Documents monetary policy 705 results

"In the face of the perceived high public and private debt levels and sluggish recovery that has followed the financial crisis of 2007-08, there have been calls for greater fiscal-monetary coordination to stimulate nominal demand. Policy debates have been focused upon the inflationary expectations that may be generated by monetary financing or related policies, consistent with New Consensus Macroeconomics theoretical frameworks. Historical examples of fiscal-monetary policy coordination have been largely neglected, along with alternative theoretical views, such as post-Keynesian perspectives that emphasise uncertainty and demand rather than rational expectations. This paper begins to address this omission. First, we provide an overview of the holdings of government debt by both central banks and commercial banks as an imperfect but still informative proxy for fiscal-monetary coordination in advanced economies in the 20th century. Second, we develop a new typology of forms of fiscal-monetary coordination that includes both direct and less direct forms of monetary financing, illustrating this with case-study examples. In particular, we focus on the 1930s-1970s period when central banks and ministries of finance cooperated closely, with less independence accorded to monetary policy and greater weight attached to fiscal policy. We find a number of cases where fiscal-monetary coordination proved useful in stimulating economic growth, supporting industrial policy objectives and managing public debt without excessive inflation."

"Economic Policy provides a unique combination of facts-based analysis, state-of-the art economic theory, and insights from first-hand policy experience at the national and international levels to shed light on current domestic and international policy challenges. It is ideally suited for students, practitioners, and scholars seeking understanding both of the pragmatic constraints of real-world policy making and the analytical tools that enhance inquiry and inform debates. The authors draw on their experiences as academics and as policy makers in European and international institutions to offer a deep dive into the rationale, design, and implementation of economic policy across a range of policy domains: fiscal policy, monetary policy, international finance, financial stability, taxes, long-term growth and inequality. Highlighting the ways experience, theories, and institutions interact, each chapter starts with historical examples of dilemmas and shows how theoretical approaches can help policy makers understand what is at stake and identify solutions. The authors highlight the differences between the positive approach to economic policy (how do policies impact the economy), the normative approach (what should be policymakers' objectives and against which criteria should their action be judged), and the political-economy constraints (what are the limits and obstacles to public intervention). They rely on the most recent academic research, providing technical boxes while explaining the mechanisms in plain English in the text, with appropriate illustrations. This new edition is informed by such important recent developments as the Great Recession, the strains on the European Union and the Euro, the challenges of public and private debt, the successes and setbacks to emerging markets, changes to labor markets along with the increased attention to inequality, the debates on secular stagnation and its implications for conventional and unconventional monetary policy, the re-regulation of the financial sector, the debt overhang in both the public and the private sector."

"Over the past winter, the EU economy performed better than expected. As the disruptions caused by the war in Ukraine and the energy crisis clouded the outlook for the EU economy, and monetary authorities around the world embarked on a forceful tightening of monetary conditions, a winter recession in the EU appeared inevitable last year. The Autumn 2022 Forecast had projected the EU economy to contract in the last quarter of 2022 and the first quarter of 2023. Instead, latest data point to a smaller-than-projected contraction in the final quarter of last year and positive growth in the first quarter of this year. The better starting position lifts the growth outlook for the EU economy for 2023 and marginally for 2024. Compared to the Winter 2023 interim Forecast,"

"In academia and political debates, the notions of ‘degrowth' has gained traction since the dawn of the 21st century. While some uncertainty around its exact definition remains, research on degrowth revolves around the idea of reducing resource and energy throughput as a unifying theme. We employ a mixed-methods design to systematically review the scientific peer-reviewed English literature from 2008 to 2022 that refers to ‘degrowth' or ‘post-growth' in title, keywords or abstract (N = 951). We find a lack of concrete distributional and monetary policy proposals in the sample analyzed, and a low overall degree of collaboration among authors in relation to degrowth's age and size. The scientific peer-reviewed literature analyzed can be grouped into seven clusters along two major gradients, one along methodology (qualitative-quantitative) and the other along scale-of-analysis (individual-societal). We conclude that the academic literature about degrowth would benefit from a more prominent discussion of the political implications of its ideas and proposals, and that in particular the debate about distributional policy implications of degrowth should be more prominent and concrete, with a stronger focus on distributional policies in a degrowing economy."

"The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now—at 3.1 percent—is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually.

The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability. Chapter 2 explains that changes in mortgage and housing markets over the prepandemic decade of low interest rates moderated the near-term impact of policy rate hikes. Chapter 3 focuses on medium-term prospects and shows that the lower predicted growth in output per person stems, notably, from persistent structural frictions preventing capital and labor from moving to productive firms. Chapter 4 further indicates how dimmer prospects for growth in China and other large emerging market economies will weigh on trading partners."

"We use scenario analysis to assess the macroeconomic effects of carbon transition policies aimed at mitigating climate change. To this end, we employ a version of the ECB's New Area-Wide Model (NAWM) augmented with a framework of disaggregated energy production and use, which distinguishes between “dirty” and “clean” energy. Our central transition scenario is that of a permanent increase in carbon taxes, which are levied as a surcharge on the price of dirty energy. Our findings suggest that increasing euro area carbon taxes to an interim target level consistent with the transition to a net-zero economy entails a transitory rise in inflation and a lasting, albeit moderate decline in GDP. We show that the short and medium-term effects depend on the monetary policy reaction, on the path of the carbon tax increase and on its credibility, while expanding clean energy supply is key for containing the decline in GDP. Undesirable distributional effects can be addressed by redistributing the fiscal revenues from the carbon tax increase to low-income households."

"Bernanke and Blanchard answer the question posed by the title by specifying and estimating a simple dynamic model of prices, wages, and short-run and long-run inflation expectations. The estimated model allows them to analyze the direct and indirect effects of product-market and labor-market shocks on prices and nominal wages and to quantify the sources of US pandemic-era inflation and wage growth. The authors find that, contrary to early concerns that inflation would be spurred by overheated labor markets, most of the inflation surge that began in 2021 was the result of shocks to prices given wages. These shocks included sharp increases in commodity prices, reflecting strong aggregate demand, and sectoral price spikes, resulting from changes in the level and sectoral composition of demand together with constraints on sectoral supply. However, although tight labor markets have thus far not been the primary driver of inflation, the authors find that the effects of overheated labor markets on nominal wage growth and inflation are more persistent than the effects of product-market shocks. Controlling inflation will thus ultimately require achieving a better balance between labor demand and labor supply."

"Climate and environmental issues will likely impact the financial system's stability as they become more pervasive and tangible. As a result, the appropriate financial regulatory and supervisory measures must be in place. This article discusses the challenges faced by financial institutions and the financial system due to the materialisation of climate and environmental risks and the shortcomings in current prudential frameworks. The arguments presented suggest that if the fundamental goal of the Paris Agreement-aligned transition is to phase out coal-fired energy, reduce oil and gas use, and transform carbon-intensive businesses, improving bank governance supervision and/or fostering climate-related disclosure requirements may not be enough. A critical role is instead played by capital requirements that adequately consider climate risks. Moreover, since microprudential tools are typically focused on direct exposures, they may not be sufficient to address the systemic dimension of climate risks. Macroprudential measures should therefore not be overlooked."