EXIT STRATEGY: IL RIALZO DEI TASSI DELLA FEDERAL RESERVE E IL PROCESSO DI NORMALIZZAZIONE DELLA POLITICA MONETARIA DOPO LA CRISI DEL 2007

“Exit strategy: il rialzo dei tassi della Federal Reserve e il processo di normalizzazione della politica monetaria dopo la crisi del 2007” is a document that aims to define the guidelines for a normalization process that follows a monetary policy accommodation during a recession. We discuss the crisis that has affected all major developed countries by 2007 and that even today after nine years, keeps busy and creates divergent hypothesis among the most eminent policymakers and economists. Discussing the crisis requires to point out the central role that monetary policy plays in similar contexts and to highlight its importance during the bursting of the housing bubble in 2007. After that, there is a comparison between the various historical periods and between different economic contexts, which allows us to highlight differences and continuity in political and economic policies of these periods. Given the actual context, talking about monetary policy we provide a description of the Taylor rule, which is highlighted in all its facets and diversity. The analysis avoids getting into the myriad implications and facets that a full discussion of the rule requires. In fact, each chapter provides the discussion of the imminent policy normalization process. After a short introduction that contextualizes the aim of the document, we discuss in Chapter 1, the role of the central bank in its function of monetary creation. Starting with a stylized balance sheet of the central bank, we talk about the creation of the monetary base and the purpose of its determination. The chapter continues by inserting in the discourse on the central bank. From here forward we will use always the singular term of the central bank, the Federal Reserve, to refer to the system. In this chapter, we broadly define the mandate of the US central bank, as it seeks to achieve its main objectives and the role it plays within the economy. Chapter 2 introduces the role of monetary policy, speaking of its importance within today's economic systems as it is carried out according to its determinants and guidelines. It demonstrates how effectively the Fed intervenes, which implements operations to change the monetary policy and how this reflects the mandate according to the Federal Reserve Act. Noting that the interest rate is the most important and used tool, let us see how that affects the economic variables through the interest rate channel. After the monetary policy, we provide the definition of the Taylor rule on chapter 3. We define its centrality from the Taylor's paper, we will specify in detail the variables involved and the impacts of changes in them. Furthermore, we also introduce a first amendment to take account the fact that changes in the rate controlled by the rule should incorporate the present value of the rate to emphasize that the process of getting closer to its target value is gradual and not "a cold shower effect". We continue talking about the forward-looking Taylor rule to highlight that it is necessary to refer also to the expected values of inflation and output gap despite of the original rule. Let us see how the rule can fit the different historical periods according to the variations of its parameters. Then we point out the question about the rule-based monetary policy. Chapter 4 deals with the recession. We do not point out the crisis cause but the consequences and the situation that the central bank through the monetary policy, has had to face and quell. After defining the maneuvers of the Fed, here is what the rule of Taylor has instead suggested and what were the variations of the rule on which they relied or that however have filled the gap that obviously the Taylor Rule has, as the zero lower bound. Passing by the date defined as the end of the recession, we see the historical perspective of the recent recession that is compared to the major recessions since the second half of the twentieth century. The chapter 5 points out the unprecedented monetary accommodation that the Fed engineered during and after the Great Recession. Here emerges the diatribe on the normalization process, highlighting the persistence of accommodative policies and when the liftoff will start. I highlight the timing of the exit strategy according to a different view. The chapter closes with the normalization according to the Taylor rule. The chapter 6 provides an overview on the federal funds rate rise. Let us see what has been a missed step in the meeting of the Federal Open Market Committee on September 17th, 2015, with completion of the reasons in the words of the chair of the Fed and the consequences in the aftermath of the meeting. Once again, we see how the Fed deviates from the Taylor rule stressing as before because according to leading economists and policymakers, the path taken will be separate from that marked by the rule which was found to be insufficient. We point out two ideological visions on the liftoff timing. The document ends by explaining the economic situation in the period of the rise in interest rates for the first time since 2007.

“Exit strategy: il rialzo dei tassi della Federal Reserve e il processo di normalizzazione della politica monetaria dopo la crisi del 2007” mira a definire delle linee guida per un processo di normalizzazione che segue ad una politica monetaria accomodante durante periodi di recessione. Si discute della crisi che ha interessato tutti i principali Paesi sviluppati dal 2007 e che ancora oggi, dopo nove anni, tiene occupati e crea divergenze tra i più eminenti policymaker ed economisti. Nello sviluppo di un discorso che verte sulla recente crisi, è necessario discutere del ruolo centrale che la politica monetaria gioca in contesti simili e come questa sia stata veicolo e navigatore per le banche centrali dei principali Paesi con economie avanzate che hanno rischiato il naufragio in seguito all’onda anomala che li ha investiti con lo scoppio della bolla finanziaria del 2007. Con la banca centrale e la politica monetaria da essa adottata, si arriva a discutere dell’esperienza storica che maggiormente ha visto tale istituzione recitare un ruolo principale e determinante nell’economia. Vi è quindi un raffronto tra le varie “epoche monetarie” e tra i diversi contesti economici, che ci permette di evidenziare differenze e continuità nelle scelte politiche ed economiche dei periodi richiamati. Visto il contesto storico in cui ci ritroviamo, parlando di politica monetaria non possiamo fare a meno di discutere della regola di Taylor, estesa trasversalmente nella nostra trattazione in tutte le sue sfaccettature e diversità che la ramificazione storica e fattuale le ha conferito. Ne vedremo infatti le diverse varianti, nate da esigenze diverse che la regola nella sua “semplicità” non poteva soddisfare; si discute inoltre delle manovre straordinarie che si sono rese necessarie di fronte ad un limite della regola come lo Zero Lower Bound. Nell’analisi non viene mai perso di vista il punto focale del discorso, evitando di inoltrarsi nella miriade di implicazioni e sfaccettature che una completa discussione della regola richiede. Infatti in ogni capitolo si riporta l’intento della trattazione, richiamando più volte l’imminente e discussa normalizzazione della politica monetaria. Si conclude con il primo rialzo dei tassi effettuato nel dicembre 2015 e definendo in linea generale le modalità e le tempistiche di una exit strategy.