Brigitte Granville
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691145402
- eISBN:
- 9781400846443
- Item type:
- book
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691145402.001.0001
- Subject:
- Business and Management, Finance, Accounting, and Banking
Today's global economy, with most developed nations experiencing very low inflation, seems a world apart from the “Great Inflation” that spanned the late 1960s to early 1980s. Yet, this book makes ...
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Today's global economy, with most developed nations experiencing very low inflation, seems a world apart from the “Great Inflation” that spanned the late 1960s to early 1980s. Yet, this book makes the case that monetary economists and policymakers need to keep the lessons learned during that period very much in mind, lest we return to them by making the same mistakes we made in the past. The book details the advances in macroeconomic thinking that gave rise to the “Great Moderation”—a period of stable inflation and economic growth, which lasted from the mid-1980s through the most recent financial crisis. The book makes the case that the central banks' management of monetary policy—hinging on expectations and credibility—brought about this period of stability, and traces the roots of this success back to the eighteenth-century foundations of modern monetary thought. Tackling fundamental questions such as the causes of inflation and its relation to unemployment and growth, the natural rate of inflation hypothesis, the fiscal theory of the price level, and the proper goals of central banks, the book aims above all to demonstrate the dangers of forgetting the role of credibility in establishing sound monetary policy. With the lessons of the past firmly in mind, the book presents stimulating ideas and proposals about inflation-targeting principles, which provide tools for present-day monetary authorities dealing with the forces of globalization, mercantilism, and reserve accumulation.Less
Today's global economy, with most developed nations experiencing very low inflation, seems a world apart from the “Great Inflation” that spanned the late 1960s to early 1980s. Yet, this book makes the case that monetary economists and policymakers need to keep the lessons learned during that period very much in mind, lest we return to them by making the same mistakes we made in the past. The book details the advances in macroeconomic thinking that gave rise to the “Great Moderation”—a period of stable inflation and economic growth, which lasted from the mid-1980s through the most recent financial crisis. The book makes the case that the central banks' management of monetary policy—hinging on expectations and credibility—brought about this period of stability, and traces the roots of this success back to the eighteenth-century foundations of modern monetary thought. Tackling fundamental questions such as the causes of inflation and its relation to unemployment and growth, the natural rate of inflation hypothesis, the fiscal theory of the price level, and the proper goals of central banks, the book aims above all to demonstrate the dangers of forgetting the role of credibility in establishing sound monetary policy. With the lessons of the past firmly in mind, the book presents stimulating ideas and proposals about inflation-targeting principles, which provide tools for present-day monetary authorities dealing with the forces of globalization, mercantilism, and reserve accumulation.
Ewald Engelen, Ismail Ertürk, Julie Froud, Sukhdev Johal, Adam Leaver, Michael Moran, Adriana Nilsson, and Karel Williams
- Published in print:
- 2011
- Published Online:
- January 2012
- ISBN:
- 9780199589081
- eISBN:
- 9780191731150
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199589081.003.0002
- Subject:
- Business and Management, Finance, Accounting, and Banking, Political Economy
The chapter makes the case for framing the crisis as an elite debacle. The first section focuses on the informal pre-2007 elite story about the benefits of financial innovation, told in the period of ...
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The chapter makes the case for framing the crisis as an elite debacle. The first section focuses on the informal pre-2007 elite story about the benefits of financial innovation, told in the period of what we call the Great Complacence when central bankers, regulators, and senior economists repeated the same reassuring but ill-founded stories about the benefits of financial innovation and the ‘Great Moderation’. The second section justifies the term debacle by presenting some political arithmetic about the form and nature of the catastrophe after 2008 and the wider consequences of the crisis and bail out. The chapter argues that we need a new and different politico-cultural approach to present-day capitalism if we are to understand the origins of the debacle in the operations of unregulated finance and the subsequent frustration of reform.Less
The chapter makes the case for framing the crisis as an elite debacle. The first section focuses on the informal pre-2007 elite story about the benefits of financial innovation, told in the period of what we call the Great Complacence when central bankers, regulators, and senior economists repeated the same reassuring but ill-founded stories about the benefits of financial innovation and the ‘Great Moderation’. The second section justifies the term debacle by presenting some political arithmetic about the form and nature of the catastrophe after 2008 and the wider consequences of the crisis and bail out. The chapter argues that we need a new and different politico-cultural approach to present-day capitalism if we are to understand the origins of the debacle in the operations of unregulated finance and the subsequent frustration of reform.
