The Chicago Plan Revisited

Kumhof, Michael; Beneš, Jaromí­r

doi:10.5089/9781475505528.001

Cited by 115 publications

(19 citation statements)

References 55 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Of course, causal relationships between accounting identities can also be specified via neoclassical behavioral closures, such as rational expectations and optimizing representative agents. However, with some notable exceptions [12], banks are typically modelled as reserve-constrained intermediaries with loans driven by savings and deposits in a loanable funds market. This contrasts with a substantial body of work in post-Keynesian monetary theory, along with the statements of central bankers who say that credit money is created endogenously via loan origination [13,14].…”

Section: Introductionmentioning

confidence: 99%

A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions

2015

View full text Add to dashboard Cite

By synthesizing stock-flow consistent models, input-output models, and aspects of ecological macroeconomics, a method is developed to simultaneously model monetary flows through the financial system, flows of produced goods and services through the real economy, and flows of physical materials through the natural environment. This paper highlights the linkages between the physical environment and the economic system by emphasizing the role of the energy industry. A conceptual model is developed in general form with an arbitrary number of sectors, while emphasizing connections with the agent-based, econophysics, and complexity economics literature. First, we use the model to challenge claims that 0% interest rates are a necessary condition for a stationary economy and conduct a stability analysis within the parameter space of interest rates and consumption parameters of an economy in stock-flow equilibrium. Second, we analyze the role of energy price shocks in contributing to recessions, incorporating several propagation and amplification mechanisms. Third, implied heat emissions from energy conversion and the effect of anthropogenic heat flux on climate change are considered in light of a minimal single-layer atmosphere climate model, although the model is only implicitly, not explicitly, linked to the economic model.

show abstract

Section: Introductionmentioning

confidence: 99%

A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions

2015

View full text Add to dashboard Cite

show abstract

“…In addition to being instrumental for implementing negative interest rate policies, CBDC opens additional exciting possibilities. In particular, CBDC makes the execution of the celebrated Chicago Plan of 1933 [22] for introducing narrow or full-reserve banks, which hold as much central bank cash as they have deposits, a possibility within reach 10 . Some authors (see [3] for example), suggest that once CBDC becomes prevalent, both firms and ordinary consumers would be able to use it to increase their direct holdings of central banks liabilities.…”

Section: Central Bank Digital Currency and Negative Ratesmentioning

confidence: 99%

On the normality of negative interest rates

Grasselli

Lipton

2019

ROKE

View full text Add to dashboard Cite

We argue that a negative interest rate policy (NIRP) can be an effect tool for macroeconomic stabilization. We first discuss how implementing negative rates on reserves held at a central bank does not pose any theoretical difficulty, with a reduction in rates operating in exactly the same way when rates are positive or negative, and show that this is compatible with an endogenous money point of view. We then propose a simplified stock-flow consistent macroeconomic model where rates are allowed to become arbitrarily negative and present simulation evidence for their stabilizing effects. In practice, the existence of physical cash imposes a lower bound for interest rates, which in our view is the main reason for the lack of effectiveness of negative interest rates in the countries that adopted them as part of their monetary policy. We conclude by discussing alternative ways to overcome this lower bound , in particular the use of central bank digital currencies.

show abstract

“…This parallel with fiscal policy implies that, under some circumstances, the banking sector and macroprudential policy may in principle be determining the price level. Such possibility of a 'Macroprudential (or financial/banking) theory of the price level' should therefore be explored in microfounded models as well as in the data (for a valuable attempt see Kumhof and Benes, 2012). 46 Both mechanisms applying jointly would arguably make Tinbergen turn in his grave, because the central bank's interest rate instrument would be misused to stabilize three separate sets of objectives: monetary, fiscal and financial.…”

Section: G P Pmentioning

confidence: 99%

Unpleasant Monetarist Arithmetic: Macroprudential Edition

Libich

2017

SSRN Journal

View full text Add to dashboard Cite

The 2008 crisis highlighted the linkages between the financial sector and the real economy, as well as between the corresponding stabilization policies: macroprudential and monetary (M&Ms). Our game-theoretic analysis focuses on the increasingly adopted separation setup, in which M&Ms are conducted by two different institutions (e.g. in Australia, Canada, Eurozone, Sweden, Switzerland and the United States). We show that separated policy M&Ms are not as sweet as their chocolate counterparts, in fact they may turn sour. The main reason is that a strategic conflict is likely to arise between the autonomous prudential authority and the central bank in addressing exuberant credit booms,

show abstract

The Chicago Plan Revisited

Abstract: The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Cited by 115 publications

References 55 publications

A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions

A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions

On the normality of negative interest rates

Unpleasant Monetarist Arithmetic: Macroprudential Edition

Contact Info

Product

Resources

About