Monetary Policy
Jacques de Larosière on the international monetary system and the euro
Christopher Jeffery speaks to former IMF managing director Jacques de Larosière about continuing efforts to restore the global financial system and where the future now lies for Europe
ECB paper examines financial exposure in eurozone
Working paper finds eurozone investors are ‘overexposed’ to securities issued within the region, more so in the case of ‘low-rating economies’
Dudley expects ‘some turbulence’ when Fed hikes rates
New York Fed president highlights importance of short-term rate path for financial asset prices – something he says will reflect changes in economic outlook and financial conditions
IMF deputy warns ‘leakages’ could undermine macro-prudential policy
Mitsuhiro Furusawa says macro-prudential tools could force financial activities into a less regulated sector or country, but adds little is known about benefits of ‘leaning against the wind’
IMF paper urges central banks to adopt sharia-compliant facilities
Authors warn lack of sharia-compliant monetary policy tools is hampering efficient liquidity management among Islamic banks, but is an area that requires further research
BoJ paper outlines idea of ‘natural yield curve’
Curve defines level of natural rate of interest at all maturities; authors suggest it provides a ‘useful benchmark’ for the conduct of monetary policy
IMF tells Fed to wait until 2016 to hike rates
Fund says keeping rates lower for longer would provide ‘valuable insurance’ against disinflation; encourages Fed to hold more press conferences and publish quarterly monetary policy report
Andrew Sheng: The new politics of central banking
Extraordinary policy actions by the world’s leading central banks have left them politicised and entangled in an increasingly awkward operating environment
Fed’s Brainard sees scope for ‘watchful waiting’
Governor says there may be room to ‘support further healing’ in the labour market before raising interest rates, but notes first hike could still come this year
Former IMF chief weighs up benefits and costs of QE
Quantitative easing is having a profound effect on markets and banking. Jacques de Larosière weighs up some of the benefits and costs of QE
Draghi warns high volatility here to stay
Government bond yields continue to climb as Draghi says ‘we should get used to periods of higher volatility’ with interest rates on the floor; ECB keeps policy unchanged
Jeffrey Frankel argues for NGDP targeting by EMs
Monetary economist says targeting nominal GDP could allow emerging and developing countries to more credibly establish a nominal anchor
Hungarian central bank to adopt new policy rate
From September it will use the rate on a new deposit facility with a longer maturity, to encourage banks to park funds with the government instead of the central bank
BoE paper questions dominance of Normal distribution
Using the t distribution and time-varying variance improves a vector autoregression’s fit with the data and forecasting performance, researchers find
Stanley Fischer praises BoE financial stability set-up as ‘leading model’
Fed vice-chair explores different arrangements for financial stability and concludes separate committee within central bank is a good model; does not rule out leaning against wind
Boston Fed president preaches patience
Eric Rosengren says it is too soon to know whether weaker economic activity at start of year is down to temporary factors or ‘broader changes in the economy’
IMF pushes Belarus to adopt new policy framework
International Monetary Fund tells National Bank of Belarus to adopt monetary targeting framework ‘without further delay’; staff and national authorities disagree over exchange rate
St. Louis Fed’s Bullard makes case for NGDP target
Working paper questions appropriate monetary policy response at zero lower bound and explores the mechanics of a ‘special upward adjustment’ in the price level on credit market
Five problems with floating rate exchange regimes
Robert Aliber bemoans the dangers of sharp moves in major currencies that are the result of floating rate currency regimes, and answers five rhetorical questions related to monetary stability
Kocherlakota sets out path back to maximum employment
Minneapolis Fed president says the FOMC should set policy in a way that allows for at least three more years ‘as good as 2014’ if the labour market is to achieve highs last seen in 2006
Central bank liquidity surge is not without historical precedent
Major central banks have injected $14 trillion of liquidity into the global economic system, but such surges are not without historical precedent
Book notes: Monetary policy and financial repression in Britain 1951–1959, by William A Allen
A fascinating and coherent account of British monetary policy in the 1950s
Book notes: Smart Money, by Andrew Palmer
An important attempt to show how financial innovation is “reshaping our world for the better” all the more important
Swiss National Bank open to buying foreign assets
IMF article IV report suggests buying foreign assets to address deflationary pressures; Swiss National Bank says it is an option but wants to see how outlook develops before easing further