a column by Dirk Schoenmaker for VOX: CEPR’s Policy Portal
The ECB’s market-neutral approach to monetary policy undermines the general aim of the EU to achieve a low-carbon economy.
The column argues that steering the allocation of the Eurosystem’s assets and collateral towards low-carbon sectors would reduce the cost of capital for these sectors relative to high-carbon sectors. A modest titling approach could accelerate a transition to a low-carbon economy, and could be implemented without interfering with the priority of price stability.
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Showing posts with label monetary_policy. Show all posts
Showing posts with label monetary_policy. Show all posts
Thursday, 25 April 2019
Monday, 21 January 2019
The ECB’s performance during the crisis
a column by Ashoka Mody and Milan Nedeljkovic for VOX: CEPR’s Policy Portal
The ECB’s actions in the wake of the Global Crisis have been described as hesitant, relative to other central banks.
Based on analysis of financial markets' response to the ECB's interventions during the euro crisis, this column argues that central bank interventions are effective if they clearly signal a commitment to reinvigorating the economy and if they address the source rather than the symptom of financial stress.
The ECB did not follow these principles, limiting its ability to improve financial market sentiment.
Continue reading
The ECB’s actions in the wake of the Global Crisis have been described as hesitant, relative to other central banks.
Based on analysis of financial markets' response to the ECB's interventions during the euro crisis, this column argues that central bank interventions are effective if they clearly signal a commitment to reinvigorating the economy and if they address the source rather than the symptom of financial stress.
The ECB did not follow these principles, limiting its ability to improve financial market sentiment.
Continue reading
Monday, 14 January 2019
The powers and pitfalls of quantitative easing
a column by Wei Cui and Vincent Sterk for VOX: CEPR’s Policy Portal
The effects of quantitative easing are poorly understood, in part because standard models of monetary policy predict that it doesn't work.
This column uses a model in which households can be unequal and hold assets with different degrees of liquidity to show that quantitative easing can provide a powerful stimulus to the macroeconomy, and that it avoided a large decline in output and inflation during 2009.
Nevertheless, side-effects on inequality mean that social welfare tends to be lower under quantitative easing than under conventional policy.
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I still don’t understand what is being talked about and I feel that I should.
The effects of quantitative easing are poorly understood, in part because standard models of monetary policy predict that it doesn't work.
This column uses a model in which households can be unequal and hold assets with different degrees of liquidity to show that quantitative easing can provide a powerful stimulus to the macroeconomy, and that it avoided a large decline in output and inflation during 2009.
Nevertheless, side-effects on inequality mean that social welfare tends to be lower under quantitative easing than under conventional policy.
Continue reading
I still don’t understand what is being talked about and I feel that I should.
Friday, 11 January 2019
Unconventional Monetary Policies in the Euro Area, Japan, and the United Kingdom
an article by Giovanni Dell’Ariccia, Pau Rabanal and Damiano Sandri (International Monetary Fund, Washington, DC) published in Journal of Economic Perspectives Volume 32 Number 4 (Fall 2018)
Abstract
The global financial crisis hit hard in the euro area, the United Kingdom, and Japan. Real GDP from peak to trough contracted by about 6 percent in the euro area and the United Kingdom and by 9 percent in Japan.
In all three cases, central banks cut interest rates aggressively and then, as policy rates approached zero, deployed a variety of untested and unconventional monetary policies. In doing so, they hoped to restore the functioning of financial markets, and also to provide further monetary policy accommodation once the policy rate reached the zero lower bound.
In all three jurisdictions, the strategy entailed generous liquidity support for banks and other financial intermediaries and large-scale purchases of public (and in some cases private) assets. As a result, central banks' balance sheets expanded to unprecedented levels.
This paper examines the experience with unconventional monetary policies in the euro zone, the United Kingdom, and Japan.
The paper starts with a discussion of how quantitative easing, forward guidance, and negative interest rate policies work in theory, and some of their potential side effects. It then reviews the implementation of unconventional monetary policy by the European Central Bank, the Bank of England, and the Bank of Japan, including a narrative of how central banks responded to the crisis and the evidence on the effects of unconventional monetary policy actions.
JEL Classification: E23, E32, E43, E44, E52, G01, H63
Full text (PDF 26pp)
Abstract
The global financial crisis hit hard in the euro area, the United Kingdom, and Japan. Real GDP from peak to trough contracted by about 6 percent in the euro area and the United Kingdom and by 9 percent in Japan.
In all three cases, central banks cut interest rates aggressively and then, as policy rates approached zero, deployed a variety of untested and unconventional monetary policies. In doing so, they hoped to restore the functioning of financial markets, and also to provide further monetary policy accommodation once the policy rate reached the zero lower bound.
In all three jurisdictions, the strategy entailed generous liquidity support for banks and other financial intermediaries and large-scale purchases of public (and in some cases private) assets. As a result, central banks' balance sheets expanded to unprecedented levels.
