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Central banks are always concerned with keeping long-run inflation expectations well anchored at some implicit or explicit low target inflation rate. To that end, they are constantly on the lookout for indicators that can gauge those expectations accurately. One such indicator frequently reported in the specialized financial press and by central banks around the world is constructed with the forward rates technique, which exploits price differentials between government bonds of various maturities. This report examines the theory behind those indicators and assesses the extent to which they can be trusted in practice. Charts and tables.
"Central banks are always concerned with keeping long-run inflation expections well anchored at some implicit or explicit low target inflation rate. To that end, they are constantly on the lookout for indicators that can gauge those expectations accurately. One such indicator frequently reported in the specialized financial press and by central banks around the world is constructed with the forward rates technique, which exploits price differentials between government bonds of various maturities. This article examines the theory behind those indicators and assesses the extent to which they can be trusted in practice" -- Abstract.
Bonds with payments linked to the Retail Price Index were first issued in the United Kingdom in 1981 and now account for a significant proportion of the total UK government bond market. This paper discusses various methods by which prices of these indexed bonds can be compared with prices of conventional bonds to infer market expectations of future inflation, and in particular outlines the approach currently used to produce the inflation term structure published in the Bank of England's Inflation Report. There are a number of estimation difficulties - both theoretical and practical - in deriving such term structures and therefore a number of caveats that should be borne in mind when interpreting such measures of expectations.
More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.
Concludes the role of asset prices in monetary policy is one of the most important, and difficult, questions confronting central banks.
Assessing regulatory measures taken at the EU level that impact European bond markets, this book examines the desirability, utility, and feasibility of certain policy measures.
This print textbook is available for students to rent for their classes. The Pearson print rental program provides students with affordable access to learning materials, so they come to class ready to succeed. For intermediate courses in economics. A unified view of the latest macroeconomic events In Macroeconomics, Blanchard presents an integrated, global view of macroeconomics, enabling students to see the connections between goods markets, financial markets, and labor markets worldwide. Organized into two parts, the text contains a core section that focuses on short-, medium-, and long-run markets and two major extensions that offer more in-depth coverage of the issues at hand. From the major economic crisis that engulfed the world in the late 2000s, to monetary policy in the US, to the problems of the Euro area, and growth in China, the text helps students make sense not only of current macroeconomic events but also of those that may unfold in the future. Integrated, detailed boxes in the 8th Edition have been updated to convey the life of macroeconomics today, reinforce lessons from the models, and help students employ and develop their analytical and evaluative skills. Also available with MyLab Economics By combining trusted author content with digital tools and a flexible platform, MyLab personalizes the learning experience and improves results for each student.
This paper provides a comprehensive survey of pertinent issues on sovereign debt restructurings, based on a newly constructed database. This is the first complete dataset of sovereign restructuring cases, covering the six decades from 1950–2010; it includes 186 debt exchanges with foreign banks and bondholders, and 447 bilateral debt agreements with the Paris Club. We present new stylized facts on the outcome and process of debt restructurings, including on the size of haircuts, creditor participation, and legal aspects. In addition, the paper summarizes the relevant empirical literature, analyzes recent restructuring episodes, and discusses ongoing debates on crisis resolution mechanisms, credit default swaps, and the role of collective action clauses.
On August 24-25, 2010, the National Defense University held a conference titled “Economic Security: Neglected Dimension of National Security?” to explore the economic element of national power. This special collection of selected papers from the conference represents the view of several keynote speakers and participants in six panel discussions. It explores the complexity surrounding this subject and examines the major elements that, interacting as a system, define the economic component of national security.