Talking About Monetary Policy: the Virtues (And Vices?) of Central Bank Communication
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Measuring the Natural Rate of Interest: International Trends and Determinants
FEDERAL RESERVE BANK OF SAN FRANCISCO WORKING PAPER SERIES Measuring the Natural Rate of Interest: International Trends and Determinants Kathryn Holston and Thomas Laubach Board of Governors of the Federal Reserve System John C. Williams Federal Reserve Bank of San Francisco December 2016 Working Paper 2016-11 http://www.frbsf.org/economic-research/publications/working-papers/wp2016-11.pdf Suggested citation: Holston, Kathryn, Thomas Laubach, John C. Williams. 2016. “Measuring the Natural Rate of Interest: International Trends and Determinants.” Federal Reserve Bank of San Francisco Working Paper 2016-11. http://www.frbsf.org/economic-research/publications/working- papers/wp2016-11.pdf The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System. Measuring the Natural Rate of Interest: International Trends and Determinants∗ Kathryn Holston Thomas Laubach John C. Williams December 15, 2016 Abstract U.S. estimates of the natural rate of interest { the real short-term interest rate that would prevail absent transitory disturbances { have declined dramatically since the start of the global financial crisis. For example, estimates using the Laubach-Williams (2003) model indicate the natural rate in the United States fell to close to zero during the crisis and has remained there into 2016. Explanations for this decline include shifts in demographics, a slowdown in trend productivity growth, and global factors affecting real interest rates. This paper applies the Laubach-Williams methodology to the United States and three other advanced economies { Canada, the Euro Area, and the United Kingdom. -
On Sticky Prices: Academic Theories Meet the Real World
This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Monetary Policy Volume Author/Editor: N. Gregory Mankiw, ed. Volume Publisher: The University of Chicago Press Volume ISBN: 0-226-50308-9 Volume URL: http://www.nber.org/books/greg94-1 Conference Date: January 21-24, 1993 Publication Date: January 1994 Chapter Title: On Sticky Prices: Academic Theories Meet the Real World Chapter Author: Alan S. Blinder Chapter URL: http://www.nber.org/chapters/c8331 Chapter pages in book: (p. 117 - 154) 4 On Sticky Prices: Academic Theories Meet the Real World Alan S. Blinder Any theory of how nominal money affects the real economy must face up to the following conundrum: Demand or supply functions derived-whether precisely or heuristically-from basic micro principles have money, M,as an argument only in ratio to the general price level. Hence, if monetary policy is to have real effects, there must be some reason why changes in M are not followed promptly by equiproportionate changes in I.! This is the sense in which some kind of “price stickiness” is essential to virtually any story of how monetary policy works.’ Keynes (1936) offered one of the first intellectually coherent (or was it?) explanations for price stickiness by positing that money wages are sticky, and perhaps even rigid-at least in the downward direction. In that case, what Keynes called “the money supply in wage units,” M/W, moves in the same direction as nominal money, thereby stimulating the economy. In the basic Keynesian model,2 prices are not sticky relative to wages. -
Real-Time Price Discovery Via Verbal Communication: Method and Application to Fedspeak
Real-time Price Discovery via Verbal Communication: Method and Application to Fedspeak Roberto G´omezCram, and Marco Grotteria October 30, 2020 CEMLA XXV Meeting of the Central Bank Researchers Network Roberto G´omezCram, and Marco Grotteria Real-time Price Discovery via Verbal Communication: Method and Application to Fedspeak 1 Expectations and the Central Bank Previous literature Expectations play an important role for central banks Forward-guidance is a key tool used to shape expectations How do economic agents form expectations? Large macroeconomic literature on information rigidity (e.g., Mankiw and Reis, 2002; Reis, 2006; Coibion and Gorodnichenko, 2015) This paper Provides granular evidence on the agents' expectations formation process. Investors' fail to fully incorporate the Central Banks' messages This failure is economically large. Roberto G´omezCram, and Marco Grotteria Real-time Price Discovery via Verbal Communication: Method and Application to Fedspeak 2 Methodological contribution Identifying individual messages For the days in which the Federal Open Market Committee has a scheduled meeting, 1 we scrape the videos of the Fed Chairman's press conference 2 we split the video into smaller frames of around 3 seconds each 3 we use an end-to-end deep learning algorithm to convert the audio into interpretable text 4 we timestamp each word spoken in each moment 5 we align high-frequency financial data with these exact words =) link between specific messages sent and the signals received Roberto G´omezCram, and Marco Grotteria Real-time Price Discovery via Verbal Communication: Method and Application to Fedspeak 3 FOMC meeting on July 31 2019: Timestamped words Start time End time Text Fed Chairman/News outlet 14:35:36.286 14:35:39.946 Per your statement here, I guess the question is, New York Times . -
