Quantitative Easing
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Quantitative Easing and Inequality: QE Impacts on Wealth and Income Distribution in the United States After the Great Recession
University of Puget Sound Sound Ideas Economics Theses Economics, Department of Fall 2019 Quantitative Easing and Inequality: QE impacts on wealth and income distribution in the United States after the Great Recession Emily Davis Follow this and additional works at: https://soundideas.pugetsound.edu/economics_theses Part of the Finance Commons, Income Distribution Commons, Macroeconomics Commons, Political Economy Commons, and the Public Economics Commons Recommended Citation Davis, Emily, "Quantitative Easing and Inequality: QE impacts on wealth and income distribution in the United States after the Great Recession" (2019). Economics Theses. 108. https://soundideas.pugetsound.edu/economics_theses/108 This Dissertation/Thesis is brought to you for free and open access by the Economics, Department of at Sound Ideas. It has been accepted for inclusion in Economics Theses by an authorized administrator of Sound Ideas. For more information, please contact [email protected]. Quantitative Easing and Inequality: QE impacts on wealth and income distribution in the United States after the Great Recession Emily Davis Abstract In response to Great Recession, the Federal Reserve implemented quantitative easing. Quantitative easing (QE) aided stabilization of the economy and reduction of the liquidity trap. This research evaluates the correlation between QE implementation and increased inequality through the recovery of the Great Recession. The paper begins with an evaluation of the literature focused on QE impacts on financial markets, wages, and debt. Then, the paper conducts an analysis of QE impacts on income, household wealth, corporations and the housing market. The analysis found that the changes in wealth distribution had a significant impact on increasing inequality. Changes in wages were not the prominent cause of changes in GINI post-recession so changes in existing wealth appeared to be a contributing factor. -
Staff Working Paper No. 845 Eight Centuries of Global Real Interest Rates, R-G, and the ‘Suprasecular’ Decline, 1311–2018 Paul Schmelzing
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QE Equivalence to Interest Rate Policy: Implications for Exit
QE Equivalence to Interest Rate Policy: Implications for Exit Samuel Reynard∗ Preliminary Draft - January 13, 2015 Abstract A negative policy interest rate of about 4 percentage points equivalent to the Federal Reserve QE programs is estimated in a framework that accounts for the broad money supply of the central bank and commercial banks. This provides a quantitative estimate of how much higher (relative to pre-QE) the interbank interest rate will have to be set during the exit, for a given central bank’s balance sheet, to obtain a desired monetary policy stance. JEL classification: E52; E58; E51; E41; E43 Keywords: Quantitative Easing; Negative Interest Rate; Exit; Monetary policy transmission; Money Supply; Banking ∗Swiss National Bank. Email: [email protected]. The views expressed in this paper do not necessarily reflect those of the Swiss National Bank. I am thankful to Romain Baeriswyl, Marvin Goodfriend, and seminar participants at the BIS, Dallas Fed and SNB for helpful discussions and comments. 1 1. Introduction This paper presents and estimates a monetary policy transmission framework to jointly analyze central banks (CBs)’ asset purchase and interest rate policies. The negative policy interest rate equivalent to QE is estimated in a framework that ac- counts for the broad money supply of the CB and commercial banks. The framework characterises how standard monetary policy, setting an interbank market interest rate or interest on reserves (IOR), has to be adjusted to account for the effects of the CB’s broad money injection. It provides a quantitative estimate of how much higher (rel- ative to pre-QE) the interbank interest rate will have to be set during the exit, for a given central bank’s balance sheet, to obtain a desired monetary policy stance. -
The Bank Restriction Act and the Regime Shift to Paper Money, 1797-1821
