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Tag Archives: Monetary Policy

Tom Rees — Bank of England hikes interest rates for first time in a decade

Bank of England increases interest rates for the first time in a decade in order curb high inflation squeezing UK households Base rate lifted from 0.25pc to 0.5pc; Mark Carney will give a press conference at 12.45pm to explain the central bank's decision Bank of England last hiked interest rates in July 2007; interest rates fell to historic lows to help the UK economy recover from the financial crisis Pound plunges on currency markets on dovish commentary from the central bank The...

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Michael Roberts — The monetary dilemma

According to the minutes of the last meeting of the monetary policy committee of the US Federal Reserve Bank, the most powerful monetary authority in the world, the committee members are split and unclear on what to do. “Some participants who counselled patience expressed “concern about the recent decline in inflation” and said the Fed “could afford to be patient under current circumstances.” They “argued against additional adjustments” until the central bank was sure that inflation was on...

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What, if anything, does Kevin Warsh understand?

I came across this article by Kevin Warsh that appeared in the Wall Street Journal last August, 2016. The article was re-posted by GATA.ORG.As you may know, Warsh is the currently the favorite to take over as Fed Chair when Janet Yellen's term expires next February.If you read the article you will find that Warsh sort of understands that Fed policy is confused and focused on either the wrong things or, things which the Fed has no set of tools to accomplish. On the other hand he seems to lack...

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Bill Mitchell — A former UK Chancellor attempts to save face and just becomes confused

On May 6, 1997, just 4 days after coming to office in what was to become Tony Blair’s retrogressive regime, the then British Labour Chancellor Gordon Brown announced that Labour would legislate the so-called independence of the Bank of England. The BBC claimed this was the “most radical shake-up in the bank’s 300-year history”, which gave “the bank freedom to control monetary policy”. Gordon Brown’s legacy to the British people, of course, is in his famous ‘light touch’ regulation, which he...

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Bill Mitchell — Mainstream macroeconomics credibility went out the window years ago

The Vice President of the European Central Bank, Vítor Constâncio, gave the opening speech – Developing models for policy analysis in central banks – at the Annual Research Conference, Frankfurt am Main, on September 25, 2017. Last time I heard Constâncio speak in person, in Florence 2015, he was in typical Europhile central bank denial. He thought the Eurozone was fine, a great success given the low inflation, inferring that the ECB’s conduct had something to do with that. He didn’t talk...

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Brian Romanchuk — The Price Level Does Not Exist

It appears to be a mistake to refer to the price level when discussing the theoretical properties of an economy; at best, there are a few price levels in play at a given time. If we are referring to the measured level of a price index, such as the Consumer Price Index (CPI) there is no difficulty, however this aggregate price index should not be expected to correspond to any useful theoretical construct. This article explains my logic, and then looks at the practical implications of what...

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Do Phillips Curves Conditionally Help to Forecast Inflation?

AbstractThis paper reexamines the forecasting ability of Phillips curves from both an uncon- ditional and conditional perspective by applying the method developed by Giacomini and White (2006). We find that forecasts from our Phillips curve models tend to be unconditionally inferior to those from our univariate forecasting models. Significantly, we also find conditional inferiority, with some exceptions. When we do find improvement, it is asymmetric – Phillips curve forecasts tend to be...

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Edward Harrison — The limits of monetary policy in today’s fiat currency world

First, let me say that two primary goals of macro policy everywhere and always should be full employment and stable prices. Why? I am looking at this purely through the lens of the political economy – thinking about how our fellow citizens live and breathe the economy and how government should be designed to respond to their needs. On the jobs side, we have seen that high unemployment leads to political instability, economic turmoil and conflict. When you have masses of people unemployed or...

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