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Begin New Search Topic Monetary Policy Publication Year within 10 Years

1. Federal Reserve Anti-Inflation Policy: Wealth Protection for the 1%?

Author:
Aaron Medlin and Gerald Epstein
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The Federal Reserve has a dual mandate from Congress that directs it to conduct monetary policy as such to achieve “maximum employment” and “stable prices.” Yet the U.S. central bank typically chooses to address inflation as a top priority and focuses on employment only secondarily, if at all. Why? In this paper we argue that an important reason is that the Federal Reserve conducts policy so as protect the real wealth of the top 1% of the wealth distribution. We focus on the Fed’s fight against inflation in 2021-2022, when it rapidly raised its policy interest rates by almost 4 percentage points in the face of more than 6 percent inflation. Using a novel econometric analysis, we provide evidence that shows that this policy serves as a real net wealth protection policy for the 1% by restoring some of the lost wealth that they would otherwise lose due to unexpected inflation. The results of this policy for the top 10% of the wealth distribution are econometrically ambiguous. But to the extent that the Fed’s high interest rates generate higher unemployment or even a recession, this wealth protection for the 1% could have serious income costs for workers who find themselves or another member of their household out of a job.
Topic:
Political Economy, Monetary Policy, Inflation, Elites, and Wealth
Political Geography:
North America and United States of America

2. The value added of central bank digital currencies: a view from the euro area

Author:
Maria Demertzis and Catarina Martins
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Different jurisdictions have set out different reasons for creating central bank digital currencies (CBDCs). Some countries, particularly those with already-operational CBDCs for retail purposes, aim to to promote financial inclusion. But in countries where most citizens have access to financial services, central banks are interested in CBDCs as an aspect of the increasing digitalisation of finance. Central banks could also choose to use CBDCs to guarantee in full citizen’s holdings (currently, deposits in commercial bank are only partially guaranteed), but this would trigger major changes in the financial system in terms of the role of commercial banks in intermediation and the role of fiat money. So far, central banks have not opted to go this way. In the euro area, consumers have multiple payment options and a very efficient retail payments system. The currency enjoys high levels of trust and is not challenged by the emergence of private currencies, such as Bitcoin, or by the risk that cash, a monetary system’s anchor, will disappear. Therefore, creating a CBDC for retail purposes in the euro area offers little obvious value added, at least for the foreseeable future. However, there is a strong case for building a CBDC that banks could use for cross-border wholesale purposes (ie with other currencies). Wholesale CBDCs could revolutionise the way that cross-border, cross-currency payments are made for two reasons. Cross-border payments are currently slow and inefficient. Pilot projects have shown that wholesale payments with CBDCs can generate substantial time and cost savings. Any two central banks that have operational wholesale CBDCs could settle transactions between themselves. This would be very different from the current system, as most settlements today are done via the dollar (and then the euro) infrastructure and use correspondent banks. The euro area and the United States would have to consider carefully from a geopolitical perspective how wholesale CBDCs might affect their global economic standing. By developing a CBDC for wholesale purposes, the European Union would be able to contribute to developing the global standard.
Topic:
Monetary Policy, Governance, Regulation, Central Bank, Digital Currency, and Euro
Political Geography:
Europe

3. Exchange Rate Pass-Around

Author:
Matthieu Crozet, Julian Hinz, and Federico Trionfetti
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In January 2015, The Swiss Franc (CHF) appreciated unexpectedly against the Euro by approximately 15%. We document a new fact: French firms that exported to both the Swiss market and the Eurozone also exhibited a sudden change in their export prices to the Eurozone. We coin this the “exchange rate pass-around” effect. We rationalise this fact with a simple model based on the endogenous decision of some firms to give up pricing-to-market and opt for single-pricing to all markets. An important implication of this finding is that single-pricing may be one of the causes of the incomplete pass-through. This mechanism has so far remained unexplored in the literature, which may have led to overestimating the importance of other factors. Based on monthly French export data, our empirical analysis confirms the existence of the pass-around. Firms directly affected by the CHF exchange rate shock increased their prices in neighboring markets by 0.8% compared to other exporters. The effect was stronger for firms with lower ex-ante price heterogeneity across markets and for firms with smaller trade costs to Switzerland. However, the effect was short-lived. As time passed, exporters tended to decouple the prices they set on the Swiss market from those for the Eurozone, and the pass-around effect faded.
Topic:
International Trade and Finance, Markets, Monetary Policy, European Union, and Exchange Rate Policy
Political Geography:
Europe

4. The Great Supply Chain Shift from China to South Asia?

Author:
Ganeshan Wignaraja
Publication Date:
07-2023
Content Type:
Research Paper
Institution:
Gateway House: Indian Council on Global Relations
Abstract:
Global supply chains connect world industry and international trade in manufactures. East Asia’s dominance with China as the preferred assembly hub in global supply chains has brought unprecedented regional prosperity, but South Asia remains a latecomer. However, pandemic-related and post-pandemic continuing disruptions to supply chains and slowing growth are being keenly felt, dampening China’s attractiveness. In an uncertain global economy, increasingly footloose foreign investors are looking for alternative production locations. Is it South Asia’s turn to prosper through supply chains in this uncertain world? This is the topical public policy question facing India and the others in South Asia. This paper discusses the concept of global supply chains, the industrial rise of East Asia, drivers of supply chain relocation from China, South Asia’s prospects, India as a complementary hub and policy lessons from East Asia’s industrial success. For the purposes of this paper, South Asia is broadly defined as the India and its contiguous countries: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
Topic:
Industrial Policy, Monetary Policy, Foreign Direct Investment, Industrialization, COVID-19, Supply Chains, and Geoeconomics
Political Geography:
China, South Asia, Asia, Southeast Asia, and United States of America

5. Radical Steps Are Essential to Jump-Starting the Replacement of the Flawed US Money Regime

Author:
Brendan Brown
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
Hudson Institute
Abstract:
A previous policy memo argued that flaws in the actual US money regime are responsible for the Great Pandemic Inflation.1 Now that reported inflation has been falling, some of us might imagine that addressing these flaws has become a non-urgent matter. After all, great supply shocks tend to come rarely. But such complacence does not fit the facts. The case for getting rid of the present rotten monetary regime is not simply based on the argument that it has malfunctioned so severely during the pandemic and war supply shock. That malfunctioning continues into the present, where there is now positive supply side news (the pandemic dislocation is fading, and a natural gas glut has emerged despite the continuing Russia-Ukraine War). The Federal Reserve and other central banks, still trying to navigate policy in an anchorless monetary system by choosing a path for short-term interest rates, are stumbling from one huge blunder to another, even if they have a rare lucky stretch in between. Beyond the woes of how the 2 percent inflation standard performed during the supply shock and subsequent supply restoration, this regime should be held responsible for a range of economic and social consequences that predate the pandemic and war. These include malinvestment (poor allocation of capital due to corrupted signaling in markets), advancement of monopoly capitalism, bloated government outlays, and punitive monetary taxation (in the form of inflation tax or monetary repression tax), all of which take their toll. Instead of enjoying a top-quality money with all its benefits, individuals have had to put up with a poor money and all its related costs, particularly the ongoing danger of serious loss of purchasing power.
Topic:
Economics, Monetary Policy, Inflation, and COVID-19
Political Geography:
North America and United States of America

