Technological change and the monetary policy effectiveness

Last week I discussed GDP-B and its potential impact on monetary policy. The main takeaway was that, if GDP-B led to a higher production figure it didn’t necessarily mean that monetary policy needed to be tighter or looser – instead it is changes in prices and inflation expectations that remain key.

However, there is a key way that the technological change embedded in GDP-B could well matter for monetary policy – the way it influences how expenditures take place and how they are shifted through time.

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Does a new GDP measure change optimal monetary policy?

At the 61st Annual Meeting of the National Association for Business Economics, The Fed’s chair Jerome Powell gave an insightful speech. The key takeaway from the speech was that in an evolving economy, monetary policy is very data driven.

Powell touched on three aspects of evolving economy: the consequences of an oil price spike, the measurement of output and productivity, and the role of tightness in the labour market.

In this post I will talk about the measurement of output and productivity aspect of the speech and some elements of that which will matter for monetary policy.

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Efficacy of monetary policy under uncertainty

In this post, I am going to talk about the efficacy of monetary policy in the face of uncertainty. 

In an earlier post, I have talked about uncertainty reducing interest rate sensitivity – but does that mean that the efficacy of monetary policy has declined? No, as ultimately, we need to think about how any investment response translates into a change in output!

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Six methods of unconventional monetary policy

In a recent response to questions, The Reserve Bank of Australia has listed six options of unconventional monetary policy that is considered in an event of extreme policy implementation. Westpac economists have also talked about potential unconventional monetary policy tools applicable to the NZ case here – this is worth a read, but is a different list!

In this post I would like to outline the RBA’s options and hopefully make them easy to understand.

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What is the difference between sterilized and unsterilized intervention?

Recently I’ve been trying to get my head around the difference between a “sterilized” asset purchase by a central bank and an “unsterilized” purchase. Here is where I’ve gotten to – happy for any comments or clarifications!

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Investment, uncertainty, and monetary policy: Part II

As per my earlier post, this follow up aims to understand how uncertainty influences monetary policy. Although we will use the lens of investment, these arguments hold for planned expenditure in the economy more generally.

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