Found 596 article(s) in category 'Monetary Policy'

A Quantity-Driven Theory of Term Premiums and Exchange Rates

A Quantity-Driven Theory of Term Premiums and Exchange Rates. Robin Greenwood, Samuel Hanson, Jeremy Stein, Adi Sunderam. 2019, Paper, “We develop a model in which risk-averse, specialized bond investors must be paid to absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, our model naturally links the predictability of long-term bond returns to the predictability of foreign exchange returns. Specifically, a shift in the net supply of long-term bonds in one currency influences bond term premiums in both currencies as well as the foreign exchange rate between the two currencies. Our model matches several important empirical patterns, including the co-movement between exchange rates and bond term premiums as well as the finding that central banks’ quantitative easing policies impact not only local-currency long-term yields, but also foreign exchange rates. We also show that this quantity-driven approach provides a unified account explaining both why foreign exchange tends to outperform when the foreign interest rates exceed domestic rates and why long-term bonds tend to outperform when the yield curve is steep.Link

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Yes, our tax system needs reform. Let’s start with this first step

Yes, our tax system needs reform. Let’s start with this first step. Lawrence Summers, November 17, 2019, Opinion, “While there’s plenty of disagreement about how the money should be used, almost everyone involved in public-policy debates agrees that it would be good if the federal government could collect more revenue without raising tax rates or reducing tax deductions or credits.Link

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The High Stakes of the Coming Digital Currency War

The High Stakes of the Coming Digital Currency War. Kenneth Rogoff, November 11, 2019, Opinion, “Facebook CEO Mark Zuckerberg was at least half right when he recently told the United States Congress that there is no US monopoly on regulation of next-generation payments technology. You may not like Facebook’s proposed Libra (pseudo) cryptocurrency, Zuckerberg implied, but a state-run Chinese digital currency with global ambitions is perhaps just a few months away, and you will probably like that even less.Link

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Warren’s plan to finance Medicare-for-all pushes into dangerous and uncharted territory

Warren’s plan to finance Medicare-for-all pushes into dangerous and uncharted territory. Lawrence Summers, November 5, 2019, Opinion, “Democratic presidential candidate Elizabeth Warren last week mounted a passionate defense of universal government-provided health care and made a detailed case that it can be paid for without burdening the middle class. The vision of Medicare-for-all is immensely attractive and evokes health systems in other countries that perform much better than ours does. I could easily imagine supporting a well-designed Medicare-for-all plan.Link

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Redeemable Platform Currencies

Redeemable Platform Currencies. Kenneth Rogoff, October 30, 2019, Paper, “Can massive online retailers such as Amazon and Alibaba issue digital tokens that potentially compete with bank debit accounts? We explore whether a large platform’s ability to guarantee value and liquidity by issuing prototype digital tokens for in-platform purchases constitutes a significant advantage that could potentially be leveraged into wider use. Our central finding is that unless introducing tradability creates a significant convenience yield, platforms can potentially earn higher revenues by making tokens non-tradable. The analysis suggests that if platforms have any comparative advantage in issuing tradable tokens, it comes from other factors.Link

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