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.
Refet S. Gürkaynak, Troy Davig, Wednesday, November 25, 2015 - 00:00
Athanasios Orphanides, Wednesday, November 11, 2015 - 00:00
There is generally consensus among macroeconomists that monetary policy works best when it is systematic. Following the financial crisis, the US Federal Reserve shifted from long-term, systematic policy to short-term goals targeting unemployment. This column argues that, while these were appropriate in the aftermath of the downturn, such policy accommodations have been pursued for too long since. The need for a somewhat accommodative policy cannot be used to defend the current non-systematic policy and excessive emphasis on short-term employment gains.
Mouhamadou Sy, Monday, November 9, 2015 - 00:00
From the introduction of the euro in 1999 to the Greek crisis in 2010, the Eurozone witnessed external imbalances between countries at its core and those at its periphery. These imbalances have been attributed either to differences in competitiveness or to the effect of financial integration. This column argues that in order to understand the imbalances within the Eurozone, it is necessary to consider credit costs and capital flows. The lower real cost of credit for high-inflation countries must be taken into account, as well as the inflow of capital to the non-tradable sector that this implies. Monetary policy cannot be conducted in a ‘one size fits all’ manner.
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.
Stefan Gerlach, Reamonn Lydon, Rebecca Stuart, Tuesday, July 21, 2015 - 00:00
Despite being a mainstay of macroeconomic theory for the past half century, the Phillips curve often receives the death knell from various commentators. These critiques often rely on results from data samples spanning relatively short periods. Using the case of Ireland, this column argues that short-term idiosyncrasies can explain the failure of the model in these contexts. Taking a longer historical view, the Phillips curve remains a useful macroeconomic model, at least in the Irish context.
Martin Brown, Ralph De Haas, Vladimir Sokolow, Saturday, March 14, 2015 - 00:00
Charles A.E. Goodhart, Monday, March 2, 2015 - 00:00
Johannes Stroebel, Joseph Vavra, Monday, January 26, 2015 - 00:00
Laurence Ball, Sandeep Mazumder, Wednesday, January 7, 2015 - 00:00
Philippe Andrade, Richard Crump, Stefano Eusepi, Emanuel Moench, Tuesday, December 23, 2014 - 00:00
John Muellbauer, Tuesday, December 23, 2014 - 00:00
Jean-Pierre Landau, Tuesday, December 2, 2014 - 00:00
Alberto Cavallo, Guillermo Crucas, Ricardo Perez-Truglia, Monday, November 10, 2014 - 00:00
Andrew K Rose, Monday, October 6, 2014 - 00:00
Hugh Rockoff, Saturday, October 4, 2014 - 00:00
Olivier Blanchard, Friday, October 3, 2014 - 00:00
Ricardo Reis, Jens Hilscher, Alon Raviv, Thursday, August 7, 2014 - 00:00
Faced with daunting levels of public debt, it may be tempting to inflate away the burden. Some recent research has endorsed such a policy, but this column argues that it is infeasible. The rule of thumb that suggests an inflation rate four percentage points higher would reduce debt by 20% ignores creditor composition and maturity details, even if a 6% inflation rate were achievable. The hard truth is that there is no easy way out of debt.
Martin Weale, Tomasz Wieladek, Tuesday, June 10, 2014 - 00:00
After reducing their policy rates close to zero in response to the global financial crisis, the Bank of England and the Federal Reserve began purchasing assets. This column assesses the effect of these asset purchases on output and inflation. In line with previous studies, the authors find that asset purchase announcements are associated with increases in both output and inflation in both countries. They also find that quantitative easing had a larger impact on UK inflation, which suggests that the UK Phillips curve is steeper.
Shusaku Nishiguchi, Jouchi Nakajima, Kei Imakubo, Friday, May 2, 2014 - 00:00
Inflation expectations are not fully captured with a single number. One important aspect is the degree of "disagreement" or "dispersion" in such expectations. This column discusses how the distribution of Japanese households' medium-horizon inflation expectations evolved using survey data. As prices have been rising since 2013, the expectations distribution showed a decrease in respondents expecting deflation or high inflation, and there was a substantial increase in respondents expecting moderate inflation.
Olivier Coibion, Yuriy Gorodnichenko, Friday, November 15, 2013 - 00:00
During the Great Recession, advanced economies have not experienced the disinflation that has historically been associated with high unemployment. This column shows that using consumers’ (as opposed to forecasters’) inflation expectations restores the traditional Phillips curve relationship for recent years. Consumers’ inflation expectations are more responsive to oil prices than those of professional forecasters. The increase in oil prices between 2009 and 2012 may in fact have prevented the onset of pernicious deflationary dynamics.