Central banking analogies

Economists are fond of analogies to describe technical ideas.

Most of those analogies are confusing and/or useless. As I wrote in the introduction of Bankers are people, too:

Economists and journalists writing for lay audiences tend to use metaphors when explaining financial concepts. For example: ‘Cheap credit is like heroin. It’s addictive, and the economy can overdose from it.’ That may sound nice, but what does it even mean?

Continue reading “Central banking analogies”

Grazie mille, dottore Draghi!

ECB President Mario Draghi has answered a number of questions from the public. People could tweet #AskDraghi to join.

I’m honored that the ECB also picked one of mine πŸ™‚

The website Debating Europe has listed all the replies of Dr. Draghi.

I only wish the ECB President would have responded to this question as well πŸ˜€

The Magic of Money

This is a review of a book written over 50 years ago by a central banker.

Based on that introduction, even most finance geeks will probably think “boring!” or “irrelevant!”. Until you learn it has Nazis, hyperinflation and the Nuremberg trials in it. And those are not even the interesting parts. Continue reading “The Magic of Money”

Negative rates: a massive transfer from savers to bank shareholders and governments with little impact on economic growth. (Post in response to Miles Kimball)

This post explores the consequences of deeply negative interest rates set by the ECB, as proposed by professor Miles Kimball. It’s a shorter version of my previous post, plus an estimation of the economic stimulus of the proposal. Continue reading “Negative rates: a massive transfer from savers to bank shareholders and governments with little impact on economic growth. (Post in response to Miles Kimball)”

Carrot or stick? The Lonergan-Kimball debate

Update 1, 12/12/2017: Prof. Kimball replied on Twitter. I have added his remarks just before the discussion section.

Update 2, 12/12/2017: See my follow-up post with more details on the distributional and stimulative effects of deeply negative ECB rates.

Central banks around the developed world have been struggling to meet their inflation targets. Economists are divided on what the Fed, the ECB or the Bank of Japan should do.

Massive amounts of quantitative easing have proven to be ineffective at boosting inflation. Some economists have proposed that central banks raise inflation expectations.

At the 5th Bruegel – Graduate School of Economics, Kobe University conference1, Eric Lonergan and professor Miles Kimball advocated their preferred solutions: helicopter money and deep negative interest rates, respectively. Continue reading “Carrot or stick? The Lonergan-Kimball debate”

Green infrastructure bonds with macro strings attached: How the ECB could fulfill its mandate by fighting climate change

This is the paper I submitted to the Central Banking and Green Finance workshop organized by the Council on Economic Policies (CEP) and De Nederlandsche Bank. I wrote it to stimulate a discussion about how central banks can contribute to the fight against climate change. The text does not necessarily reflect my personal opinion. Continue reading “Green infrastructure bonds with macro strings attached: How the ECB could fulfill its mandate by fighting climate change”

My beef with bitcoin bulls

Everybody has heard of bitcoin by now. The price of the cryptocurrency is hitting all-time highs. John McAfee has bet that one bitcoin will be worth $500,000 in the year 2020. Bank chief Jamie Dimon called bitcoin a fraud. His statements were (predictably) followed by articles saying that bankers should be afraid of cryptocurrencies.

It seems there are two bitcoin camps: the true believers and the naysayers. Izabella Kaminska from FT Alphaville in particular has been explaining for years why cryptocurrencies are not the utopia some imagine them to be. In this post, I summarize my own reasons why I don’t think bitcoin is a credible threat to the banking industry.1 Continue reading “My beef with bitcoin bulls”

Europe and Japan: Monetary policies in the age of uncertainty (notes)

On 2 October, think tank Bruegel and Kobe University organized a conference on monetary policy in Brussels. The speakers compared the challenges faced by the European Central Bank (ECB) and the Bank of Japan (BoJ). This post is a reminder to myself based on my notes. I don’t cover the contributions of all participants. Don’t expect a story or a conclusion πŸ™‚ Continue reading “Europe and Japan: Monetary policies in the age of uncertainty (notes)”

Bankers are people, too

My book is published!

Do you think banking is too hard for you? Are you convinced that all bankers are crooks? Would you like to follow the financial news, but you always get stuck on terms like derivatives, cryptocurrency or quantitative easing?

Then I have some good news. Continue reading “Bankers are people, too”

Should central banks have an Independent Evaluation Office?

Should the European Central Bank (ECB) have an independent evaluation office (IEO)? Benjamin Braun recently asked this question on Twitter.

My first reaction was: probably not, because the ECB already evaluates its past performance. However, after more thought, I have changed my mind. This post examines some recent failures of central banks; how an IEO could improve monetary policy going forward1; and what it would take for the IEO to be an effective department rather than a paper tiger. Continue reading “Should central banks have an Independent Evaluation Office?”