External authors
Working Paper
Highlights The financial crisis modified drastically and rapidly the European financial system’s political economy, with the emergence of two competing narratives. First, government agencies are frequently described as being at the mercy of the financial sector, routinely hijacking political, regulatory and supervisory processes, a trend often referred to as “capture”. But alternatively, governments are portrayed […]
Blog Post
What’s at stake: Federal Reserve Governor Jeremy Stein gave serious consideration to the idea that monetary policy has a role to play in managing financial stability (read asset prices) in a speech titled “Overheating in Credit Markets: Origins, Measurement, and Policy Responses” given last week at a conference hosted by the St. Louis Fed. Governor Stein provided evidence that risk was building in certain segments of financial markets and discussed policy tools that go beyond countercyclical macroprudential regulation or the simple use of the Federal Funds rate to address these risks.
Blog Post
What’s at stake: There has been much ink spilt (except maybe in the eurozone) over the last few years about the need to move away or at least complement the flexible inflation-targeting framework so that central banks can create expectations of future expansionary policy in a liquidity trap without changing its long-run goals. One idea – Nominal GDP targeting – has gathered most attention. After qualifying the idea as “powerful” and raising expectations of a possible future adoption, the Bank of England governor-designate Mark Carney reversed course and said that he was “far from convinced” by the idea in front of the Treasury select committee yesterday. While he didn’t lay out precisely the intellectual reasons for that change of heart, we’ve tried to put together some of the reasons put forward against NGDP targeting.
Blog Post
What’s at stake: The media has widely echoed that Michael Woodford – arguably the top monetary economist in the world – came out in support of Nominal GDP targeting in his speech at the Jackson Hole Economic Symposium. But Woodford’s 96 pages paper is much more than that as it provides certainly the best non-technical discussion of policy options available to central banks at the ZLB. The paper discusses forward guidance policies as well as balance-sheet policies, in which the central bank varies either the size or the composition of its balance sheet. In this review, we focus on the latter as Woodford’s paper provides a useful complement to understand the ongoing blogosphere discussion about Wallace neutrality – an economics proposition due to Neil Wallace (1981) asserting that, in certain environments, alternative size and composition of the CB balance sheet have no effect.
