Daily Archives: October 10, 2011

Claire Jones

As this post highlights, the Bank of England has been pretty inconsistent in explaining how quantitative easing works.

With the Bank restarting its asset purchases today, here are the two latest interpretations.  

Claire Jones

Monetary policy is no longer shrouded in mystery; the curtain has been pulled back on the great and powerful Federal Reserve to reveal Ben Bernanke.

That central bankers now bother to tell us what interest rate they are targeting owes much to a belief that more transparency affords them greater influence on markets’ and the public’s expectations, which in turn makes monetary policy more effective in affecting demand.

But how much of an impact do expectations about policy actually have on the economy? Today’s Nobel Prize has been awarded to two economists – Thomas Sargent and Christopher Sims – that have done much to answer this question.