6. The Global Economic Outlook and the State of Indonesia

Author:
Ivana Markus and Pyan Amin Muchtar
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The global economy is facing a perfect storm as a result of the coronavirus disease (COVID-19) pandemic, prolonged geopolitical tensions, soaring inflation, and tightening monetary policy. A darkening future has been projected and the worst is yet to come. Amid global uncertainty, governments have become less aggressive in their budget spending, while high inflation has led many central banks to tighten their monetary policy. Furthermore, the pandemic has left widespread scarring effects, such as unemployment, poverty, and inequality, particularly on vulnerable groups. Global challenges and lower economic growth of the major economies will also affect Indonesia’s economic conditions, as the country may experience slower growth as a spillover from its major trading partners. It is important for the world and Indonesia to address these challenges, particularly the scarring effects, through multilateral solidarity and better maintenance of prudent fiscal policy.
Topic:
Monetary Policy, Geopolitics, Economy, Investment, Trade, and COVID-19
Political Geography:
Indonesia and Southeast Asia

7. Excess liquidity in the euro area: developments and implications

Author:
Marek Dabrowski
Publication Date:
09-2023
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
The excess liquidity in the euro area is a product of a long period of quantitative easing. It changed the operational framework of the European Central Bank (ECB)’s monetary policy from the scarce reserves system (SRS) to the abundant reserves system (ARS). To eliminate excess liquidity and return to the SRS, the ECB must intensify quantitative tightening, which is also essential for successful disinflation. Fiscal adjustment can help in this process and mitigate the risk of financial instability. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 25 September 2023.
Topic:
Monetary Policy, Finance, European Central Bank, and Liquidity
Political Geography:
Europe

8. Exchange Rate Arrangements: Fix, Float, or Manage?

Author:
Nathaniel Cline, Carlos Schönerwald da Silva, and Matias Vernengo
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The paper tries to provide a concise summary of the main debates on exchange rate arrangements. It a simple taxonomy of exchange rate arrangements, fixed, flexible and managed, and a brief analysis of the main debates about their advantages and disadvantages. It emphasizes the different policy objectives of mainstream and heterodox schools of thought, suggesting that they tend to be more relevant than the specific defense of one particular exchange rate arrangement. In that sense, there are divergences on their preferences within schools of thought. The paper also discusses the causes of currency crises and the role of the dollar in the international monetary system.
Topic:
Economics, Monetary Policy, Crisis Management, Exchange Rate Policy, and Currency
Political Geography:
Global Focus

9. Federal Reserve Monetary Policy and Wealth Inequality

Author:
Aaron Medlin and Gerald Epstein
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This study analyzes the impact of conventional expansionary monetary policy on wealth inequality in the United States from 1976 to 2012. We use the local projections instrumental variable (LP-IV) approach for our estimation method and employ two monetary shock series to identify the causal effect. High-frequency data is obtained on the distribution of real net wealth and the Gini index from two new sources: Realtime Inequality and the Federal Reserve’s Distributional Financial Accounts (DFA). We find that expansionary monetary policy has positive and persistent effects on wealth inequality over the medium term, in contrast to previous research. Specifically, an expansionary policy of 100 basis points cut in the policy rate increases the share of wealth for the top 10 and 1 percent and reduces the share for the bottom 50 and middle 40 percent of the distribution. Overall, wealth inequality, as measured by the Gini coefficient, increases around 0.005 on the Gini scale (between 0 and 1) with Realtime data and around 0.015 using DFA data. We also find that the effect size of expansionary policy on inequality varies over prior decades; the effects between 1976 and 1980 are smaller and transient relative to the periods since. We also find that expansionary policy increases wealth inequality regardless of the business cycle. However, its effects are more substantial during economic expansions. Lastly, we estimate the historical contribution of monetary policy to the variation in wealth distribution and find that it does account for significant variations in wealth distribution during certain periods of recent U.S. history.
Topic:
Monetary Policy, Federal Reserve, Economic Inequality, and Wealth Distribution
Political Geography:
Global Focus

10. International Currency Instability and Food Security: Time to Rebuild “Real Food Economies”?

Author:
Jose M. L. Montesclaros
Publication Date:
10-2022
Content Type:
Commentary and Analysis
Institution:
Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:
Debt-distressed countries are handicapped in riding the rising costs of imported food and farming inputs amidst monetary policy shifts internationally. It is timely to rebuild “real food economies” to improve food availability and affordability, hence averting food crises and ensuing political and social instability.
Topic:
Economics, Monetary Policy, Food, and Food Security
Political Geography:
Global Focus

11. Monetary Policy for the Climate? A Money View Perspective on Green Central Banking

Author:
Jakob Vestergaard
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Central banks can potentially influence the investment decisions of private financial institutions, which in turn will create incentives towards green technology adoption and development of lower emission business models. This paper examines how monetary policies can be deployed to promote a greening of finance. To guide the efforts, the paper mobilizes the Money View literature. This enables a comparative assessment of different monetary policy options. The main finding is that a promising way forward for green monetary policy is to adopt a strategy of expanding collateral eligibility through positive screening and widening haircut spreads to change relative incentives in favor of green over brown assets.
Topic:
Climate Change, Economics, Monetary Policy, Banking, and Green Transition
Political Geography:
Global Focus

12. Western financial warfare and Russia’s de-dollarization strategy: How sanctions on Russia might reshape the global financial system

Author:
Maria Shagina
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
Finnish Institute of International Affairs
Abstract:
Since 2014, Russia’s de-dollarization plan has been guided by security and geopolitical considerations. By dumping the US dollar from its foreign currency reserves, Russia diverted from the traditional approach where liquidity and the credibility of the issuer determine the choice of currency. In 2022, Russia has doubled down on its efforts to de-dollarize the economy. What started as de-dollarization in 2014, transformed into full-blown rouble-ization in 2022. Following the dynamic of an emerging multipolar world order, the global financial system is also gravitating towards fragmentation and currency multipolarity. The overuse of sanctions could strengthen revisionist countries’ desire to increasingly conduct their trade in non-dollar currencies in an attempt to avoid US oversight. If current trends continue, the de-dollarization effort could gain ground and undermine the primacy of the US dollar.
Topic:
Monetary Policy, Sanctions, Finance, and Conflict
Political Geography:
Russia, Europe, and Global Focus

