How independent should a central bank be?

Federal Reserve System - Independence ; Banks and banking, Central ; Econometric models ; Deutsche Bundesbank

Relative Price Variability and Inflation: Evidence from US Cities

We test whether the time-series positive correlation of inflation and intermarket relative price variability is also present in a cross-section of US cities. We find this correlation to be a robust empirical regularity: cities which have higher than average inflation also have higher than average relative price dispersion, ceteris paribus. This result holds for different periods of time, different classes of goods, and across different time horizons. Our results suggest that at least part of the relationship between inflation and relative price variability cannot be explained by monetary factors.

Inflation Targeting and the Inflation Process: Lessons from an Open Economy

In an open economy inflation-targeting framework, whether policy makers should target aggregate or non-traded inflation depends on the structural relationships in the economy. This paper shows that in a small empirical model of the Australian economy, it makes little difference which measure is targeted. This conclusion is reinforced by the significant changes to the inflation process that the paper suggests have occurred over the past two decades: the effect of exchange rate changes on inflation appears to have become more muted and the inflation process appears to have become better anchored.

Generational Differences In Motivation For Learning: An Ethnographic Research Project On The Differences Between Learning Styles And Motivations To Learn Based On Generation

There are a number of differences between generational groups as far as influences, technology, and preferences. The purpose of this research project can help determine if there are differences in motivations and preferences toward learning delivery methods, based on age groups. To determine this, a Likert scale survey was issued to seventy four college students via a Zoomerang online survey link. The respondents were only asked to display their age and were classified into one of four generational groups. The Likert scale helped determine preferences to online or traditional classroom training. In addition the respondents were asked to list frustrations that they had experienced in both online courses and traditional classroom settings. Participants were also surveyed on the convenience of online courses, experience working with other students, and how comfortable each was with the use of technology. The survey results indicated that most of the groups preferred traditional classroom training over online courses. In addition all of the generational groups responded that they learned best with a traditional classroom setting. Of these two items, Millennials (those born between 1981-1994) had the highest preference to classroom learning, and lowest preference to online learning

Evaluating multiagency interventions for children living with intimate partner violence in Birmingham

This research endeavour was born out of the need for a systematic evaluation of the efficacy of the multiagency Domestic Abuse Risk Assessment tool, which necessitates that all incidents of ‘domestic abuse’ (any incident within the family domain) reported to West Midlands Police, where a child or unborn child resides within that home, are scrutinised by Police and Social Care (and partners from Health, Education and the voluntary sector where possible) using a joint protocol. The primary purpose of the protocol is to promote safeguarding and provide a timely and appropriate response to children at risk following domestic abuse. The protocol incorporates the Banardos’ Multiagency Domestic Violence Risk Identification Threshold Scales (MDVRITS), which aids decision making about appropriate interventions based on predicted risk to children using a four level scale

Inflation Targeting and Output Stabilisation

Inflation targeting has been criticised for being ‘inflation only’ targeting and hence, for ignoring output and employment. This paper argues that this criticism is misplaced. The inflation-targeting framework has sufficient flexibility to allow for the short-run trade-off between output and inflation. The extent to which it does so in part reflects some design features of the inflation-targeting framework, such as targeting bands and the policy horizon, that have been adopted in practice in the inflation-targeting countries. Medium-term price stability can be maintained while still allowing some degree of short-run inflation variability, thus providing scope for lower output variability.Inflation targeting; output stabilisation

The Effect of Uncertainty on Monetary Policy: How Good are the Brakes?

In practice, monetary policy changes tend to produce a smooth path for interest rates while the path of policy interest rates generated by models is often considerably more variable. This paper investigates whether the inclusion of uncertainty can help reconcile the theory to the practice. It shows that parameter uncertainty does not induce much smoothness when its effects are directly incorporated into a model. Uncertainty about the interest sensitivity of output can increase the smoothness of optimal policy in a model, but the path of policy interest rates generated is still considerably more variable than that observed in practice.interest rate smoothing; monetary policy; parameter uncertainty

Consumption, Investment and International Linkages

This paper seeks to explain the strong contemporaneous relationship between Australian and foreign output growth. It does so by adopting a more disaggregated approach than previous work, focussing in particular on consumption and investment. The theoretical frameworks of the permanent income hypothesis for consumption and the cash flow version of the neo-classical model of investment are used to identify potential foreign linkages. Some evidence of a foreign linkage through consumption is established. Little evidence is found of foreign influences on domestic investment, although an indirect channel operating through business confidence is identified. The paper also provides evidence of a decline in liquidity constraints since financial deregulation, and confirms previous evidence of the importance of cash flow in determining investment.

Trends in the Australian Banking System: Implications for Financial System Stability and Monetary Policy

Financial system stability is defined in terms of the expected macroeconomic losses that arise from financial system disturbances. This captures both the probability of various financial disturbances and the size of the macroeconomic costs arising from such disturbances. Because of the links between the real sector of the economy and the financial sector, monetary policy needs to be cognisant of the potential for financial system stability. We develop a general framework for policy analysis which highlights the trade-off between financial system stability and efficiency. We use this framework to analyse the potential impact on stability and efficiency of three current pressures in the Australian financial system. Namely, consolidation among the largest banks, the formation of large financial conglomerates, and greater opportunities for smaller niche institutions provided by technological developments. We develop a simple model to show that consolidation might reduce system stability through a loss of diversification – which is important in the case of idiosyncratic shocks to individual financial institutions. Offsetting this effect, consolidation might increase system stability if contagion is an important source of failure of financial institutions. Conglomeration has two offsetting effects in terms of system stability: diversification across different financial services can reduce the probability of failure of an individual institution; and contamination, which can lead to contagion flowing from failure of an unhealthy arm of the conglomerate.financial system stability and efficiency; consolidation; conglomeration

Monetary Policy Goals for Inflation in Australia

This paper outlines the inflation objective for monetary policy in Australia, which we describe as seeking to achieve a broad central tendency for inflation of between 2 and 3 per cent over the long run – a “thick point” – rather than a narrow target band. It also provides a more detailed rationale for this objective. In doing so, the paper discusses the issues relevant in determining the appropriate mean inflation rate at which policy should aim, the degree of variation of inflation around that central point, and how policy should respond to shocks. A simple model of the economy is presented which attempts to address these issues in a consistent framework.