Central Banking
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Fed Independence 2025
Headline: The Fed just forced mortgage servicers that got caught submitting "documents that were not properly notarized," among other sins, to cough up money towards principal reduction, for people unaffected by the notarization scandal, as well as to fund "nonprofit housing counseling organizations" and other policy objectives. Deeper question: What will the Fed look like in 2025? How long can it stay independent as it takes on more and more power, and uses that power for these kinds of political policy actions?
The Federal Reserve ’s decision last month to set a soft inflation target is the latest in a series of steps the central bank has taken in recent years to improve policy transparency. It’s also the most controversial among economists, and with good reason. In 2004, Frederic Mishkin, an economics professor at Columbia University who later became a member of the Federal Reserve Board, engaged in a written debate on the issue with Ben Friedman of Harvard University in the journal International Finance.
Fed Inflation Goal Is More Politics Than Policy: Evan Schnidman
The unprecedented behaviour of the central banks | Gavyn Davies | Insight into macroeconomics and the financial markets from the Financial Times
on macroeconomics Welcome. If you have yet to register on FT.com you will be asked to do so before you begin to read FT blogs. However, our posts remain free. A blog on macroeconomics, economic policymaking and the financial markets. Gavyn usually writes about a key topic of the week on Sunday.
La fin du « nouveau consensus monétaire »
Ce texte s’inspire d’une allocution prononcée le 24 juin 2008 au Parlement européen. Le 8 novembre 2002, à Chicago, Ben Bernanke, alors gouverneur de la Banque centrale américaine, aujourd’hui son président, prononçait un discours en hommage à Milton Friedman, à l’occasion du 90 e anniversaire du fondateur de la théorie monétariste. « Comme tout le monde ici présent le sait, Friedman et [Anna Jacobson] Schwartz affirment dans leur Histoire monétaire que l’effondrement économique de 1929-1933 avait été le résultat du dérèglement du mécanisme monétaire du pays. Contredisant la vision acceptée par leurs contemporains, […] Friedman et Schwartz pensaient que ‘la contraction est en réalité une preuve tragique de l’importance des forces monétaires’. […] J’aimerais dire à Milton et à Anna : au sujet de la Grande Dépression, vous avez raison, c’est notre faute. Nous sommes désolés. Mais grâce à vous, nous ne recommencerons pas ».US annualized real GDP growth from 1950 to 2010, showing the years of the Great Moderation. In economics, the Great Moderation refers to a reduction in the volatility of business cycle fluctuations starting in the mid-1980s, believed to have been caused by institutional and structural changes in developed nations in the later part of the twentieth century. [ 1 ] Sometime during the mid-1980s major economic variables such as real GDP growth, industrial production, monthly payroll employment and the unemployment rate began to decline in volatility. [ 2 ] [ edit ] Origins of the term
Great Moderation
Monetary policy: Today in central banking
THE Bank for International Settlements, often called the central banker's central bank, is a bastion of conservatism and policy orthodoxy. Unsurprisingly, the BIS is not particularly comfortable with the central bank policy interventions that have been adopted as a response to demand-side weakness at the zero lower bound. And unsurprisingly, the BIS (which demanded in June that "growth must slow") is laying out an intellectual framework to help justify inaction. Here is Claudio Borio: There is considerable cross-country evidence that banking crises tend to be preceded by unusually strong credit and asset price booms (see below), that those crises go hand-in-hand with permanent output losses (BCBS (2010)), and that subsequent recoveries tend to be slow and protracted (eg Reinhart and Rogoff (2009), Reinhart and Reinhart (2010)).
Instrument rules, target rules, NGDP, complexity and learning
At one extreme you have pure discretion . The central bank does whatever it thinks is best. At the other extreme you have an instrument rule . The rule specifies exactly how the central bank should set the monetary policy instrument, conditional on the indicators (i.e. conditional on its information). The Taylor Rule is an example of an instrument rule*; it specifies the exact setting of the interest rate as a function of recent data on output and inflation. Somewhere in the middle you have a target rule .
