Monetary policy and behavioural economics

Anna Breman and Björn Lagerwall of Riksbank explore how behavioral economics can help improve monetary policy:

This Economic Commentary aims to provide some ideas on how empirical research from behavioural economics could help explain economic developments in recent years, particularly in relation to the large increase in inflation. We also discuss why it may be important to consider this research to improve future analysis when designing monetary policy. The first part of the Commentary describes some of the key findings from behavioural economics research. In this context, we will also discuss insights from social psychology that are important to consider in the context of group decision-making. The second part describes a simple monetary policy framework. The third part focuses on the inflation shock in 2021 and 2022 and its consequences going forward. We end the Commentary with some concluding thoughts.

History of Tipping : From Scourge of Democracy to American Ritual

How did tipping become an American ritual?

Tim Sablik looks at this interesting history of tipping in Richmond Fed ‘s EconFocus:

Finternet: the financial system for the future

Agustín Carstens and Nandan Nilekani in this BIS paper lay out a new vision for the financial system:

This paper lays out a vision for the Finternet: multiple financial ecosystems interconnected with each other, much like the internet, designed to empower individuals and businesses by placing them at the centre of their financial lives. It advocates for a user-centric approach that lowers barriers between financial services and systems, thus promoting access for all.

The envisioned system leverages innovative technologies such as tokenisation and unified ledgers, underpinned by a robust economic and regulatory framework, to dramatically expand the range and quality of financial services. This integration aims to foster greater participation, offer more personalised services and improve speed and reliability, all while reducing costs for end users. Most of the technology needed to achieve this vision exists and is fast improving, driven by efforts around the world.

This paper provides a blueprint for how key technical characteristics like interoperability, verifiability, programmability, immutability, finality, evolvability, modularity, scalability, security and privacy can be incorporated, and how varied governance norms can be embedded. Delivering this vision requires proactive collaboration between public authorities and private sector institutions. The paper serves as a call for action for these entities to establish a strong foundation. This would pave the way for a user-centric, unified and universal financial ecosystem brought into the digital era that is inclusive, innovative, participatory, accessible and affordable, and leaves no one behind.