Claudio Borio, Piti Disyatat, Mikael Juselius, Phurichai Rungcharoenkitkul, 18 October 2018

Has the decline in real (inflation-adjusted) interest rates over the last 30 years been driven by variations in desired saving and investment, as commonly presumed? And is this a useful way of thinking about the determination of real interest rates more generally, at least over long horizons? This column finds that this is not the case by systematically examining the relationship between several saving-investment drivers and market real interest rates (as well as estimates of natural rates) since the 1870s and for 19 countries. By contrast, a clear and robust role for monetary policy regimes emerges. The analysis has significant implications for the notion of monetary neutrality and policymaking.

Alfonso Rosolia, 14 September 2018

Given the role firms play in the transmission of monetary policy decisions, it is useful to understand how they form their inflation expectations. The column uses data from Italy to show that firms are attentive to the economic environment, even if they are not completely aware of the latest developments. They are also able to extract relevant information to update their expectations from ECB communications.

Marcel Fratzscher, Christoph Grosse Steffen, Malte Rieth, 17 August 2018

Does inflation targeting help absorb large shocks? This column shows that it implies higher output growth and lower inflation when countries are hit by natural disasters. Hard targeting works in these cases; soft targeting does not. This has impacts for how we evaluate the success of inflation targeting during the global crisis, but also for the debate on flexible inflation targeting.

Stephen Cecchetti, Kim Schoenholtz, 25 July 2018

Michael McLeay, Silvana Tenreyro, 03 July 2018

The Phillips curve – a positive relationship between inflation and economic slack – is one of the building blocks of the standard macroeconomic models used for forecasting and policy advice in central banks. On the face of it, recent findings of a breakdown in this relationship would therefore have major implications for monetary policy. This column argues that these findings are perfectly consistent with a stable underlying Phillips curve. The reason is simple: monetary policy will typically seek to reduce output whenever inflation is set to rise above target, blurring the identification of the Phillips curve in the data.

Swati Dhingra, Karl Whelan, Luc Frieden, 29 June 2018

2 years on from the UK’s referendum vote to leave the EU, substantial questions about the path to Brexit remain. In this special edition of Vox Talks, Tim Phillips talks to Swati Dhingra, Karl Whelan, and Luc Frieden about how the process of Brexit negotiation is itself impacting UK households already, from food price inflation to bilateral trade relations across Europe. The data suggests these effects are not transitory, but will persist beyond the current climate of policy uncertainty.

Javier Cravino, Ting Lan, Andrei Levchenko, 16 June 2018

Monetary policy shocks can affect different types of agents differently. These distributional effects can have important consequences for policy effectiveness. Using US data, this column explores how shocks differentially affect the prices faced by households with different incomes. The results suggest that middle-income households’ consumption baskets have more volatile prices than those of high-income households, and they are therefore more exposed to monetary policy shocks.

Roberto Duncan, Enrique Martínez García, 08 June 2018

Understanding what helps forecast inflation is important for any modern economy, but analysis remains limited in the emerging market economy context. This column presents recent findings on inflation forecasting in such economies, showing that a variant of the simple random walk model specification seems difficult to beat. The strong forecasting performance of this model can be observed even though many emerging economies have adopted a de facto or de jure inflation-targeting regime.

Simon Wren-Lewis, 03 June 2018

Dan Andrews, Peter Gal, William Witheridge, 11 May 2018

Low inflation at the same time as rising global competition has led to a debate on the importance of globalisation for domestic inflation. This column suggests that greater participation in global value chains has placed downward pressure on inflation. The current higher level of global value chain integration may also dampen inflation by accentuating the impact of global economic slack on domestic inflation. There is a risk that stalling globalisation since the crisis, coupled with stronger aggregate demand and declining market contestability, could lead to inflationary pressures in the medium term.

Natalie Chen, 08 May 2018

Exchange rate movements pass through to the prices consumers pay domestically. Natalie Chen discusses how, in order to understand the relationship between exchange rates and domestic inflation, we must look beyond the bilateral exchange rates between importing and exporting countries. What is key is the exchange rate movement between the importing currency and the one in which goods are invoiced.