13. Monetary policy in South Africa, 2007–21

Author:
Patrick Honohan and Athanasios Orphanides
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper reviews South Africa’s monetary policy since 2007 and makes recommendations towards improving the inflation-targeting framework currently in place. Following a surge in inflation into double digits in 2007/08, the South African Reserve Bank managed to guide inflation in line with the 3–6 per cent target band. Estimates of South Africa’s potential output underwent successive downward revisions. The resulting output gap misperceptions contributed to the tendency of inflation to be closer to the upper edge of the band in the 2010s. Our assessment is that the current definition of the target is not ambitious enough and reduces the benefits that inflation targeting could otherwise provide. An eventual point target of 3 per cent would better promote growth and protect the value of the currency, as mandated by the Republic’s Constitution.
Topic:
Monetary Policy, Economy, History, and Inflation
Political Geography:
Africa and South Africa

14. The Economic Outlook for Xi’s Third Term: Mounting Challenges, Dwindling Fiscal and Monetary Options

Author:
Alicia Garcia-Herrero
Publication Date:
09-2022
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
China’s decade-long economic slowdown is accelerating. The pace has picked up since former U.S. President Donald Trump launched his trade war against China in early 2018, and even more so since the COVID-19 pandemic started in early 2020. This year has been particularly difficult as stubborn zero-COVID policies have ground the economy to a halt, further pushed by the bursting of the real estate bubble that had been China’s most important engine of growth for decades. Many ask themselves how much of China’s deceleration is cyclical and how much is structural, but also how much can be reverted. On the first issue, the cyclical element of the ongoing deceleration of the Chinese economy is clearly important and adds additional downward pressure to the well-known structural factors, such as aging and decreasing labor productivity.
Topic:
Monetary Policy, Economy, Xi Jinping, and Zero-COVID
Political Geography:
China and Asia

15. The low productivity of European firms: how can policies enhance the allocation of resources?

Author:
Gregory Claeys, Giovanni Sgaravatti, and Marie Le Mouel
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This paper summarises the most important policy lessons from the research undertaken in the MICROPROD project, work package 4, related to the allocation of the factors of production, with a special focus on the weak dynamism of European small and medium-sized enterprises (SMEs). In particular, MICROPROD work package 4 investigated the impact of labour market institutions and skill shortages on firm dynamism, and which types of (foreign) competition are conducive for total factor productivity (TFP) maximizing factor allocation. The papers of this work package also explored the side effects of unconventional monetary policy and of forbearance in bank restructuring for the survival of ‘zombie’ firms, and for employment growth and the TFP of new SMEs.
Topic:
Monetary Policy, Business, Productivity, and Resource Allocation
Political Geography:
Europe

16. Monetary Policy and Racial Inequality

Author:
Alina Bartscher, Moritz Kuhn, Moritz Schularick, and Paul Wachtel
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The racial tensions that spread across the United States in 2020 have caught the attention of monetary policymakers and focused concern on the size and persistence of the gap between both the income and wealth of black and white households. There is widespread recognition that despite some decline in overt labor market discrimination, gains in educational opportunities, and income growth of black households since the onset of the civil rights movement, the gaps persist and have even grown larger by some measures. According to the 2019 Survey of Consumer Finances (SCF), the median wealth of a white household was $184,390, compared with only $20,730 for the median black household. The typical black household owns only about 11 percent of the wealth of the typical white household. The income gap is smaller but still large; the median income of black households ($38,688) is 58 percent of the median income of white households ($67,196).
Topic:
Race, Monetary Policy, Inequality, and Economic Policy
Political Geography:
North America and United States of America

17. No Strings Attached: Corporate Welfare, State Intervention, and the Issue of Conditionality

Author:
Fabio Bulfone, Timur Ergen, and Manolis Kalaitzake
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
This paper contributes to Comparative Political Economy (CPE), developing an analytical concept of corporate welfare. Corporate welfare — the transfer of public funds and benefits to corporate actors with weak or no conditionality — is a prominent form of state-business relations that CPE scholarship regularly overlooks and misinterprets. Such transfers should be understood as a structural privilege of business in a globalized post-Fordist capitalism, and an increasingly common strategy through which states attempt to steward national economic dynamism within a highly constrained range of policy options. However, with- out a well-developed concept of corporate welfare – premised upon the key criterion of conditionality – studies that identify a “return” of the state in industrial planning misrepre- sent these transfers to business as a reassertion of state influence and control, rather than a reflection of state weakness and subordination. The paper provides the analytical building blocks to properly conceptualize transfers to business, works out the core challenges for em- pirical research, and provides empirical illustrations of this burgeoning phenomenon from the fields of unconventional monetary policy, privatization, and urban political economy.
Topic:
Industrial Policy, Political Economy, Privatization, Monetary Policy, Welfare, and Public-Private Partnership
Political Geography:
Global Focus

18. Changes, Challenges and Implications of Fiscal and Monetary Policy Directions in the Post Pandemic Era

Author:
Sungbae An
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
COVID-19 has changed the way of our lives since it started emerging as a pandemic early 2020. The global experience leave a trauma, and eventually work as a main driver to reconsider and improve our system. The need for change becomes even bigger as the pandemic continues beyond initial expectations. With that, we are now entering the era of the great transformation. The brief focuses on examining the policy environment changed by the COVID-19 pandemic and analyzing the points to be considered when implementing future fiscal and monetary policies.
Topic:
Monetary Policy, Economy, Fiscal Policy, Pandemic, and COVID-19
Political Geography:
Global Focus

19. 25 years of excess unemployment in advanced economies: Lessons for monetary policy

Author:
Joseph E. Gagnon and Madi Sarsenbayev
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
For about 25 years before the COVID-19 pandemic, inflation was very low and stable in most advanced economies. A little noticed dark side of this impressive achievement is that unemployment rates were almost always higher than needed to keep inflation low. This widespread and persistent policy error arose because of a major flaw in standard macroeconomic models—the use of a linear Phillips curve. This flaw would have been far less costly if central banks had not chosen such a low target for inflation. This paper thus adds to the arguments in favor of a moderately higher inflation target. Even without a higher target, central banks need to use a broader range of economic models and should verify their estimates of the natural rate of unemployment by running the economy hot from time to time in order to see nascent inflationary pressure before throttling back.
Topic:
Economics, Monetary Policy, Unemployment, and COVID-19
Political Geography:
Global Focus