Fed Falters Yellen’S Wavering
October 2015 The Bulletin Vol. 6 Ed. 9 Official monetary and financial institutions▪ Asset management ▪ Global money and credit Fed falters Yellen’s wavering Meghnad Desai on US interest rate nerves Mojmir Hampl on why Europe needs Britain Kingsley Chiedu Moghalu on Buhari’s challenges Rakesh Mohan on US and Brics IMF roles David Owen on restructuring Europe David Smith on Pope Francis’ economic voice Global Louis de Montpellier [email protected] +44 20 3395 6189 ConneCt Into aPaC Hon Cheung [email protected] +65 6826 7505 amerICas Carl Riedy the network [email protected] +1 202 429 8427 Connect into State Street Global Advisors’ network of expertise, tailored training and investment excellence. emea Benefit from our Official Institutions Group’s decades-deep experience. Our service Kristina Sowah [email protected] is honed to the specific needs of sovereign clients such as central banks, sovereign +44 20 3395 6842 wealth funds, government agencies and supranational institutions. From Passive to Active, Alternatives to the latest Advanced Beta strategies, the Official Institutions Group can provide the customised client solutions you need. To learn more about how we can help you, please visit our website ssga.com/oig or contact your local representative. FOR INSTITUTIONAL USE ONLY, Not for Use with the Public. Investing involves risk including the risk of loss of principal. State Street Global Advisors is the investment management business of State Street Corporation (NYSE: STT), one of the world’s leading providers of financial services to institutional investors. © 2015 State Street Corporation – All rights reserved. INST-5417. Exp. 31.03.2016. -
Redefining the Role of the State: Joseph Stiglitz on Building A
Redefining the Role of the State Joseph Stiglitz on building a ‘post-Washington consensus’ An interview with introduction by Brian Snowdon ‘Economic ideas—knowledge about economics—have had a profound effect on the lives of billions of people, making it absolutely essential that we do our best to try and understand the scientific basis of our theories and evidence…In practice, however, there are often large differences in the understanding of or about economic issues. The purpose of economic science is to narrow these dif- ferences by subjecting the positions and beliefs to rigorous analysis, statistical tests, and vigorous debate’. (Joseph Stiglitz, 1998a) Introduction Joseph Stiglitz is a remarkably productive economist and is internation- ally recognised as one of the world’s leading thinkers. To date, in his 35- year career as a professional economist (1966–2001), Professor Stiglitz has published well over three hundred papers in academic journals, con- ference proceedings and edited volumes. He is also the author and edi- tor of numerous books. In 1966, having completed his PhD at MIT, he embarked on an academic career during which he has taught and con- ducted research at many of the world’s most prestigious universities including MIT, Yale, Oxford, Princeton and Stanford. In 1979 he was awarded the prestigious John Bates Clark Medal from the American Economic Association, an award given to the most distinguished economist under the age of forty. From 1993–97 Professor Stiglitz was a member of the US President’s Council of Economic Advisors, becoming Chair of the CEA in June 1995. From February 1997 until his Joseph Stiglitz is currently (since July 2001) Professor of Economics, Business and International Affairs at Columbia University, New York. -
The Discount Window Refers to Lending by Each of Accounts” on the Liability Side
THE DISCOUNT -WINDOW David L. Mengle The discount window refers to lending by each of Accounts” on the liability side. This set of balance the twelve regional Federal Reserve Banks to deposi- sheet entries takes place in all the examples given in tory institutions. Discount window loans generally the Box. fund only a small part of bank reserves: For ex- The next day, Ralph’s Bank could raise the funds ample, at the end of 1985 discount window loans to repay the loan by, for example, increasing deposits were less than three percent of total reserves. Never- by $1,000,000 or by selling $l,000,000 of securities. theless, the window is perceived as an important tool In either case, the proceeds initially increase reserves. both for reserve adjustment and as part of current Actual repayment occurs when Ralph’s Bank’s re- Federal Reserve monetary control procedures. serve account is debited for $l,000,000, which erases the corresponding entries on Ralph’s liability side and Mechanics of a Discount Window Transaction on the Reserve Bank’s asset side. Discount window lending takes place through the Discount window loans, which are granted to insti- reserve accounts depository institutions are required tutions by their district Federal Reserve Banks, can to maintain at their Federal Reserve Banks. In other be either advances or discounts. Virtually all loans words, banks borrow reserves at the discount win- today are advances, meaning they are simply loans dow. This is illustrated in balance sheet form in secured by approved collateral and paid back with Figure 1. -