European Historical Economics Society EHES WORKING PAPERS IN ECONOMIC HISTORY | NO. 100 Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821 Patrick K. O’Brien Department of Economic History, London School of Economics Nuno Palma Department of History and Civilization, European University Institute Department of Economics, Econometrics, and Finance, University of Groningen JULY 2016 EHES Working Paper | No. 100 | July 2016 Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821* Patrick K. O’Brien Department of Economic History, London School of Economics Nuno Palma Department of History and Civilization, European University Institute Department of Economics, Econometrics, and Finance, University of Groningen Abstract The Bank Restriction Act of 1797 suspended the convertibility of the Bank of England's notes into gold. The current historical consensus is that the suspension was a result of the state's need to finance the war, France’s remonetization, a loss of confidence in the English country banks, and a run on the Bank of England’s reserves following a landing of French troops in Wales. We argue that while these factors help us understand the timing of the Restriction period, they cannot explain its success. We deploy new long-term data which leads us to a complementary explanation: the policy succeeded thanks to the reputation of the Bank of England, achieved through a century of prudential collaboration between the Bank and the Treasury. JEL classification: N13, N23, N43 Keywords: Bank of England, financial revolution, fiat money, money supply, monetary policy commitment, reputation, and time-consistency, regime shift, financial sector growth * We are grateful to Mark Dincecco, Rui Esteves, Alex Green, Marjolein 't Hart, Phillip Hoffman, Alejandra Irigoin, Richard Kleer, Kevin O’Rourke, Jaime Reis, Rebecca Simson, Albrecht Ritschl, Joan R. -
Frequently Asked Questions Coins and Notes July 2020
Frequently Asked Questions Coins and Notes July 2020 A. Currency Issuance 1. Under what authority does the Bangko Sentral ng Pilipinas (BSP) issue currency? The BSP is the sole government institution mandated by law to issue notes and coins for circulation in the Philippines. In Particular, Section 50 of Republic Act (R.A) No. 7653, otherwise known as The New Central Bank Act, as amended by Republic Act No. 11211, stipulates that the BSP shall have the sole power and authority to issue currency within the territory of the Philippines. It also issues legal tender commemorative notes and coins. 2. How does the BSP determine the volume/value of notes and coins to be issued annually? The annual volume/value of currency to be issue is projected based on currency demand that is estimated from a set of economic indicators which generally measure the country’s economic activity. Other variables considered in estimating currency order include: required currency reserves, unfit notes for replacement, and beginning inventory balance. The total amount of banknotes and coins that the BSP may issue should not exceed the total assets of the BSP. 3. How is currency issued to the public? Based on forecast of currency demand, denominational order of banknotes and coins is submitted to the Currency Production Sub-Sector (CPSS) for production of banknotes and coins. The CPSS delivers new BSP banknotes and coins to the Cash Department (CD) and the Regional Operations Sub-Sector (ROSS). In turn, CD services withdrawals of notes and coins of banks in the regions through its 22 Regional Offices/Branches. -
Monetary Policy Oversight in Comparative Perspective: Britain and America During the Financial Crisis
Political Science and Political Economy Working Paper Department of Government London School of Economics No. 3/2014 Monetary Policy Oversight in Comparative Perspective: Britain and America during the Financial Crisis Cheryl Schonhardt-Bailey (LSE) Monetary Policy Oversight in Comparative Perspective: Britain and America During the Financial Crisis Cheryl Schonhardt-Bailey Government Department London School of Economics and Political Science Houghton Street London WC2A 2AE [email protected] http://personal.lse.ac.uk/schonhar/ This study examines deliberation on monetary policy oversight in the US and UK between 2006 and 2009. It employs reciprocity as the key criterion for judging the quality of monetary policy oversight deliberation (i.e., committee participants are expected to engage with one another, taking up and responding to the reasons offered by other participants). Using automated content analysis, the empirical finding is that reciprocity is clearly evident in the parliamentary oversight committee, but much less so in the two congressional committees. The two country cases represent very different approaches to legislative oversight, with the UK demonstrating a committee approach both in terms of the testimony of the monetary policy body and of the behaviour of the legislative committee, while the US demonstrates a focus on a series of individual contributions both from the Fed chairman and Members of Congress. In the US, this appears to allow greater scope to divert discussion away from the primary focus of hearings (i.e., monetary policy). 1 I. Introduction In normal economic times, clashes between politicians and central bankers in legislative oversight hearings on monetary policy are not typically considered worthy of headline news coverage. -
HOW DID QUANTITATIVE EASING REALLY WORK? a New Methodology for Measuring the Fed’S Impact on Financial Markets
