Macroeconomic policy

Sayuri Shirai, 16 March 2017

The Bank of Japan has been pursuing quantitative and qualitative monetary easing since 2013, but has failed to achieve its target of a stable 2% inflation rate. This column explores the Bank’s recent practices and performance, and identifies four structural factors that have contributed to the limited impact of unconventional monetary easing on aggregate demand and inflation. The Bank now needs to come up with more objective projections for the timing of achieving its price stability target. 

Luca Benati, Robert Lucas, Juan Pablo Nicolini, Warren E. Weber, 11 March 2017

Most economists and central bankers no longer consider money supply measures to be useful for conducting monetary policy. One reason is the alleged instability of the relationship between monetary aggregates. This column uses data from 32 countries and spanning up to 100 years to argue that the long-run demand for money is alive and well. Results show a remarkable stability in long run money demand, both within and across countries. Nonetheless, short-run departures can be large and persistent, and further research is needed.

Thorsten Beck, Geoffrey Underhill, 01 March 2017

The institutions and even the very idea of the EU are under fire, with feelings of disenfranchisement among large parts of the population driving support for populist movements across the continent. This column introduces a new eBook that brings together analyses of this multidimensional crisis and of the way out - the future of the European Union. A worryingly common message is that muddling through will not be enough to save the EU as a political project.

Stephen Cecchetti, Kim Schoenholtz, 01 March 2017

Policymakers and economists have been looking for ways to make it easier to manage increasing debt burdens. This column assesses one possible solution: GDP-linked bonds that tie the size of debt payments to an economy’s wellbeing. There are clear benefits to a government from issuing GDP-linked bonds, but establishing investor confidence in these instruments will require a better approach to the obstacles posed by data revisions and changes in methodology.

M. Ayhan Kose, Csilla Lakatos, Franziska Ohnsorge, Marc Stocker, 27 February 2017

A growth surge in the world’s largest economy could provide a significant boost to global activity. In contrast, uncertainty about the direction of US policies could have the opposite effect. This column investigates spillover channels linking the US and the global economy. An acceleration in US growth would have positive effects for the rest of the world if not counterbalanced by increased trade barriers. However, policy uncertainty could hamper global growth, and could have particularly bad effects on investment growth in emerging and developing economies.

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