20. Will economic statecraft threaten western currency dominance? Sanctions, geopolitics, and the global monetary order

Author:
Carla Norrlof
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Atlantic Council
Abstract:
The return of great power rivalry is stoking renewed fears of weakening Western currency dominance. Financial sanctions are becoming the preferred economic tool for accomplishing geopolitical goals. These instruments are especially popular with the United States and Europe. In response, rival great powers, notably China and Russia, are diversifying away from Western currencies and developing counterstrategies to maintain economic and foreign policy autonomy. As other countries are hit by increasingly punishing Western sanctions, the incentive to join Russia and China’s alternative international monetary order increases. New analysis, published in this report, shows early signs that some countries may be trying to diversify away from the dollar. A growing circle of countries attempting to evade the Western-centric financial and currency order may over time erode the dollar and the euro’s sizeable lead, though will likely fall well short of ending their global dominance. This report analyzes these trends and quantifies the extent of reserve diversification following Russia’s 2022 war on Ukraine. It also assesses the polarity of the international currency order since the onset of the euro in 2002. Reserve diversification out of the dollar, and into the euro, has been modest, though Chinese renminbi reserves grew after Russia’s February offensive in Ukraine. Dollar unipolarity declined acutely in 2017 as the number of countries sanctioned by the United States increased and the US President Donald J. Trump threatened to revoke alliance commitments. Using economic statecraft while retaining global economic influence will require the United States to keep its economic house in order and allies close, if the current unipolar currency order is to survive.
Topic:
Economics, Monetary Policy, Sanctions, and Geopolitics
Political Geography:
China, Europe, and Asia

21. Don’t look only to Brussels to increase the supply of safe assets in the European Union

Author:
Francesco Papadia and Heliodoro Temprano Arroyo
Publication Date:
12-2022
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
A sufficient supply of safe assets denominated in euros is critical if the European Union is to achieve full banking and capital markets union while fostering the euro’s international role. The European debate on developing the supply of safe assets has so far focused on the possible creation of a common safe asset. This has tended to underplay the potential contribution of sovereign assets. Expanding the supply of national safe assets, notably through the gradual implementation of fiscal and growth-oriented structural policies in euro-area countries, leading to upgrading of their sovereign ratings, provides a promising, and perhaps more feasible, option. An upgrade to triple A of those euro-area countries that are currently rated double A could produce substantially more safe assets than most common safe asset proposals, including those based on the development of ‘synthetic’ safe assets. There has been a remarkable increase in the share of supranational assets in the stock of euro-based safe assets since 2008, reflecting downgrades in sovereign ratings and the EU’s financial responses to the euro-area crisis and the pandemic. However, safe assets in euro remain dominated by those issued by euro-area governments. Although common safe assets have certain advantages over national safe assets, reflecting their built-in risk diversification properties, there is currently not much political appetite for such proposals. Meanwhile, sovereign safe assets already offer many of the advantages of common safe assets. Sound fiscal policies and growth-stimulating reforms, which are in any case desirable, should be implemented to improve the credit ratings of euro-area sovereigns. This might not be politically feasible in the short-term, given the difficult economic environment currently faced by the EU, but it should be a key component of the EU’s medium-term safe asset strategy. Should the political consensus be found to create a common safe asset, such an asset could be incorporated into the euro area’s existing safe asset system, reinforcing its positive effects.
Topic:
Debt, Markets, Monetary Policy, European Union, Regional Integration, European Monetary Union, and Banking
Political Geography:
Europe

22. Asia’s Push For Monetary Alternatives

Author:
Marcus Noland
Publication Date:
12-2022
Content Type:
Special Report
Institution:
East-West Center
Abstract:
For the last quarter century, Asia has been seeking greater autonomy within the existing international monetary system. While the region has had the resources to go its own way, intraregional rivalries and a reluctance to damage ties to the US and the International Monetary Fund have put a damper on regional initiatives. Now the ascendency of China offers a path toward greater regional autonomy in monetary affairs. Asia, led by China, has been playing a two-track strategy pushing for greater influence within the existing global institutions, while developing its own parallel institutions such as the Chiang Mai Initiative Multilateralization, the Belt and Road Initiative, and the Asian Infrastructure Investment Bank. Use of the Chinese renminbi will likely grow as a trade invoicing currency but expanded use of the renminbi as a reserve currency is more uncertain. It is possible that the dollar-centered international financial system could evolve into a multipolar system with multiple currencies playing key roles.
Topic:
Monetary Policy, Finance, Economy, and Investment
Political Geography:
China, South Asia, East Asia, Asia, and Southeast Asia

23. World Economy Winter 2022: Strong headwinds for global economic activity

Author:
Klaus-Jurgen Gern, Stefan Kooths, Ulrich Stolzenburg, Jan Reents, and Nils Sonnenberg
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Global growth has decelerated over the course of the year under the impact of high energy prices and great uncertainty. Monetary policy, which is being tightened very quickly in view of high inflationary pressure across the board, is now also putting a drag on economic activity. Overall, production remained on an upward trend into the fall, with impetus coming from easing supply bottlenecks and the continuing normalization of activity in those sectors of the economy particularly affected by the Covid-19 pandemic. Towards the end of the year, however, economic momentum weakened noticeably further. The major advanced economies in particular are currently facing a period of weak economic activity despite considerable fiscal support measures. At the same time, the problems for the Chinese economy remain significant. While global output (measured on a purchasing power parity basis) at 3.2 percent is expected to grow by 0.3 percentage points more this year than expected in September, we continue to forecast an increase of only 2.2 percent next year. For 2024, our expectation has even been reduced slightly to 3.2 percent, mainly because we do expect the US economy to recover slowly. Inflation is likely to have peaked and is expected to slow significantly over the forecast horizon thanks to lower commodity prices and easing economic tensions. However, underlying inflation is not likely to return to target levels until the end of the forecast period.
Topic:
Monetary Policy, Economy, Business, COVID-19, and Emerging Economies
Political Geography:
China, Europe, Asia, North America, and United States of America

24. German Economy Winter 2022: Inching through the energy crisis

Author:
Jens Boysen-Hogrefe, Dominik Groll, Nils Sonnenberg, Nils Jannsen, Stefan Kooths, Vincent Stamer, and Timo Hoffmann
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Wholesale prices for gas and electricity have fallen significantly in recent months - even though they are still at a high level. In addition, the burdens on private households and companies caused by high energy costs are to be cushioned by so-called price brakes. Overall, inflation in 2023 will be much lower at 5.4 percent than we had expected in our autumn forecast (8.7 percent). Although real disposable income and, as a result, private consumption are likely to decrease next year, the decline will be much smaller than had been expected a few months ago. As a result, we now expect a slight increase in GDP of 0.3 percent for 2023 (autumn: -0.7 percent). In 2024, GDP is expected to grow somewhat more strongly again at 1.3 percent (autumn: 1.7 percent). The labour market is robust despite the economic slowdown, partly because companies are still desperately seeking skilled workers. The public fiscal balance is likely to deteriorate significantly in 2023 due to the aid packages in response to the energy crisis and displays a deficit of around 4 percent relative to GDP. With the expiry of the aid packages, the deficit will decrease again in 2024.
Topic:
Economics, Monetary Policy, Budget, Business, Labor Market, Energy Crisis, Emerging Economies, and Advanced Economies
Political Geography:
Europe and Germany

