Jackson Hole: monetary and macroprudential policy in the spotlight
In today’s wired world, it is stunning to see the world’s leading central bankers and their invited guests spend a weekend in Wyoming discussing the economic and regulatory policy issues of our day with so little transparency. True, some speeches are published by individual speakers. But the full agenda, participant list, and all delivered papers are not available from the Jackson Hole conference sponsors (U.S. Federal Reserve Bank of Kansas City) until months after the conference has ended. Journalists attending the sessions have shared sparingly their observations of the discussions and papers discussed over the weekend. Whether such an approach can continue much farther into the 21st century is a topic for another day.
The dearth of published remarks has a silver lining. It forces us to look at other puzzle pieces published in the weeks before the Jackson Hole conference by leading policymakers who were presumably at least invited to attend the Kansas City Fed conference. The broader perspective yields a different analysis than that presented in the media over the last 72 hours from Wyoming. The media and markets have focused almost exclusively on the remarks of one speaker (Federal Reserve Chairman Bernanke) on quantitative easing prospects in the United States. But those remarks are nearly silent on the vigorous debate underway within the central banking community on the intersection and implications that “macroprudential” regulatory policy can have on the formulation and signaling roles of monetary policy.
This issue of The Risk Telescope analyzes the Jackson Hole public speeches in light of policy signals sent by international policymakers over the last few weeks on the intersection of macroprudential and macroeconomic policy. The inescapable conclusion is that the process by which central banks constrain (or supply) credit availability is broadening dramatically beyond the interest rate channel.
On this point, consensus seems to exist across a range of policymakers and seems certain to ensure that key components of the Basel Committee’s proposed new regulatory framework (Basel 3) will not shift materially in the coming weeks. The bigger questions regarding the precise construct of the new policy tools as well as the balance of authority and responsibility between fiscal authorities and financial regulators remain open for debate. This issue of The Risk Telescope explores that debate in some detail. The implications for the design of financial instruments, risk management and, of course, economic growth are massive.
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