New Regimes of Monetary Policy

Time I: 
10:00am to 01:00pm
Venue I: 
DIW Berlin, Mohrenstraße 58, Elinore Ostrom Hall

The course will be held via Webex. Information on how to attend the online course will be provided to registered students by M. Fratzscher's office.

The seminar deals with changes and new developments in the theoretical and empirical literature on monetary policy. Topics covered through lectures and seminar papers include the following: the appropriate mandates and objective function of central banks, the relationship between monetary policy and financial supervision, the role of the exchange rates, the functioning of monetary policy in a monetary union, the importance of fiscal dominance, quantitative easing during financial crises, the role of communication of objectives and policies, the functioning of central bank committees, transparency and independence and accountability, global coordination of monetary policy, the international role of the euro and the US dollar.

The course will first start with a series of lectures addressing these various issues. The seminar participants are then asked to prepare a seminar paper on one of the issues, which then has to be presented and discussed towards the end of the semester. To allow an intensive dialogue among the students, the seminar is organized in block classes. Many topics are closely related to each other.

The lectures will take place on 28 April and 5 May. The seminar presentations will take place on 7, 14 and 16 July.

Part of the seminar:
Ungraded presentation and discussion

Restriction to participation: 20

Registration: 30.03. to 03.04.2020 via e-mail to


1. Monetary policy by the ECB
There is a large controversy about the effectiveness of the ECB’s unconventional monetary policies. Is monetary policy doing too much; is the ECB going beyond its mandate? What should it do going forward? And how effective have its nonstandard monetary policy been in the past?

Altavilla, C., Giannone, D., Lenza, M., 2014. The financial and macroeconomic effects of the OMT announcements. ECB Working Paper forthcoming.
Fratzscher, M., Lo Duca, M., Straub, R., 2014, “ECB Unconventional Monetary Policy Actions: Market Impact, International Spillovers and Transmission Channels”, IMF AR conference paper.
Rogers, J. H., Scotti, C. and Wright, J. H., 2014. Evaluating asset-market effects of unconventional monetary policy: a cross country comparison. Board of Governors of the Federal Reserve System, International Finance Discussion Papers No. 1101, March 2014.
Praet, P (2013), "Forward Guidance and the ECB",, August 6.

2. Unconventional monetary policy by the Federal Reserve
The Federal Reserve has been one of the first central banks that adopted a policy of quantitative easing following the global financial crisis in 2008. The Fed combined these policies with other policy measures. Moreover, quantitative easing policies differ sharply across countries and central banks, given different objectives and different market structures. What are the channels through which nonstandard monetary policy functions? What is the evidence which of these channels were most important? What are the costs and benefits from such policies?

Bauer M.D., Rudebush, G., 2013. The Signalling Channel of Federal Reserve Bond Purchases. International Journal of Central Banking, forthcoming.
Gagnon, J., Raskin, M., Remache, J., Sack, B., 2011. “The Financial Market Effect of Federal Reserve’s Large-Scale Asset Purchases”. International Journal of Central Banking, 7 (1), 3–43.
Krishnamurthy A., Vissing-Jorgensen, A., 2011. The effects of quantitative easing on interest rates: channels and implications for policy. Brookings Papers on Economic Activity 2, 215-287.

3. Spillovers and interdependence of monetary policy
There is a big discussion in international fora whether and how large spillovers of US and European quantitive easing policies have been over the past few years to other countries, in particular emerging markets what is the evidence for such spillovers? What are the costs and benefits? Do emerging markets benefits from such policies or do they suffer?

Bowman, D., Londono, J. M., Sapriza, H., 2014. US unconventional monetary policy and contagion to emerging market economies. Board of Governors of the Federal Reserve System, Mimeo.
Chen,Q., Fliardo, A., He, D., and Zhu F., 2012. International spillovers of central bank balance sheet policies. BIS Working Paper 66, 2012.
Fratzscher, M., Lo Duca, M., Straub, R., 2013, “On the international spill-overs of US quantitative easing”. ECB Working Paper No. 1557.
Lim, J., J.,Mohapatra, S., Stocker, M., 2014. Tinker, Taper, QE, Bye? The Effect of Quantitative Easing on Financial Flows to Developing Countries. World Bank Policy Research Working Paper No. 6820.

4. The inflation targeting debate – has inflation targeting been successful?
Central banks have shifted massively towards inflation targeting since the early 1990s. But this trend has been stopped and partly been reverse during the crisis as many central banks have abandoned informally heir inflation objective and focused on other objectives (financial stability, growth, employment, exchange rate stability). What are the pros nd cons of IT? Is it still the preferred monetary policy regime after the crises? What are the criteria to answer this question, and what is the outlook for the future?

Fatas, A., Mihov, I. and A. Rose (2006). Quantitative Goals for Monetary Policy, Journal of Money, Credit and Banking.
Levin, A.T., F.M. Natalucci and J.M. Piger (2004). The Macroeconomic Effects of Inflation Targeting. Federal Reserve Bank of St. Louis Review. 86(4), 51-80.
Gürkaynak, R., A. Levin, und E. Swanson (2006). Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the US, UK and Sweden. Federal Reserve Bank of San Francisco Working Paper No. 2006-09.
Lin, S. and Ye, H. (2007). Does inflation targeting really make a difference? Evaluating the treatment effect of inflation targeting in seven industrial countries, Journal of Monetary Economics

5. Global reserve accumulation
Many emerging markets (EMs) have been accumulating massive amounts of foreign reserve holdings. What are the motivations for this trend? What are its domestic and global repercussions; what are possible alternatives? How does foreign-exchange accumulation fit into different monetary policy strategies? What is the relationship between foreign-exchange policy, capital account openness and monetary policy?

Aizenman, J., and H. Ito. 2013. Living with the Trilemma Constraint: Relative Trilemma Policy Divergence, Crises, and Output Losses for Developing Countries. NBER Working Paper No. 19448 (September). Cambridge: National Bureau of Economic Research.
Aizenman, J., M. D. Chinn, and H. Ito. 2008. “Assessing the Emerging Global Financial Architecture: Measuring the Trilemma's Configurations Over Time.” NBER Working Paper #14533. Cambridge: National Bureau of Economic Research.
Aizenman, J., M. D. Chinn, and H. Ito. 2010. "The Emerging Global Financial Architecture: Tracing and Evaluating the New Patterns of the Trilemma's Configurations", Journal of International Money and Finance, Vol. 29, No.4, p. 615-641 (2010).
Cheung, Y.-W. and H. Ito. 2009. “Cross-sectional analysis on the determinants of international reserves accumulation.” International Economic Journal, Vol. 23, No. 4, p. 447-481.

6. Global saving glut, global imbalances and monetary policy
What are the chances, and what the potential channels for an adjustment of global current account positions and capital flows? What are the risks from such imbalances; and how important have they been in explaining the global financial crisis? How does the global saving glut relate to monetary policy, is it a cause or consequence or entirely unrelated?

Chinn, Menzie and E. Prasad (2003), “Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration,” Journal of International Economics 59, 47–76.
Lane, Philip R. and Gian Maria Milesi-Ferretti (2011), “External Adjustment and the Global Crisis,” IMF Working Paper WP/11/197, August.
Bernanke, Ben S. (2005), “The Global Saving Glut and the U.S. Current Account Deficit.” The Sandburg Lecture, Virginia Association of Economists, Richmond, VA, March 10.
Chinn, M., B. Eichengreen and H. Ito (2013): "A forensic analysis of global imbalances", Working Paper, University of Wisconsin.

Exam: Term paper

Spring 2020
Deutsches Institut für Wirtschaftsforschung