Rashad Ahmed, Joshua Aizenman, Yothin Jinjarak, 28 June 2019

Countries have significantly increased their public-sector borrowing since the Global Crisis. This column documents several potential fiscal dominance effects during 2000-17 under inflation targeting and non-inflation-targeting regimes. A higher ratio of public debt to GDP is associated with lower policy interest rates in advanced economies. In emerging economies under non-inflation-targeting regimes, composed mostly of exchange-rate targeters, the interest rate effect of higher public debt is non-linear and depends both on the ratio of foreign currency to local currency debt, and on the ratio of hard currency debt to GDP.

James Costain, Anton Nakov, 28 June 2019

Recent low inflation is motivating new research to better characterise how individual firms and workers set prices and wages. This column describes a new approach which emphasises that the costs of decision making may limit the precision of price and wage changes. As well as making better sense of price and wage changes in microeconomic data, this new approach also strikes a middle ground between two leading models of monetary policy transmission, improving our quantitative understanding of the short-run effects of monetary policy on output and the short-run trade-off between inflation and unemployment.

Tatsuyoshi Okimoto, 13 June 2019

Japan’s monetary policy has had to be unconventional in order to address the economic conditions the country has faced. This column assesses the Bank of Japan’s exchange-traded fund purchasing programme, which has been repeatedly expanded in recent years. The purchases have achieved some positive results, propping up stock prices but also increasing real output and inflation. But, given the increased risks the Bank faces as its purchases have grown, the time to unwind has come.

Michael Bordo, 07 June 2019

Growing international imbalances are widely understood to have led Nixon to end gold convertibility in 1971. This column argues that a key fundamental underlying these imbalances was the rising inflation in the US, in turn created by US macroeconomic policies. President Nixon blamed the rest of the world instead of correcting US monetary and fiscal policies. It also identifies similarities between the imbalances of the 1960s and 1970s and those of today, especially regarding fiscal policies and the use of tariff protection as a strategic tool.

Roger Farmer, Giovanni Nicolò, 20 May 2019

The economies of many countries are operating close to full capacity, but unemployment and inflation are both low. Using data from the US, UK and Canada, this column compares differences in the macroeconomic behaviour of real GDP, the inflation rate and the yields on three-month Treasury securities in the three countries. It shows that the Farmer monetary model, closed with a belief function, outperforms the New Keynesian model, closed with the New Keynesian Phillips curve. The data fit the multiple equilibria emphasised in the Farmer model well, rather than the mean-reverting processes assumed by the New Keynesian model. 

Pierpaolo Benigno, 26 April 2019

Cryptocurrencies have attracted the attention of consumers, policymakers and the media. This column investigates whether they can jeopardise the primary function of central banks, namely, controlling inflation and economic activity. Currency competition can succeed in calming inflation and preventing the sort of manipulation of interest rates and prices to which governments have historically been prone. But currency competition may also lead to government money losing the function of medium of exchange, which could be risky and lead government currency into further troubles. 

Jongrim Ha, M. Ayhan Kose, Franziska Ohnsorge, 11 April 2019

Emerging market and developing economies have achieved a remarkable decline in inflation since the early 1970s, supported by robust monetary policy frameworks, strengthening of global trade, financial integration, and the disruptions caused by the global crisis. The column argues that a continuation of low and stable inflation in these countries is not guaranteed. If this wave of structural and policy-related factors loses momentum, elevated inflation could re-emerge. Policymakers may find that maintaining low inflation is as difficult as achieving it.

Giuseppe Ferrero, Mario Pietrunti, Andrea Tiseno, 21 March 2019

Dealing with uncertainty about the state of the economy is one of the main challenges facing monetary policymakers. In recent years there has been an extensive debate on the value of some of the deep parameters driving the economy, such as the natural rate of interest and the slope of the Phillips curve, estimates of which are quite uncertain. This column argues that when facing uncertainty on the structural relationship among macroeconomic variables, central banks should adopt a pragmatic and data-dependent approach to adjusting their monetary policy stance. 

Marcin Bielecki, Michał Brzoza-Brzezina, Marcin Kolasa, 05 March 2019

Population ageing is likely to affect many areas of life, from pension system sustainability to housing markets. This column shows that monetary policy can be considered another victim. Low fertility rates and increasing life expectancy substantially lower the natural rate of interest. As a consequence, central banks are more likely to hit the lower bound constraint on the nominal interest rate and face long periods of low inflation, especially if they fail to account for the impact of demographic trends on the natural interest rate in real time.

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Submissions are sought on the following themes:
• Digital currencies, fintech, and technology
• Regulation, markets, and financial intermediation
• International economics
• Macroeconomics, monetary policy, macrofinance, monetary policy frameworks, and communication
• Inflation dynamics
• Policy lessons from the history of finance and central banking
The deadline for submissions is Saturday, February 2nd.
The meeting commences on Thursday, July 18 at the FRB New York, featuring presentations by Nellie Liang and Jeremy C. Stein, and John C. Williams.
The 31 contributed sessions take place on Friday and Saturday, July 19-20 at the Kellogg Center, SIPA, Columbia University. Contributed sessions are organized by BIS, FSB, IMF, SNB, FRB St. Louis, Bank of Israel, FRB Cleveland, ECB, Riksbank, FRB San Francisco, Norges Bank, Bank of Spain, Bank of Japan, Bank of Canada, Bank of Korea, OeNB, FRB Minneapolis, Bundesbank, Central Bank of Ireland, SAFE, CEPR, ABFER, and IBRN.

Christiane Nickel, Derry O'Brien, 20 November 2018

Just like other central banks, the ECB generally monitors a range of measures of underlying inflation to help distinguish noise from signal in headline inflation. This column describes measures of underlying inflation that are routinely used at the ECB for measuring euro area headline inflation and provides some insights on their interpretation. Each of the measures has merits and shortcomings and they should be taken together in arriving at a first-pass assessment of developments in headline inflation. At the same time, the measures need to be complemented by a more structural examination of their driving forces in order to better understand the inflation process.

Alex Cukierman, Thomas Lustenberger, 04 November 2018

Almost 60 years ago, John Muth introduced the idea that adaptive expectations are rational if they efficiently use all available information. However, individuals are never fully certain, even ex post, about the permanence of economic developments. Using Israeli data, this explores the implications of this residual uncertainty for market efficiency. The findings point to issues with conventional market efficiency tests where ‘permanent-transitory confusion’ is in effect. 

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.

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