The origins of monetary policy disagreement: The role of supply and demand shocks – Beragampengetahuan
Contents
The origins of monetary policy disagreement: The role of supply and demand shocks
Carlos Madeira, João Madeira and Paulo Santos Monteiro in this research says whether inflationis due to demand shock or supply shock matters a lot for mon policy:
Since a year after the onset of the Covid-19 pandemic, there has been a global resurgence in inflation (Jordá and Nechio 2023). This became more pronounced in the months following the Russian invasion of Ukraine (Seiler 2022). These events represent supply shocks, which not only increase inflation but also negatively impact output (Baldwin 2020, Alessandri and Gazzani 2023). Concerns over a possible looming recession have also risen (Liang 2022, O’Donnell 2022). This has led to disagreement amongst economists on how monetary policy makers should best react. Some advocate setting high interest rates to tame inflation (Giles 2023), while others are more concerned with exacerbating recession risks (World Bank 2022). Forecasting the path of interest rates became a more difficult task for economic agents (Ward 2022).
Our recent research (Madeira et al. forthcoming) shows that the distinction between supply shocks (which move output and inflation in opposite directions) and demand shocks (which move output and inflation in the same direction) is crucial. In particular, it helps to understand disagreement in monetary policy committee deliberations.
Findings?
Our results show that supply shocks can be a significant cause of disagreement in the conduct of monetary policy when central banks have a dual mandate. These findings are particularly relevant in the present, as the global economy recovers from the Covid-19 pandemic and the impact of the Ukraine war. These events have disrupted global supply chains, labour markets, and commodity markets. Confronted with these shocks, central banks committees may find consensus formation especially challenging, and this in turn may affect the ability of policymakers to steer private sector expectations.
kegiatan ekonomi
prinsip ekonomi
ekonomi kreatif, ilmu ekonomi adalah, pelaku ekonomi
, kegiatan ekonomi adalah, sistem ekonomi
#origins #monetary #policy #disagreement #role #supply #demand #shocks