25. World Economy Autumn 2022: Global growth falters

Author:
Klaus-Jurgen Gern, Stefan Kooths, Ulrich Stolzenburg, Jan Reents, and Nils Sonnenberg
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In spring 2022, world economic growth came to a standstill amid high inflation, persistent supply bottlenecks and elevated uncertainty. In many countries real wages are declining significantly dampening private consumption even though extra savings accumulated during the pandemic are still available to mitigate the adverse impact to some extent. At the same time financial conditions have also deteriorated as central banks tightened their policies. In China, the strict zero-covid policy and problems in the real estate sector are slowing economic activity. Against this backdrop, the outlook for the global economy has deteriorated further. We have, again, lowered our forecast and are now expecting global output to increase by only 2.9 percent this year and 2.2 percent next year (calculated on a purchasing power parity basis). The forecast assumes that commodity prices will gradually decline in line with forward prices, which will over time reduce the upward pressure on prices and provides the foundations for an economic upturn in 2024. However, the pass-through of higher commodity prices into consumer prices is probably not yet complete and wage increases are likely to intensify in many countries. Consequently, underlying inflation is likely to remain higher than in the years before the Covid crisis and remain above central bank targets over the forecast horizon.
Topic:
Monetary Policy, Business, COVID-19, Zero-COVID, Emerging Economies, and Advanced Economies
Political Geography:
China, Europe, Asia, North America, and United States of America

26. No Strings Attached: Corporate Welfare, State Intervention, and the Issue of Conditionality

Author:
Fabio Bulfone, Timur Ergen, and Manolis Kalaitzake
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
This paper contributes to Comparative Political Economy (CPE), developing an analytical concept of corporate welfare. Corporate welfare — the transfer of public funds and benefits to corporate actors with weak or no conditionality — is a prominent form of state-business relations that CPE scholarship regularly overlooks and misinterprets. Such transfers should be understood as a structural privilege of business in a globalized post-Fordist capitalism, and an increasingly common strategy through which states attempt to steward national economic dynamism within a highly constrained range of policy options. However, without a well-developed concept of corporate welfare – premised upon the key criterion of conditionality – studies that identify a “return” of the state in industrial planning misrepresent these transfers to business as a reassertion of state influence and control, rather than a reflection of state weakness and subordination. The paper provides the analytical building blocks to properly conceptualize transfers to business, works out the core challenges for empirical research, and provides empirical illustrations of this burgeoning phenomenon from the fields of unconventional monetary policy, privatization, and urban political economy.
Topic:
Industrial Policy, Political Economy, Privatization, Monetary Policy, and Subsidies
Political Geography:
Global Focus

27. Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy

Author:
Jakob Vestergaard and Daniela Gabor
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Despite much attention to unconventional monetary policies after the financial crisis, the collateral policies of central banks are rarely discussed. And when they are, the haircuts applied to assets pledged to access central bank liquidity tend not to be analyzed. An exception to these trends is the recent work by Nyborg (2017), who argues that the collateral policies adopted by the European Central Bank (ECB) aggravated the sovereign debt crisis and put the survival of the euro at risk. Taking our point of departure in the money view literature (Mehrling 2011), we argue however that Nyborg’s critique of the ECB’s crisis response is misguided and that his proposal to deepen and reinforce the ECBs role in the fiscal disciplining of member states would be procyclical and destabilizing. Through our analysis of Nyborg’s work and the ECBs crisis response, we identify core principles for countercyclical collateral policies suitable for market-based financial systems.
Topic:
Monetary Policy, Financial Crisis, Finance, and Banking
Political Geography:
Global Focus

28. An Analysis of the Effects of Oil Price Fluctuations on the Conduct of Monetary Policy in the Economic

Publication Date:
03-2021
Content Type:
Working Paper
Institution:
The Nkafu Policy Institute
Abstract:
For many years, the economies of the Economic and Monetary Community of Central Africa, like most of the world’s economies, have been confronted with numerous fluctuations in the price of raw materials on international markets. For these predominantly extroverted economies, that is, those dependent on export earnings, these price variations have consequences for their macroeconomic performance and the conduct of economic policy. Like most economic crises in the world in the past, the pandemic caused by the new Coronavirus that has been raging since 2020 has also brought with it many changes. Between the confinement measures taken by public authorities to curb the spread of the virus and the resulting slowdown in global economic activity, there has been an inevitable significant drop in global oil demand. The direct consequence of such a scenario is the fall in oil prices on world markets, which is very bad news for the public finances of oil-exporting countries. The main objective of this report is to analyze the effects of oil price fluctuations on the conduct of monetary policy in the CEMAC. We start from the observation that oil shocks are the source of strong inflationary pressures in these economies. It is the responsibility of monetary policy to ensure price stability. Thus, after analyzing the effects of oil price fluctuations on the world economy as well as the macroeconomic and financial implications of these fluctuations on the economies in 2020, we use a Vector Auto Regressive model to analyze the contribution of oil price shocks on the historical dynamics of macroeconomic variables in the various CEMAC countries between 2001 and 2020. Then, we use a Panel Smooth Transition Regression model to analyze the impact of oil price changes on monetary policy in the CEMAC.
Topic:
Economics, International Political Economy, Oil, Natural Resources, Monetary Policy, Global Markets, Inflation, and Macroeconomics
Political Geography:
Africa, Cameroon, and Central Africa

29. Procedurally Justifiable Strategies: Integrating Context Effects into Multistage Decision Making

Author:
Fynn Kemper and Philipp Wichaardt
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper proposes a simple framework to model contextual influences on procedural decision making. In terms of utility, we differentiate between monetary payoffs and contextual psychological ones, e.g. deriving from the subjects’ normative frame of reference. Monetary payoffs are treated as common knowledge while psychological payoffs are treated as partly unforeseeable. Regarding behaviour, we assume that players act optimal given their local perception of the game. As perceptions may be incorrect, we do not consider common equilibrium conditions but instead require strategies to be procedurally justifiable. As we will argue, various common inconsistencies considered in behavioural economics can be understood as procedurally justifiable behaviour. With the present framework, we add an abstract tool to the discussion which allows to consider also the behavioural implications of players foreseeing the corresponding behavioural effects ̶ which is often not considered in the respective original models.
Topic:
Economics, Monetary Policy, and Models
Political Geography:
Global Focus