Alan Stuart Blinder February 2020
CURRICULUM VITAE Alan Stuart Blinder February 2020 Address Department of Economics and Woodrow Wilson School of Public & International Affairs 284 Julis Romo Rabinowitz Building Princeton University Princeton, NJ 08544-1021 Phone: 609-258-3358 FAX: 609-258-5398 E-mail: blinder (at) princeton (dot) edu Website : www.princeton.edu/blinder Personal Data Born: October 14, 1945, Brooklyn, New York. Marital Status: married (Madeline Blinder); two sons and four grandchildren Educational Background Ph.D., Massachusetts Institute of Technology, l97l M.Sc. (Econ.), London School of Economics, 1968 A.B., Princeton University, summa cum laude in economics, 1967. Doctor of Humane Letters (honoris causa), Bard College, 2010 Government Service Vice Chairman, Board of Governors of the Federal Reserve System, 1994-1996. Member, President's Council of Economic Advisers, 1993-1994. Deputy Assistant Director, Congressional Budget Office, 1975. Member, New Jersey Pension Review Committee, 2002-2003. Member, Panel of Economic Advisers, Congressional Budget Office, 2002-2005. Honors Bartels World Affairs Fellow, Cornell University, 2016. Selected as one of 55 “Global Thought Leaders” by the Carnegie Council, 2014. (See http://www.carnegiecouncil.org/studio/thought-leaders/index) Distinguished Fellow, American Economic Association, 2011-. Member, American Philosophical Society, 1996-. Audit Committee, 2003- Fellow, American Academy of Arts and Sciences, 1991-. John Kenneth Galbraith Fellow, American Academy of Political and Social Science, 2009-. William F. Butler Award, New York Association for Business Economics, 2013. 1 Adam Smith Award, National Association for Business Economics, 1999. Visionary Award, Council for Economic Education, 2013. Fellow, National Association for Business Economics, 2005-. Honorary Fellow, Foreign Policy Association, 2000-. Fellow, Econometric Society, 1981-. -
What Have We Learned Since October 1979? by Alan S. Blinder Princeton
What Have We Learned since October 1979? by Alan S. Blinder Princeton University CEPS Working Paper No. 105 April 2005 “What Have We Learned since October 1979?” by Alan S. Blinder Princeton University∗ My good friend Ben Bernanke is always a hard act to follow. When I drafted these remarks, I was concerned that Ben would take all the best points and cover them extremely well, leaving only some crumbs for Ben McCallum and me to pick up. But his decision to concentrate on one issue—central bank credibility—leaves me plenty to talk about. Because Ben was so young in 1979, I’d like to begin by emphasizing that Paul Volcker re-taught the world something it seemed to have forgotten at the time: that tight monetary policy can bring inflation down at substantial, but not devastating, cost. It seems strange to harbor contrary thoughts today, but back then many people believed that 10% inflation was so deeply ingrained in the U.S. economy that we might to doomed to, say, 6-10% inflation for a very long time. For example, Otto Eckstein (1981, pp. 3-4) wrote in a well-known 1981 book that “To bring the core inflation rate down significantly through fiscal and monetary policies alone would require a prolonged deep recession bordering on depression, with the average unemployment rate held above 10%.” More concretely, he estimated that it would require 10 point-years of unemployment to bring the core inflation rate down a single percentage point,1 which is about five times more than called for by the “Brookings rule of thumb.”2 In the event, the Volcker disinflation followed the Brookings rule of thumb rather well. -
Stanley Fischer
Stanley Fischer: Monetary policy - by rule, by committee, or by both? Speech by Mr Stanley Fischer, Vice Chair of the Board of Governors of the Federal Reserve System, at the 2017 US Monetary Policy Forum, sponsored by the Initiative on Global Markets at the University of Chicago Booth School of Business, New York City, 3 March 2017. * * * In recent years, reforms in the monetary policy decisionmaking process in central banks have been in the direction of an increasing number of monetary policy committees and fewer single decisionmakers – the lone governor model.1 We are only a few months away from the 20th anniversary of the introduction of the Bank of England’s Monetary Policy Committee, just a few years after the 300th birthday of the venerable Old Lady of Threadneedle Street. The Bank of Israel moved from a single policymaker to a monetary policy committee in 2010, while I was governor there; more recently, central banks in India and New Zealand have handed over monetary policy to committees. The Federal Reserve is not part of this recent shift, however. The Federal Open Market Committee (FOMC) has been responsible for monetary policy decisions in the United States since it was established by the Banking Act of 1935, two decades after the founding of the Fed itself.2 The movement toward committees reflects the advantages of committees in aggregating a wide range of information, perspectives, and models. Despite the prevalence and importance of committees in modern central banking, the role of committees in the formulation of policy -
