Monetary Policy

Rebecca Mari and Matteo Ficarra. Floods are the most costly natural disaster in Europe. In the UK, they account for around GBP1.4 billion in annual losses. Yet, evidence on the macroeconomic implications is inconclusive. GDP often shows a puzzling delayed response, and prices can be pushed in opposite directions. Using a novel county level data … Continue reading Weathering the storm: the economic impact of floods and the role of adaptation →

Boromeus Wanengkirtyo, Francesca Diluiso, Rebecca Mari, Jenny Chan, Ambrogio Cesa-Bianchi and Alex Haberis. Climate change is becoming increasingly important for monetary policy as the world transitions into greener economies and climate change’s physical impacts become more prominent. This is complementary, but distinct to, examining how climate change affects financial stability risks (Carney (2015)). This series … Continue reading Climate and monetary policy series →

Francesca Diluiso, Boromeus Wanengkirtyo and Jenny Chan. This post examines key aspects of climate mitigation policies that could matter for monetary policy, using insights from structural climate macroeconomic models (Environmental Dynamic Stochastic General Equilibrium). Three main findings emerge: first, mitigation policies – like carbon pricing – can be a direct source of shocks, creating potential … Continue reading Some implications of climate policy for monetary policy →

David Elliott, Ralf Meisenzahl and José-Luis Peydró Capital flows and credit growth are strongly correlated across countries. Macroeconomic evidence suggests that this ‘global financial cycle’ is largely driven by US monetary policy: expansionary policy by the Federal Reserve drives increases in lending globally, while contractionary Fed policy leads to a tightening of global financial conditions. … Continue reading Nonbank lenders as global shock absorbers →

Francesca Diluiso and Aydan Dogan To achieve the emissions reduction targets outlined in The Paris Agreement, many economies have started implementing various types of climate policies. These policies, which include subsidies for green production or investment, carbon taxes, and cap and trade schemes, are crucial for guiding the transition to a greener economy. However, by … Continue reading International spillovers from climate policy →

GOWER INITIATIVE FOR MODERN MONEY STUDIES – WRITTEN EVIDENCE SND0019 – SUSTAINABILITY OF THE UK’S NATIONAL DEBT INQUIRY   Introduction 1.1    The national debt has been a recurring topic …

The post Submission to the “Sustainability of the UK’s national debt” Inquiry appeared first on The Gower Initiative for Modern Money Studies.

Aydan Dogan, Melih Firat and Aditya Soenarjo How does the use of imported inputs in production affect inflation dynamics in the UK? Over the past few decades, with the rise of global value chains (GVCs), production processes have become increasingly interlinked across countries and sectors. This interconnection means that firms’ pricing decisions are now more … Continue reading Global value chains and inflation: how imported inputs shape UK prices →

Krishan Shah, Phil Bunn and Marko Melolinna An important way in which monetary policy impacts the economy is through its effects on the capital expenditure of firms. When policy rates are raised (and as long as risk-premia remain unchanged) firms’ cost of capital increases. A higher cost of capital should lead firms to increase their … Continue reading High hurdles: evidence on corporate investment hurdle rates in the UK →

Joanna McLafferty, Kirstine McMillan and Joseph Smart On 7 May 2024 the SONIA rate, the UK’s risk-free reference rate, printed at exactly 5.2000% and has remained there to the end of July 2024 (the time of writing). Flatlining of SONIA is not a phenomenon we see often. Prior to this, over the past six years … Continue reading SONIA: steady as she goes →

Vania Esady Monetary policy actions transmit to inflation and real activity with ‘long and variable’ lags. However, it is not obvious how the effectiveness of monetary policy varies across economic states (for instance pace of economic growth). The academic literature suggests the possibility effects of monetary policy being state dependent. For example, Tenreyro and Thwaites … Continue reading State-dependent effects of UK monetary policy →