30. Thinking Beyond the Pandemic: Monetary Policy Challenges in the Medium- to Long-Term

Author:
Marek Dabrowski
Publication Date:
04-2021
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
The economic characteristics of the COVID-19 crisis differ from those of previous crises. It is a combination of demand- and supply-side constraints which led to the formation of a monetary overhang that will be unfrozen once the pandemic ends. Monetary policy must take this effect into consideration, along with other pro-inflationary factors, in the post-pandemic era. It must also think in advance about how to avoid a policy trap coming from fiscal dominance. This paper is organized as follows: Chapter 2 deals with the economic characteristics of the COVID-19 pandemic and its impact on the effectiveness of the monetary policy response measures undertaken. In Chapter 3, we analyse the monetary policy decisions of the ECB (and other major CBs for comparison) and their effectiveness in achieving the declared policy goals in the short term. Chapter 4 is devoted to an analysis of the policy challenges which may be faced by the ECB and other major CBs once the pandemic emergency comes to its end. Chapter 5 contains a summary and the conclusions of our analysis.
Topic:
Monetary Policy, Economic Growth, Trade, Pandemic, and COVID-19
Political Geography:
Europe and Global Focus

31. After the Fall: Lebanon’s Path towards Monetary Stabilization

Author:
Jean Tawile
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Arab Reform Initiative (ARI)
Abstract:
Lebanon is suffering the worst economic crisis in its history, caused by an economic model that produced a rentier economy feeding off a corruption-ridden state and preventing any economic growth and social justice. This model is not redeemable. This paper argues that stabilizing the currency is a first step to getting Lebanon’s economy back on the right track and explores possible pathways for doing so.
Topic:
Economics, Monetary Policy, Fiscal Policy, Strategic Stability, and Economic Stability
Political Geography:
Middle East and Lebanon

32. U.S. Monetary Policy and the Decline in the Interest Rates (1990-2007)

Author:
Santiago Capraro, Carlo Panico, and Luis Daniel Torres-Gonzalez
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Interest rates in the U.S. and in other countries have experienced persistent and generalised declines since the 1980s. The main interpretations of this phenomenon ignore the role of monetary factors, such as financial and monetary policy. The essay proposes an alternative interpretation based on the choice of the Federal Reserve (FED) to conduct monetary policy by attributing high priority to financial stability. The interaction between changes in financial regulation, the transformation of "specialized" into "universal” banking, and the concern with financial instability have led the central bank to add to the role of "lender of last resort" that of "lender of first resort," which systematically provides liquidity at a low cost to financial firms. This new conduct of monetary policy has produced the downward trend in interest rates.
Topic:
Monetary Policy, Federal Reserve, Economy, and Interest Rates
Political Geography:
United States of America

33. On the economic desirability of the West African monetary union: would one currency fit all?

Author:
Cécile Couharde, Carl Grekou, and Valérie Mignon
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
In this paper, we investigate from a policy coordination viewpoint the desirability of the West African monetary union project, ECO. Our approach is built around the inclusion of national objectives in the regional integration perspective. Thanks to cluster analysis, we identify two groups of countries with relatively homogenous sustainable exchange rate paths in West Africa. We also find that no single currency peg nor a freely floating exchange rate regime would be preferable for any of the countries or groups of economies. Overall, our findings argue in favor of two ECOs —at least in a first step, i.e., one for each of the two identified zones. Each ECO would serve as a virtual anchor —with some flexibility— for the considered group, and would be determined by a basket of currencies mainly composed of euro and US dollar.
Topic:
Economics, International Political Economy, Monetary Policy, and Currency
Political Geography:
West Africa

34. World Interest Rates and Macroeconomic Adjustments in Developing Commodity Producing Countries

Author:
Vincent Bodart, François Courtoy, and Erica Perego
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
With commodities becoming international financial securities, commodity prices are affected by the international financial cycle. With this evidence in mind, this paper reconsiders the macroeconomic adjustment of developing commodity-exporting countries to changes in world interest rates. We proceed by building a model of a small open economy that produces a non-tradable good and a storable tradable commodity. The difference with standard models of small open economies lies in the endogenous response of commodity prices which -due to commodity storage- adjust to variations in international interest rates. We find that the endogenous response of commodity prices amplifies the reaction of commodity exporting countries to international monetary shocks. This suggests that commodity exporting countries are more vulnerable to unfavourable international monetary disturbances than other small open economies. In particular, because of the existence of the commodity price channel, even those small open commodity-exporting economies that are disconnected from international financial markets can be affected by the international financial cycle.
Topic:
Economics, International Political Economy, Monetary Policy, Finance, Commodities, Interest Rates, Exports, and Price
Political Geography:
Global Focus

35. Does the new fiscal consensus in advanced economies travel to emerging markets?

Author:
Olivier Blanchard, Josh Felman, and Arvind Subramanian
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Anew consensus on fiscal policy has emerged in advanced economies, that stimulus is both needed and feasible. At first blush, the scope for stimulus seems even greater in emerging markets, since their primary deficits are smaller and interest-growth differentials more favorable, suggesting that they can sustain much higher levels of debt. But more careful analysis suggests that this is not the case. The authors point out that what matters for debt sustainability are not current conditions but rather the range of possible future outcomes. And prospects for interest rates and growth are more uncertain in emerging markets, while primary balances are more difficult to adjust. As a result, debt limits are in fact tighter than advanced economies. Taking India as a case study, the authors argue that what is needed in the current situation is responsible, slow fiscal adjustment. More generally, one should be careful about importing wholesale the new fiscal consensus into emerging markets.
Topic:
Emerging Markets, Monetary Policy, Fiscal Policy, and Consensus
Political Geography:
Global Focus

36. Low interest rates in Europe and the US: one trend, two stories

Author:
Maria Demertzis and Nicola Viegi
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
In both Europe and the United States, interest rates have been declining for more than fifteen years. For much of this period, real interest rates have been negative and they are expected to remain negative for at least another decade. The literature associates this decline in interest rates with a similarly protracted decline in productivity. But the decline in productivity appears paradoxical given major technological advances. The decline in the price of capital is underpinned by the factors that have caused a decline in demand for capital, as well as a relative increase in its supply. On the supply side, aging and an increase in overall macroeconomic risk since the financial crisis have both led to increased savings. On the demand side, the increase in the importance of intangible capital in production has reduced the demand for physical capital. Nevertheless, for the US, the literature has identified the increase in market concentration as the biggest factor responsible for the reduction in the overall demand for capital. Digital innovation has led to the creation of champion firms that have captured big market shares and have been able to prevent others from entering not only the US market, but markets globally. This has dampened investment. Europe is affected by US digital dominance, but other factors, including aging and increased risk, are more prominent in sustaining the downward pressure on interest rates. In particular, the lack of risk capital, in the context of capital markets, contributes to this downward pressure in the EU. As the knowledge economy relies increasingly on intangible capital, a bank-based system that requires collateral is not well suited to finance investments. A lack of suitable finance will remain an important factor in the downward pressure on interest rates. The structural factors behind the downward pressure on interest rates imply that macroeconomic policy will have a reduced role in managing aggregate demand. Monetary policy in the euro area will be more about preventing financial fragmentation and less about stimulating demand. Equally, fiscal policy will have more of a supporting rather than stimulating role. Tackling the structural decline in market dynamism and therefore in real rates will require structural policies to reduce market power globally and ensure the creation of capital markets in the EU.
Topic:
Monetary Policy, Governance, European Union, Finance, and Macroeconomics
Political Geography:
Europe, North America, and United States of America

