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.
2019-07-01 12:35:00 Monday ET
Apple releases the new iOS 13 smartphone features. These features include Dark Mode, Audio Share, Memoji, better privacy protection, smart photo collection,
2020-02-26 09:30:00 Wednesday ET
Goldman Sachs follows the timeless business principles and best practices in financial market design and investment management. William Cohan (2011) M
2018-07-21 13:35:00 Saturday ET
President Trump supports a bipartisan bill or the Foreign Investment Risk Review Modernization Act (FIRRMA), which effectively broadens the jurisdiction of
2025-07-26 09:26:00 Saturday ET
Nir Eyal and Ryan Hoover explain why keystone habits lead us to purchase products, goods, and services in our lives. The Hooked Model can help shine new lig
2022-03-25 09:34:00 Friday ET
Corporate cash management The empirical corporate finance literature suggests four primary motives for firms to hold cash. These motives include the tra
2018-04-13 14:42:00 Friday ET
Mike Pompeo switches his critical role from CIA Director to State Secretary in a secret visit to North Korea with no regime change as the North Korean dicta