Is there a credit channel? | afoe | A Fistful of Euros | European Opinion
An important argument at the moment is whether or not the so-called credit channel exists. When central banks carry out quantitative easing, and even more so in the case of a “credit easing” policy like the one George Osborne announced recently, a major reason for it is that they are trying to reduce the price (i.e. the real-terms interest rate) and increase the supply of loans to businesses. This being their effective cost of capital, this should encourage them to invest, and thus to increase aggregate demand. This is the New Keynesian account; the monetarist one is that creating an expectation of future inflation creates a disincentive to hold onto cash.
GILLIAN Tett alerted FT readers to a thoughtful paper from Claudio Borio at the Bank for International Settlements, the central bankers' central bank. For those who don't want to read the whole thing (although it's worth doing so), here are some edited highlights. Mr Borio comments on why recoveries from financial crises tend to be slow and protracted. In all probability this reflects a mixture of an overestimation of potential output and growth during the boom, the corresponding misallocation of resources, notably capital, the headwinds of the subsequent debt and real capital stock overhangs, and disruptions to financial intermediation. Fiscal expansions in the wake of the crises can add to these problems, by piling government debt on top of private debt and sometimes threatening a sovereign crisis. All this reduces the effectiveness of monetary policy in dealing with the bust and exacerbates its unwelcome side-effects.
The debt crisis: Clean-up problems
Actualités | Économie générale Publié le 21/10/2011 Les gratte-ciels sont la manifestation la plus visible d'un vaste processus de construction qui se trouve à la première phase du boom. Par Daniel Luna
La « malédiction des gratte-ciels » frappe l’Europe | Contrepoints
Milton Friedman on the Euro and QE3
In 2000 Milton Friedman gave the keynote address to a conference at the Bank of Canada on flexible exchange rates. A Q&A at the end of the talk featured David Laidler, Michael Bordo, John Crow and others. Michael Bordo asked Friedman about the Euro: Milton Friedman:…I think the euro is in its honeymoon phase. I hope it succeeds, but I have very low expectations for it. I think that differences are going to accumulate among the various countries and that non-synchronous shocks are going to affect them.From the depths of the recession which began in 2007, and severely intensified in 2008:Q3, there has been an ever-growing chorus of (minority) opinion in the blogosphere regarding the nature of the recession, the causes, and the proper prescription for returning the economy to growth. The practitioners of this style of macroeconomics have since been dubbed the “quasi-monetarist” school, of which I consider myself a member. “Quasi-monetarism” has always been a somewhat unsatisfactory title for this group of thinkers, but it has stuck — so far. Lars Christensen, however, seeks to change that in a new working paper entitled “ Market Monetarism: The Second Monetarist Counter-Revolution “, in which he lays out the core tenets of the quasi-monetarist market monetarist view.
Market Monetarism « Modeled Behavior
La crise que le monde connaît depuis juillet 2008 pose encore de nombreuses énigmes. Comment en est-on arrivé là alors que les mécanismes semblent relativement simples et auraient pu être anticipés ? Cette crise marque-t-elle l’échec des politiques monétaires des années 1980 et est-ce le retour des politiques keynésiennes de relance ? L’École d’économie de Paris a organisé un séminaire exceptionnel réunissant huit spécialistes de la crise, académiques et professionnels, pour éclairer le débat. Extraits vidéo.
Les théories monétaristes à l'épreuve de la crise financière
Monétarisme
Un article de Wikipédia, l'encyclopédie libre. Le monétarisme est un courant de pensée économique pour lequel l'action de l'État en matière monétaire est inutile voire nuisible. La réflexion sur ce thème est ancienne (cf. les écrits de Jean Bodin , David Hume , ou plus récemment Irving Fisher ). Mais le rénovateur de ce courant est sans conteste l'économiste Milton Friedman (chef de file de l' École de Chicago ), qui a contribué à réhabiliter et à relancer la théorie quantitative de la monnaie contre le paradigme dominant de l'époque, le keynésianisme . Ainsi la politique monétaire est réapparue sur le devant de la scène pour figurer depuis quelques années parmi les instruments essentiels de la politique économique. Description [ modifier ]Monnaie et finance Publié le 14/08/2011 La Fed promet de maintenir sa politique et de ne plus relever ses taux jusqu'à la mi-2013. Comment interpréter ce fait sans précédent? Par Gerald O' Driscoll, depuis les États-Unis Article publié en collaboration avec UnMondeLibre