37. Modern Monetary Theory Meets Greece and Chicago

Author:
George S. Tavlas
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
During the fall of 2009, George Papandreou headed the ticket of the Panhellenic Socialist Movement, known by its acronym PASOK, against the then‐​governing conservative party, New Democracy, in the Greek national elections. Papandreou ran on a platform that featured highly expansive fiscal spending. During a press conference on September 13, 2009, he was asked where he would find the money to fund his party’s spending proposals. His answer was that given in the above quotation, by which he meant that Greece had abundant fiscal space to increase government spending; he believed that tax revenues could be sharply raised through stricter enforcement of laws against tax evasion. On October 4, PASOK won a landslide electoral victory, garnering 43.9 percent of the popular vote, compared with 33.5 percent for the second‐​place, incumbent New Democracy party, with the result that Papandreou became Greece’s prime minister. In the following months, a sovereign‐​debt crisis erupted in Greece that, within a year, engulfed much of the euro area through contagion. In November 2011, Papandreou resigned the premiership, becoming the first Greek prime minister in almost 50 years to be forced out of office by his own cabinet. An article in the Financial Times, reporting on his ouster, stated: “George Papandreou will be remembered by Greeks with more than a trace of bitterness as the man who smilingly declared ‘the money’s there’ ” (Hope 2011). In the next Greek elections, held in June 2012, PASOK won only 12.3 percent of the vote.
Topic:
Monetary Policy, Conservatism, Political Parties, and Socialism
Political Geography:
Europe and Greece

38. Lessons for the Fed from the Pandemic

Author:
John A. Allison
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Covid‐​19 pandemic greatly increased the scope and power of the Federal Reserve. The Fed created a number of new emergency lending facilities, which allowed it to make off‐​balance sheet loans and buy the debt of corporations and municipalities through special purpose vehicles backstopped by the Treasury under the CARES Act. Meanwhile, the Fed’s large‐​scale asset purchase program, known as quantitative easing (QE), was put on steroids after the pandemic struck in March 2020. The Fed has been purchasing longer‐​term Treasuries and mortgage‐​backed securities amounting to $120 billion per month, pushing the size of its balance sheet to an astonishing $7 trillion.
Topic:
Economics, Monetary Policy, Federal Reserve, Pandemic, and COVID-19
Political Geography:
North America and United States of America

39. Central Bank Digital Currency as a Potential Source of Financial Instability

Author:
George Selgin
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Various proposals for a central bank digital currency (CBDC) involve different technical solutions to as many distinct problems. My concern is with the monetary policy implications of those (e.g., Bordo and Levin 2019; Ricks 2020) that would allow anyone to place deposits in a Fed Master Account, directly or using ordinary banks as brokers.
Topic:
Monetary Policy, Banks, Central Bank, Financial Stability, and Digital Currency
Political Geography:
Global Focus

40. Cryptocurrencies and All That: Two Ideas from Monetary Economics

Author:
Jesús Fernández‐​Villaverde
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The monetary arrangements of societies are the result of the interplay of technology and ideas. Technology determines, for example, which coins can be minted and at what cost. For centuries, minting small‐​denomination coinage was too costly to induce Western European governments to supply enough small change (Sargent and Velde 2002). Only the arrival of steam‐​driven presses fixed this problem (Doty 1998). Simultaneously, ideas about private property and the scope of government determined whether private entrepreneurs were allowed to compete with governments in the supply of small change (Selgin 2008). Technology and ideas about money engage dialectically. Technological advances shape our ideas about money by making new monetary arrangements feasible. Ideas about desirable outcomes direct innovators to develop new technologies.
Topic:
Economics, Science and Technology, Monetary Policy, and Cryptocurrencies
Political Geography:
Europe and Global Focus

41. Ten Stablecoin Predictions and Their Monetary Policy Implications

Author:
Caitlin Long
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Stablecoins are financial obligations issued on a blockchain. They are generally fully collateralized with either fiat currency deposits at a bank, or with short‐​term government bonds held at a custodian. They’re issued only by nonbanks, although FINMA in Switzerland does allow Swiss banks to issue Swiss franc–denominated stablecoins. Usually stablecoins do not pay interest, and they are designed to trade at par with the fiat currency. Because they are issued on a blockchain, they usually settle in minutes, with irreversibility, and — critically — they are “programmable,” which means users can build their own software applications to interact with them.
Topic:
Monetary Policy, Banks, and Digital Currency
Political Geography:
Global Focus and United States of America

42. Should the State or the Market Provide Digital Currency?

Author:
Lawrence H. White
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Private commercial banks have been providing trusted money to the public for hundreds of years, in the form of banknotes (where allowed) and transferable deposit balances, as an integral part of their business model. Economically, money balances are a private good: they are rival in consumption (you and I can’t both simultaneously spend a given banknote or deposit balance) and excludable in supply (you and your bank can stop me from spending the funds in your wallet or account) (White 1999: 89). Accordingly, the market does not inherently fail to provide money efficiently.
Topic:
Markets, Monetary Policy, Economy, State, Banks, and Digital Currency
Political Geography:
Global Focus

43. Technology Development of Digital Currency

Author:
Neha Narula
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
We often spend a lot of time talking about the regulatory aspects of what a digital currency might look like, or the economic aspects. But if we take a look at the largest companies, the most influential on our ways of life, they’re tech companies. Technology is incredibly important and influences what we can do with policy and what kinds of functionality we can even enable. So, what I hope to tell you today is a little bit about how I’m seeing the technology development of digital currency.
Topic:
Development, Science and Technology, Monetary Policy, and Digital Currency
Political Geography:
Global Focus

