Search Results
Working Paper
Inflation and the Size of Government
It is commonly supposed in public and academic discourse that inflation and big government are related. We show that economic theory delivers such a prediction only in special cases. As an empirical matter, inflation is significantly positively related to the size of government mainly when periods of war and peace are compared. We find a weak positive peacetime time series correlation between inflation and the size of government and a negative cross-country correlation of inflation with non-defense spending.
Working Paper
Does Anyone Listen when Politicians Talk? The Effect of Political Commentaries on Policy Rate Decisions and Expectations
This paper investigates the effects of political commentaries on policy rate decisions and policy expectations in the United States and the euro area. The results suggest that political commentaries do influence policy rate expectations in both regions, even after controlling for macroeconomic releases and immediate interest rate expectations. The findings regarding the policy reaction functions reveal that market expectations are mostly rational. There is no evidence that the Federal Reserve responds to political commentaries that suggest rate hikes or easings. Meanwhile, the European ...
Speech
Central bank independence: what it is, what it isn’t – and the importance of accountability: remarks at the 2019 Annual Meeting of the Central Bank Research Association, Columbia University, New York, New York, July 19, 2019
Central banks need not have independence with respect to the what ? the end goals, which are set by the elected representatives. But central banks should have independence with respect to the how ? the means of getting there.
Working Paper
Fiscal Dominance
Central banks' resolve and independence is chronically tested by fiscal authorities wishing to impose their desired policies, often leading to socially undesirable economic outcomes. I study how the fiscal and monetary authorities' disagreement over outcomes and their choice of active instruments shape the implementation of policy, dispensing with commitment or first-mover advantage. I characterize the equilibrium for various combinations of active (and correspondingly, passive) instruments, identify which sources of disagreement play a role in each case, and show whether and under what ...
Speech
Brief Introductory Remarks, Outlook 26: The New England Economic Forum, Hosted by the New England Bankers Associations
Federal Reserve Bank of Boston President & CEO Susan M. Collins delivered brief, opening remarks and introduced the keynote speaker, Michelle W. Bowman, Vice Chair for Supervision at the Federal Reserve Board, at "Outlook 26: The New England Economic Forum." The event, hosted by the six New England Bankers Associations, is a forum for bankers and business leaders that focuses on sharing economic perspectives and insights.
Speech
The Economic Outlook and Monetary Policy
St. Louis Fed President Alberto Musalem spoke at an American Enterprise Institute event in Washington, D.C. He delivered prepared remarks, “The Economic Outlook and Monetary Policy,” and participated in a Q&A moderated by AEI’s Michael Strain.
Working Paper
Who Paid for the Profits of Taiwan's Central Bank?
We analyze the interaction between the Taiwan central bank's profits and its policies. To earn large and consistent profits, the Taiwan central bank significantly expanded its balance sheet and relied on inexpensive short-term domestic funding to invest in longer-term foreign debt securities. In doing so, the central bank engineered a massive duration and currency mismatch on its balance sheet to capture term and currency risk premiums. We also argue that these large profits could not have been realized without a low rate policy combined with heavy regulations on domestic financial ...
Working Paper
Fiscal Dominance
Central banks' resolve and independence are chronically tested by fiscal authorities wishing to impose their desired policies, often leading to socially undesirable economic outcomes. I study how the fiscal and monetary authorities' disagreement over outcomes and their choice of active instruments shape the implementation of policy, dispensing with commitment or first-mover advantage. I characterize the equilibrium for various combinations of active (and correspondingly, passive) instruments, identify which sources of disagreement play a role in each case, and show whether and under what ...
Working Paper
Helicopter Drops and Liquidity Traps
We show that if the central bank operates without commitment and faces constraints on its balance sheet, helicopter drops can be a useful stabilization tool during a liquidity trap. With commitment, even with balance sheet constraints, helicopter drops are, at best, irrelevant.