Search results for "Monetary Policy"
showing 10 items of 105 documents
Shipping Costs and Inflation
2023
The Covid-19 pandemic has disrupted global supply chains, leading to shipment delays and soaring shipping costs. We study the impact of global shipping costs-measured by the Baltic Dry Index (BDI)-on domestic prices for a large panel of countries during the period 1992-2021. We find that spikes in the BDI are followed by sizable and statistically signif-icant increases in import prices, PPI, headline, and core inflation, as well as inflation expec-tations. The impact is similar in magnitude but more persistent than for shocks to global oil and food prices. The effects are more muted in countries where imports make up a smaller share of domestic consumption, and those with inflation targetin…
Oil prices and inflation dynamics: Evidence from advanced and developing economies
2018
Abstract We study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015. We find that a 10% increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage points on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a more credible monetary policy and less reliance on energy imports.…
Banking Competition, Collateral Constraints and Optimal Monetary Policy
2013
We analyze optimal monetary policy in a model with two distinct financial frictions. First, borrowing is subject to collateral constraints. Second, credit flows are intermediated by monopolistically competitive banks, thus giving rise to endogenous lending spreads. We show that, up to a second order approximation, welfare maximization is equivalent to stabilization of four goals: inflation, output gap, the consumption gap between constrained and unconstrained agents, and the distribution of the collateralizable asset between both groups. Following both financial and non-financial shocks, the optimal monetary policy commitment implies a short-run trade-off between stabilization goals. Such p…
Global factors, uncertainty, weather conditions and energy prices: On the drivers of the duration of commodity price cycle phases
2020
We investigate the role of global factors in explaining the length of commodity price cycle phases, using a continuous-time Weibull duration model and data for a panel of 33 countries over the period 1980Q1-2015Q4. We find evidence of increasing (constant) positive duration dependence for commodity price booms and busts (normal time spells). Global macroeconomic conditions - in particular, inflation, economic policy uncertainty and monetary policy actions - significantly affect the duration of all commodity price cycle phases. Global environmental conditions also impact the duration of commodity price booms, with a rise in average temperature (rainfall) increasing (reducing) their length. A…
The effects of monetary policy shocks on inequality
2018
Abstract This paper provides new evidence of the effect of conventional monetary policy shocks on income inequality. We construct a measure of unanticipated changes in policy rates—changes in short-term interest rates that are orthogonal to unexpected changes in growth and inflation news—for a panel of 32 advanced and emerging market countries over the period 1990–2013. Our main finding is that contractionary monetary policy shocks increase income inequality, on average. The effect is asymmetric—tightening of policy raises inequality more than easing lowers it—and depends on the state of the business cycle. We find some evidence that the effect increases with the share of labor income and i…
Inflation anchoring and growth: The role of credit constraints
2022
Abstract Can inflation anchoring foster growth? To answer this question, we use panel data on sectoral growth for 22 manufacturing industries from 39 advanced and emerging market economies over 1990–2014 and employ a difference-in-differences strategy based on the theoretical prediction that higher inflation uncertainty particularly depresses investment in industries that are more credit constrained. Industries characterized by high external financial dependence, liquidity needs, and R&D intensity, and low asset tangibility, tend to grow faster in countries with well-anchored inflation expectations. The results, based on an IV approach—using indicators of monetary policy transparency and ce…
Rethinking Monetary Policy with Reference to Monetary Circuit Theory
2011
Standard monetary policy is grounded in the quantity theory of money, which links changes in the general price level to excess money that would induce excess demand on the goods market. This article shows that this theoretical foundation is misleading and harmful to growth. This is so because price determination is multifaceted. Central banks, especially the European Central Bank, currently tighten credit conditions whereas money is not an issue. In this way, they act not only on demand but also on the supply of goods. The additional reference made to rational expectations is an aggravating factor. Is there another way to conduct monetary policy? In this article it is argued that circuit th…
Teorías monetarias poskeynesianas: una aproximación de la escuela francesa
2009
Este texto es una presentación sintética de las características esenciales de las teorías monetarias poskeynesianas. Deseamos mostrar que, en el marco institucional actual, éstas constituyen una herramienta útil para aprehender el funcionamiento de nuestras economías monetarias. Al descomponer las relaciones entre las esferas financiera y productiva, los poskeynesianos justifican la necesidad de promover una regulación monetaria y financiera. En el análisis se ve con claridad que la política monetaria no debe estar exclusivamente dedicada a la lucha contra la inflación, además de que el gran desentendimiento del Estado no deja exenta de riesgos a la estabilidad del sistema en su totalidad.
The P* model and its performance for the Spanish economy
2000
The performance of the P∗ model is tested as an inflation forecaster for the Spanish economy. It is shown that log-run relationships work as expected according to the model and the Quantitative Theory of Money. The Error Correction Model constructed by using the gap between actual prices and the long-term equilibrium price level as an error correction term, offers a consistent explanation for the short-run dynamics in prices. On the other hand, the P∗ approach shows a forecasting ability similar to that presented for other countries in several studies, although the degree of accuracy in the prediction is not specially satisfactory, mainly for the period 1989:3- 1992:3, when the credibility …
Does Inflation Targeting Affect the Trade-off Between Output Gap and Inflation Variability?
2002
We utilize a stochastic volatility model to analyse the possible effects of inflation targeting on the trade–off between output gap variability and inflation variability. We find that the adoption of inflation targets (in New Zealand, Australia, Canada, the UK, Sweden and Finland) might result in a more favourable monetary policy trade–off (except in Australia and Finland). This conclusion is reached by comparing, first, the economic performance of targeting countries in the 1980s and the 1990s; and second, the economic performance in the 1990s of targeting and non–targeting countries (the USA, Japan, Switzerland, Germany, France and the Netherlands). We focus on two possible explanations f…