44. Public and Private Money Can Coexist in the Digital Age

Author:
Tobias Adrian and Tommaso Mancini-Griffoli
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
a card, waving a phone, or clicking a mouse. Or we might hand over notes and coins, though in many countries increasingly less often. Today’s world is characterized by a dual monetary system, involving privately issued money — by banks of all types, telecom companies, or specialized payment providers — built upon a foundation of publicly issued money — by central banks. While not perfect, this system offers significant advantages, including innovation and product diversity, mostly provided by the private sector, and stability and efficiency, ensured by the public sector. These objectives — innovation and diversity on the one hand, and stability and efficiency on the other — are related. More of one usually means less of the other. A tradeoff exists that countries — central banks especially — have to navigate. How much of the private sector to rely upon, versus how much to innovate themselves? Much depends on preferences, available technology, and the efficiency of regulation. So it is natural, when a new technology emerges, to ask how today’s dual monetary system will evolve. If digitalized cash — called central bank digital currency — does emerge, will it displace privately issued money or allow it to flourish? The first is always possible, by way of more stringent regulation. We argue that the second remains possible, by extending the logic of today’s dual monetary system. Importantly, central banks should not face a choice between either offering central bank digital currency, or encouraging the private sector to provide its own digital variant. The two can coincide and complement each other — to the extent central banks make certain design choices and refresh their regulatory frameworks.
Topic:
Monetary Policy, Banks, Money, Digital Policy, and Digital Currency
Political Geography:
Global Focus

45. Reflections on Monetary Policy and Its Future

Author:
Jeb Hensarling, Phil Gramm, and John B. Taylor
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Fed’s huge balance sheet allows it to engage in credit policy (the composition of the balance sheet is by definition credit policy), which inherently auto‐​resides in fiscal policy — but should auto‐​reside with Congress. This discussion, moderated by John B. Taylor, took place at the Cato Institute’s 38th Annual Monetary Conference on November 19, 2020. The transcript has been edited for publication.
Topic:
Economics, Monetary Policy, Federal Reserve, and Credit
Political Geography:
North America and United States of America

46. Discounting Gold: Money and Banking in Gold Rush California

Author:
Jonathan Tiemann and Christopher McKenna
Publication Date:
04-2021
Content Type:
Case Study
Institution:
Oxford Centre for Global History
Abstract:
Two momentous events early in 1848 completely and abruptly transformed California. On 24 January, James Marshall found gold in a millrace he was building for John Sutter at Coloma, on the South Fork of the American River. Nine days later, on 2 February, the United States and Mexico concluded the Treaty of Guadalupe Hidalgo, ending nearly two years of hostilities. Under the Treaty, Mexico ceded much of the present south-western United States to the US for monetary consideration. An American occupation government had ruled most of California since mid-1846, but neither the American military governor nor the earlier Mexican governors had held firm political control over the remote, sparsely populated territory. 1 Now, the problem was fully in the hands of the Americans.
Topic:
Economics, History, Monetary Policy, Capitalism, Currency, and Banking
Political Geography:
United States

47. COVID-19 in Africa: The implications for macroeconomic and socioeconomic dimensions

Author:
Mma Amara Ekeruchera
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Centre for the Study of the Economies of Africa (CSEA)
Abstract:
The COVID-19 outbreak began in December 2019 in the Wuhan city of China and has continued to spread globally. As of this writing, 28.2 million cases have been recorded globally with 910,000 deaths. Aside the health impact, the pandemic has led to an unprecedented disruption in economic activities, initiating a sudden demand, supply, and financial shock. The mitigation strategies put in place by governments across the world to curb the virus as well as the uncertainty associated with the pandemic has led to a reduction in the consumption of non-essential commodities. Meanwhile, disruptions to global supply chains in a closely connected world as well as the reduced demand have necessitated a slowdown in production. Furthermore, investors have become more risk averse with the prices of risk assets falling to levels experienced in the 2007-20008 global financial crisis. To counteract the fall in private sector demand, stabilize the financial system, and ensure economic recovery, governments and central banks across the world have deployed a range of policies and programmes. Central banks are cutting policy rates and providing direct liquidity to the financial system. Federal and sub-national governments are providing tax relief, cash transfers, and employee retention schemes to alleviate the burden on affected individuals and businesses. Africa is not left behind as governments have increased spending plans (about 1.9% of their GDP) and central banks are adopting more accommodating monetary policies.
Topic:
Economics, Health, Monetary Policy, Central Bank, Macroeconomics, Pandemic, COVID-19, Socioeconomics, and Supply Chains
Political Geography:
Africa

48. The European Central Bank’s Monetary Policy Strategy Review: the key to a return to sustainable growth in Europe

Author:
Nicolas Goetzmann
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Robert Schuman Foundation (RSF)
Abstract:
On 23 January 2020, a few weeks before the Covid19 pandemic began, Christine Lagarde, President of the European Central Bank (ECB), announced that a "strategy review" would be held with the aim of evaluating the monetary policy conducted since May 2003, the date of the last "review". Faced with an inflation rate significantly below 2%, whereas its objective is "below but close to 2% over the medium term", the ECB had no choice but to carry out such a procedure.
Topic:
Monetary Policy, Economic Growth, European Central Bank, and Sustainability
Political Geography:
Europe

49. Regional Financial Cooperation in East Asia from a New Perspective

Author:
Sungbae An and Subin Kim
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Following the Asian financial crisis of 1998, there was a need to improve regional financial cooperation, including liquidity support. The Chiang Mai Initiative Multilateralization (hereinafter, CMIM) and the Asian Bond Market Initiative (hereafter, ABMI) are two of the outcomes, but it is difficult to find countries that are actively using these mechanisms. Against this backdrop, we will first examine the limitations of existing systems and propose ways to overcome those limitations, as well as new ways to strengthen East Asian financial cooperation. We suggest three ways to strengthen financial coopera-tion in East Asia from a new perspective: 1) monetary cooperation through Central Bank Digital Currency (CBDC) 2) establishment of development financial institution in Northeast Asia 3) financial cooperation with Central Asia and Mongolia. Of course, more precise planning is required to implement these alternatives, and it is also recognized that the topics covered in this study represent only a subset of regional financial and monetary cooperation. However, by overcoming the limitations thus far, it is hoped that it can be a contribution that provides at least a glimmer of thought, which can hopefully become more concrete in future studies.
Topic:
Development, Regional Cooperation, Monetary Policy, Financial Crisis, and Finance
Political Geography:
Central Asia and East Asia

50. The Impact of Monetary Policy on Exchange Rate and Its Policy Implication

Author:
Deok Ryong Yoon, Soyoung Kim, and Jinhee Lee
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In this study we aim to clarify the different extents to which monetary policy influences foreign exchange rate determination between the monetary policies of small open economies with international currency and those without international currency, and use empirical research to explain why. Based on the analysis above, we make some policy suggestions.
Topic:
Foreign Exchange, Monetary Policy, Economic Policy, and Currency
Political Geography:
South Korea and Global Focus