2019-04-21 10:07:54 Sun ET
federal reserve monetary policy treasury dollar employment inflation interest rate exchange rate macrofinance recession systemic risk economic growth central bank fomc greenback forward guidance euro capital global financial cycle credit cycle yield curve
Central bank independence remains important for core inflation containment in the current age of political populism. In accordance with the dual mandate of both price stability and maximum sustainable employment, most central banks seek to solve the dynamic consistency problem on the basis of a key desire to insulate monetary policy decisions from political influence.
A landmark empirical study of cross-country comparisons by Alberto Alesina and Lawrence Summers confirms that countries with better central bank independence experience lower inflation without suffering any real economic output or labor force penalty. An independent central bank can enhance fiscal discipline by reducing the relative likelihood of fiscal dominance and monetization of perennial budget deficits.
Historical experience and economic theory teach us an informative lesson. When monetary policy is subject to political control, people expect dovish expansionary interest rate adjustments and so anticipate higher wages and prices in response. The undesirable economic outcome is stagflation (or the worst-case scenario of both high inflation and high unemployment). It can cost prohibitive welfare losses for the central bank to bring down inflation with subsequent interest rate hikes. Key credible apolitical monetary policy decisions would thus promote price stability with minimal real impact on economic growth, employment, and capital investment.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2019-04-19 12:35:00 Friday ET
Federal Reserve proposes to revamp post-crisis rules for U.S. banks. The current proposals would prescribe materially less strict requirements for community
2019-02-28 20:44:00 Thursday ET
AYA Analytica finbuzz podcast channel on YouTube February 2019 In this podcast, we discuss several topical issues as of February 2019: (1) our proprieta
2023-10-19 08:26:00 Thursday ET
World politics, economics, and new ideas from the Psychology of Money written by Morgan Housel We would like to provide both economic and non-economic th
2019-05-11 10:28:00 Saturday ET
The Trump administration still expects to reach a Sino-U.S. trade agreement with a better mechanism for intellectual property protection and enforcement. Pr
2019-06-23 08:30:00 Sunday ET
The financial crisis of 2008-2009 affects many millennials as they bear the primary costs of college tuition, residential demand, health care, and childcare
2017-01-23 09:30:00 Monday ET
There are several highlights from the first news conference after Trump's presidential election victory: The Trump administration will repeal-and-