Monetary policy
Viñals supports negative interest rates in current climate
Financial counsellor believes negative rates are helpful, but there are limits regarding how low they can go and how long they can stay there
Advanced economies could learn from EM counterparts in managing balance sheets, paper says
Composition of advanced economies' balance sheets is aligning in some respects to their EM counterparts, largely as a consequence of increasing size since the financial crisis, paper says
Mexican deputy calls for ‘proper consideration’ of peers
Mexican deputy stresses need for improved policy communication between advanced economies and emerging markets
Operational reform has not impacted longer term rates, BoE working paper says
Reserve averaging and reserve targets reduced volatility in overnight rate but had little impact on longer-term rates, research finds
BIS’s Shin argues bank capital underpins both monetary policy and financial stability
Research sheds light on tension between bank shareholders and wider society, as high levels of capital support lending and therefore affect the real economy as well as the financial sector
Riksbank paper finds BVAR models can outperform DSGE
Bayesian vector autoregressions often produce better forecasts than judgement-based or DSGE-based options, authors find – but DSGE is still more popular for policy-making
BoJ’s Funo calls for efforts to revive potential growth
Board member uses first speech to back continued expansionary policy, highlighting steps that could help raise Japan’s potential growth from current depressed levels
Angolan central bank hikes again amid soaring inflation
Inflation breaches 20% in February prompting central bank to raise interest rates to 14%; new governor continues tightening cycle in attempt to curb prices
Economists still scrambling to adapt models to lower bound
Many traditional economic models perform poorly now major economies are near the effective lower bound, but economists at the RES annual conference offer a range of solutions
RBNZ investigating possible leak
Central bank launches external investigation, after former RBNZ economist was told there would be an unexpected rate cut before the decision was made public
Currency networks shape global spillovers, BIS authors find
Authors make use of recently enhanced BIS data sets to map currency networks, studying how these affected the risk-taking channel of monetary policy during the ‘taper tantrum’
BoE alert to second-round effects from low inflation, minutes show
BoE enters eighth year with rate at 0.5%; committee will continue to watch for second-round effects of inflation on wages
Bank capital matters for risk-taking channel of monetary policy, Norges Bank paper finds
Less capitalised Norwegian banks are more likely to extend credit to risky firms in response to a cut in the policy rate, author finds
Inflation target and interest rates about right, UK survey suggest
Median expectations of inflation for 2016 were 1.8%; largest share of UK public says it is best for the economy if interest rates stay where they are
Central Bank of Brazil calls for structural reforms
Inflation figures come down, but still nowhere near target range; central bank calls on government to ensure fiscal consolidation in longer-term
IMF’s Viñals announces ‘long and testing to-do list’ for policy-makers
Viñals says the plan for ‘great normalisation’ is more urgent than ever; calls for policy action beyond monetary and financial measures
RBNZ tweaks forecasting models and cuts key rate
Reserve Bank of New Zealand cuts rates by 25bp to 2.25% in attempt to prevent inflation expectations from falling further; updates models in wake of optimistic forecasts
Jamaica successfully restarts bond market, governor says
Government debt issuance in February was oversubscribed; Wynter hopes surplus liquidity will continue to increase, helping to accommodate ‘crowding-in’ of private investment
BIS paper: short-term interest rate may no longer be enough to set policy
Globalised debt markets, the falling long-term interest rate and dollar debt accumulation has altered every major aspect of the monetary transmission mechanism in emerging markets, authors say
Central banks running out of room amid turbulence, BIS warns
Confidence in central banks is “faltering” as policies prove impotent, while negative rates erode bank profitability and debt levels weigh on global growth
Regulation affects pass-through to current account, BoE paper finds
Discussion paper sets out theoretical and empirical backing for idea that low rates can cause a current account deficit to grow, in the presence of liberalised financial markets
IMF welcomes Indian inflation progress, but RBI should ‘stand ready’
IMF welcomes progress made with inflation targeting in India; calls for “growth-friendly” fiscal consolidation to support monetary policy
Central bank models need to adjust to nature of exchange rate pass-through, paper says
Exchange rate pass-through shown to be incomplete, endogenous, nonlinear and asymmetric; working paper seeks to quantify effect over time
Snapshot: IMF reveals staff views on Argentina
IMF releases informal briefings compiled 2013-2015 in absence of Article IV; staff highlighted adverse effects of central bank and banking sector financing of government