Report
The vital choice of what the central bank controls
In traditional macroeconomic theory, the central bank controls the money supply; interest rates are then endogenous (determined by the economic equilibrium, uncontrolled); in the long run, inflation is determined by money supply growth. From the mid-1980s, central banks abandoned control of the money supply in favour of controlling short-term interest rates by buying and selling short-term securities or entering into short-term repos. The money supply and long-term interest rates were then endogenous. Finally, after the subprime crisis, central banks switched to controlling nominal interest rates at all maturities by buying and selling securities at all maturities. The money supply then became endogenous, but the fact that all nominal interest rates are controlled introduces the possibility of neo-Fisherism, i.e. a situation where nominal interest rates determine inflation in the long run. We attempt to compare the pros and cons of these three regimes.
Provider
Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
Other Reports from Natixis
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.