James Hamilton, 12 October 2018

Quantitative easing policies have been used widely over the past decade. This column explores how markets responded to the announcements surrounding the three phases of the Fed’s quantitative easing operations. It also discusses a basic identification problem with high-frequency event studies, namely, that they cannot resolve whether the announcement mattered because it conveyed information about monetary policy or about economic fundamentals. 

Linda Schilling, Harald Uhlig, 11 October 2018

The Bank for International Settlements has attributed the volatility of the price of Bitcoin and other cryptocurrencies to the lack of a crypto central bank. This column examines the implications of this and the increasing, but bounded, supply of Bitcoin for the cryptocurrency’s price. It also discusses how the price of Bitcoin interacts with monetary policy for traditional currencies.

Peter Karadi, Marek Jarociński, 03 October 2018

Central bank announcements simultaneously convey information about monetary policy and the economic outlook. This column uses changes in interest rate expectations and stock prices around the time of policy announcements of the Federal Reserve to disentangle the impact of news about monetary policy from that of news about the economic outlook. It finds that both pieces of information play a significant role in the dynamics of inflation and economic growth. Controlling for news about the economy provides a more accurate measure of the transmission of monetary policy.

Jose A. Lopez, Andrew Rose, Mark Spiegel, 02 October 2018

Many countries have now adopted negative nominal interest rates. The column uses data on 5,000 banks affected by this policy to conclude that, while their net income has not fallen, strategies to increase non-interest income are unlikely to be sustainable. Therefore we cannot assume that bank performance and lending will carry on at current levels over extended periods of negative policy rates.

Jon Danielsson, Robert Macrae, 12 September 2018

Financial policy is determined in multiple domains by separate government authorities. This column explores the hierarchical ranking of these domains and authorities. On top is the authority in charge of fiscal policy, followed by those running monetary, microprudential, and finally macroprudential policies. This ranking can cause conflicts in terms of policy effectiveness and legitimacy.

Andreas Neuhierl, Michael Weber, 31 August 2018

Equity markets are known to move in a predictable manner immediately after policy decisions. This column provides evidence of large predictable movements in stock prices 25 days before policy actions in the US. The shocks continue for another 15 days, and average 4.5%. It suggests monetary policy shocks might not be shocks after all, and that we might be underestimating the effect of monetary policy on asset prices and real consumption.

Michael Bordo, Klodiana Istrefi, 20 August 2018

US presidents can influence monetary policy through the appointment process of the Federal Open Market Committee members. This column examines the policy preferences of Committee members in relation to the ideology of their appointers. Democratic Board nominees have been mostly perceived to be doves, while the shares of both hawks and doves (as opposed to swingers) appears higher for Republican nominees. In contrast, a high share of hawks among Federal Reserve Bank presidents, who are appointed by their bank’s board of directors, is observed irrespective of the president’s party.

Agnès Bénassy-Quéré, Matthieu Bussière, Pauline Wibaux, 16 August 2018

Recent events on the international stage have reignited the debate on trade and currency wars. This column compares two forms of non-cooperative policies – import tariffs and currency devaluations – within a single framework. The results show that tariffs and devaluations do not have equivalent effects on trade flows. A 1% depreciation of the importer's currency reduces imports by around 0.5% in current dollars, whereas an increase in import tariffs by 1 percentage point reduces imports by around 1.4%.

Stephen Cecchetti, Kim Schoenholtz, 25 July 2018

Antoine Levy, 22 July 2018

The euro improved the credibility of monetary policy for many member states, but the downsides of not having monetary autonomy became painfully apparent during the European debt crisis. This column proposes ‘targeted inflation targeting’ as a way to improve stabilisation mechanisms in the euro area, without losing the benefits of integration. The ECB would maintain a rules-based approach that targets countries in a weaker macroeconomic position more aggressively.

Akvile Bertasiute, Domenico Massaro, Matthias Weber, 07 July 2018

A key critique of commonly used macroeconomic models is their reliance on the assumption of rational expectations. This column addresses this concern with a model of currency unions wherein expectations are formed through behavioural reinforcement learning, that is, learning from past mistakes. The model suggests that economic integration is of crucial importance to the functioning of a currency union. Monetary policy, in contrast, can only play a limited stabilising role.

Simon Wren-Lewis, 03 July 2018

Stephen Cecchetti, 25 June 2018

Though central banks do not seem concerned about being driven obsolete by cryptocurrencies, some are considering issuing digital currencies with similar technology. Stephen Cecchetti discusses three policy implications this might have, namely for restricting the illegal use of cash, allowing for negative interest rates, and improving financial access. All three are possible, but come with risk.

Stephen Cecchetti, Kim Schoenholtz, 10 May 2018

Juan Dolado, Gergo Motyovszki, Evi Pappa, 17 May 2018

There is ongoing debate over the welfare implications of the unorthodox measures adopted by central banks in the wake of the Global Crisis. Using US data, this column explores the implications of monetary policy for income and wealth inequality. Unexpected monetary expansions are found to increase inequality between high- and low-skilled workers. In terms of stabilising the economy, strict inflation targeting is found to be the most successful policy.

Claudia Buch, Matthieu Bussière, Linda Goldberg, Robert Hills, 20 April 2018

The channels through which one country’s monetary policy affects the international economy are still not that well understood. This column presents findings from latest project of the International Banking Research Network, which reveal that monetary policy spillover effects via bank lending are significant across countries in both conventional and unconventional periods. While the results provide some support to the bank lending and portfolio channels traditionally studied in the literature, they also suggest that other bank-level frictions matter.

Hélène Rey, 23 April 2018

There are significant commonalities between the movements of credit aggregates, credit flows, and asset prices - referred to as the global financial cycle. Helene Rey explains how this cycle is impacted by US monetary policy. Raising interest rates by the Fed will tighten credit in dollar-dependent economies, leading to capital outflows. To withstand such impact, policymakers must employ macroprudential tools to hit their domestic targets.

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SUERF / WU / OeNB Conference
Date: Friday, 4 May 2018
Venue: Oesterreichische Nationalbank, Otto-Wagner-Platz 3, 1090 Vienna

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