Found 549 article(s) in category 'Monetary Policy'

Effects of Austerity: Expenditure- and Tax-based Approaches

Effects of Austerity: Expenditure- and Tax-based Approaches. Alberto Alesina, Spring 2019, Paper, “Sometimes governments need to reduce their budget deficits aggressively. These policies are labeled “austerity.” Almost always austerity is needed because excessive debt has been accumulated, as a result of policy mistakes and political distortions (Alesina and Passalacqua 2016; Yared, in this issue). The austerity policies embraced by several European countries starting in 2010 have generated an extraordinarily harsh policy debate. One side has argued that austerity is (almost) always a bad idea. From this perspective, even European countries that were experiencing serious difficulties in financial markets—either by being totally cut off from borrowing like Greece, or by paying high risk premia like Portugal, Spain, Ireland, and Italy—should have continued to stimulate their economies with high levels of government spending. Austerity, the argument continues, was self-defeating because the recessions it induced, or extended, only increased government debt as a ratio of GDP. Blanchard and Leigh (2014) argued that this round of austerity was particularly costly: in other words, fiscal multipliers were especially high. The other side argued that postponing austerity would have caused Effects.Link

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What a wise US-China trade deal looks like? Full of trade-offs

What a wise US-China trade deal looks like? Full of trade-offs. Kenneth Rogoff, May 8, 2019, Opinion, “Will a possibly imminent US-China trade agreement exacerbate global business cycles or even plant the seeds of the next Asian financial crisis? If the eventual agreement – assuming there is one – forces China to hew indefinitely to its outmoded, overly rigid exchange-rate regime, then the answer may be yes.Link

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Explaining Inflation Inertia

Explaining Inflation Inertia. Carmen Reinhart, May 6, 2019, Opinion, “Despite central bankers’ concerted efforts, credible price-stability targets have proved elusive in countries like Argentina, where inflation is soaring, and Japan, which can’t shake the specter of deflation. What can governments do to influence inflation expectations when central banks’ policies prove insufficient to the task?Link

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Dollar Invoicing and the Heterogeneity of Exchange Rate Pass-Through

Dollar Invoicing and the Heterogeneity of Exchange Rate Pass-Through. Gita Gopinath, 2019, Paper, “The vast majority of international goods trade is invoiced in a dominant currency, which is most often the U.S. dollar (Goldberg and Tille (2008); Gopinath (2015); Casas et al. (2016); Boz, Gopinath and Plagborg-Møller (2017)). Accordingly, the dominant currency paradigm (DCP) bargained transactions the empirically relevant framework for analyzing trade responses to exchange rate fluctuations and international spillovers of monetary policy. The theoretical framework underlying DCP predicts that pass through from exchange rates to prices or quantities should vary across countries, depending on the share of imports invoiced in dollars.Link

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Debate: Tax Competition and Global Interdependence

Debate: Tax Competition and Global Interdependence. Mathias Risse, April 29, 2019, Paper, “We are very grateful for written comments and feedback from Andreas Cassee, Peter Dietsch, Joachim Helfer, Martin O’Neill, Thomas Rixen, Kate Vredenburgh, Gabriel Wollner, and two anonymous referees. Peter Dietsch engaged with our article at various stages and each time provided extremely generous responses. We are grateful for the opportunity to present earlier versions of this article and receive productive feedback at the Colloquium for Political Philosophy, Humboldt University Berlin; the Political Theory Workshop, University of York; and the Political Theory Workshop, University of Hamburg. Marco Meyer gratefully acknowledges financial support from the Leverhulme Trust.Link

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The Case for Implementing Effective Negative Interest Rate Policy

The Case for Implementing Effective Negative Interest Rate Policy. Kenneth Rogoff, April 24, 2019, Paper, “This paper explores the case for gradually instituting the changes necessary to implement unconstrained negative interest rate policy as a long-term solution to the zero bound on interest rates (or more precisely the near zero effective lower bound.) We shall argue that if negative interest rate policy can be implemented, it would be by far the most elegant and stable long-term solution to the severe limits on monetary tools that have emerged since the financial crisis. Admittedly, the question of how to resuscitate monetary policy is of more immediate relevance in Europe and Japan, where interest rates are already at the effective zero lower bound (in many cases mildly negative) a decade after the global financial crisis, and more than two decades after Japan’s financial crisis. But even the United States is likely to face severe constraints in the event of another financial crisis, possibly even in a deep recession.Link

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Further Thinking on the Costs and Benefits of Deficits

Further Thinking on the Costs and Benefits of Deficits. Jason Furman, Lawrence Summers, April 22, 2019, Opinion, “In recent months the debate over the future of fiscal policy has intensified. For example, Olivier Blanchard, in his presidential address to the American Economic Association this year, highlighted the implications of the empirical fact of sustained low real interest rates for fiscal policy, and others have debated the purported changes in the nature of economic theory itself—most notably modern monetary theory (MMT). In January we made our own contribution to the fiscal policy debate in Foreign Affairs. We offer here our current perspectives on a number of issues that have emerged as most salient in the months of discussion since then.Link

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Why Trust Is the Gold Standard in Developing Countries

Why Trust Is the Gold Standard in Developing Countries. Tarun Khanna, April 18, 2019, Audio, “Entrepreneurs in the developing world face a distinct disadvantage over their Western counterparts – a widespread lack of trust. Western nations have spent centuries putting in place customs, institutions and regulations to support new companies. But those structures don’t necessarily exist in places like India, South America, Africa or China. Harvard Business School professor Tarun Khanna believes smart entrepreneurs who want to succeed in places with “rampant mistrust” must build their own microcosm of trust with employees, partners and customers. Khanna, who is also director of the Lakshmi Mittal and Family South Asia Institute at Harvard, details this approach in his new book, Trust: Creating the Foundation for Entrepreneurship in Developing Countries. He spoke on the Knowledge@Wharton radio show on SiriusXM about why a conventional strategy doesn’t work wherever societal mistrust is the norm.Link

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