HOW DID QUANTITATIVE EASING REALLY WORK? A New Methodology for Measuring the Fed’s Impact on Financial Markets Ramin Toloui Stanford Institute for Economic Policy Research [email protected] SIEPR Working Paper No. 19-032 November 2019 ABSTRACT This paper introduces a new methodology for measuring the impact of unconventional policies. Specifically, the paper examines how such policies reshaped market perceptions of how the Fed would behave in the future—not merely the expected path for policy rates, but how the central bank would adjust that path in response to different combinations of future inflation and growth. In short, it studies how quantitative easing affected investor beliefs about the future policy reaction function. The paper (1) proposes a novel model of market expectations for the central bank’s future policy reaction function based on the Taylor Rule; (2) shows that empirical estimates of the model exhibit structural breaks that coincide with innovations in unconventional policies; and (3) finds that such policy innovations were associated with regime shifts in the behavior of 10-year U.S. Treasury yields, as well as unusual performance in risk assets such as credit spreads and equities. These findings provide evidence that a key causal channel for unconventional policies was via their impact on market expectations for the Fed’s future policy reaction function. These shifts in expectations, in turn, appear to have had larger, more persistent, and more pervasive effects across financial markets than found in previous studies. Monetary economics today is obsessed with balance sheets—and rightfully so. More than ten years after the global financial crisis, policy interest rates remain exceptionally low in much of the industrialized world. -
API-119: Advanced Macroeconomics for the Open Economy I, Fall 2020
Sep 1, 2020 API-119: Advanced Macroeconomics for the Open Economy I, Fall 2020 Harvard Kennedy School Course Syllabus: prospectus, outline/schedule and readings Staff: Professor: Jeffrey Frankel [email protected] Faculty Assistant: Minoo Ghoreishi [email protected] Teaching Fellow: Can Soylu Course Assistants: Julio Flores, Alberto Huitron & Yi Yang. Email address to send all questions for the teaching team: [email protected]. Times: Lectures: Tuesdays and Thursdays, 10:30-11:45 a.m. EST.1 Review Sessions: Tuesdays, 12:30-1:30 pm; Fridays, 1:30-2:30 pm EST.2 Final exam: Friday, Dec. 11, 8:00-11:00 am EST. Prospectus Course Description: This course is the first in the two-course sequence on Macroeconomic Policy in the MPA/ID program. It particularly emphasiZes the international dimension. The general perspective is that of developing countries and other small open economies, defined as those for whom world income, world inflation and world interest rates can be taken as given, and possibly the terms of trade as well. The focus is on monetary, fiscal, and exchange rate policy, and on the determination of the current account balance, national income, and inflation. Models of devaluation include one that focuses on the price of internationally traded goods relative to non-traded goods. A theme is the implications of increased integration of global financial markets. Another is countries’ choice of monetary regime, especially the degree of exchange rate flexibility. Applications include Emerging Market crises and problems of commodity-exporting countries. (Such topics as exchange rate overshooting, speculative attacks, portfolio diversification and debt crises will be covered in the first half of Macro II in February-March.) Nature of the approach: The course is largely built around analytical models. -
Reform of the Bank of England a New Bank for a New Governor
Reform of the Bank of England A new Bank for a new Governor James Barty Policy Exchange is the UK’s leading think tank. We are an educational charity whose mission is to develop and promote new policy ideas that will deliver better public services, a stronger society and a more dynamic economy. Registered charity no: 1096300. Policy Exchange is committed to an evidence-based approach to policy development. We work in partnership with academics and other experts and commission major studies involving thorough empirical research of alternative policy outcomes. We believe that the policy experience of other countries offers important lessons for government in the UK. We also believe that government has much to learn from business and the voluntary sector. Trustees Daniel Finkelstein (Chairman of the Board), Richard Ehrman (Deputy Chair), Theodore Agnew, Richard Briance, Simon Brocklebank-Fowler, Robin Edwards, Virginia Fraser, Edward Heathcoat Amory, David Meller, George Robinson, Robert Rosenkranz, Andrew Sells, Patience Wheatcroft, Rachel Whetstone and Simon Wolfson. Acknowledgements We would like to thank all of the people who have given us their views on the Bank, its historic performance and what could be done to reform it. We would particularly like to thank Dan Conaghan whose book The Bank (Inside the Bank of England) is an excellent read and a great source of information. This project was also enhanced by the panel debate we had with Sir John Gieve and Andrea Leadsome MP on the future of the Bank, which prompted a number of extra lines of enquiry for us. Finally we would like to thank those who have contributed to the Financial Policy unit at Policy Exchange without whose financial assistance this report could not have been produced. -
