I have a new paper out at Center for Corporate Governance at Copenhagen Business School.
Here is the abstract:
In the aftermath of the economic and financial shock of 2008-10, the wider policy debate has often turned on why inflation has remained very subdued and interest rates and bond yields historically low despite a marked drop in interest rates and a significant increase in the money base in the US and the euro zone.
In this paper, we try to explain these developments with a simple model which highlights the importance of growing demand for ‘safe assets’ (government bonds). By its effect on the demand for money, this shift is inherently deflationary. Expansion of the money base is a natural and necessary consequence of inflation-targeting central banks ‘doing theirRead More »