Monetary Policy and Sustainability

Hosted by the Bellagio Center of the Rockefeller Foundation
Bellagio, Italy

  • Monetary policy has wide ranging effects on the economy and society as a whole. The actions taken by central banks with regard to interest rate levels, inflation targets, and exchange rates are key factors in investment decisions and play a significant role in the distribution of wealth and income. They also have critical impacts on social security systems and the ability of savers to secure adequate real income over their lifetime. Their influence on asset prices and volatility in general and commodity prices in particular are further cases in point with considerable social and environmental repercussions.

    Nonetheless, the links between monetary policy and a broad sustainability agenda that strengthens individual opportunity, social cohesion and environmental stability are rarely reflected in policy debates. The nexus between central bank decisions and sustainability are seldom on top of agendas. Bringing light to this blind spot is critical.

    Against this background, CEP launched a program on “Monetary Policy and Sustainability” in summer 2012 to advance research, raise awareness and build up an international community of experts on the topic. This conference was a key milestone in this process and convened over 20 participants from central banks, academia, IGOs, think tanks, NGOs and the media to review existing research, define an agenda to further explore the topic, and offer a platform to identify opportunities for cooperation and joint research initiatives. The event was generously hosted by the Bellagio Center of the Rockefeller Foundation.

    Guiding questions

    The following questions provided initial guidance. Further topics were identified during the event:

    • What is the impact of current monetary policies on sustainability – in particular with regard to inequality and resource security?
    • What are the effects of inflation on sustainability?
    • What are the environmental and social impacts of low interest rates? Do current low interest rate levels endanger our social security systems? Do high interest rates increase short-termism because they lead to higher discounting of the future in discounted cash flow models?
    • What are the social and environmental effects of sector and regional biases in monetary policy and how could negative effects be reduced?
    • What are the sustainability effects of exchange rate interventions within and between countries?
    • What are plausible scenarios for the future impact of monetary policy – in particular an unwinding of QE – on sustainability?
    • Are there alternative approaches to current monetary policies that remain within central bank mandates and would be better aligned with a broad sustainability agenda?
    • What are ideas for monetary reforms that would strengthen this alignment?

  • June 16, 2014
    17:00Welcome and Introduction
    18:00Getting us Started
    Presentation and Discussion
    "Monetary Policy in the New Normal"
    Tommaso Mancini-Griffoli, International Monetary Fund; United States
    June 17, 2014
    09:00Drawing the Landscape, Prioritizing Questions, Screening Answers
    Presentations and Discussion (Slides)
    Alexander Barkawi and Pierre Monnin, Council on Economic Policies; Switzerland
    14:00Reviewing the Research, Identifying Gaps
    Parallel Workshops
    "Monetary Policy and Inequality: The Current Status of Research"
    Robert Triest, Federal Reserve Bank of Boston; United States
    "Monetary Policy and Conflicting Social Objectives" (Slides)
    Peter Dietsch, Université de Montréal; Canada
    "Financialization of Commodities and the Impact of Monetary Policy on Prices, Volatility and Correlation: The Current Status of Research" (Slides)
    Ibrahim Jamali, American University of Beirut; Lebanon
    "Monetary Policy, Dynamic Efficiency and Resource Security"(Slides)
    Christian Kimmich, Research Group on Sustainable Money – WANG; Switzerland
    17:15Summaries and Reflections
    James Heintz, Political Economy Research Institute; United States
    Branimir Jovanovic, National Bank of the Republic of Macedonia; Macedonia
    Izabella Kaminska, Financial Times; UK
    June 18, 2014
    09:00Probing Theory, Exploring Empirics
    Parallel Workshops
    “Inequality in the Welfare Costs of Inflation and Disinflation” (Slides)
    Benjamin Pugsley, Federal Reserve Bank of New York; United States
    “Inflation and Inequality: Identifying Dynamic Causality in U.S. States”
    Oguzhan Dincer, Illinois State University; United States
    “Monetary Policy and the Distribution of Personal Income and Wealth” (Slides)
    Yannis Dafermos, University of the West of England; United Kingdom
    “Effects of Global Liquidity on Commodity and Food Prices” (Slides)
    Ulrich Volz, SOAS, University of London and German Development Institute; UK and Germany
    “Food Prices and Inflation Dynamics in India” (Slides)
    Sangita Misra, Reserve Bank of India; India
    “Monetary Policy and Subsistence Levels of Consumption” (Slides)
    Marco Airaudo, Drexel University; United States
    14:00Expanding the Agenda
    Open Space
    Facilitator: Raj Thamotheram, Preventable Surprises; UK
    17:15Summaries and Reflections
    Rossana Galli, University of Zurich; Switzerland
    Peter Heller, Williams College; United States
    Md. Allah Malik Kazemi, Bangladesh Bank; Bangladesh
    June 19, 2014
    08:00Breakfast and Special Guest
    09:00Evaluating Policies
    “Intertemporal Discoordination in the 100 Percent Reserve Banking System” (Paper)
    Romain Baeriswyl, Swiss National Bank; Switzerland
    “Floating Exchange Rates, Capital Account Liberalization and Sustainability – The Case of Bangladesh”
    Md. Habibur Rahman, Bangladesh Bank; Bangladesh
    “Beyond the Fiscal/Monetary Policy Divide: Strategic Quantitative Easing” (Slides)
    Josh Ryan-Collin, New Economics Foundation; UK
    14:00Advancing Knowledge, Raising Awareness
    Working Groups
    Facilitator: Raj Thamotheram, Preventable Surprises; UK
    17:15Summaries and Reflections
    Simon Zadek, UNEP Inquiry into the Design of a Sustainable Financial System; Switzerland
    John Baffes, World Bank; United States
    Yongseok Shin, Washington University of St. Louis, Federal Reserve Bank of St. Louis; United States
    June 20, 2014
    08:45Reviewing Results, Planning Next Steps