Figure 7 - uploaded by Otaviano Canuto
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Macroeconomic dynamics in the U.S. economy has increasingly become associated with asset price fluctuations in the past few decades. Financial conditions have increasingly become an influential factor shaping the cyclical pace of the macroeconomy.
There has been a mismatch between rising financial wealth and the pace of creation and incorporation o...
Context in source publication
Context 1
... levels of policy rates established by central banks in their aggregate demand management tend to accommodate to such structural long-term determinants. Notice in Figure 7 how the short-term interest rates established by the Federal Reserve Bank followed a trend of decline along its cycles of hike and descent, with decreasing peaks and troughs along those cycles. Central Banks set their basic short-term interest rates following their inflation targets and they move rates counter-cyclically relative to ups and downs of economic cycles, as these phases come with corresponding inflationary or deflationary pressures. ...
