ISTANBUL – Central bankers want only a few things. To achieve any of them they usually seek to nudge inflation expectations, demonstrate the transparency of monetary policy, and establish their institutions’ credibility. To communicate their intentions simply and clearly, they may set an explicit target range in terms of a particular economic variable, or announce a forecast for the variable, or offer forward guidance by specifying a threshold value for it that must be met before changing interest rates.
CAMBRIDGE – Headlines around the world last week trumpeted a watershed moment for the global economy. As the Financial Timesput it, “China poised to pass US as world’s leading economic power this year.” This is a startling development – or it would be if the claim were not essentially wrong. In fact, the United States remains the world’s largest national economy by a substantial margin.
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Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.