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Author: Maurice Obstfeld
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 0
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Book Description
Macroeconomic theory posits a critical real rate of interest below which the monetary policy setting is inflationary and above which it is deflationary. For roughly a decade after the Great Financial Crisis, many economists linked deflationary pressures to the difficulty central banks encountered in attaining sufficiently low policy interest rates, after decades of global decline in market real rates of interest. In contrast, some ascribe the recent global upsurge in inflation to central banks’ tardiness in perceiving the need for real interest rates high enough to place a sharp brake on demand. This paper surveys the decline in real interest rates in advanced and emerging economies over the past several decades, linking that process to a range of global factors that have operated with different force in different periods. The paper argues that estimates of long-run equilibrium real rates ( r̅ ) may not always furnish an accurate guide to the rate appropriate for short-term monetary policy (r*). It argues further that effective monetary should consider not only equilibrium in the market for domestic goods, but also the current account balance, financial conditions (including capital flows), and imperfect policy credibility. Equilibrium long-term real interest rates have risen recently according to market indicators. However, the main underlying factors that have pushed real interest rates down since the 1980s and 1990s -- notably demographic shifts, lower productivity growth, corporate market power, and safe asset demand relative to supply -- do not appear poised to reverse strongly enough to drive a big and durable rise in global real interest rates over the coming years. Low equilibrium interest rates may well continue periodically to bedevil monetary policy and financial stability.
Author: Maurice Obstfeld
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 0
Get Book Here
Book Description
Macroeconomic theory posits a critical real rate of interest below which the monetary policy setting is inflationary and above which it is deflationary. For roughly a decade after the Great Financial Crisis, many economists linked deflationary pressures to the difficulty central banks encountered in attaining sufficiently low policy interest rates, after decades of global decline in market real rates of interest. In contrast, some ascribe the recent global upsurge in inflation to central banks’ tardiness in perceiving the need for real interest rates high enough to place a sharp brake on demand. This paper surveys the decline in real interest rates in advanced and emerging economies over the past several decades, linking that process to a range of global factors that have operated with different force in different periods. The paper argues that estimates of long-run equilibrium real rates ( r̅ ) may not always furnish an accurate guide to the rate appropriate for short-term monetary policy (r*). It argues further that effective monetary should consider not only equilibrium in the market for domestic goods, but also the current account balance, financial conditions (including capital flows), and imperfect policy credibility. Equilibrium long-term real interest rates have risen recently according to market indicators. However, the main underlying factors that have pushed real interest rates down since the 1980s and 1990s -- notably demographic shifts, lower productivity growth, corporate market power, and safe asset demand relative to supply -- do not appear poised to reverse strongly enough to drive a big and durable rise in global real interest rates over the coming years. Low equilibrium interest rates may well continue periodically to bedevil monetary policy and financial stability.
Author: Mr.Andrea Pescatori
Publisher: International Monetary Fund
ISBN: 1513508385
Category : Business & Economics
Languages : en
Pages : 22
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Book Description
We use a semi structural model to estimate neutral rates in the United States. Our Bayesian estimation incorporates prior information on the output gap and potential output (based on a production function approach) and accounts for unconventional monetary policies at the ZLB by using estimates of “shadow” policy rates. We find that our approach provides more plausible results than standard maximum likelihood estimates for the unobserved variables in the model. Results show a significant trend decline in the neutral real rate over time, driven only in part by a decline in potential growth whereas other factors (including excess global savings) matter. Neutral rates likely turned negative during the Global Financial Crisis and are expected to increase only gradually looking forward.
Author: Barry Eichengreen
Publisher: Brookings Institution Press
ISBN: 0815726120
Category : Political Science
Languages : en
Pages : 401
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Book Description
A Brookings Institution Press and Asian Development Bank Institute publication Meet the next global currency: the Chinese renminbi, or the "redback." Following the global financial crisis of 2008, China's major monetary policy objective is the internationalization of the renminbi, that is, to create an inter-national role for its currency akin to the international role currently played by the U.S. dollar. Renminbi internationalization is a hot topic, for good reason. It is, essentially, a window onto the Chinese government's aspirations and the larger process of economic and financial transformation. Making the renminbi a global currency requires rebalancing the Chinese economy, developing the country's financial markets and opening them to the rest of the world, and moving to a more flexible exchange rate. In other words, the internationalization of the renminbi is a monetary and financial issue with much broader supra-monetary and financial implications. This book offers a new perspective on the larger issues of economic, financial, and institutional change in what will eventually be the world's largest economy.
Author: Peter J. N. Sinclair
Publisher: Routledge
ISBN: 1135179778
Category : Business & Economics
Languages : en
Pages : 402
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Book Description
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Author: Luís Brandão Marques
Publisher: International Monetary Fund
ISBN: 1513570080
Category : Business & Economics
Languages : en
Pages : 84
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Book Description
This paper focuses on negative interest rate policies and covers a broad range of its effects, with a detailed discussion of findings in the academic literature and of broader country experiences.