This paper examines the experience with unconventional monetary policies in the euro zone, the United Kingdom, and Japan.
The paper starts with a discussion of how quantitative easing, forward guidance, and negative interest rate policies work in theory, and some of their potential side effects. It then reviews the implementation of unconventional monetary policy by the European Central Bank, the Bank of England, and the Bank of Japan, including a narrative of how central banks responded to the crisis and the evidence on the effects of unconventional monetary policy actions.
JEL Classification: E23, E32, E43, E44, E52, G01, H63
Full text (PDF 26pp)
Tuesday, 9 October 2018
Why women matter in monetary policymaking
a column by Donato Masciandaro, Paola Profeta and Davide Romelli for VOX: CEPR’s Policy Portal
Women are increasingly represented in central banks, yet little is known about the role they play in monetary policymaking.
Using a new global dataset on the presence of women on central bank monetary policy committees in 2002-2016, this column finds that for the same level of inflation, a higher share of women on the central bank board is associated with a higher interest rate.
The findings suggest that women in central banks have a more hawkish attitude, and that heterogeneity of monetary policy committees can have an impact on monetary policy decisions.
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Women are increasingly represented in central banks, yet little is known about the role they play in monetary policymaking.
Using a new global dataset on the presence of women on central bank monetary policy committees in 2002-2016, this column finds that for the same level of inflation, a higher share of women on the central bank board is associated with a higher interest rate.
The findings suggest that women in central banks have a more hawkish attitude, and that heterogeneity of monetary policy committees can have an impact on monetary policy decisions.
Continue reading
Saturday, 3 March 2018
Money and monetary stability in Europe, 1300-1914
a column by K. Kıvanç Karaman, Sevket Pamuk and Seçil Yıldırım-Karaman for VOX: CEPR’s Policy Portal
There is a notable lack of long-run analyses of monetary systems and their stability. This column addresses this gap by looking at the monetary systems of major European states between 1300 and 1914. The evidence collected suggests that, despite many switches between standards and systems, fiscal capacity and political regimes ultimately shaped patterns of monetary stability. Theories of monetary stability that rely on the mechanics of monetary systems perform poorly when such a long-run perspective is taken.
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Hazel’s comment
Even if you have little or no interest in money or monetary stability you will find some fascinating graphical illustrations of devaluation and inflation in this column. I spent far more time than I should have done actually reading.
If I did that for all my posts I would never get anything posted.
There is a notable lack of long-run analyses of monetary systems and their stability. This column addresses this gap by looking at the monetary systems of major European states between 1300 and 1914. The evidence collected suggests that, despite many switches between standards and systems, fiscal capacity and political regimes ultimately shaped patterns of monetary stability. Theories of monetary stability that rely on the mechanics of monetary systems perform poorly when such a long-run perspective is taken.
Continue reading
Hazel’s comment
Even if you have little or no interest in money or monetary stability you will find some fascinating graphical illustrations of devaluation and inflation in this column. I spent far more time than I should have done actually reading.
If I did that for all my posts I would never get anything posted.
Saturday, 21 October 2017
The benefits of central bank digital currency
a column by Michael Bordo and Andrew Levin for VOX: CEPR’s Policy Portal
Central banks across the world are considering sovereign digital currencies. This column argues that these currencies could transform all aspects of the monetary system and facilitate the systematic and transparent conduct of monetary policy. In particular, a central bank digital currency can serve as a practically costless medium of exchange, a secure store of value, and a stable unit of account. To achieve this, the currency would be account based and interest bearing, and the monetary policy framework would target true price stability.
Continue reading
Central banks across the world are considering sovereign digital currencies. This column argues that these currencies could transform all aspects of the monetary system and facilitate the systematic and transparent conduct of monetary policy. In particular, a central bank digital currency can serve as a practically costless medium of exchange, a secure store of value, and a stable unit of account. To achieve this, the currency would be account based and interest bearing, and the monetary policy framework would target true price stability.
Continue reading
Thursday, 20 August 2015
Monetary policy and bubbles in the national and regional UK housing markets
an article by I-Chun Tsai (National University of Kaohsiung, Taiwan, Republic of China) published in Urban Studies Volume 52 Number 8 (June 2015)
Abstract
Numerous studies have explained the significant correlation between monetary policies and asset pricing bubbles. This study uses data on the overall UK housing market and the five UK regions with the highest house prices to evaluate the correlation between monetary policies and pricing bubbles in the UK housing markets.
This study uses a theoretical model to verify whether monetary policies affect asset pricing bubbles. Fluctuations in house prices are classified into fluctuations related to fundamentals (the mean reversion behaviour and responses to information in the current period) and fluctuations unrelated to fundamentals (self-related behaviour).
After estimating the fluctuation behaviour of house prices through quantile regression, this study asserts that a monetary easing environment can significantly increase housing returns. The self-related phenomenon of asset returns has increased significantly and has thus continuously increased prices and formed a bubble.
