Alexander Dietrich, Keith Kuester, Gernot Müller, Raphael Schoenle, 24 March 2020

The effects of the COVID-19 pandemic on the global economy are still largely unknown. The short-term economic impact will depend importantly on people’s expectations of the overall effect, and the amount of uncertainty thereof. This column uses a survey of US households to show that the expected economic effect is negative, large, and highly uncertain. An asset-pricing equation is used to quantify the implication of these expectations for the natural rate of interest. The natural rate declines by several percentage points, suggesting a role for monetary accommodation to (partially) offset the shock.

Nadav Ben Zeev, Evi Pappa, 06 September 2017

Kim Jong Un’s dictatorship has grabbed the attention of the whole world with its nuclear brinkmanship – and global markets have responded with a flight to safe-haven assets. This column reports research showing that such an escalation in international tensions can also have real effects for the US economy in the short to medium run. According to the authors’ analysis of the macroeconomic effects of anticipated increases in defence spending, North Korea’s insistent and rapid test-firing of missiles could boost the US economy.

Charles Goodhart, 02 March 2015

Following the Warsh Review, the recording, number, and timing of the Bank of England’s Monetary Policy Committee meetings will change. This column argues that the recording may make the decision meeting more formal and could inhibit debate, although the eight-year gap before publishing transcripts ameliorates this concern. Having fewer MPC meetings is a good thing, and reduces ‘noise’ around monetary policy. The revised meeting schedule will not add to transparency and raises the risk of leaks and ‘news shocks’.

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