Monetary policy
Riksbank research suggests inflation correlated with policy rate in some cases
Research by two Swedish economists uses the work of Irving Fisher to illustrate how low policy rates might be leading to low inflation in some countries; cites Irving Fisher for causal explanation
IMF staff identify ‘priority areas’ for SSA reform
Staff members in the IMF African department chart the progress of financial development in sub-Saharan Africa, the challenges that remain and how they might be addressed
ECB bulletin: risks to taxpayer funds gradually diminishing
An article in the European Central Bank's latest bulletin weighs the fiscal impact of financial sector support during the crisis, highlighting the benefits of a move towards banking union
National Bank of Denmark confident it possesses ‘necessary tools’ to defend currency
The ministry of finance will resume issuing government bonds in October after measures to stabilise the krone have ‘desired effect’
BoE’s Forbes calls for rethink of exchange rate pass-through
MPC member outlines new, more nuanced approach to measuring the exchange rate’s impact on inflation, noting this implies rates could need to be tightened sooner than older models suggest
Flaws in banking laws common across countries, working paper finds
IMF working paper examines the weaknesses in specific banking laws, concluding they are not country specific; seeks to provide a blueprint for ways to improve
Bank of England wary of China risks but UK outlook steady
The MPC’s view is not materially affected by recent volatility in the financial markets as it keeps policy on hold; domestically, an increase in wage growth is offset by higher productivity
RBA deputy welcomes ‘considerable’ exchange rate adjustment
Philip Lowe says flexibility of the exchange rate, labour market and monetary policy have helped Australian economy adjust to ‘downswing’ in commodity prices and mining investment
Negative rates working as planned, says Riksbank’s Cecilia Skingsley
Transmission of negative rates is working well and there is room to ease further, deputy governor says, despite the possibility of unwanted side effects; changing inflation target a ‘bad idea’
National Bank of Kazakhstan sets base rate for first time
Central bank sets new benchmark interest rate at 12% in first monetary policy meeting under inflation targeting framework
BIS’s Borio says current account obsession obscures important results
Focus on current account imbalances obscures many important – and often counterintuitive – results about global financial flows
National Bank of Denmark calls end to crisis measures
Central bank has moved from buying to selling foreign exchange in recent months, opening up room to return deposit limits to more normal levels and re-start government bond issuance
Turkish central bank eyes return to normality
Central bank plans to return to a simpler, more conventional monetary policy framework, but politics may yet get in the way
Capital controls ineffective at handling policy trilemma, ECB paper finds
Emerging market capital controls have a limited impact on monetary policy trilemma variables and come with spillover effects, the authors warn
PBoC steps in with rate cuts
Central bank cuts interest rates and reserve requirements amid deepening crisis, and uses the opportunity to push liberalisation agenda
Falling real rates put US ‘at risk of financial instability’, says Kocherlakota
Minneapolis Fed president warns that long-run real interest rates are falling and risk causing financial instability and ineffectual monetary policy
Trawl through BoJ archives reveals emergence of current policy-making
Study of failures and successes of BoJ policy-making in the 1980s reveals the emergence of current thinking about how best to conduct monetary policy
FOMC inching towards rate hike, minutes hint
Minutes of July meeting show some members are still concerned that labour market and inflation data are not strong enough for a hike, but several think the economy is nearly ready
Irish central bank paper finds high cost to hasty austerity
Economists find most of the costs of fiscal consolidation from 2011-13 could have been avoided if policy-makers waited until the zero lower bound was no longer a constraint
Iceland’s Guðmundsson sees role for IMF as arbiter of capital flows
Small open economies are being forced to take sub-optimal actions to defend themselves from capital flows, and while global ‘rules of the game’ are far off, IMF monitoring could be a first step
Markets regain confidence after PBoC officials intervene
Yi Gang and Zhang Xiaohui step in to reassure markets, helping to reverse some of the renminbi’s fall; Asian currencies also slide and Bank Indonesia takes action
Sarb research updates forecasting model
Refinements to central bank’s semi-structural general equilibrium model aim to better reflect the South African economy over the inflation-targeting period
Managing financial stability, monetary systems and the economic order
If policy-makers fail to address the challenges presented by strong feedback loops between the economic and monetary systems, the next crisis could seriously damage faith in market-based economies
Book notes: Money and Trade Wars in Interwar Europe, by Alessandro Roselli
Alessandro Roselli’s book on interwar Europe should be compulsory reading for all those who are handling or interested in the current crisis in the euro area