Francesco Papadia and Tuomas Vӓlimӓki
- Published in print:
- 2018
- Published Online:
- April 2018
- ISBN:
- 9780198806196
- eISBN:
- 9780191844058
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198806196.003.0002
- Subject:
- Economics and Finance, Macro- and Monetary Economics
The chapter describes the historical process as well as the analytical and empirical factors that, at the end of the twentieth century, led to the dominance, in advanced economies, of a central bank ...
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The chapter describes the historical process as well as the analytical and empirical factors that, at the end of the twentieth century, led to the dominance, in advanced economies, of a central bank model based on an independent institution devoted to price stability as its overriding objective. The central bank pre-crisis model was elegant, performing, and efficient. However, it could not easily accommodate the pursuit of a traditionally important central bank objective: financial stability. Indeed, since central banks have, in essence, just one tool, that is, the interest rate, the pursuit of a financial stability objective in addition to a price stability objective could create dilemma situations. In the two decades between the mid-1980s and the mid-2000s, the economies of advanced economies were very stable, and this period was thus identified as Great Moderation. However, subsequent experience showed that, in this period, the crisis was incubating.Less
The chapter describes the historical process as well as the analytical and empirical factors that, at the end of the twentieth century, led to the dominance, in advanced economies, of a central bank model based on an independent institution devoted to price stability as its overriding objective. The central bank pre-crisis model was elegant, performing, and efficient. However, it could not easily accommodate the pursuit of a traditionally important central bank objective: financial stability. Indeed, since central banks have, in essence, just one tool, that is, the interest rate, the pursuit of a financial stability objective in addition to a price stability objective could create dilemma situations. In the two decades between the mid-1980s and the mid-2000s, the economies of advanced economies were very stable, and this period was thus identified as Great Moderation. However, subsequent experience showed that, in this period, the crisis was incubating.
Andrew Farlow
- Published in print:
- 2013
- Published Online:
- April 2015
- ISBN:
- 9780199578016
- eISBN:
- 9780191808623
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:osobl/9780199578016.003.0001
- Subject:
- Economics and Finance, Financial Economics
This chapter examines how global economic imbalances and the accumulation of debt contributed to the financial crisis of 2008. It begins by considering the ‘Great Moderation’, a phrase coined by Ben ...
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This chapter examines how global economic imbalances and the accumulation of debt contributed to the financial crisis of 2008. It begins by considering the ‘Great Moderation’, a phrase coined by Ben Bernanke in 2004 to describe the ‘remarkable decline’ of inflation and output volatility in the United States and other developed economies (with the exception of Japan at the time) over the previous two decades. It then turns to a discussion of global economic imbalances that reflected forces at work over very long stretches of time, including the shift of global production towards countries with much lower labour costs, with an ever-growing share of income going to the owners of capital. It also discusses the relationship between China and the United States and the role of very low, real, long-term interest rates in the financial crash, along with the growth of debt and the underpricing of risk.Less
This chapter examines how global economic imbalances and the accumulation of debt contributed to the financial crisis of 2008. It begins by considering the ‘Great Moderation’, a phrase coined by Ben Bernanke in 2004 to describe the ‘remarkable decline’ of inflation and output volatility in the United States and other developed economies (with the exception of Japan at the time) over the previous two decades. It then turns to a discussion of global economic imbalances that reflected forces at work over very long stretches of time, including the shift of global production towards countries with much lower labour costs, with an ever-growing share of income going to the owners of capital. It also discusses the relationship between China and the United States and the role of very low, real, long-term interest rates in the financial crash, along with the growth of debt and the underpricing of risk.
