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RBA money printer didn’t go brrrr

I’m in USSC’s The45th explaining why the RBA’s money printer didn’t go brrrr.

posted on 25 March 2020 by skirchner in Monetary Policy

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Policy Forum: Macroeconomic Issues in a Changing World

The March 2020 issue of the Australian Economic Review is out, with a Policy Forum including my article on The Effect of Changes in Monetary Policy on Consumer and Business Confidence. Be sure to also read Bruce Preston’s article in the same issue on The Case for Reform of the Reserve Bank of Australia Policy and Communication Strategy. There is a CAMA Working Paper version of Bruce’s article for those without access to the journal.

I’m pleased my paper contributed to the RBA walking back the contention in the November Board minutes that rate cuts hurt confidence. The draft paper was circulated within the Bank by John Simon, which was fitting given that it was essentially an update of his 2001 RBA RDP on the determinants of sentiment. John’s 2001 results hold-up quite well. Bruce’s paper also discusses why the contention in the November Board minutes is incoherent from a strategy and comms perspective.

The final capitulation came when Governor Lowe explicitly rejected the idea that rate cuts hurt confidence in testimony before the House Economics Committee, responding to some very effective questioning by Andrew Leigh.

posted on 28 February 2020 by skirchner in Monetary Policy

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RBA’s foot-dragging leaves economy dangerously exposed

I have an op-ed in the AFR on the lessons from the US experience with monetary policy for the RBA in the wake of yesterday’s official interest rate decision.

posted on 05 February 2020 by skirchner in Monetary Policy

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The evidence suggests Reserve Bank rate cuts don’t hurt confidence

In The Conversation, I round-up the US and Australian evidence on the effect of monetary policy on consumer confidence. There is little evidence for a perverse signalling effect from rate cuts on confidence, contrary to suggestions by the RBA Board.

posted on 04 February 2020 by skirchner in Monetary Policy

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The Effect of Monetary Policy on Consumer and Business Confidence

I have an article forthcoming in the March issue of the Australian Economic Review examining the US and Australian evidence on the effect of monetary policy on consumer and business confidence. It has been suggested that recent reductions in official interest rates might have a perverse signalling effect on consumer and business confidence. But that is not what the US and Australian evidence or my own estimates suggest. While consumers talk their book in relation to expectations for their own finances, when it comes to expectations for the economy as a whole, consumers and business are for the most part clear about rate cuts being expansionary for the economy.

As noted in the article, even if rates cuts did have a perverse signalling effect on confidence, this would not be an argument against monetary easing. It implies that the Reserve Bank should not act on its assessment of the economy, which is likely to be self-defeating.

Shane Wright writes up the paper for the SMH/Age in the context of the January consumer confidence release.

posted on 24 January 2020 by skirchner in Monetary Policy

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US-China trade deal is spin for Trump’s failed protectionism

I have an op-ed in the AFR on the US-China ‘phase one’ trade deal noting its lack of substance in law and economics. To the extent that third parties like Australia are adversely affected by trade diversion, they could mount a case against China at the WTO.

posted on 23 January 2020 by skirchner in Free Trade & Protectionism

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Don’t bank on US dollar demise

I have an op-ed in the AFR arguing that the perennial predictions of the US dollar’s demise reflect a fundamental misunderstanding of the sources of its dominant role in the world economy. The US dollar’s advantages are not easily replicated by putative rivals (text below the fold).

continue reading

posted on 09 January 2020 by skirchner in Financial Markets

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US protectionism a costly failure

I have an op-ed in the AFR explaining why the ‘phase one’ US-China trade deal exemplifies the costly failure of President Trump’s protectionist trade diplomacy.

posted on 17 December 2019 by skirchner in Free Trade & Protectionism

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Now we know. Phil Lowe’s speech on QE

I have a piece in The Conversation on what we learned from Governor Lowe’s speech last night about its prospective approach to QE. As I note in the article, the risk now is that the RBA repeats the US Fed’s mistakes by moving too slowly.

posted on 27 November 2019 by skirchner in Monetary Policy

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The ‘reserve currency’ myth: The US dollar’s current and future role in the world economy

Very long time readers of this blog will know that the future of the US dollar was much debated in these pages in the mid-2000s. I have given these ideas a systematic treatment in a new report for the United States Studies Centre, The ‘reserve currency’ myth: The US dollar’s current and future role in the world economy.

This year, the euro celebrated its 20th anniversary. At the time of its launch at the beginning of 1999, it was widely expected the euro would assume a role equal to that of the US dollar in the international monetary system. Despite some early gains, in net terms, the euro has not increased its share since its inception two decades ago.

The campaign to internationalise the RMB from 2009 has also faltered. Measures of RMB globalisation have gone nowhere since 2016 as China’s communist party has prioritised state control. The inclusion of the RMB in the IMF’s Special Drawing Rights basket was little more than a vanity project.

posted on 11 November 2019 by skirchner in Economics, Financial Markets

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The Treasurer should not let the RBA off the hook so easily

I have an op-ed in the AFR arguing that the Treasurer’s decision to leave its agreement with the RBA unchanged is a missed opportunity to hold the RBA accountable for its recent underperformance against mandate.


Robert Guy has a related piece in the same edition. The headline says it all.


The Treasurer just backed the RBA over what the market is telling us. We will see how that turns out.

continue reading

posted on 06 November 2019 by skirchner in Monetary Policy

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Could the US-China trade deal save or sink Trump?

I talk to the United States Studies Center’s @2020VisionCast podcast about last week’s tentative trade deal between the US and China, US Commerce Secretary Wilbur Ross’s visit to Australia and other topics.

posted on 16 October 2019 by skirchner in Free Trade & Protectionism

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What is really driving monetary policy?

I get a mention in this insightful column by Parnell McGuinness noting that the debate over monetary policy is really about the allocation of responsibility for macroeconomic policy. RBA needs to step-up, not deflect.

posted on 16 October 2019 by skirchner in Monetary Policy

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Trump’s fake trade deal comes at a high price for global economy

I have an op-ed in the AFR on the tentative trade deal the Trump Administration has negotiated with China. While partially forestalling further tariff increases, enormous economic damage has already been done and will get worse in 2020.

posted on 14 October 2019 by skirchner in Free Trade & Protectionism

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Fiscal stimulus and open economy crowding-out

I’m quoted in this AFR story on the open economy crowing-out effects via the exchange rate and net exports that could be expected from a discretionary fiscal stimulus.

I make the case in more detail in this 2013 op-ed marking the 30th anniversary of the float Australian dollar.

posted on 12 October 2019 by skirchner in Fiscal Policy, Monetary Policy

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