Abstract
Numerous studies have explained the significant correlation between monetary policies and asset pricing bubbles. This study uses data on the overall UK housing market and the five UK regions with the highest house prices to evaluate the correlation between monetary policies and pricing bubbles in the UK housing markets.
This study uses a theoretical model to verify whether monetary policies affect asset pricing bubbles. Fluctuations in house prices are classified into fluctuations related to fundamentals (the mean reversion behaviour and responses to information in the current period) and fluctuations unrelated to fundamentals (self-related behaviour).
After estimating the fluctuation behaviour of house prices through quantile regression, this study asserts that a monetary easing environment can significantly increase housing returns. The self-related phenomenon of asset returns has increased significantly and has thus continuously increased prices and formed a bubble.
Tuesday, 20 August 2013
Was the Government’s macroeconomic policy right after all?
This is a relatively old item [6 August] which I had obviously mislaid somewhere but the title intrigued me coming from the TUC!! Read on.
With the UK’s return to growth, many will now no doubt argue that the government’s macroeconomic policy has turned out to be a success.
So, are they right? Does the recent pick-up in UK growth prove that the Government were right all along? Have the critics of tight fiscal policy been confounded?
The short answer is very straight forward, “no”.
Continue reading
With the UK’s return to growth, many will now no doubt argue that the government’s macroeconomic policy has turned out to be a success.
So, are they right? Does the recent pick-up in UK growth prove that the Government were right all along? Have the critics of tight fiscal policy been confounded?
The short answer is very straight forward, “no”.
Continue reading
Thursday, 9 August 2012
A Path Back to Growth
an IPPR publication by Tony Dolphin, Senior Economist and Associate Director for Economic Policy
Executive Summary
The UK economy is back in recession and needs to find a path that will return it to a higher growth track in the medium term. To not do so will make it harder for the country to tackle the legacies of the financial crisis, including high youth unemployment and government borrowing. In the face of serious headwinds from the eurozone, current policies – even after taking into account new initiatives such as funding for lending and the plan to guarantee up to £40 billion of spending on infrastructure projects – are unlikely to deliver the desired outcome. More effort is required to boost demand in the short term and to ensure that the economy’s growth potential is supported in the medium term.
The debate about the role of government policy in the UK’s return to recession and about Plan A or Plan A+ or Plan B has become a sterile one, focused too narrowly on the Coalition’s fiscal plans. A path back to growth will require a change in fiscal policy, but on its own this will be insufficient. To be effective, policymakers need to make a number of complementary shifts in policy.
These shifts should be designed to reduce uncertainty about the economic outlook. This will encourage households to consume and business to invest and to hire more workers. Private sector companies will only be engines of growth in the UK if they can foresee a positive outlook and healthy returns on their investments. That is patently not the case at present.
Growth on its own is not enough. It needs to be accompanied by reform to address long-standing weaknesses in the UK economy: underinvestment, vulnerability to external shocks, poor export performance and persistent inequalities. The path back to growth should also be a path to a different kind of British capitalism.
The roadmap for growth should have six elements:
Full text (PDF 24pp)
Executive Summary
The UK economy is back in recession and needs to find a path that will return it to a higher growth track in the medium term. To not do so will make it harder for the country to tackle the legacies of the financial crisis, including high youth unemployment and government borrowing. In the face of serious headwinds from the eurozone, current policies – even after taking into account new initiatives such as funding for lending and the plan to guarantee up to £40 billion of spending on infrastructure projects – are unlikely to deliver the desired outcome. More effort is required to boost demand in the short term and to ensure that the economy’s growth potential is supported in the medium term.
The debate about the role of government policy in the UK’s return to recession and about Plan A or Plan A+ or Plan B has become a sterile one, focused too narrowly on the Coalition’s fiscal plans. A path back to growth will require a change in fiscal policy, but on its own this will be insufficient. To be effective, policymakers need to make a number of complementary shifts in policy.
These shifts should be designed to reduce uncertainty about the economic outlook. This will encourage households to consume and business to invest and to hire more workers. Private sector companies will only be engines of growth in the UK if they can foresee a positive outlook and healthy returns on their investments. That is patently not the case at present.
Growth on its own is not enough. It needs to be accompanied by reform to address long-standing weaknesses in the UK economy: underinvestment, vulnerability to external shocks, poor export performance and persistent inequalities. The path back to growth should also be a path to a different kind of British capitalism.
The roadmap for growth should have six elements:
- an increase in the scale of quantitative easing
- fiscal measures to boost growth in the short term combined with a reaffirmation of the plan to eliminate the deficit in the medium term
- additional infrastructure spending
- measures to make household debt restructuring easier
- measures to keep the long-term unemployed in touch with the labour market
- an active industrial policy.
Full text (PDF 24pp)
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