Athanasios Orphanides (born 22 March 1962)[1] is a Cyprioteconomist who served as Governor of the Central Bank of Cyprus between 3 May 2007 to 2 May 2012 and as a member of the Governing Council of the European Central Bank between 1 January 2008 and 2 May 2012.[2]
Prior to his appointment as governor, he served as senior adviser at the board of governors of the Federal Reserve System in the US, where he started his professional career as an economist in 1999.[3] While at the Federal Reserve he taught undergraduate and graduate courses in macroeconomics and monetary economics at Georgetown University and Johns Hopkins University.[3]
On 29 April 2012 President Demetris Christofias announced that Panicos O. Demetriades would succeed Orphanides as governor of the Central Bank of Cyprus effective 3 May 2012.[4] Orphanides is a professor at [5]MIT Sloan School of Management.[6]
After his mandate as governor of the ECB, Orphanides has repeatedly criticized the ECB's reliance on private credit ratings agencies for accepting assets as eligible for the ECB's monetary refinancing operations.[7][8][9] In a September 2020 study co-authored with Yvan Lengwiler for the European Parliament's Committee on Economic and Monetary Affairs, Orphanides provided suggestions for the ECB's monetary policy strategy review.[10]
A major theme of Orphanides' research on monetary economics has been the evaluation and design of monetary policy in real time. He argued that since the data available to policy makers at the time policy decisions are made are imperfect and subject to substantial revisions, the historical analysis of monetary policy decisions as well as the evaluation of alternative policy strategies must be based on the information available in real time (Orphanides, 2001, Orphanides, 2003).[11] His work has documented significant problems arising from policy decisions drawing on unobservable concepts such as the output gap. Orphanides has argued against output-gap-based policy rules, such as the Taylor rule, and in favour of non-activist policy rules drawing on Milton Friedman and Knut Wicksell. He has stressed that overemphasizing the output gap as reflected, for example, in the Taylor rule or optimal control policy, is counterproductive for stabilizing the macroeconomy. He has also provided an explanation of the high inflation experience in the United States during the late 1960s and 1970s as resulting from policy focused too closely at stabilizing the real economy, by aiming to close the perceived output and unemployment gaps. According to this analysis, the high inflation resulted from the fact these gaps were badly mismeasured due to overoptimistic real time estimates of potential output and the natural rate of unemployment (Orphanides, 2003).[12]
In related work, Orphanides and Simon van Norden, have explained that the unreliability of output gap measures in real time is of a more general nature than previously thought. They documented the unreliability of various statistical techniques for measuring the output gap in real-time and also the lack of predictive power of real-time output gap estimates for forecasting inflation, thus calling into question policy approaches that rely on the output for stabilization policy (Orphanides and Norden, 2002).[13]
The role of imperfect knowledge and the formation of expectations in a learning environment has been a theme in the work by Orphanides and John C. Williams. They have argued that the central bank must ensure that inflation expectations must remain well-anchored, in line with the central bank's price stability objective, in order to improve the stability of the macroeconomy. Their work documented the benefits associated with a central bank's numerical price stability objective and the pitfalls of optimal control policy design (Orphanides and Williams, 2008).[14]
Working with Volker Wieland and others, Orphanides also contributed to research on the conduct of monetary policy near to zero lower bound for nominal interest rates. This work was motivated by the Japanese experience with near-zero rates in the late 1990s but became of immediate policy relevance during the 2008 global financial crisis (Orphanides and Wieland, 2000).[15]
↑ Pantelides, Poly (29 April 2012). "Central Bank Governor officially named". cyprus-mail. Archived from the original on 2 May 2012. Retrieved 29 April 2012. PRESIDENT Demetris Christofias yesterday appointed academic Panicos Demetriades as Cyprus' central bank governor and European Central Bank Governing Council member, succeeding Athanasios Orphanides. ... His five-year term starts on 3 May, a day after Orphanides' term expires.
↑ Lengwiler, Y. and Orphanides, A., Options for the ECB’s Monetary Policy Strategy Review, Study for the Committee on Economic and Monetary Affairs, Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, Luxembourg, 2020.
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base. Many central banks also have supervisory or regulatory powers to ensure the stability of commercial banks in their jurisdiction, to prevent bank runs, and in some cases also to enforce policies on financial consumer protection and against bank fraud, money laundering, or terrorism financing.
The European Central Bank (ECB) is the prime component of the Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important central banks.
Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies. Macroeconomists study topics such as output/GDP and national income, unemployment, price indices and inflation, consumption, saving, investment, energy, international trade, and international finance.
Monetary economics is the branch of economics that studies the different theories of money: it provides a framework for analyzing money and considers its functions, and it considers how money can gain acceptance purely because of its convenience as a public good. The discipline has historically prefigured, and remains integrally linked to, macroeconomics. This branch also examines the effects of monetary systems, including regulation of money and associated financial institutions and international aspects.
Monetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability. Further purposes of a monetary policy may be to contribute to economic stability or to maintain predictable exchange rates with other currencies. Today most central banks in developed countries conduct their monetary policy within an inflation targeting framework, whereas the monetary policies of most developing countries' central banks target some kind of a fixed exchange rate system. A third monetary policy strategy, targeting the money supply, was widely followed during the 1980s, but has diminished in popularity since that, though it is still the official strategy in a number of emerging economies.
The Taylor rule is a monetary policy targeting rule. The rule was proposed in 1992 by American economist John B. Taylor for central banks to use to stabilize economic activity by appropriately setting short-term interest rates.
