Search

Begin New Search Topic Macroeconomics Political Geography United States of America

11. Securing macroeconomic and monetary stability with a Federal Reserve–backed digital currency

Author:
Julia Coronado and Simon Potter
Publication Date:
03-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The US monetary system faces significant challenges from advances in technology and changes in the macroeconomy that, left unaddressed, will threaten the stability of the US economy and financial system. At the same time, low interest rates mean that central banks will not have the policy ammunition they had in the past during the next recession. The Federal Reserve needs new tools to meet its mandates of price stability and maximum employment. It also needs to preserve the safety and soundness of the financial system in a rapidly digitizing world. The authors propose a Fed-backed digital currency to solve both problems. Their proposal creates a regulated system of digital currency accounts for consumers managed by digital payment providers and fully backed by reserves at the Fed. The system would be limited in size, to preserve the functions and stability of the existing banking system. Fed backing would mean low capital requirements, which would in turn facilitate competition. Low fees and no minimum balance requirements in the new system would also help financial institutions reach the roughly 25 percent of the US population that is currently either unbanked or underbanked. Digital accounts for consumers could also provide a powerful new stabilization tool for both monetary and fiscal policies. For fiscal policy, it could facilitate new automatic stabilizers while also allowing the Fed to provide quantitative easing directly to consumers. This tool could be used in a timely manner with broad reach to all Americans.
Topic:
Economics, Government, Monetary Policy, Banks, and Macroeconomics
Political Geography:
North America and United States of America

12. New risks to global financial stability

Author:
Hung Tran
Publication Date:
10-2019
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
The post-2008 financial regulatory reform has strengthened the banking system, bringing the bank-generated liquidity expansion under control. However, central-bank liquidity has been growing significantly for more than a decade, and financial mediation has moved from banks to non-bank financial institutions, and from lending to capital-market transactions. This new system has created new financial imbalances and distortions and pose new areas of vulnerability that require appropriate policy responses. In “New Risks to Global Financial Stability” author Hung Tran, a nonresident senior fellow at the Atlantic Council’s Global Business & Economics program, assesses the global financial system weaknesses and outlines steps to promote financial stability. Tran updates a framework, first developed by the Committee on the Global Financial System, to recommend policy responses along three lines of defense: prevention of excess liquidity; strengthening domestic policy measures; and cooperative provision of central-bank liquidity.
Topic:
Regulation, Finance, Economy, Business, and Macroeconomics
Political Geography:
Canada, North America, and United States of America

13. The Impact of Labour Market Institutions and Capital Accumulation on Unemployment: Evidence for the OECD, 1985-2013

Author:
Philipp Heimberger
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper provides econometric evidence on the impact of labour market regulations on (‘structural’) unemployment rates. Based on a data set for 23 OECD countries over the time period 1985‑2013, the panel regression results suggest that standard institutional labour market indicators – such as employment protection legislation, trade union density, tax wedge, minimum wages – largely underperform in explaining (medium-term) unemployment, while cyclical macroeconomic factors – in particular capital accumulation, but also the long-term real interest rate – are essential determinants. These results underscore that the existing macroeconometric evidence in favour of the view that labour market rigidities are at the heart of increased ‘structural’ unemployment in advanced economies is modest at best. Some labour market variables do have an impact on unemployment, but it is in general smaller than the impact of relevant macroeconomic variables. To understand the development of unemployment in OECD countries, researchers and policy-makers therefore should consider aggregate demand dynamics and focus on capital accumulation.
Topic:
Migration, Labor Issues, Institutions, Macroeconomics, Unemployment, Labor Market, and Capital Accumulation
Political Geography:
Europe and United States of America

14. Predictive Macro-Impacts of PLS-Based Financial Conditions Indices: An Application to the USA

Author:
Duo Qin
Publication Date:
01-2016
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This investigation seeks to construct financial conditions indices (FCIs) by the partial least squares (PLS) method with the aims (i) that the FCIs should outperform interest rate, which is conventionally used in small VAR (Vector Auto-Regression) models to present the predictive macro-impacts of the financial markets, and (ii) that the FCIs are adequately invariant during regular updates to resemble non-model based aggregate indices. Both aims are shown to be attainable as long as the FCIs are tailor-made with carefully selected components and suitably targeted macro variables of forecasting interest. The positive outcome sheds light on why the widely used principal component analysis (PCA) approach is ill-suited to the tasks here whereas why the PLS route promises a fruitful way forward.
Topic:
Economics, Markets, Finance, and Macroeconomics
Political Geography:
North America and United States of America

15. Limits of Quantitative Easing

Author:
Marek Dabrowski
Publication Date:
11-2010
Content Type:
Working Paper
Institution:
Center for Social and Economic Research - CASE
Abstract:
"The recent decision of the U.S. Federal Reserve Board (Fed) to increase its assets by purchasing $600 billion worth of Treasury bonds is unlikely to boost economic growth or employment prospects in the U.S. Instead, it will cause damage to the world economy and may even lead to another financial crisis (especially in emerging and developing markets), where the U.S. dollar remains a leading reserve and transaction currency."
Topic:
Financial Crisis, Economy, Macroeconomics, and Currency
Political Geography:
Global Focus and United States of America

16. The Impact of Macroeconomic Announcements on Real Time Foreign Exchange Rates in Emerging Markets

Author:
Fang Cai and Hyunsoo Joo
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper utilizes a unique high-frequency database to measure how exchange rates in nine emerging markets react to macroeconomic news in the U.S. and domestic economies from 2000 to 2006. We find that major U.S. macroeconomic news have a strong impact on the returns and volatilities of emerging market exchange rates, but many domestic news do not. Emerging market currencies have become more sensitive to U.S. news in recent years. We also find that market sentiment could sway the impact of news on these currencies systematically, as good (bad) news seems to matter more when optimism (pessimism) prevails. Market uncertainty also interacts with macroeconomic news in a statistically significant way, but its role varies across currencies and news.
Topic:
Emerging Markets, Exchange Rate Policy, and Macroeconomics
Political Geography:
North America and United States of America