Many Targets, Many Instruments: Where Do We Stand?
Thank you to the International Monetary Fund for allowing me to take part in what I expect will be a very lively discussion. 1  Only five or six years ago, there wouldn ’ t have been a panel on the “ many instruments ” and “ many targets ” of monetary policy. Before the financial crisis, the focus was on one policy instrument: the short-term policy interest rate. Although central banks did not uniformly rely on a single policy target, many adopted an “ inflation targeting ” framework that, as the name implies, gives a certain preeminence to that one objective. Of course, the Federal Reserve has long been a bit of an outlier in this regard, with its explicit dual mandate of price stability and maximum employment. Still, the discussion might not have gone much beyond “ one instrument and two targets ” if not for the financial crisis and its aftermath, which have presented central banks with great challenges and transformed how we look at this topic. Let me start with a few general observations to get the ball rolling. In terms of the targets, or, more generally, the objectives of policy, I see continuity in the abiding importance of a framework of flexible inflation targeting. By one authoritative account, about twenty-seven countries now operate full-fledged inflation-targeting regimes. 2 The United States is not on this list, but the Federal Reserve has embraced most of the key features of flexible inflation targeting: a commitment to promote low and stable inflation over a longer-term horizon, a predictable monetary policy, and clear and transparent communication. The Federal Open Market Committee (FOMC) struggled for years to formulate an inflation goal that would not seem to give preference to price stability over maximum employment. In January 2012, the committee adopted a “ Statement on Many Targets, Many Instruments: Where Do We Stand?
MACROECONOMIC PERFORMANCE IN BRAZIL UNDER THE INFLATION TARGETING REGIME
ABSTRACTThis study analyses theoretically and empirically the relationship between monetary institutions and macroeconomic performance in Brazil, in the period after the adoption of the inflation targeting regime (ITR), in 1999. The hypothesis is that the monetary institutions inhibited economic growth, rather than being effective at controlling inflation, whose main causes are related to structural and institutional factors, indexation process and domestic and external shocks. The main results of the ITR, embodied in the highly restrictive monetary policy, are the following negative effects: A reduction in Gross Domestic Product (GDP) growth rates, a rise in the stock of public debt and an appreciation of the domestic currency. Likewise, the itr has not been successful in maintaining inflation rate below its target. In this respect, revisions in the Brazilian monetary institutions would be essential to improve the results of the ITR, both in terms of actual inflation and economic performance. DESEMPEÑO MACROECONÓMICO EN BRASIL DESPUÉS DEL RÉGIMEN DE METAS DE INFLACIÓNRESUMENEste estudio analiza teórica y empíricamente la relación entre las instituciones monetarias y el desempeño macroeconómico en Brasil en el periodo posterior a la adopción del régimen de metas de inflación (RMI) en 1999. La hipótesis es que las instituciones monetarias impidieron el crecimiento económico, más que controlar efectivamente la inflación, cuyas causas principales están relacionadas con factores estructurales e institucionales, procesos de indexación y choques internos y externos. Los principales resultados del RMI, consustanciados en la política monetaria altamente restrictiva, son los siguientes efectos negativos: una reducción de las tasas de crecimiento del producto interno bruto (PIB), un aumento del stock de deuda pública y una apreciación de la moneda nacional. Asimismo, el RMI no logró mantener la tasa de inflación por debajo de su meta. A este respecto, revisiones en las instituciones monetarias brasileñas serían esenciales para mejorar los resultados del rmi, tanto en términos de inflación como de desempeño económico.
Neutral Technology Shocks and the Dynamics of Labor Input: Results from an Agnostic Identification
This article studies the dynamic response of labor input to neutral technology shocks. It uses benchmark dynamic, stochastic, general equilibrium models enriched with labor market search and matching frictions and investment‐specific technological progress that enables a new, agnostic, identification scheme based on sign restrictions on a structural vector autoregression (SVAR). The estimation supports an increase of labor input in response to neutral technology shocks. This finding is robust across different perturbations of the SVAR model.