The quantity theory of money is a theory from monetary economics which states that the general price level of goods and services is directly proportional to the amount of money in circulation, and that the causality runs from money to prices. This implies that the theory potentially explains inflation. It originated in the 16th century and has been proclaimed the oldest surviving theory in economics.
John Brian Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University, and the George P. Shultz Senior Fellow in Economics at Stanford University's Hoover Institution.
In macroeconomics, inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the medium-term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability, and price stability is achieved by controlling inflation. The central bank uses interest rates as its main short-term monetary instrument.
Helicopter money is a proposed unconventional monetary policy, sometimes suggested as an alternative to quantitative easing (QE) when the economy is in a liquidity trap. Although the original idea of helicopter money describes central banks making payments directly to individuals, economists have used the term "helicopter money" to refer to a wide range of different policy ideas, including the "permanent" monetization of budget deficits – with the additional element of attempting to shock beliefs about future inflation or nominal GDP growth, in order to change expectations. A second set of policies, closer to the original description of helicopter money, and more innovative in the context of monetary history, involves the central bank making direct transfers to the private sector financed with base money, without the direct involvement of fiscal authorities. This has also been called a citizens' dividend or a distribution of future seigniorage.
Romania's national currency is the leu. After Romania joined the European Union (EU) in 2007, the country became required to replace the leu with the euro once it meets all four euro convergence criteria, as stated in article 140 of the Treaty on the Functioning of the European Union. As of 2023, the only currency on the market is the leu and the euro is not yet used in shops. The Romanian leu is not part of the European Exchange Rate Mechanism, although Romanian authorities are working to prepare the changeover to the euro. To achieve the currency changeover, Romania must undergo at least two years of stability within the limits of the convergence criteria. The current Romanian government established a self-imposed criterion to reach a certain level of real convergence as a steering anchor to decide the appropriate target year for ERM II membership and Euro adoption. In March 2018, the National Plan for the Adoption of the Euro scheduled the date for euro adoption in Romania as 2024. Nevertheless, in early 2021, this date was postponed to 2027 or 2028, and once again to 2029 in late 2021 and then moved up to 2026.
The Central Bank of Cyprus is the Cypriot member of the Eurosystem and has been the monetary authority for the Republic of Cyprus from 1963 to 2007, issuing the Cypriot pound. Since 2014, it has also been Cyprus's national competent authority within European Banking Supervision.
Economic stability is the absence of excessive fluctuations in the macroeconomy. An economy with fairly constant output growth and low and stable inflation would be considered economically stable. An economy with frequent large recessions, a pronounced business cycle, very high or variable inflation, or frequent financial crises would be considered economically unstable.
Denmark uses the krone as its currency and does not use the euro, having negotiated the right to opt out from participation under the Maastricht Treaty of 1992. In 2000, the government held a referendum on introducing the euro, which was defeated with 53.2% voting no and 46.8% voting yes. The Danish krone is part of the ERM II mechanism, so its exchange rate is tied to within 2.25% of the euro.
Monetary inflation is a sustained increase in the money supply of a country. Depending on many factors, especially public expectations, the fundamental state and development of the economy, and the transmission mechanism, it is likely to result in price inflation, which is usually just called "inflation", which is a rise in the general level of prices of goods and services.
Jordi Galí is a Spanish macroeconomist who is regarded as one of the main figures in New Keynesian macroeconomics today. He is currently the director of the Centre de Recerca en Economia Internacional at Universitat Pompeu Fabra and a Research Professor at the Barcelona Graduate School of Economics. After obtaining his doctorate from MIT in 1989 under the supervision of Olivier Blanchard, he held faculty positions at Columbia University and New York University before moving to Barcelona.
The new neoclassical synthesis (NNS), which is now generally referred to as New Keynesian economics, and occasionally as the New Consensus, is the fusion of the major, modern macroeconomic schools of thought – new classical macroeconomics/real business cycle theory and early New Keynesian economics – into a consensus view on the best way to explain short-run fluctuations in the economy. This new synthesis is analogous to the neoclassical synthesis that combined neoclassical economics with Keynesian macroeconomics. The new synthesis provides the theoretical foundation for much of contemporary mainstream macroeconomics. It is an important part of the theoretical foundation for the work done by the Federal Reserve and many other central banks.
Panicos Onisiphorou Demetriades in Limassol, Cyprus, is a Cypriot economist, currently Professor of Financial Economics at the University of Leicester. During 3 May 2012 - 10 April 2014, Demetriades was a European Central Bank Governing Council member and the Governor of the Central Bank of Cyprus. According to RePEC he is in the top 2% of economic authors in Europe. He is the author of "A Diary of the Euro Crisis in Cyprus: Lessons for Bank Recovery and Resolution", published by Palgrave Macmillan in 2017.
Benoît Georges Cœuré is a French economist who has been serving as President of the Autorité de la concurence since 2022. He previously served as a member of the Executive Board of the European Central Bank from 2012 to 2019.
In economics, divine coincidence refers to the property of New Keynesian models that there is no trade-off between the stabilization of inflation and the stabilization of the welfare-relevant output gap for central banks. This property is attributed to a feature of the model, namely the absence of real imperfections such as real wage rigidities. Conversely, if New Keynesian models are extended to account for these real imperfections, divine coincidence disappears and central banks again face a trade-off between inflation and output gap stabilization. The definition of divine coincidence is usually attributed to the seminal article by Olivier Blanchard and Jordi Galí in 2007.
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