The Balance Sheet Policy of the Banque De France and the Gold Standard (1880-1914)
NBER WORKING PAPER SERIES THE PRICE OF STABILITY: THE BALANCE SHEET POLICY OF THE BANQUE DE FRANCE AND THE GOLD STANDARD (1880-1914) Guillaume Bazot Michael D. Bordo Eric Monnet Working Paper 20554 http://www.nber.org/papers/w20554 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2014 We are grateful from comments from Vincent Bignon, Rui Esteves, Antoine Parent, Angelo Riva, Philippe de Rougemont, Pierre Sicsic, Paul Sharp, Stefano Ungaro, François Velde, as well as seminar participants at the University of South Danemark, Sciences Po Lyon, Federal Reserve of Atlanta and Banque de France. The views expressed are those of the authors and do not necessarily reflect the views of the Bank of France, the Eurosystem, or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2014 by Guillaume Bazot, Michael D. Bordo, and Eric Monnet. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. The Price of Stability: The balance sheet policy of the Banque de France and the Gold Standard (1880-1914) Guillaume Bazot, Michael D. Bordo, and Eric Monnet NBER Working Paper No. 20554 October 2014 JEL No. E42,E43,E50,E58,N13,N23 ABSTRACT Under the classical gold standard (1880-1914), the Bank of France maintained a stable discount rate while the Bank of England changed its rate very frequently. -
Jerome H Powell: Opening Remarks
For release on delivery 9:55 a.m. EDT (8:55 a.m. CDT) June 4, 2019 Opening Remarks by Jerome H. Powell Chair Board of Governors of the Federal Reserve System at “Conference on Monetary Policy Strategy, Tools, and Communications Practices” sponsored by the Federal Reserve Federal Reserve Bank of Chicago Chicago, Illinois June 4, 2019 Good morning. I am very pleased to welcome you here today. This conference is part of a first-ever public review by the Federal Open Market Committee of our monetary policy strategy, tools, and communications. We have a distinguished group of experts from academics and other walks of life here to share perspectives on how monetary policy can best serve the public. I’d like first to say a word about recent developments involving trade negotiations and other matters. We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective. My comments today, like this conference, will focus on longer-run issues that will remain even as the issues of the moment evolve. While central banks face a challenging environment today, those challenges are not entirely new. In fact, in 1999 the Federal Reserve System hosted a conference titled “Monetary Policy in a Low Inflation Environment.” Conference participants discussed new challenges that were emerging after the then-recent victory over the Great Inflation.1 They focused on many questions posed by low inflation and, in particular, on what unconventional tools a central bank might use to support the economy if interest rates fell to what we now call the effective lower bound (ELB). -
Taylor Rules
ESTIMATING TAYLOR-TYPE RULES IN CENTRAL AND EASTERN EUROPE By Giorgi Tarkhan-Mouravi Submitted to Central European University Department of Economics In partial fulfillment of the requirements for the degree of Master of Arts Supervisors: Professor Max Gillman and Professor Katrin Rabitsch CEU eTD Collection Budapest, Hungary 2009 Acknowledgments I want to thank my girlfriend Ilona Ferenczi, the thesis could not have been accomplished without her great support and encouragement. The stylistic side of the paper gained a lot from her valuable suggestions. I want to thank my supervisors, Professor Katrin Rabitsch and Professor Max Gillman, for directing me during the process of thesis writing. Especially Max Gillman, whose excellent course “Monetary Economics” motivated me to chose the subject. I want to thank Thomas Rooney for his useful comments regarding the style and the language of paper and to the administrative staff at CEU economics department, who contributed in making the process of writing the thesis enjoyable. Finally, I want to thank my family for their great support during all the time of my study at CEU and my CEU friends, who made the studying period fun. CEU eTD Collection i TABLE OF CONTENTS ABSTRACT.............................................................................................................................III I. INTRODUCTION..................................................................................................................1 II. THE TAYLOR RULE LITERATURE REVIEW ..............................................................3