Rethinking Monetary Policy: Adapting Central Bank Approaches in 2024 and Beyond

William White presented a webinar to the Global Risk Institute in Toronto on 7 February 2024 in which he questioned the wisdom of central banks targeting inflation. His presentation was based on  Working Paper No 10, published on 3 August 2023 by INET. He began by documenting some facts: in particular, how the aggressive easing of monetary policy after the bursting of financial “bubbles” in the 1980’s and 1990’s led to a series of still bigger “bubbles” and the uncertain future still facing us today. He then turned to an analysis of how certain “false beliefs” of central banks had led them to conduct policy as they did. White then gave some brief consideration as to to how alternative monetary policy frameworks might have left us facing fewer policy challenges than we currently do.



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Has the Fed Produced a Soft Economic Landing?

William White participated in a panel at the American Enterprise Institute (AEI) on 21 September 2023. Other panelists were Don Kohn and Kevin Warsh, former members of the FOMC,  and Desmond Lachman of the AEI. White said that, even if the Fed did achieve a near-term soft landing, medium term prospects would remain challenging since the world was moving from an Age of Plenty to an Age of Shortages. This implied that “higher for longer” would be maintained for some time with attendant risks for financial stability and fiscal sustainability.



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Graduation ceremony at the University of Manchester

William White gave the commencement address to the graduating class of the School of Social Sciences at the University of Manchester on 12 July. After congratulating the graduates for their success, due in part to their own efforts, White urged them to reflect that simple “good luck” might also have played a role. If so, they had a moral obligation to create “good luck” for others. He went on to suggest that the economic world they were entering would be unusually challenging. Yet, it would also provide opportunities for economists with good professional training, which the University of Manchester had provided, and for those with enough humility to recognize the further need for a lifetime of adaptation and learning.



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“Sleepwalking” towards a global Polycrisis?

William White contributed to a “Math for complex climate challenges workshop” held at the University of Waterloo from May 1 to May 4. He pointed out that there were many deficiencies in our global efforts to mitigate climate  change. Not only were there shortcomings in identifying what we should do, but the adequacy of our capacity and willingness to act were also in doubt. White concluded by referring to a still broader problem identified in a a recent paper from the Cascade Institute at Royal Roads University.  It calls for more research on the steps needed to avoid a polycrisis; namely, the likelihood that a number of the systems required to support human life and civilization might all fail in a cascade of “tipping points”.



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Soft landing or financial market crisis?

William White participated in a webinar panel organized by the American Enterprise Institute on 18 January 2023. White began his remarks with a long list of reasons to be concerned about financial instability. He then went on to note that, absent an “immaculate disinflation”, there might well be the need for more restrictive macroeconomic policy than is currently envisaged. With further monetary tightening likely to be constrained by fears of  private financial instability, as well as fears of government debt service becoming unsustainable, fiscal restraint had to be considered more seriously. Absent the political will to do so, “financial repression” might be turned to as an easier alternative.


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The new macroeconomic paradigm: Pandemic lessons and policy needs

William White presented a webinar to the Global Risk Institute in Toronto on 24 January, 2023. He contended that the global economy will face a number of negative supply shocks in the years ahead, while at the same time facing the need for a significant increase in investment. This will create pressure for higher inflation and for higher real interest rates. However, as a legacy of past debt accumulation, higher rates could create financial instability and also fears about the sustainability of government finance in many countries. To avoid this dilemma, the best solution would comprise orderly debt restructurings, fiscal restraint and measures to temper consumption. Given the political difficulties of doing this, the more likely solution might be an attempt to reimpose the “financial repression” used successfully to reduce debt overhang after World War ll.

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The future of policy modelling

William White contributed to the opening panel of the 25th Central Bank Macroeconomic Modelling Workshop, which took place from 9-11 November. In his remarks, White said he would evaluate recent developments in modelling from a particular perspective: namely, that economies were complex, adaptive systems with associated properties. From this perspective, he concluded that many recent developments (recognition of uncertainty and non-linearities, more reliance on scenarios than forecasts etc.) would improve the conduct of monetary policy. In contrast, White identified some neglected areas (supply side developments, the possibility of financial instability etc.) that needed to be more closely integrated into models and the monetary policy framework. His written notes and the recording are available below




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“The Fed’s Big Inflation Fight”

William White participated in a panel, organized by the American Enterprise Institute, that also included Don Kohn and Kevin Warsh (both ex Fed) and Desmond Lachman of the AEI. White expressed concern about a plausible future combination of negative supply shocks and a strong need for increased investment. These two could only be combined, without more inflation, if consumption could be reduced to free up resources. Fiscal restraint, especially higher taxes, seemed a better instrument for reducing consumption than monetary restraint, especially given the current fragility of the financial system. However, in the current political climate, tax increases seem unlikely.

White’s speaking notes and the video can be found below.




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What next for the global economy: Could negative supply shocks disrupt other fragile systems?

William White made the opening presentation at an international conference which took place in Reykjavik, Iceland on 1-2 September. Borrowing from earlier presentations, White suggested that realizing the joint objectives of sustainable, inclusive growth in  a free society required each of a variety of interdependent systems to function well. He worried in particular that negative supply shocks could cause global economic problems that might well pose dangers to democratic political systems that were already showing worrisome signs of instability.



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Negative Supply Shocks: Can our Fragile Democracies Take the Hit?

William White made a presentation on  May 3 at the Institute for International Economic Policy at George Washington University in Washington DC. He contended that the global economic and financial system has been showing increasing signs of stress for many years, raising the likelihood of harmful “tipping points”. In large part, this has been due to the unintended consequences of well-meaning macroeconomic and regulatory policies. Now we must also confront negative supply shocks that will lower real growth and exacerbate inflationary tendencies over a number of years. Unfortunately, over recent years, many democratic countries have also developed political “fault lines” that could now threaten the future of democracy itself. Since history provides many examples of political regime change –  triggered by environmental crises, pandemics, and above all economic and financial crises – there are legitimate reasons for concern.




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