Karl Walentin, Andreas Westermark, 02 April 2018

The Great Recession has spawned a vigorous debate regarding the potential benefits of stabilising the real economy. This issue takes on additional importance as the current economic situation in some countries, including the US, seem to imply an interesting monetary policy trade-off between stabilising the inflation and the unemployment level. This column summarises research indicating that stabilising the real economy raises the long-run level of output.

Cristina Conflitti, Riccardo Cristadoro, 21 March 2018

A recent strand of literature suggests that the decline of long-term inflation expectations observed between 2014 and 2016 was partly due to the fall in oil prices. Using euro area data, this column argues that this presumed relationship is false. Lower global demand prompted a positive correlation between oil prices and the real economy, while perceived constraints on monetary policy action resulted in a positive correlation between short- and long-term inflation expectations. These two phenomena explain the emergence of the apparent direct relationship.

Charles Bean, 15 March 2018

Interest rates are near zero and inflation is even lower. Professor Sir Charles Bean, former Deputy Governor at the Bank of England and President of the Royal Economic Society, talks to Mark Thoma about the importance of clear communication in such uncertain times. The interview was recorded at the Royal Economic Society annual conference at The University of Manchester in Spring 2015 and produced by Econ Films.

David Cobham, 16 March 2018

Monetary policy characterisations across countries rely on the availability of data, but while exchange rate classifications are well developed, the same is not true for domestic targets. This column introduces a new classification of the monetary policy frameworks of different advanced and emerging countries, including domestic and external targets. One trend revealed by the classification is the movement over time away from exchange rate targets and loosely structured discretion towards inflation targeting.

Kevin Daly, Loughlan O'Doherty, 05 March 2018

Recent years have seen emerging market economy inflation rates converge towards developed economy rates, as well as convergence between emerging markets. The sustained improved inflation performance in emerging markets has occurred even as unemployment in many of these economies has fallen to record lows. This column attributes the improved performance to two factors: increases in monetary policy credibility following the widespread introduction of inflation targeting, and a reduction in the frequency of emerging market currency crises, reflecting a secular improvement in their balance sheets.

Thomas Hasenzagl, Filippo Pellegrino, Lucrezia Reichlin, Giovanni Ricco, 15 January 2018

The ECB's Survey of Professional Forecasters supports the ECB’s view that inflation in the Eurozone will pick up and will be back within the central bank's target range in 2019.  This column disagrees.  Using a model that formalises the widely held view that inflation dynamics are a function of three components – long-term expectations, the Phillips curve, and oil price movement – it forecasts Eurozone inflation in 2019 at only 1.1%, a rate which is close to that implied by the bond markets.

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PLEASE USE THE BELOW LINK FOR A LIST OF TOPICS AND SUBMISSION INFORMATION - contributions are being sought for 20 contributed sessions on a wide range of policy-relevant research topics.
CEBRA’s 2018 Annual Meeting is co-organized by the Research Center SAFE (Sustainable Architecture for Finance in Europe) at Goethe University Frankfurt. The scientific committee is chaired by Ester Faia and Mirko Wiederholt.
Jens Weidmann, Governor of the Deutsche Bundesbank and Chairman of the Board of the Bank for International Settlements will deliver the keynote speech of the meeting.
The International Monetary Fund will organize a high-level panel on the topic “Financial Conditions, Financial Vulnerability, and Stabilization Policies”
The Deutsche Bundesbank and the Financial Stability Board will organize a high-level panel on the topic “Post-implementation Evaluations of the G20 Financial Regulatory Reforms”.

Holger Breinlich, Elsa Leromain, Dennis Novy, Thomas Sampson, 20 November 2017

On 23 June 2016, the UK voted to leave the EU. As soon as the result became clear, sterling depreciated sharply and, since the vote, UK inflation has dramatically increased. This column asks how much of the rise in inflation is due to the referendum. It finds that the referendum result pushed up UK inflation by 1.7 percentage points, which amounts to an annual (and potentially permanent) cost of £404 for the average British household.

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