Xi’s rightly wary of Fed tightening
I have an op-ed in the AFR explaining why Chinese President Xi Jinping will be eyeing a prospective Fed tightening warily and why the RBA will lag the Fed. Full text below the fold.
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posted on 19 January 2022 by skirchner in Financial Markets, Monetary Policy
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Australia has become a net exporter of human and financial capital
I have an op-ed in the AFR noting that Australia has become a net exporter of human and financial capital. I argue that reversing these net outflows should be a priority for post-pandemic recovery. Full text below the fold. Note AFR is responsible for ‘savings’ instead of ‘saving’!
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posted on 22 December 2021 by skirchner in Financial Markets, Free Trade & Protectionism, Population & Migration
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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).
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posted on 09 January 2020 by skirchner in Financial Markets
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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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I have a Substack
I have a Substack. Nothing you won’t find here or elsewhere, but available for those who like the medium.
posted on 15 August 2019 by skirchner in Economics, Financial Markets
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US bond bears are right, but for all the wrong reasons
My piece for Business Insider on why rising US real interest rates are a good news story, have little to do with the Fed, and help explain the Australian yield curve’s record inversion to the US.
posted on 12 October 2018 by skirchner in Financial Markets
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The ‘Lehman Moment’ that Wasn’t: Marking the Wrong Anniversary
My reflection on the 10th anniversary of the failure of Lehman argues that we are focused on the wrong anniversary. The failure of the Congressionally-mandated GSEs one week before should be the exemplar of the crisis.
posted on 12 September 2018 by skirchner in Financial Markets
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Donald Trump has a chance to shape US monetary policy for years
I have an op-ed in today’s AFR on how Obama’s neglect gives Trump the chance to own the leadership of the Federal Reserve Board. Full text below the fold (may differ slightly from published version).
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posted on 14 February 2018 by skirchner in Economics, Financial Markets, Monetary Policy
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My Review of Sebastian Mallaby’s Bio of Alan Greenspan
The latest issue of CIS Policy includes my review of Sebastian Mallaby’s biography of Alan Greenspan. Here is a sample:
Far from being a tragedy, Greenspan’s tenure at the Fed was a spectacular success, as Mallaby for the most part acknowledges. This is not to say that US monetary policy could not have been improved by a more rules-based and transparent approach. Mallaby briefly mentions nominal gross domestic product targeting as an alternative to inflation targeting, but does not elaborate on its significance. Greenspan could have moved the Fed in these directions at the expense of his own authority and influence. While one can fault Greenspan’s highly discretionary approach to monetary policy on procedural and other grounds, the results were far better than could reasonably be expected and this is in no small part due to Greenspan’s judgement, which was spectacularly right more often than not. Had Greenspan gone against his own free market instincts and sought to second-guess financial markets on asset prices, as Mallaby suggests, the results would almost certainly have been disastrous and his biography would relate a different type of tragedy. The counter-factual in which someone other than Greenspan was Fed Chair (and we largely know who the alternatives might have been) is one that is worth contemplating.
Full article here.
posted on 29 March 2017 by skirchner in Economics, Financial Markets
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High Frequency Trading: Fact & Fiction
The latest issue of the CIS journal Policy includes my article on High Frequency Trading: Fact and Fiction.
posted on 14 March 2016 by skirchner in Centre for Independent Studies, Economics, Financial Markets
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Too Much Finance?
I have an op-ed in the AFR looking at the long-run relationship between financial sector size and living standards that addresses the ‘too much finance’ critique. Full text below the fold.
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posted on 11 January 2016 by skirchner in Economics, Financial Markets
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I am leaving CIS and returning to financial markets
This is my last week at CIS. I will be returning to financial markets from whence I came back in 2008. Thanks to Greg Lindsay for giving me a platform to participate in the public policy debate over the last few years. Thanks also to those who contributed to Policy while I was editor over the last 18 months. Policy will continue under a new editor.
My new employer won’t be paying me to blog or tweet during business hours, so you will be hearing even less from me on what is already a very low frequency blog. I will still post material here from time to time and link to what I am doing when appropriate. Needless to say, nothing on this web site should be attributed to current or previous employers.
This blog has followed me around in various roles since 2003, back when economics blogs were a rarity. The economics blogosphere is now a very over-crowded space. Since 2009, Scott Sumner has been saying much of what I wanted to say, only better. It is more efficient for me to send him a link and have him blog on it than to do it myself. So go read him if you don’t already.
posted on 28 August 2014 by skirchner in Centre for Independent Studies, Economics, Financial Markets
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The Financial System Inquiry and Macro-Pru
I have an op-ed in Business Spectator endorsing the sceptical approach to macro-prudential regulation taken in the Murray inquiry’s interim report:
Macro-prudential policies are seen as providing policymakers with a more targeted set of policy instruments that might complement or even substitute for changes in official interest rates. However, these instruments also implicate policymakers in making much finer judgements about risks to financial stability as well as the more traditional concern of monetary policy with price stability.
A blunt instrument like monetary policy encourages caution in making such judgements. By contrast, more targeted counter-cyclical quantitative controls are a standing invitation to micro-manage credit allocation, but do not in themselves improve the ability of policymakers to make appropriate judgements about the implications of such policies. It can also create a false impression that a central bank’s price stability mandate has been subordinated to other objectives, such as house price inflation.
Macro-prudential policies are also more politically fraught than traditional monetary policy. Quantitative controls designed to be selective in impact are more likely to provoke opposition. In Britain, macro-prudential policies are at cross-purposes with the government’s ‘Help to Buy’ mortgage guarantee scheme. Macro-prudential regulation is often a second-best approach to dealing with the inflationary implications of supply-side rigidities in housing markets. It may also push borrowing and lending activities outside the regulatory perimeter altogether.
posted on 25 July 2014 by skirchner in Economics, Financial Markets
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ECB to Adopt QE in H2 2014
I have an op-ed in Business Spectator arguing that the ECB will likely resort to QE in the second half of this year. This will be a vindication of the long-standing criticisms of ECB monetary policy made by the new market monetarists. Inflation outcomes, nominal GDP and the euro exchange rate are all consistent with monetary policy having been too tight rather than too easy. The emerging divergence between ECB/BoJ and Fed monetary policy should set the stage for broad-based USD outperformance.
posted on 11 April 2014 by skirchner in Economics, Financial Markets, Monetary Policy
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Do Financial Markets Care About the G20?
An ECB Working Paper looks at the impact of G20 meetings on financial markets:
In this paper we run an event study to test whether G20 meetings at ministerial and Leaders level have had an impact on global financial markets. We focus on the period from 2007 to 2013, looking at equity returns, bond yields and measures of market risk such as implied volatility, skewness and kurtosis. Our main finding is that G20 summits have not had a strong, consistent and durable effect on any of the markets that we consider, suggesting that the information and decision content of G20 summits is of limited relevance for market participants.
That won’t stop the Australian federal government spending $500 million on a process markets have deemed an irrelevance.
posted on 05 April 2014 by skirchner in Economics, Financial Markets
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