For the past four decades, the Kansas City Fed’s Economic Policy Symposium has provided a forum for central bankers, economists and policymakers. Over the years, the annual gathering in Jackson Hole, Wyo., has explored topics including financial markets and stability, the role of the housing market, economic growth and other challenges facing central banks around the world.
This year’s event, Aug. 23-25, addressed “Changing Market Structure and the Implications for Monetary Policy.” The agenda each year is developed by the Kansas City Fed’s Economic Research staff in consultation with Bank President Esther George, who is the host of the event. The 2018 event included 20 presenters and discussants who shared in-depth research and commentary on the topic. Close to 40 countries were represented at the gathering.
Shifts in market structure over the past two decades have contributed to changes in productivity, growth and inflation that are of interest to central banks. Within product markets, there has been a notable increase in economic activity associated with large multinational corporations along with increased market concentration in many industries.
These developments suggest that large firms today may have greater market power than in the past, and this shift may result in a decrease in competition within many industries. These shifts should concern central bankers since they likely have important linkages to observed structural changes in the global economy, including lower capital investment, a declining labor share, slow productivity growth, slow wage growth and declining dynamism.
The marketplace for consumers also has seen rapid changes due to advances in technology along with changes in consumer behavior. New markets are emerging online as traditional retailers struggle to adapt. This shift may be altering pricing behavior of firms in an increasingly global marketplace.
In particular, it may limit the ability of firms to raise prices in response to rising demand which may affect deviations from the law of one price. As pricing behavior evolves, inflation dynamics will also evolve, suggesting that the monetary policy transmission mechanism within and between countries may change as well.
Finally, the marketplace for the banking industry has also changed, leading to an increased focus on financial stability in the aftermath of the financial crisis that has raised questions about potentially competing tradeoffs between competition, efficiency and stability.
Disentangling these potential trade-offs requires an improved understanding of the relationship between competition and bank risk. Analysis of changes in banking markets and bank regulation across countries before and after the financial crisis can provide valuable insights for regulatory policy makers and central bankers concerned about the monetary transmission mechanism.
With changes in the markets that firms, consumers, banks and the government transact in, understanding the implications of these changes for inflation, pricing dynamics, productivity and growth is vital for policymakers as they seek to promote conditions that can best foster long-run sustainable growth with stable prices.
The 2018 Jackson Hole Economic Policy Symposium provided a timely opportunity for central bankers, policy experts and academics to discuss the range of issues around this important topic.
View the papers and presentations from this year’s symposium, as well as historic records of previous symposiums.