Search results for "Monetary economics"
showing 10 items of 361 documents
When Fiscal Consolidation Meets Private Deleveraging
2016
We analyze the interaction between fiscal consolidation and private-sector deleveraging in an economy within a monetary union. Pre-existing long term collateralized private debt – a core ingredient of the deleveraging process – plays a critical role in shaping fiscal multipliers. By buffering the short-run fall in debtors’ spending capacity, long-run private debt reduces the short-run multipliers of aggressive (large and/or fast) consolidations. However, absent credibility concerns, aggressive consolidations raise the intensity and length of private deleveraging, causing higher output losses over the medium run. In terms of discounted output losses and welfare, this latter effect dominates,…
Rethinking exchange and prices
2017
Our monetary economies of production are not based upon relative exchanges described by the standard theory. Money is neither a commodity nor a positive asset; it cannot be exchanged against physical goods and services. It follows that payments do not consist of mutual transfers of commodities. In fact, each producer working for the needs for the community produces wealth for himself. Further, transactions on any markets are absolute exchanges. One of the consequences of this is that market prices do not measure wealth; rather, they are coefficients of redistribution of products.
Contingent Convertible Bonds for Sovereign Debt Risk Management
2018
Abstract We consider convertible bonds that contractually stipulate payment standstill, contingent on a market indicator of a sovereign’s credit worthiness breaching a distress threshold. This financial innovation limits ex ante the likelihood of debt crises and imposes ex post risk sharing between creditors and the debtor. Drawing from literature on contingent contracts, neglected risks, and bank CoCo, we extend prevailing arguments in favor of sovereign CoCo (S-CoCo). We discuss issues relating to their design: which market trigger, market discipline and sovereign incentives, and errors of false alarms or missed crises, and provide supporting evidence with eurozone data and a simple simul…
Monetary policy and exchange rate dynamics in the Spanish economy
1999
As the Spanish economy gets more integrated in international markets, the real exchange rate becomes a key determinant of the monetary transmission. In this paper we trace out the dynamic response of prices, output and the exchange rate following a monetary policy shock. We estimate a structural VAR model whose identification scheme is based on the long run properties common to a large class of models. The results suggest that a small model with efficient asset markets plus nominal inertia and long run monetary neutrality, captures the essential features of the monetary transmission mechanism in Spain. The interest rate shock is well identified and the exchange rate overshoots its long run …
Modeling foreign exchange market activity around macroeconomic news: Hawkes-process approach
2015
We present a Hawkes-model approach to the foreign exchange market in which the high-frequency price dynamics is affected by a self-exciting mechanism and an exogenous component, generated by the pre-announced arrival of macroeconomic news. By focusing on time windows around the news announcement, we find that the model is able to capture the increase of trading activity after the news, both when the news has a sizable effect on volatility and when this effect is negligible, either because the news in not important or because the announcement is in line with the forecast by analysts. We extend the model by considering noncausal effects, due to the fact that the existence of the news (but not…
Operating leverage and the cost of debt in European agri-food firms
2020
Aim of study: To analyse the effect that operating leverage exerts on the cost of debt of agri-food firms in Europe, both in isolation and indirectly through its other risk factors.Area of study: We used panel data made up of 18,360 European firms from 2009 to 2016 (146,880 observations).Material and methods: The data were extracted from the ORBIS database and EUROSTAT. The econometric approach was estimated by the Generalized Method of Moments.Main results: The results obtained confirm that operating leverage or cost structure, in addition to affecting the cost of debt, also affects the relationship between that cost and other sources of risk. More specifically, indebtedness, size, specifi…
Differences in wage determination in the Eurozone: A challenge to the resilience of the common currency
2019
Abstract Different developments in wages and unit labor costs across countries can reduce the synchronization of business cycles within a currency area and therefore be a potential source of asymmetric shocks and/or asymmetric response to a common shock. In this paper, we use novel econometric methods to identify differences and similarities in wage determination across Eurozone countries. Results show that wages have different determinants across euro area countries, among which two relatively distinct groups can be identified. In particular, wages in Germany, Austria, Belgium, Luxembourg, the Netherlands and Finland behave more similarly, are less sticky and respond more to macroeconomic …
Limits to Arbitrage and Interest Rates: a Debate Between Keynes, Hawtrey and Hicks
2018
International audience; This paper deals with a debate between Hawtrey, Hicks and Keynes concerning the capacity of the central bank to influence the short-term and the long-term rates of interest. Both Hawtrey and Keynes considered the central bank’s ability to influence short-term rates of interest. However, they do not put the same emphasis on the study of the long-term rates of interest. According to Keynes, long-term rates are influenced by future expected short-term rates (1930, 1936), whereas for Hawtrey (1932, 1937, 1938), long-term rates are more dependent on the business cycle. Short-term rates do not have much effect on long-term rates according to Hawtrey. In 1939, Hicks enters …
Asymmetric effects of monetary policy shocks across US states
2019
This paper provides new empirical evidence of the asymmetric effects of monetary policy shocks across regions. Using a measure of unanticipated changes in the Fed's policy rates over the period 1969Q3–2008Q4 and a local projection method extended to account for spatial effects, we find that monetary policy tightening leads to a long-lasting decrease in states' real personal income, with asymmetric effects across states that are amplified by spatial spillovers. The paper then investigates the role played by several transmission channels finding larger contractionary effects of monetary policy tightening in states with higher manufacturing share, smaller firms, smaller banks and higher house …
The Effects of the Value-Added Tax on Revenue and Inequality
2019
This paper examines the impact of the introduction of the value-added tax on inequality and government revenues using newly released macro data. We present both conventional country fixed effect regressions and instrumental variable analyses, where VAT adoption is instrumented using the previous values of neighbouring countries’ VAT systems as an instrument. The results reveal – in contrast to earlier work – that the revenue consequences of the VAT have not been positive. The results indicate that income-based inequality has increased due to the VAT adoption, whereas consumption inequality has remained unaffected. Peer reviewed