The Federal Reserve, the US central bank, is making some changes to the measurement and monitoring of the short term interest rate between banks, which is its key target for monetary policy, * Most central banks have goals such as low inflation … Continued
Despite the increasing ease of electronic payments, cash remains popular in the UK, according to the Bank of England. * Money is anything that fulfils the three functions of money: i) a means of payment; ii) a unit of account; … Continued
The foreign exchange reserves held by governments, having risen for over a decade, have recently fallen. This is mainly because they are being used, as intended, to protect against turbulence in financial markets that would otherwise hurt the developing economies. … Continued
For years there has been pressure on China to allow its exchange rate to be determined by market forces rather than by the central bank. Now that seems closer to happening but it might mean a fall in the RMB, … Continued
The fundamentals of global economic growth seem broadly positive but there are some reasons for caution, which can be understood through the savings-investment framework described in the previous blog. If savings are “too high” or investment “too low” then the … Continued
Macroeconomics is a complicated subject but it’s possible to understand quite a lot about the key questions in macro, and some of the policy challenges, by considering a few key concepts. This blog gives the elements of what ties macroeconomics to … Continued
Debt is a contract but sometimes contracts must be broken, either in the mutual interests of the contracting parties or in the interests of justice. But it’s hard to come up with general rules for this. The long-running arguments about … Continued
Evidence from Nigeria shows that access to finance can help households reduce the impact of bad luck, reducing the fall in consumption that they suffer. * Yesterday I was part of a group discussing a draft research paper on the ethics … Continued
Central banks have balance sheets like other banks and in theory their liabilities can exceed their assets, meaning they are insolvent. But they can always create new money so they can settle their debts. So can they really go bust? … Continued
Greece this week repaid €750m to the International Monetary Fund (IMF) which it funded by drawing on its SDR account at the IMF. This legitimate but unusual move caught many commentators by surprise and drew attention to the little known … Continued
This week it was reported (*) that the European Commission was investigating some southern EU nations to see if they had unfairly and illegally allowed banks to count deferred tax assets towards their capital. What does this mean and what … Continued
As an economist, over the years I’ve been asked two things repeatedly by people who hold economics in touchingly high regard. One is, which way will house prices move? And the other is, what will happen to the value of … Continued
The biggest topic in the global economy remains the oil price. It’s notoriously difficult to forecast commodity prices but how can we make sense of what would push the price up or down? A basic demand and supply framework gets … Continued
We take it for granted that capitalists hire workers rather than workers hiring capital, but why? The main reason is the difficulty of diversifying labour, which means that workers ideally require some form of insurance to offset their concentration of … Continued
CDOs – collateralised debt obligations – were widely seen as the main villain of the financial crisis. CDO issuance peaked in 2007, collapsed in 2008 and is now gradually recovering. Should we be worried? * The latest Bank for International … Continued