Download Central Banks and the Global Economy: Lessons Learned and Future Challenges and more Slides Banking and Finance in PDF only on Docsity! What next for central banks – and the global economy? Docsity.com Docsity.com US interest rates diverged sharply from the Taylor rule from 2001 onwards Deviation of policy rates from Taylor rule (%), 2000 – 2009 Source: OECD data taken from Charlie Bean’s Schumpeter Lecture at the Annual Congress of the European Economic Association, Barcelona, August 25, 2009. Docsity.com Household debt as % of GDP, 1987-2007 Source: FSA, ONS, Federal Reserve, Eurodata, Datastream Household debt rose sharply Docsity.com Real house prices rose steadily from 1996 - 2006 Real increase in house prices (%), 1996 – 2006 Source: David Miles, Morgan Stanley (derived from the ECB, National Statistical Offices, the IMF, the European Mortgage Federation, the Italian Ministry of Infrastructure, and Morgan Stanley Research). Docsity.com Risk became seriously mispriced JP Morgan Global High-Yield Index (bps), 2003 – 2007 Source: JP Morgan research. Docsity.com Financial stability is much less tangible than price stability Source: Aspachs et al. (2006). Searching for a Metric for Financial Stability. DifficultSimpleAdministrative Procedure f) Simulations or Stress TestsStandard ForecastsForecasting Proceduree) Tails of distributionCentral tendency of distribution Forecasting Structured) HardlyYesAccountablec) Limited, and difficult to adjust Yes, subject to lagsInstrument for controlb) Hardly, except by its absence Yes, subject to technical queries Measurement and Definition a) Financial StabilityPrice Stability Contrasts between Price and Financial Stability Docsity.com There has been no shortage of financial stability literature Source: M Cihak (2006). Central Banks and Financial Stability: A Survey of Financial Stability Reports. The number of countries publishing FSRs, 1995 – 2005 Docsity.com Docsity.com -4 -2 0 2 4 6 8 10 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 World Advanced economies Emerging and developing economies Growth is expected to resume Global GDP growth, annual % change, 2003-2015 Source: IMF WEO Database, April 2010. Docsity.com Source: JPMorgan. Emerging market consumption now surpasses US levels US and EM consumption as % of global consumer spending, 1990 - 2008 Docsity.com Docsity.com Real exchange rate* and relative export performance, cumulative change between 1999 and 2008 Source: Bruegel Policy Brief, March 2010. There has been a remarkable divergence in competitiveness *Real exchange rates are based on unit labour costs. Docsity.com The borrowers… Current account balances, % of GDP, 1997 – 2010 Source: IMF WEO Database, April 2010. -20 -15 -10 -5 0 5 10 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 Germany Greece Italy Portugal Spain Docsity.com Conclusions • The finance-led boom is over • A new age of austerity is dawning in Europe, especially in the public sector • High earners will pay much more tax • Export performance must improve, so the euro and sterling are likely to remain weak Docsity.com What next for central banks – and the global economy?S Docsity.com