The Tempered Ordered Probit (TOP) Model with an Application to Monetary Policy William H.Greene Max Gillman Mark N.Harris Christopher Spencer WP 2013 – 10
ISSN 1750-4171 ECONOMICS DISCUSSION PAPER SERIES The Tempered Ordered Probit (TOP) Model With An Application To Monetary Policy William H.Greene Max Gillman Mark N.Harris Christopher Spencer WP 2013 – 10 School of Business and Economics Loughborough University Loughborough LE11 3TU United Kingdom Tel: + 44 (0) 1509 222701 Fax: + 44 (0) 1509 223910 http://www.lboro.ac.uk/departments/sbe/economics/ The Tempered Ordered Probit (TOP) model with an application to monetary policy William H. Greeney Max Gillmanz Mark N. Harrisx Christopher Spencer{ September 2013 Abstract We propose a Tempered Ordered Probit (TOP) model. Our contribution lies not only in explicitly accounting for an excessive number of observations in a given choice category - as is the case in the standard literature on in‡ated models; rather, we introduce a new econometric model which nests the recently developed Middle In‡ated Ordered Probit (MIOP) models of Bagozzi and Mukherjee (2012) and Brooks, Harris, and Spencer (2012) as a special case, and further, can be used as a speci…cation test of the MIOP, where the implicit test is described as being one of symmetry versus asymmetry. In our application, which exploits a panel data-set containing the votes of Bank of England Monetary Policy Committee (MPC) members, we show that the TOP model a¤ords the econometrician considerable ‡exibility with respect to modelling the impact of di¤erent forms of uncertainty on interest rate decisions. Our …ndings, we argue, reveal MPC members’ asymmetric attitudes towards uncertainty and the changeability of interest rates. Keywords: Monetary policy committee, voting, discrete data, uncertainty, tempered equations. -
Speech by Martin Weale at the University of Nottingham, Tuesday
Unconventional monetary policy Speech given by Martin Weale, External Member of the Monetary Policy Committee University of Nottingham 8 March 2016 I am grateful to Andrew Blake, Alex Harberis and Richard Harrison for helpful discussions, to Tomasz Wieladek for the work he has done with me on both asset purchases and forward guidance and to Kristin Forbes, Tomas Key, Benjamin Nelson, Minouche Shafik, James Talbot, Matthew Tong, Gertjan Vlieghe and Sebastian Walsh for very helpful comments. 1 All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx Introduction Thank you for inviting me here today. I would like to talk about unconventional monetary policy. I am speaking to you about this not because I anticipate that the Monetary Policy Committee will have recourse to expand its use of unconventional policy any time soon. As we said in our most recent set of minutes, we collectively believe it more likely than not that the next move in rates will be up. I certainly consider this to be the most likely direction for policy. The UK labour market suggests that medium-term inflationary pressures are building rather than easing; wage growth may have disappointed, but a year of zero inflation does not seem to have depressed pay prospects further. However, I want to discuss unconventional policy options today because the Committee does not want to be a monetary equivalent of King Æthelred the Unready.1 It is as important to consider what we could do in the event of unlikely outcomes as the more likely scenarios. In particular, there is much to be said for reviewing the unconventional policy the MPC has already conducted, especially as the passage of time has given us a clearer insight into its effects. -
MONEY, MARKETS, and DEMOCRACY
MONEY, MARKETS, and DEMOCRACY POLITICALLY SKEWED FINANCIAL MARKETS and HOW TO FIX THEM GEORGE BRAGUES Money, Markets, and Democracy George Bragues Money, Markets, and Democracy Politically Skewed Financial Markets and How to Fix Them George Bragues University of Guelph-Humber Toronto , Ontario , Canada ISBN 978-1-137-56939-4 ISBN 978-1-137-56940-0 (eBook) DOI 10.1057/978-1-137-56940-0 Library of Congress Control Number: 2016955852 © The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifi cally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfi lms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specifi c statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the pub- lisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made.