. This would discourage market participants from relying on informational shortcuts, and reduce the likelihood that informational shocks trigger collateral crises.
Philippe Bacchetta, Elena Perazzi, Eric van Wincoop, Saturday, June 20, 2015 - 00:00
A popular explanation for the sovereign debt crisis in Europe is self-fulfilling sentiments. What can central banks do to avoid self-fulfilling debt crises? This column argues that while in theory there are policies to make the public debt sustainable, central banks cannot credibly commit to them. The ability of a central bank to avert a self-fulfilling debt crisis is thus limited.
Pierpaolo Benigno, Salvatore Nisticò, Monday, June 15, 2015 - 00:00
In the aftermath of the Global Crisis, many central banks have engaged in unconventional purchases of risky securities. Such operations can entail possible losses on their balance sheets. This column argues that neutrality of open-market operations holds only in specific policy regimes, such as when central banks’ losses are covered by taxes levied on the public sector. In absence of such support, losses should be resolved through a prolonged increase in inflation.
Donato Masciandaro, Davide Romelli, Sunday, April 26, 2015 - 00:00
In the aftermath of the Global Crisis, many countries increased their central banks’ involvement in financial supervision. This column uses a novel dataset to argue that financial crises episodes significantly increase the probability of reforms in the financial structure. More interestingly, the authors find evidence of a ‘bandwagon effect’ by showing that politicians are more likely to undertake reforms when their peers do so.
Sylvester Eijffinger, Ronald Mahieu, Louis Raes, Thursday, April 23, 2015 - 00:00
Classifying the preferences of members of policy committees has been a topic of intense debate and research. This column presents spatial analysis of the preferences of the Federal Open Market Committee (FOMC) members using transcripts from meetings. The results indicate that a political appointment channel was not active or effective, and there is little effect of career experiences. The overall lack of systemic preference among FOMC members is a reassuring with regard to the institutional design of the FOMC.
Charles A.E. Goodhart, Monday, March 2, 2015 - 00:00
Philippe Karam, Ouarda Merrouche, Moez Souissi, Rima Turk, Monday, February 2, 2015 - 00:00
Jon Danielsson, Sunday, January 18, 2015 - 00:00
Jean-Pierre Landau, Tuesday, December 2, 2014 - 00:00
Morris Goldstein, Tuesday, November 18, 2014 - 00:00
David Miles, Wednesday, October 22, 2014 - 00:00
Christian Daude, Eduardo Levy Yeyati, Monday, September 1, 2014 - 00:00
Pierre-Cyrille Hautcoeur, Angelo Riva, Eugene N. White, Wednesday, July 2, 2014 - 00:00
The key challenge for lenders of last resort is to ameliorate financial crises without encouraging excessive risk-taking. This column discusses the lessons from the Banque de France’s successful handling of the crisis of 1889. Recognising its systemic importance, the Banque provided an emergency loan to the insolvent Comptoir d’Escompte. Banks that shared responsibility for the crisis were forced to guarantee the losses, which were ultimately recouped by large fines – notably on the Comptoir’s board of directors. This appears to have reduced moral hazard – there were no financial crises in France for 25 years.
Michael Bordo, Friday, March 21, 2014 - 00:00
Since 2007, there has been a buildup of TARGET imbalances within the Eurosystem – growing liabilities of national central banks in the periphery matched by growing claims of central banks in the core. This column argues that, rather than signalling the collapse of the monetary system – as was the case for Bretton Woods between 1968 and 1971 – these TARGET imbalances represent a successful institutional innovation that prevented a repeat of the US payments crisis of 1933.
Donato Masciandaro, Francesco Passarelli, Saturday, December 21, 2013 - 00:00
During the Great Moderation, central banks focused on price stability, and independence was seen as crucial to limit inflation bias. Since the Global Financial Crisis, emergency support measures for banks, and central banks’ increasing involvement in supervision, have called central bank independence into question. This column argues that the literature has overlooked the distributional effects of the tradeoff between monetary and financial stability. In a political economy framework, heterogeneity in voters’ portfolios can cause the degree of central bank independence to differ from the social optimum.