Derrick Kanngiesser and Tim Willems This post describes a systematic way for central banks to employ past forecasts (and associated errors) with the aim of learning more about the structure and functioning of the economy, ultimately to enable a better setting of monetary policy going forward. Results suggest that the Monetary Policy Committee’s (MPC’s) inflation … Continue reading Forecast accuracy and efficiency at the Bank of England – and how forecast errors can be leveraged to do better
Monetary Policy
Tomas Key Nominal wage growth has increased markedly in the UK in recent years, reaching levels that haven’t been seen for more than 20 years. Although growth has moderated a little in recent months, it remains significantly above its pre-pandemic level. An assessment of whether this strong rate of wage growth will persist is a … Continue reading Using sectoral data to estimate the trend in aggregate wage growth
Julian Reynolds Policymakers and market participants consistently cite geopolitical developments as a key risk to the global economy and financial system. But how can one quantify the potential macroeconomic effects of these developments? Applying local projections to a popular metric of geopolitical risk, I show that geopolitical risk weighs on GDP in the central case … Continue reading Quantifying the macroeconomic impact of geopolitical risk
Natalie Burr, Julian Reynolds and Mike Joyce Monetary policymakers have a number of tools they can use to influence monetary conditions, in order to maintain price stability. While central banks typically favour short-term policy rates as their primary instrument, when policy rates remained constrained at near-zero levels following the global financial crisis (GFC), many central … Continue reading To the lower bound and back: measuring UK monetary conditions
Samuel Smith and Marco Pinchetti Recent events in the Middle East, as well as Russia’s invasion of Ukraine, have sparked renewed interest in the consequences of geopolitical tensions for global economic developments. In this post, we argue that geopolitical risk (GPR) can transmit via two separate and intrinsically different channels: (i) a deflationary macro channel, … Continue reading The transmission channels of geopolitical risk
Tim Willems and Rick van der Ploeg Since the post-Covid rise in inflation has been accompanied by strong wage growth, interactions between wage and price-setters, each wishing to attain a certain markup, have regained prominence. In our recently published Staff Working Paper, we ask how monetary policy should be conducted amid, what has been referred … Continue reading Markup matters: monetary policy works through aspirations
by Brian Czech
If you recognize the damages done by a bloating economy, you’ll be alarmed by the global GDP meter, which hit the existentially menacing threshold of $100 trillion in 2022. If that doesn’t give you a dose of distress, try the global debt clock. Then, for a dizzying dose indeed, check the casino-like combination of debt and GDP maintained by “US Debt Clock.”
Almost all readers,
The post Debt, Deficits, and Warranted Money appeared first on Center for the Advancement of the Steady State Economy.
Dario Bonciani and Johannes Fischer The UK economy has been hit by significant terms-of-trade shocks, most notably the rise in energy prices following the Russian invasion of Ukraine. These shocks have created substantial and persistent inflationary pressure in many countries. Such upheavals bring increased uncertainty about the future, making macroeconomic forecasting more challenging. In this … Continue reading Forecasting UK inflation in the presence of large global shocks
Josh Martin The Monetary Policy Committee has recently looked at wage growth as an important indicator of inflation persistence. One way that wages matter for price inflation is as a cost for businesses, who may raise their prices in response to higher wages. For this channel, the wage measure needs to reflect the coverage and … Continue reading CPI-weighted wage growth
Lennart Brandt, Natalie Burr and Krisztian Gado The Bank of England has a 2% annual inflation rate target in the ONS’ consumer prices index. But looking at its 700 item categories, we find that very few prices ever change by 2%. In fact, on a month-on-month basis, only about one fifth of prices change at … Continue reading Beyond the average: patterns in UK price data at the micro level