Pierre L. Siklos
- Published in print:
- 2017
- Published Online:
- August 2017
- ISBN:
- 9780190228835
- eISBN:
- 9780190228866
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190228835.003.0001
- Subject:
- Economics and Finance, Public and Welfare
This chapter provides an overview of the macroeconomic environment since 2000. The era is broken down into three periods: 2000–2006, 2007–2010, and 2011–present. Warnings of an imminent crisis were ...
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This chapter provides an overview of the macroeconomic environment since 2000. The era is broken down into three periods: 2000–2006, 2007–2010, and 2011–present. Warnings of an imminent crisis were present before 2007, but generally they were ignored by self-satisfied policymakers. Pre-crisis, inflation control was the once rising and, seemingly, preeminent monetary policy strategy. A review, both pre- and post-GFC, of a wide variety of macroeconomic and financial indicators is included, with discussion of lesser known variables such as proxies for central bank communication and balance sheet indicators. These clearly enable us to identify interventions by central banks while also highlighting areas of continuing concern. In some respects (e.g. concerns about financial stability), everything has changed post-crisis, but in other respects (e.g. monetary policy strategy) fewer changes are apparent. The chapter concludes by arguing that there are reasons to be apprehensive about the current state of monetary policy and central banking.Less
This chapter provides an overview of the macroeconomic environment since 2000. The era is broken down into three periods: 2000–2006, 2007–2010, and 2011–present. Warnings of an imminent crisis were present before 2007, but generally they were ignored by self-satisfied policymakers. Pre-crisis, inflation control was the once rising and, seemingly, preeminent monetary policy strategy. A review, both pre- and post-GFC, of a wide variety of macroeconomic and financial indicators is included, with discussion of lesser known variables such as proxies for central bank communication and balance sheet indicators. These clearly enable us to identify interventions by central banks while also highlighting areas of continuing concern. In some respects (e.g. concerns about financial stability), everything has changed post-crisis, but in other respects (e.g. monetary policy strategy) fewer changes are apparent. The chapter concludes by arguing that there are reasons to be apprehensive about the current state of monetary policy and central banking.
Donal Donovan and Antoin E. Murphy
- Published in print:
- 2013
- Published Online:
- September 2013
- ISBN:
- 9780199663958
- eISBN:
- 9780191749223
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199663958.003.0003
- Subject:
- Economics and Finance, Financial Economics
The Celtic Tiger’s fall occurred against the background of significant changes in prevailing global economic ideologies that emphasized financial deregulation and the arrival of the ‘Great ...
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The Celtic Tiger’s fall occurred against the background of significant changes in prevailing global economic ideologies that emphasized financial deregulation and the arrival of the ‘Great Moderation’. These ideologies greatly influenced policymakers as to the role of monetary policy, financial regulation, and the financial architecture of the ECB. The ideologies inherent in the New Classical Macroeconomics and the Efficient Markets Hypothesis encouraged the view that people were rational and that markets could successfully self-regulate, thereby downplaying the risks to financial stability. The Maastricht Treaty charged the ECB with a single macroeconomic objective — control of inflation — leaving other important goals to politicians and/or economic forces. Supervisory responsibilities of the national central banks remained vested at the national level. The ECB had no direct role in promoting or overseeing a pan-European financial regulatory system. The problem of the sovereignization of a country’s banking debts in order to prevent contagion and the systemic failure of the financial system was not considered.Less
The Celtic Tiger’s fall occurred against the background of significant changes in prevailing global economic ideologies that emphasized financial deregulation and the arrival of the ‘Great Moderation’. These ideologies greatly influenced policymakers as to the role of monetary policy, financial regulation, and the financial architecture of the ECB. The ideologies inherent in the New Classical Macroeconomics and the Efficient Markets Hypothesis encouraged the view that people were rational and that markets could successfully self-regulate, thereby downplaying the risks to financial stability. The Maastricht Treaty charged the ECB with a single macroeconomic objective — control of inflation — leaving other important goals to politicians and/or economic forces. Supervisory responsibilities of the national central banks remained vested at the national level. The ECB had no direct role in promoting or overseeing a pan-European financial regulatory system. The problem of the sovereignization of a country’s banking debts in order to prevent contagion and the systemic failure of the financial system was not considered.
