Refet Gürkaynak, Cédric Tille, 28 April 2017

Are Dynamic Stochastic General Equilibrium (DSGE) models worthwhile? Some economists suggest not, due to their complex nature and disputable assumptions.  This column introduces a new eBook which provides an all-round evaluation of DSGE models, widely used by many central banks, by looking at their current and historical uses as well as their future position in economics.

Thomas Huertas, 21 April 2017

Central banks helped contain the Global Crisis using a policy of 'eligibility easing'. The policy expanded the collateral that could be used to access liquidity facilities and the range of counterparties that could request liquidity. This column argues that although eligibility easing successfully reduced the need for central banks to act as lender of last resort or to provide emergency liquidity assistance, the time has come to determine its future role as a macro-prudential tool.

Christopher Palmer, 08 February 2017

How does segmentation in mortgage markets affect central bank decisions? In this video, Christopher Palmer points out mortgage market policy should complement macro policy. This video was recorded at the Brevan Howard Centre in October 2016.

Kjell G. Nyborg, 24 January 2017

Central banks inject money into the economy against collateral, but we know little about the terms of the exchange. This column argues that market forces or discipline have little role to play in the central bank collateral frameworks that are the foundation of the monetary and financial system. This distorts the financial system and wider economy – in the Eurozone, for example, political influence on these frameworks has created indirect bailouts of some banks and sovereigns.

Ulrich Bindseil, Luc Laeven, 13 January 2017

The scale and scope of central bank lender of last resort operations during the Global Crisis raised concerns that central banks may be taking excessive risks and supporting moral hazard. This column argues that criticism of such operations is misguided. In the crisis, central banks did not make financial losses when acting as lender of last resort, which shows that they have applied their frameworks with prudence. 

Ian Bright, Senne Janssen, 13 January 2017

With growth and inflation in Europe remaining low, the idea of helicopter money is slowly gaining traction with politicians and economists alike. This column presents the results of a survey that asked people how, if they were to receive an extra €200 per month to do with as they chose, they would use the money. There was broad support for the policy among respondents, but only about one in four said they would spend most of the money. The findings suggest that a larger impact might be achieved if instead the money were given to the government to finance projects.

Ricardo Reis, 14 October 2016

Conventional economic theory predicts that, outside of a financial crisis, quantitative easing should have no effect on real outcomes or inflation. This column proposes two theoretical channels through which quantitative easing might also work in a fiscal crisis. In this case, quantitative easing can be a valuable tool because it can control the path of inflation over time and reduce the distortions to the credit flow in the economy.

Carlos Arteta, M. Ayhan Kose, Marc Stocker, Temel Taskin, 26 September 2016

Against a background of persistently weak growth and low inflation expectations, a number of central banks have implemented negative interest rate policies over the past few years. This column argues that such policies could help provide additional monetary policy stimulus, as long as policy interest rates are only modestly negative and do not stay negative for too long to avoid adverse effects on the financial sector. While these policies do have a place in the policymaker’s toolkit, they need to be handled with care to secure their benefits while mitigating risks.

Stephen Cecchetti, Kim Schoenholtz, 19 August 2016

Helicopter money is not just another version of unconventional monetary policy. Using simple central bank and government balance sheets, this column explains how helicopter money today is different from what Milton Friedman imagined back in 1969 – it is expansionary fiscal policy financed by central bank money.

John Williams, 26 November 2015

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%.

Refet Gürkaynak, Troy Davig, 25 November 2015

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.

Athanasios Orphanides, 11 November 2015

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.

David-Jan Jansen, Jakob de Haan, 13 May 2013

The European Central Bank has often been criticised for inconsistencies in its policy communications. At the same time, several papers show how ECB communication has been effective. This column resolves this paradox by providing evidence showing that ECB introductory statements were, in fact, quite consistent over the first decade of its operations.

Michael Ehrmann, Marcel Fratzscher, Benjamin Born, 29 November 2010

In response to the financial crisis, many central banks are receiving significant new responsibilities for macroprudential supervision. Exploiting the experience of central banks with Financial Stability Reports and other financial stability-related statements, this column argues that such central bank communication can be highly effective, in particular during periods of financial stress.

Donato Masciandaro, Marc Quintyn, 01 August 2009

This column examines the white paper on financial supervision issued by the Obama administration in mid-June. It focuses on the proposal’s preference for interagency cooperation over supervisory consolidation and warns that such an approach, while politically expedient, risks worse governance outcomes.

Carlo Favero, 18 July 2009

Has the Federal Reserve responded too slowly to macroeconomic conditions during the crisis? This column defends the central bank based on new estimates of the policy function, arguing that it has reacted promptly to a gradually evolving macroeconomic situation.

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