The Worlds New Financial Landscape Challenges For Economic Policy

This book addresses how digital technology is challenging the principles of the market economy and the consequences for economic policy.

This book represents one of the key milestones of PoliVisu, an H2020 research and innovation project funded by the European Commission under the call “Policy-development in the age of big data: data-driven policy-making, policy-modelling and policy-implementation”.

The determinants of yield curve dynamics have been thoroughly discussed in finance models. However, little can be said about the macroeconomic factors behind the movements of short- and long-term interest rates as well as the risk compensation demanded by financial investors. By taking on a macro-finance perspective, the book’s approach explicitly acknowledges the close feedback between monetary policy, the macroeconomy and financial conditions. Both theoretical and empirical models are applied in order to get a profound understanding of the interlinkages between economic activity, the conduct of monetary policy and the underlying macroeconomic factors of bond price movements. Moreover, the book identifies a broad risk-taking channel of monetary transmission which allows a reassessment of the role of financial constraints; it enables policy makers to develop new guidelines for monetary policy and for financial supervision of how to cope with evolving financial imbalances.