SAO PAULO | By Marcus Nunes | The difference between the RBA and the BoJ, the Fed or ECB is that while all four central banks have inflation targets, the RBA also has an implicit income target. If central banks determine aggregate demand, the only way to hold them genuinely responsible for what they actually do is for them to explicitly and directly target it: also known as NGDP targeting.
SAO PAULO | By Marcus Nunes | Recently, both Simon Wren-Lewis and Paul Krugman have singled Sweden as a country where the central bank has moved from targeting inflation to worrying about ‘deflating’ bubbles.
MADRID | By Luis Arroyo | It is possible, as we have seen over the past few years, that no matter how much the Central Banks increase their money emissions, it won’t change people’s preference for liquidity. It isn’t clear that an increase in banking credit will swell investment either, especially if investors own a higher than normal debt stock and if they don’t see a clear future profitability. The same applies to families.
SAO PAULO | By Marcus Nunes | Markit´s PMI survey is a favorite of central banks and financial institutions. The panel below shows both the global (comprised of 32 countries) and the Eurozone and Japan PMI´s. Trichet´s rate increase ‘folly’ of April and June 2011 as well as Draghi´s “ECB will do whatever it takes” of July 2012 are marked. So is the “Abe effect” in Japan.
SAO PAULO | By Marcus Nunes | An alternative, which has been proposed by people like Krugman and Blanchard, is for the central bank to increase the inflation target.
MADRID | All the “Great Depression” stories show how both the governments’ blindness and central banks made the crisis last longer. So it does makes sense that in the current crisis both governments and central banks have been active to take measures, although not necessarily successful and effective. However, the ECB has been less belligerent than other bankers and its members don’t hold homogeneous positions.
SAO PAULO | By Marcus Nunes | “The past few days have made it overwhelmingly clear that the Fed is steering this recovery. That should be comforting; all it has to do is steer things in a more expansionary direction! But it isn’t.”
MADRID | By David Fernández | Foreign investors are showing a sudden interest in assets made in Spain due to, among others, central bank’s last data, Europe’s decision to delay the deficit commitment by two years and international factors such as second-round monetary helicopter launched by the Bank of Japan. Will this trend vanish?
MADRID | By J. M. Campuzano, analyst at Citigroup | During the crisis that began in 2007, capital markets’ weight has been cut to 350% from 450% of the world’s economic output. The past, in terms of depth and worldwide markets liquidity before the crisis, is long gone and will not come back.
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