Search results for "Monetary Policy"
showing 10 items of 105 documents
Unconventional monetary policy reaction functions: evidence from the US
2020
Abstract We specify unconventional monetary policy reaction functions for the Fed using linear and nonlinear econometric frameworks. We find that nonstandard policy measures are largely driven by the dynamics of inflation and the output gap, with the effect being particularly strong during QE rounds. Moreover, we uncover the presence of asymmetry and regime dependence in central bank’s actions since the global financial crisis, especially concerning the response of the term spread and the shadow short rate to the growth rate of central bank reserves. From a policy perspective and given the lack of a systematic response of monetary policy to asset price growth in nonstandard times, our findi…
How does monetary policy respond to the dynamics of the shadow banking sector?
2020
We investigate the response of the central bank to the change in size of non-bank financial intermediaries. Using quarterly data for the U.S. over the period 1946:Q1-2016Q4, we find that when faced with an increase in the asset growth of the securities' brokers and dealers and the shadow banking sector, the monetary authority reacts by raising the short-term nominal interest rate. This response is stronger in the case of sharp variation in the size of the balance sheet of nonbank financial intermediaries. From a policy perspective, our study suggests that an extended version of the original Taylor rule - embedding both price stability and financial stability concerns – provides a good chara…
Global Food Prices and Domestic Inflation: Some Cross-Country Evidence
2015
We study the impact of global food price shocks on domestic inflation in a large group of countries. For advanced economies, a 10% increase in global food inflation raises domestic inflation by about 0.5 percentage point after a year; however, the impact has declined over time and become less persistent. The global food price shocks of the 2000s had a much bigger impact on domestic inflation in emerging and developing economies than in advanced economies. This could reflect the smaller share of food in the consumption baskets in advanced economies. We also provide evidence that inflation expectations are more anchored in advanced than in emerging economies, which could also explain the smal…
Some new results on interest rate rules in EMU and in the US
2000
Abstract This paper offers two new results on interest rate rules. First, we show that the empirical evidence from 1970 onwards for the US is compatible with a Taylor rule when we consider the possibility of changes in the inflation target and in the real interest rate. Second, recursive estimates of a forward-looking version of the Taylor rule for EMU confirm an increasing weight for inflation in the area, possibly as a consequence of the EMS, and, furthermore, a convergence in the nineties to the German value observed for the whole period. This process has coincided with an important reduction in the deviation of inflation across EMU countries. The results also show that credibility probl…
International Inflation Spillovers through Input Linkages
2019
We document that international input-output linkages contribute substantially to synchronizing producer price inflation (PPI) across countries. Using a multicountry, industry-level data set that combines information on PPI and exchange rates with global input-output linkages, we recover the underlying cost shocks that are propagated internationally via the global input-output network, thus generating the observed dynamics of PPI. We then compare the extent to which common global factors account for the variation in actual PPI and in the underlying cost shocks. Across a range of econometric tests, input-output linkages account for half of the global component of PPI inflation.
Monetary Policy from a Circuitist Perspective
2007
As Arestis says, circuit theory is ‘a strong component of the endogenous money thesis’ (1996: 113). This notably means that circuitists endorse the original Post Keynesian dismissal of the orthodox Monetarist approach to monetary policy by which the quantity of money in the economy should be regulated so as to stifle inflationary pressures. From the endogenous view, money creation is, in Moore’s words (1988), ‘credit-driven’, meaning that money is demanded by the general public and firms to finance spending which is dependent upon prices and money wages. Hence it is prices and money wages that are factors determining the amount of money created and not the contrary. This led Post Keynesian …
Wage Bargaining Centralization And Macroeconomic Performance: An Experimental Approach
2001
This paper experimentally analyzes the effect of wage bargaining centralization (WBC) on macroeconomic performance. Our theoretical benchmark comes from that developed by Cukierman and Lippi (1999) to investigate the joint effects of monetary policy and labor market institutions on unemployment and inflation. We focus on the implications of two well known effects related to the degree of WBC: the competitive effect and the strategic effect. To do so we established a simple wage setting mechanism based on the existence of assorted levels of WBC measured by the number of unions in the labor market. In the three control treatments, unions' welfare and monetary rewards depend only on unemployme…
The Taylor Rule and the Practice of Central Banking
2010
The Taylor rule has revolutionized the way many policymakers at central banks think about monetary policy. It has framed policy actions as a systematic response to incoming information about economic conditions, as opposed to a period-by-period optimization problem. It has emphasized the importance of adjusting policy rates more than one-for-one in response to an increase in inflation. And, various versions of the Taylor rule have been incorporated into macroeconomic models that are used at central banks to understand and forecast the economy. ; This paper examines how the Taylor rule is used as an input in monetary policy deliberations and decision-making at central banks. The paper charac…
Deficit sustainability and inflation in EMU: An analysis from the Fiscal Theory of the Price Level
2007
Price determination theory typically focuses on the role of monetary policy, while the role of fiscal policy is usually neglected. From a different point of view, the Fiscal Theory of the Price Level takes into account monetary and fiscal policy interactions and assumes that fiscal policy may determine the price level, even if monetary authorities pursue an inflation targeting strategy. In this paper we try to test empirically whether the time path of the government budget in EMU countries would have affected price level determination. Our results point to the sustainability of fiscal policy in all the EMU countries but Finland, although no firm conclusions can be drawn about the prevalence…
A Long Term View on the Short Term Co-movement of Output and Prices in a Small Open Economy
2012
- One assumption behind inflation targeting as objective for monetary policy is that inflation rates in the short run to some extent reflect output cycles. The present paper investigates the historical co-movements of output and prices for a small open raw material based economy, in this case Norway 1830 – 2006. Looking at contemporaneous movements we find more often negative correlations between the two variables than positive. The correlations do not give any evidence of causality. However, they may indicate that supply side shocks, often caused by the foreign sector, were more important for historical output cycles in Norway than assumed hitherto