Author: David Wessel
Publisher: Brookings Institution Press
ISBN: 0815727062
Category : Business & Economics
Languages : en
Pages : 178
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Book Description
The underexamined art and science of managing the federal government's huge debt. Everyone talks about the size of the U.S. national debt, now at $13 trillion and climbing, but few talk about how the U.S. Treasury does the borrowing—even though it is one of the world's largest borrowers. Everyone from bond traders to the home-buying public is affected by the Treasury's decisions about whether to borrow short or long term and what types of bonds to sell to investors. What is the best way for the Treasury to finance the government's huge debt? Harvard's Robin Greenwood, Sam Hanson, Joshua Rudolph, and Larry Summers argue that the Treasury could save taxpayers money and help the economy by borrowing more short term and less long term. They also argue that the Treasury and the Federal Reserve made a huge mistake in recent years by rowing in opposite directions: while the Fed was buying long-term bonds to push investors into other assets, the Treasury was doing the opposite—selling investors more long-term bonds. This book includes responses from a variety of public and private sector experts on how the Treasury does its borrowing, some of whom have criticized the way the Treasury has been managing its borrowing.
Author: Arkadiusz (University of Wroclaw) Sieron
Publisher: Routledge
ISBN: 9780367621889
Category : Global Financial Crisis, 2008-2009
Languages : en
Pages : 0
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Book Description
The author provides a thorough analysis of the issues related to the interest rates in the conduct of monetary policy, such as the risk-taking channel of monetary policy, zombie firms in the economy and the difference between the neutral and natural interest rate and the negative interest rate policy.
Author: Charles Goodhart
Publisher: Springer Nature
ISBN: 3030426572
Category : Business & Economics
Languages : en
Pages : 260
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Book Description
This original and panoramic book proposes that the underlying forces of demography and globalisation will shortly reverse three multi-decade global trends – it will raise inflation and interest rates, but lead to a pullback in inequality. “Whatever the future holds”, the authors argue, “it will be nothing like the past”. Deflationary headwinds over the last three decades have been primarily due to an enormous surge in the world’s available labour supply, owing to very favourable demographic trends and the entry of China and Eastern Europe into the world’s trading system. This book demonstrates how these demographic trends are on the point of reversing sharply, coinciding with a retreat from globalisation. The result? Ageing can be expected to raise inflation and interest rates, bringing a slew of problems for an over-indebted world economy, but is also anticipated to increase the share of labour, so that inequality falls. Covering many social and political factors, as well as those that are more purely macroeconomic, the authors address topics including ageing, dementia, inequality, populism, retirement and debt finance, among others. This book will be of interest and understandable to anyone with an interest on where the world’s economy may be going.
Author: Philip Arestis
Publisher: Edward Elgar Publishing
ISBN: 1845427939
Category : Business & Economics
Languages : en
Pages : 261
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Book Description
. . . this book provides a useful overview of the challenges facing the IT policy framework, both by pointing to the limitations of the underlying theory and, more importantly, by outlining the importance of a transparent policy framework for anchoring expectations. . . the book should be of interest to all central bankers and students of monetary policy. Colin Rogers, Economic Record Recent developments in macroeconomic and monetary thinking have given a new impetus to the management of the economy. The use of monetary policy by way of manipulating the rate of interest to affect inflation is now well accepted by both academic economists and central bank practitioners. Beginning with an assessment of new thinking in macroeconomics and monetary theory, this book suggests that many countries have adopted the New Consensus Monetary Policy since the early 1990s in an attempt to reduce inflation to low levels. It goes on to illustrate that the explicit control of the money supply, which was fashionable in the 1970s and 1980s in the UK, US, Europe and elsewhere, was abandoned in favour of monetary rules that focus on interest rate manipulation by the central bank. The objective of these rules is to achieve specific, or a range of, inflation targets. Bringing together a distinguished cast of international contributors, this book presents a collection of papers, which discuss the following issues amongst others: the stability of the macroeconomic equilibrium monetary policy divergences in the Euro area stock market prices the US post- new economy bubble the information economy inflation targeting. This useful analysis of New Consensus Monetary Policy will be of great interest to financial economists and international monetary economists, as well as students and scholars of macroeconomics and finance.
Author: Mr.Nicolas E. Magud
Publisher: International Monetary Fund
ISBN: 1475512503
Category : Business & Economics
Languages : en
Pages : 49
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Book Description
This paper estimates neutral real interest rate (NRIR) ranges for 10 Latin American countries that either have full-fledged inflation targeting regimes in place or have recently adopted them, using an array of methodologies commonly used in the literature. We find that NRIRs have declined in the last decade, with more economically and financially developed economies exhibiting lower NRIR levels. Based on the estimated NRIRs, we assess that the current monetary stance (measured by the interest rate gap) is appropriately neutral in most of the considered economies, in line with closing output gaps. We also observe that the interest rate gap can be a good predictor of future inflation dynamics and economic growth. In addition, looking at the recent experiences in Brazil and Peru, we suggest that macro-prudential policies could affect the monetary stance even in the absence of direct interest rate changes, through affecting the NRIR.
