Author : Jakob de Haan
Publisher :
Page : 15 pages
File Size : 23,66 MB
Release : 2014
Category :
ISBN :
Author : Andreas Jobst
Publisher : International Monetary Fund
Page : 48 pages
File Size : 16,24 MB
Release : 2016-08-10
Category : Business & Economics
ISBN : 1475524471
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.
Author : Richhild Moessner
Publisher :
Page : 12 pages
File Size : 39,58 MB
Release : 2019
Category :
ISBN :
Short-term market interest rates seem to have been less responsive to economic news in the post-crisis period. We evaluate two potential reasons: forward guidance and the constraint on monetary policy imposed by the zero lower bound (ZLB). We quantify how the ZLB has dampened market reactions to news in the United States, using estimates of the probability of hitting the ZLB derived from overnight index swap rates. For short maturities, variations in the ZLB's probability are sufficient to account for the fall in the sensitivity of market interest rates while the ZLB was binding. However, since it was precisely at the ZLB that forward guidance was most actively used, its role cannot be ruled out. But even after the policy rate rose, significantly reducing the ZLB's probability, the market's response to news continued to be more muted for shorter-maturity bonds and some risky assets. This suggests that other mechanisms also played a part, including forward guidance about gradual policy rate normalisation.
Author : Peter J. N. Sinclair
Publisher : Routledge
Page : 402 pages
File Size : 14,9 MB
Release : 2009-12-16
Category : Business & Economics
ISBN : 1135179778
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Author : Mr.Ales Bulir
Publisher : International Monetary Fund
Page : 29 pages
File Size : 47,4 MB
Release : 2014-09-24
Category : Business & Economics
ISBN : 1498392911
We study whether clarity of central bank inflation reports affects return volatility in financial markets. We measure clarity of reports by the Czech National Bank, the European Central Bank, the Bank of England, and Sveriges Riksbank using the Flesch-Kincaid grade level, a standard readability measure. We find some evidence, mainly for the euro area, of a negative relationship between clarity and market volatility prior to and during the early stage of the global financial crisis. As the crisis unfolded, there is no longer robust evidence of a negative connection. We conclude that reducing noise using clear reports is possible but not without challenges, especially in times of crisis.
Author : Andrew J. Filardo
Publisher :
Page : 17 pages
File Size : 21,19 MB
Release : 2014
Category :
ISBN :
Four major central banks have adopted new approaches to policy rate forward guidance with the aim of enhancing the effectiveness of monetary policy at the zero lower bound. In this special feature, we examine these approaches and assess their impact. So far, the forward guidance appears to have led to lower volatility of near-term expectations of the future path of policy rates, but the effects on the level of interest rate expectations and on the responsiveness of financial markets to news are less clear. At the same time, the forward guidance raises a number of significant challenges. How they are managed will ultimately determine the enduring value of this communication tool.
Author : Pavel S. Kapinos
Publisher :
Page : 30 pages
File Size : 22,95 MB
Release : 2017
Category :
ISBN :
This paper employs a recent contribution to the construction of the shadow nominal interest rate during the zero lower bound episode of the Great Recession of 2008-2009 and the Greenbook forecasts to obtain a measure of monetary policy shocks over that time period. It then identifies monetary policy news shocks as a novel measure of the forward-looking conduct of monetary policy in the U.S. Using the data from 1987-2010 and impulse responses from the method of local projections, it shows that contractionary monetary surprise and news shocks tended to reduce systemic risk measures over the full sample. In contrast, expansionary monetary news shocks reduced systemic risk at the zero lower bound, whereas surprises had little effect. These findings suggest that the Federal Reserve's efforts at providing expansionary forward guidance at the zero lower bound were successful in stabilizing measures of systemic risk during the Great Recession.
Author : Ruchir Agarwal
Publisher : International Monetary Fund
Page : 89 pages
File Size : 23,95 MB
Release : 2019-04-29
Category : Business & Economics
ISBN : 1484398777
The experience of the Great Recession and its aftermath revealed that a lower bound on interest rates can be a serious obstacle for fighting recessions. However, the zero lower bound is not a law of nature; it is a policy choice. The central message of this paper is that with readily available tools a central bank can enable deep negative rates whenever needed—thus maintaining the power of monetary policy in the future to end recessions within a short time. This paper demonstrates that a subset of these tools can have a big effect in enabling deep negative rates with administratively small actions on the part of the central bank. To that end, we (i) survey approaches to enable deep negative rates discussed in the literature and present new approaches; (ii) establish how a subset of these approaches allows enabling negative rates while remaining at a minimum distance from the current paper currency policy and minimizing the political costs; (iii) discuss why standard transmission mechanisms from interest rates to aggregate demand are likely to remain unchanged in deep negative rate territory; and (iv) present communication tools that central banks can use both now and in the event to facilitate broader political acceptance of negative interest rate policy at the onset of the next serious recession.
Author : Laurent Ferrara
Publisher : Springer
Page : 300 pages
File Size : 19,46 MB
Release : 2018-06-13
Category : Business & Economics
ISBN : 3319790757
This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
Author : Günter Coenen
Publisher :
Page : 48 pages
File Size : 29,71 MB
Release : 2021
Category : Fiscal policy
ISBN :
We study the incidence and severity of periods with a binding effective lower bound on nominal interest rates and the efficacy of three types of state-dependent policies-forward guidance about the path of future interest rates, large-scale asset purchases and spending based fiscal stimulus-in mitigating the detrimental consequences of the lower bound. Based on the ECB's New Area-Wide Model of the euro area, our findings suggest that, if unaddressed, the lower bound can cause substantial macroeconomic distortions. In the near term, forward guidance, if fully credible, is most powerful and can largely undo the distortions due to the lower bound. A combination of imperfectly credible forward guidance, asset purchases and fiscal stimulus is almost equally effective, especially when asset purchases enhance the credibility of the forward-guidance policy via a signalling effect. In the long run, with an equilibrium real rate as low as zero, a combination of all three policies is needed to materially reduce the distortions.
