Macroeconomics
Demographics could explain entire drop in real rate – Fed paper
Authors find ageing population can explain most – or even all – of the estimated decline in the long-run real interest rate, implying low rates are here to stay
Maskin: technocrats should set eurozone fiscal policy
Harvard economist argues a technocratic body similar to a central bank could set spending and revenue targets in eurozone before allowing politicians to determine the details
RBI’s Mundra: pinning down credit-GDP link is tricky
Deputy governor says a host of factors combine to make the link between credit and growth unclear, but the link may reinstate itself as the economy stabilises
BoE’s Forbes studies generation of ‘global tsunamis’
External MPC member asks why some global shocks have major consequences and others do not, seeking answers in countries’ financial linkages, common shocks and contagion
Richmond Fed tries to bridge gap between rules and discretion
Economist presents research urging Fed to be more explicit about its strategy using “graphical framework”, while Jeffrey Lacker says rules offer valuable guidance to policy-makers
Eurozone exchange rate pass-through has declined over time – researcher
Italian exchange rate pass-through has behaved very differently from other major eurozone economies – particularly Germany’s – paper finds
RBA’s Kent considers life after the mining boom
Australian economy is well into an adjustment, following the country’s mining investment boom; RBA correctly identified the patterns of adjustment, but was surprised by the magnitude
Chinese financial spillovers to Asia-Pacific on the rise – BIS paper
Working paper finds Chinese equity markets now have almost as much of an impact on Asia-Pacific as the US, though the effects differ in stressed and placid times
Book notes: And the weak suffer what they must?, by Yanis Varoufakis
A book that is likely to elicit strong opinions – but Varoufakis writes persuasively, and may well win over many of his readers, says David Mayes
Falling natural rates impacted by common global factors – Fed paper
Research by Kathryn Holston, Thomas Laubach and John Williams finds no sign of natural rate decline reversing; advanced economies jointly affected by global factors
HKMA researchers dig into persistent covered interest parity deviation
Authors posit forex swap dealers filter out counterparty risk from money market rates when setting swap prices; risk adjustment continues even in non-stressed periods
Jackson Hole: economists flag costs and benefits of bloated balance sheets
Economists including Christopher Sims, Ricardo Reis and Jeremy Stein unpack the economics of central bank balance sheets, identifying both dangers and potential benefits
Book notes: The euro and the battle of ideas, by Markus K Brunnermeier, Harold James and Jean-Pierre Landau
The authors have produced a fascinating and informative book that offers suggestions on how differences in beliefs can be overcome
More work needed to make case for GDP-linked bonds – BoE paper
The design of GDP-linked bonds needs to align macroeconomic need with investor demand, according to a paper authored for the G20 summit; clearer guidelines and principles could aid adoption
Fiscal stimulus works even in debt-driven recessions – Cleveland Fed paper
Study uses defence spending to estimate fiscal multiplier, finding it is higher in areas with larger debt burdens, contrary to the fears of some economists
Bullard backs new approach to forecasting
Idea of economy converging to a single steady state has “likely outlived its usefulness”, St Louis Fed president says; instead reserve bank will now focus on regime-based forecasts
BoE research finds support for Phillips curve in micro data
Authors turn to direct measures of firms’ expectations and employ new instrumental variables in search of empirical support for the Phillips curve
IMF paper examines drivers of India’s disinflation
‘Backward-looking’ expectations and domestic institutional structures amplified shocks, paper says; only 15% of India’s deflation is attributed to a decline in oil price
Argentinian central bank removes $5m dollar conversion cap
New measures aim to make it easier for businesses to acquire dollars; bank removes cap on dollar conversion and reduces paperwork involved
IMF paper explores link between imports and pro-cyclicality of productivity
Research finds firm-level import decisions explain “non-trivial” fraction of fluctuations in aggregate productivity in South Korean manufacturing sector between 2006 and 2012
Regulation may be fuelling covered interest parity breakdown – BoJ economists
Authors link puzzling breakdown of CIP to regulations including liquidity constraints, as well as divergent monetary policies
IMF urges Abenomics ‘reload’ as BoJ struggles
Fund tells Japanese authorities to be clearer and more systematic in setting policy, as government unveils new stimulus; working paper suggests alternative to helicopter money
IMF’s crisis performance criticised by internal review
Report evaluates IMF’s handling of eurozone crises from 2010 to 2013; work during programme design and implementation described as ‘uneven’ and concerns raised over political pressure
Irish central bank warns of ‘negative and material’ impact from Brexit
Quarterly bulletin discusses channels through which UK vote to leave EU will affect Ireland; economy expected to grow by 4.9% this year and 3.7% next