unconventional monetary instruments

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pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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Andrei Shleifer, Asian financial crisis, bank run, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, blockchain, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, cryptocurrency, debt deflation, distributed ledger, Edward Snowden, ethereum blockchain, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial intermediation, financial repression, forward guidance, frictionless, full employment, George Akerlof, German hyperinflation, illegal immigration, inflation targeting, informal economy, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, money: store of value / unit of account / medium of exchange, moral hazard, moveable type in China, New Economic Geography, offshore financial centre, oil shock, open economy, payday loans, price stability, purchasing power parity, quantitative easing, RAND corporation, RFID, savings glut, secular stagnation, seigniorage, The Great Moderation, the payments system, transaction costs, unbanked and underbanked, unconventional monetary instruments, underbanked, unorthodox policies, Y2K, yield curve

A few empirical papers argue that these unorthodox central bank policies have accomplished more than meets the eye.5 Nevertheless, the stunning challenges that the Bank of Japan and the ECB have faced in lifting inflationary expectations suggest that unconventional policies are vastly less effective than plain vanilla interest rate policy might have been, if unfettered negative rate policy were fully possible—that is, if all the institutional, legal, and other barriers were cleared away, as we discuss in chapters 10 and 11. Even at the Federal Reserve, which has produced many of the chirpier appraisals of unconventional monetary instruments, nobody really wants to have to rely on them again, not least because they involve risks that are difficult to measure or understand. If the zero bound led only to uncertainty about the effects of monetary policy, it would be bad enough, but it has clouded the entire debate on macroeconomic stabilization policy. Indeed, there is a growth industry based on studying how the zero bound affects other policies, such as government spending, government deficits, structural reform, and the international transmission of macroeconomic policies.

See also Eurozone; individual country names European Central Bank (ECB): consumer cash holdings, efforts to determine, 52; discount rate cuts in response to recent crises, 131–32; euro purchase, program for, 245n20; inflationary expectations, challenges faced in lifting, 124; inflation control, mandate for, 120, 193; legal domestic economy, demand for euros in, 236n23; negative interest rates, experience with, 1; nominal policy interest rates, 2000–2015, 130; profits from printing money, 81; quantitative easing by, 135–36; terrorist financing, concerns regarding, 77 Eurozone: buying back paper currency, cost in GDP of, 217; cash, restrictions on the use of, 64; cash circulating, amount of, 32–34; cash used for different kinds of purchases, percentage of by country, 55; currency/GDP ratio, 1995–2015, 34; currency per capita, 38, 40; discount rate cuts in response to recent crises, 131–32; financial stability concerns, negative interest rates and, 178; foreign holdings of currency, 45–47; large-denomination notes of, 31; member countries of, 235n5; negative interest rates, functioning of swap markets and, 163; negative interest rates in, 5, 123; nominal policy interest rates, 2000–2015, 130; paper currency, profits from monopoly on, 217; revenue as a percentage of GDP, 2006–2015, 83–84; underground economy, estimated size of, 63 Farhi, Emmanuel, 246n26, 250n18, 251n3 Faust (Goethe), 15, 21, 24 Federal Reserve Bank/Board/System: abolishing, call for, 191; consumer cash holdings, efforts to determine, 49–51; creation of, 192; discount rate cuts in response to recent crises, 131–32; flexible inflation targeting by, 193; foreign holdings of currency, estimates of, 44–45; inflation and, 28; inflation target, choice of, 153; inflation targeting adopted by, 232; Nixon’s reelection and, 189; nominal policy interest rates, 2000–2015, 130; quantitative easing by, 135–36, 140–42; security in the event of a nuclear attack, 113–14; ten-year treasury inflation-indexed securities, constant maturity, 142; unconventional monetary instruments, chirpy appraisals of, 124; welfare of other countries not considered by, 207; zero bound, work on, 132–34 Feige, Edgar L., 238n6 Feldstein, Martin, 156–57 Ferengi currency (Star Trek), 216, 254n9 Ferguson, Niall, 21 fiat currency: basis of value for, 8; contemporary, 30; Mongol currency as, 23; Wallace’s paradox of, 105, 225–26 Financial Action Task Force, 75 financial repression, 186–87 Finland, 71 fiscal policy: theory of at the zero bound, 249n12; the zero bound constraint and opportunistic, 154–56 Fiscal Theory of the Price Level, 227 Fischer, Stanley, 149 Fisher, Irving, 5, 86, 164 Fitzgerald, F.


pages: 401 words: 112,784

Hard Times: The Divisive Toll of the Economic Slump by Tom Clark, Anthony Heath

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Affordable Care Act / Obamacare, British Empire, Carmen Reinhart, credit crunch, Daniel Kahneman / Amos Tversky, debt deflation, deindustrialization, Etonian, eurozone crisis, falling living standards, full employment, Gini coefficient, hiring and firing, income inequality, interest rate swap, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, low skilled workers, mortgage debt, new economy, Northern Rock, obamacare, oil shock, Plutocrats, plutocrats, price stability, quantitative easing, Ronald Reagan, science of happiness, statistical model, The Wealth of Nations by Adam Smith, unconventional monetary instruments, War on Poverty, We are the 99%, women in the workforce, working poor

The individual measures are coming thick and fast, and we can describe only a fraction of them. The biggest single saving comes from Osborne's move to hold benefits at below the cost of living for several years in a row, capping rises at 1%, irrespective of a rate of inflation that in summer 2013 was running at close to 3%. At the same time as the chancellor was issuing the Bank of England's new governor, Mark Carney, with a new remit recognising the ‘need to use unconventional monetary instruments’49 – coded encouragement for taking more risks with inflation for the sake of recovery – his benefit policy was ensuring that the victims of hard times would be more exposed to higher prices than at any time in recent history. A recipe for social insecurity indeed. With the important exception of old age, social insurance against all of life's financially testing contingencies is being pared back.