Douglas D. Evanoff, George G. Kaufman, and A. G. Malliaris (eds)
- Published in print:
- 2012
- Published Online:
- April 2015
- ISBN:
- 9780199844333
- eISBN:
- 9780190258504
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:osobl/9780199844333.001.0001
- Subject:
- Business and Management, Finance, Accounting, and Banking
This book critically re-examines the profession's understanding of asset price bubbles in light of the global financial crisis of 2007–2009. It is well known that bubbles have occurred in the past, ...
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This book critically re-examines the profession's understanding of asset price bubbles in light of the global financial crisis of 2007–2009. It is well known that bubbles have occurred in the past, with the October 1929 crash as the most demonstrative example. However, the remarkably well-behaved performance of the U.S. economy from 1945–2006, and, in particular during the Great Moderation period of 1984–2006, assured the economics profession and monetary policymakers that asset bubbles could be effectively managed with little or no real economic impact. The recent financial crisis has now triggered a debate about the emergence of a sequence of repeated bubbles in the Nasdaq market, housing market, credit market, and commodity markets. The realities of the crisis have intensified theoretical modeling, empirical methodologies, and debate on policy issues surrounding asset price bubbles and their potentially adverse economic impact if poorly managed. Taking a novel approach, this book presents classic work that represents accepted thinking about asset bubbles prior to the financial crisis. It also includes original chapters challenging orthodox thinking and presenting new insights. A summary chapter highlights the lessons learned and experiences gained since the crisis.Less
This book critically re-examines the profession's understanding of asset price bubbles in light of the global financial crisis of 2007–2009. It is well known that bubbles have occurred in the past, with the October 1929 crash as the most demonstrative example. However, the remarkably well-behaved performance of the U.S. economy from 1945–2006, and, in particular during the Great Moderation period of 1984–2006, assured the economics profession and monetary policymakers that asset bubbles could be effectively managed with little or no real economic impact. The recent financial crisis has now triggered a debate about the emergence of a sequence of repeated bubbles in the Nasdaq market, housing market, credit market, and commodity markets. The realities of the crisis have intensified theoretical modeling, empirical methodologies, and debate on policy issues surrounding asset price bubbles and their potentially adverse economic impact if poorly managed. Taking a novel approach, this book presents classic work that represents accepted thinking about asset bubbles prior to the financial crisis. It also includes original chapters challenging orthodox thinking and presenting new insights. A summary chapter highlights the lessons learned and experiences gained since the crisis.
Louçã Francisco and Ash Michael
- Published in print:
- 2018
- Published Online:
- October 2018
- ISBN:
- 9780198828211
- eISBN:
- 9780191866883
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198828211.003.0012
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Financial Economics
Chapter 11 assesses the growth prospects of the world economy. The history of global economic doomsaying is traced briefly, a frequently reasonable position that has not done well with the facts for ...
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Chapter 11 assesses the growth prospects of the world economy. The history of global economic doomsaying is traced briefly, a frequently reasonable position that has not done well with the facts for the past hundred years. Capitalism has been adept at escaping from the pit and pendulum. A set of global imbalances is then reviewed that are seen as posing a severe threat to global economic stability and certainly to the prospects for sustainable and equitable growth. The Great Recession following the Crash of 2007–8 might be “different this time.” Historical and contemporary fears of “secular stagnation” are discussed but the speculative nature of stagnationist assessments is acknowledged.Less
Chapter 11 assesses the growth prospects of the world economy. The history of global economic doomsaying is traced briefly, a frequently reasonable position that has not done well with the facts for the past hundred years. Capitalism has been adept at escaping from the pit and pendulum. A set of global imbalances is then reviewed that are seen as posing a severe threat to global economic stability and certainly to the prospects for sustainable and equitable growth. The Great Recession following the Crash of 2007–8 might be “different this time.” Historical and contemporary fears of “secular stagnation” are discussed but the speculative nature of stagnationist assessments is acknowledged.
