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Updated by Malcolm Riddell on Jul 11, 2018
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Monetary Policy

The term structure and recessions before the Fed | VOX, CEPR Policy Portal

Many market commentators are worried that the gradual flattening of the US term structure in recent months is indicative of an increased risk of a recession. This column argues that the term structure contained information about the likelihood of a future recession even before the establishment of the Federal Reserve, suggesting that the information content does not arise

The roles of economic integration and monetary policy in currency unions | VOX, CEPR Policy Portal

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

Optimal inflation and the identification of the Phillips curve | VOX, CEPR Policy Portal

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

Consumption baskets and the distributional consequences of monetary policy | VOX, CEPR Policy Portal

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

Macroprudential tools, capital controls, and the trilemma | VOX, CEPR Policy Portal

In the Bretton woods system, capital controls ensured the independence of monetary policy. This column argues that it is impossible to understand how they worked without understanding their role in supporting credit controls at the time, which were used to fight inflation without raising the domestic interest rate. This may be relevant today in emerging markets in which

Monetary policy and inequality: A new channel | VOX, CEPR Policy Portal

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

Price-level targeting to escape the zero lower bound | VOX, CEPR Policy Portal

The Global Crisis and Great Recession dealt a blow to inflation targeting as a good monetary policy framework, and several prominent economists and central bankers have suggested that price-level targeting could help in bringing the economy back to normal. This column argues that although a newly established policy regime could well have low initial credibility, this may not

DSGE models: A cup half full | VOX, CEPR Policy Portal

Macroeconomic models are an essential part of a monetary policymaker’s toolkit. In this column, taken from a VoxEU ebook, the author gives his personal assessment of the usefulness of DSGE models currently in use at the Federal Reserve and identifies three key issues that the next generation of DSGE models will need to address to be more relevant for policymakers.

A recipe for monetary policy in emerging market economies | VOX, CEPR Policy Portal

The Global Crisis originated in developed economies but was also a large shock to emerging market economies. Based on this event, this column argues that emerging market central banks should take into account domestic and external financial variables such as bank credit, asset prices, credit spreads, the US interest rate and the real exchange rate, not just effects on

Research Conference 2017, Federal Reserve Bank of Boston

Should the Federal Reserve have discretion in setting its instrument to the level it believes best attains its mandated goals, or should that instrument be either determined or constrained by a preset rule? The purpose of this conference is to place the ongoing debate in the context of current economic theory and practice, especially in light of how monetary policy has been conducted since the Great Recession.

Central banking in turbulent times | Bruegel

Central banks came out of the Great Recession with increased power and responsibilities. Indeed, central banks are often now seen as 'the only game in town', and a place to put innumerable problems vastly exceeding their traditional remit. These new powers do not fit well, however, with the independence of central banks, remote from the democratic control of government.

The changing fortunes of central banking | Bruegel

What are the major challenges of central banks today? This book discusses the developing role of central banks and the policies they pursue in seeking monetary and financial stabilisation, while also giving suggestions for model strategies.

Cryptocurrencies and monetary policy | Bruegel

Can cryptocurrencies acquire the role of money? And what are the implications for central banks and monetary policy? Read the policy contribution to understand what challenges cryptocurrencies have to overcome to replace official currencies.