On Thursday the Federal Reserve announced a series of measures that will come to be referred to as a third round of “quantitative easing,” or QE3. Here I review what effects this is intended to have and some of the developments so far.
Category Archives: inflation
Return to the gold standard
Several sources reported that the 2012 Republican Platform would call for a commission to explore the possibility of the U.S. returning to a gold standard. However, the final document makes no mention of gold, and instead seems to have settled on a proposal that is unlikely to do any harm:
President Reagan, shortly after his inauguration,
established a commission to consider the feasibility
of a metallic basis for U.S. currency. The
commission advised against such a move. Now, three
decades later, as we face the task of cleaning up the
wreckage of the current Administration’s policies, we
propose a similar commission to investigate possible
ways to set a fixed value for the dollar.
I thought it would be worthwhile to review some of the reasons why we should be thankful that saner heads seem to have prevailed.
U.S. monetary policy since the financial crisis
The Federal Reserve Bank of New York announced on Thursday that it had sold the last remaining securities from its Maiden Lane III portfolio, successfully closing the chapter on its assistance to insurance giant AIG. I thought this would be a good occasion to review the various measures that the Fed implemented over the last 5 years– what they were attended to accomplish, what they did accomplish, and the significance of Thursday’s announcement.
Guest Contribution: “Sticky Prices, Store-Switching, and Effective Price Flexibility”
Today, we are fortunate to have a guest contribution written by Olivier Coibion (UT Austin), Yuriy Gorodnichenko (UC Berkeley), and Gee Hee Hong (Bank of Canada); it is based on The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications.
Recent developments in oil markets
The price of Brent crude oil fell $35/barrel between April and June. But increases this summer have taken about $25 of that back.
Central Bank Balance Sheets and Inflation
Given several prominent policymakers have worried about central bank actions leading to high inflation, (e.g. Representative Ryan) it seems reasonable to see how expansions in central bank balance sheets correlate with inflation.
High Inflation at the Gates?
The Federal Reserve needs to raise interest rates to stave off inflation, says Rep. Paul Ryan, R-Wis. “I’m worried they’re not going to pre-empt inflation,” the House Budget Committee Chairman tells CNBC.
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Is QE3 coming?
Conditions have changed since January, and we might expect some additional stimulus from the Fed at the next FOMC meeting.
The housing market and the case for higher inflation targets
From a VoxEU column today, by me and Joshua Aizenman:
Might more inflation be good for the US and Europe? This column looks at the housing market in the US and argues that, with houses dropping in price, buyers are playing a waiting game. And as buyers keep delaying, the price drops further. Given the importance of property in many economies, the knock-on effects are severe. Yet one way to break this vicious cycle is with inflation.
Conditional Inflation Now!
Back in January, Jeffry Frieden and I argued for higher inflation, conditioned on macro conditions, in a Foreign Policy article. The roster of economists in favor expands: Nobel laureates Rob Engle and Paul Krugman join Chicago Fed President Charles Evans, for the US.