Archive for November 2nd, 2018

Should a country print its own banknotes or outsource it?

November 2, 2018

JP Koning has a knack for writing amazing pieces on money.

In this new  piece, he looks at business of printing currency. Should one print own currency or outsource it? The history throws all kinds of lessons:


Primer: The Neutral Rate of Interest

November 2, 2018

Dallas Fed President Robert Kaplan writes a primer on neutral rate of interest:

In the September Federal Open Market Committee (FOMC) meeting, the Federal Reserve raised the federal funds rate to a range of 2 to 2.25 percent. In our statement announcing the decision, we ceased to include language that described the current stance of monetary policy as “accommodative.”

I supported the most recent federal funds rate increase. In my recent speeches and essays, I have been arguing that the Federal Reserve should be gradually and patiently raising the federal funds rate until we get into the range of a “neutral stance.” Once we’ve reached that point, I intend to assess the outlook for the U.S. economy and look at a broad range of factors before deciding what further actions, if any, might then be appropriate.

One challenge in moving toward a neutral stance is the inherently imprecise and uncertain nature of estimating what constitutes “neutral.” This judgment is more of an art than a science and involves observing and analyzing a wide variety of factors. The uncertainty of this judgment is complicated by the fact that 2018 U.S. gross domestic product (GDP) growth has been substantially aided by sizable fiscal stimulus, whose impact is likely to fade somewhat in 2019 and further in 2020.

The purpose of this essay is to explore a number of the key issues associated with using the neutral rate concept in formulating monetary policy. In particular, I will discuss several of the challenges associated with estimating this rate, describe limitations on the use of this concept, and explain how it might best be used in debating and determining the appropriate path for the U.S. federal funds rate.

What is neutral rate?


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