Obstfeld argues central banks’ rate models are ‘conceptually flawed’
Former IMF chief economist says rates could soon return to the effective lower bound
Many of the analytical frameworks used by central banks are “conceptually flawed” as they fail to capture the full range of forces acting on interest rates, Maurice Obstfeld argues in new research.
Obstfeld, who was chief economist for the International Monetary Fund between 2015 and 2018, says central banks should consider a broader range of factors when setting monetary policy.
“The drivers of global real interest rates are multiple and changing,” Obstfeld says in the paper, which he presented
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