WorldWideScience

Sample records for optimal monetary policy

  1. Endogenous price flexibility and optimal monetary policy

    OpenAIRE

    Ozge Senay; Alan Sutherland

    2014-01-01

    Much of the literature on optimal monetary policy uses models in which the degree of nominal price flexibility is exogenous. There are, however, good reasons to suppose that the degree of price flexibility adjusts endogenously to changes in monetary conditions. This article extends the standard new Keynesian model to incorporate an endogenous degree of price flexibility. The model shows that endogenizing the degree of price flexibility tends to shift optimal monetary policy towards complete i...

  2. Chaotic dynamics in optimal monetary policy

    Science.gov (United States)

    Gomes, O.; Mendes, V. M.; Mendes, D. A.; Sousa Ramos, J.

    2007-05-01

    There is by now a large consensus in modern monetary policy. This consensus has been built upon a dynamic general equilibrium model of optimal monetary policy as developed by, e.g., Goodfriend and King [ NBER Macroeconomics Annual 1997 edited by B. Bernanke and J. Rotemberg (Cambridge, Mass.: MIT Press, 1997), pp. 231 282], Clarida et al. [J. Econ. Lit. 37, 1661 (1999)], Svensson [J. Mon. Econ. 43, 607 (1999)] and Woodford [ Interest and Prices: Foundations of a Theory of Monetary Policy (Princeton, New Jersey, Princeton University Press, 2003)]. In this paper we extend the standard optimal monetary policy model by introducing nonlinearity into the Phillips curve. Under the specific form of nonlinearity proposed in our paper (which allows for convexity and concavity and secures closed form solutions), we show that the introduction of a nonlinear Phillips curve into the structure of the standard model in a discrete time and deterministic framework produces radical changes to the major conclusions regarding stability and the efficiency of monetary policy. We emphasize the following main results: (i) instead of a unique fixed point we end up with multiple equilibria; (ii) instead of saddle-path stability, for different sets of parameter values we may have saddle stability, totally unstable equilibria and chaotic attractors; (iii) for certain degrees of convexity and/or concavity of the Phillips curve, where endogenous fluctuations arise, one is able to encounter various results that seem intuitively correct. Firstly, when the Central Bank pays attention essentially to inflation targeting, the inflation rate has a lower mean and is less volatile; secondly, when the degree of price stickiness is high, the inflation rate displays a larger mean and higher volatility (but this is sensitive to the values given to the parameters of the model); and thirdly, the higher the target value of the output gap chosen by the Central Bank, the higher is the inflation rate and its

  3. Fear of Floating: An optimal discretionary monetary policy analysis

    OpenAIRE

    Madhavi Bokil

    2005-01-01

    This paper explores the idea that “Fear of Floating” and accompanying pro-cyclical interest rate policies observed in the case of some emerging market economies may be justified as an optimal discretionary monetary policy response to shocks. The paper also examines how the differences in monetary policies may lead to different degrees of this fear. These questions are addressed with a small open economy, new- Keynesian model with endogenous capital accumulation and sticky prices. The economy ...

  4. US fiscal regimes and optimal monetary policy

    NARCIS (Netherlands)

    Mavromatis, K.

    2014-01-01

    Fiscal policy in the US has been documented to have been the leading authority in the ‘60s and the ‘70s (active fiscal policy), while committing to make the necessary fiscal adjustments following Volcker’s appointment (passive fiscal policy). Moreover, while passive, US fiscal policy has at times

  5. Input-output interactions and optimal monetary policy

    DEFF Research Database (Denmark)

    Petrella, Ivan; Santoro, Emiliano

    2011-01-01

    This paper deals with the implications of factor demand linkages for monetary policy design in a two-sector dynamic general equilibrium model. Part of the output of each sector serves as a production input in both sectors, in accordance with a realistic input–output structure. Strategic...... complementarities induced by factor demand linkages significantly alter the transmission of shocks and amplify the loss of social welfare under optimal monetary policy, compared to what is observed in standard two-sector models. The distinction between value added and gross output that naturally arises...... in this context is of key importance to explore the welfare properties of the model economy. A flexible inflation targeting regime is close to optimal only if the central bank balances inflation and value added variability. Otherwise, targeting gross output variability entails a substantial increase in the loss...

  6. Optimization of Simple Monetary Policy Rules on the Base of Estimated DSGE-model

    OpenAIRE

    Shulgin, A.

    2015-01-01

    Optimization of coefficients in monetary policy rules is performed on the base of the DSGE-model with two independent monetary policy instruments estimated on the Russian data. It was found that welfare maximizing policy rules lead to inadequate result and pro-cyclical monetary policy. Optimal coefficients in Taylor rule and exchange rate rule allow to decrease volatility estimated on Russian data of 2001-2012 by about 20%. The degree of exchange rate flexibility parameter was found to be low...

  7. Optimal Operational Monetary Policy Rules in an Endogenous Growth Model: a calibrated analysis

    OpenAIRE

    Arato, Hiroki

    2009-01-01

    This paper constructs an endogenous growth New Keynesian model and considers growth and welfare effect of Taylor-type (operational) monetary policy rules. The Ramsey equilibrium and optimal operational monetary policy rule is also computed. In the calibrated model, the Ramseyoptimal volatility of inflation rate is smaller than that in standard exogenous growth New Keynesian model with physical capital accumulation. Optimal operational monetary policy rule makes nominal interest rate respond s...

  8. Optimal Monetary Policy Cooperation through State-Independent Contracts with Targets

    DEFF Research Database (Denmark)

    Jensen, Henrik

    2000-01-01

    Simple state-independent monetary institutions are shown to secure optimal cooperative policies in a stochastic, linear-quadratic two-country world with international policy spill-overs and national credibility problems. Institutions characterize delegation to independent central bankers facing...... quadratic performance related contracts punishing or rewarding deviations from primary and intermediate policy targets...

  9. Welfare-based optimal monetary policy in a two-sector small open economy

    Czech Academy of Sciences Publication Activity Database

    Rychalovska, Yuliya

    -, č. 16 (2007), s. 1-46 ISSN 1803-2397 Institutional research plan: CEZ:AV0Z70850503 Keywords : DSGE models * optimal monetary policy * non-traded goods Subject RIV: AH - Economics http://www.cnb.cz/m2export/sites/www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2007_16.pdf

  10. Optimal Monetary Policy and Exchange Rate in a Small Open Economy with Unemployment

    Directory of Open Access Journals (Sweden)

    Hyuk-Jae Rhee

    2014-09-01

    Full Text Available In this paper, we consider a small open economy under the New Keynesian model with unemployment of Gali (2011a, b to discuss the design of the monetary policy. Our findings can be summarized in three parts. First, even with the existence of unemployment, the optimal policy is to minimize variance of domestic price inflation, wage inflation, and the output gap when both domestic price and wage are sticky. Second, stabilizing unemployment rate is important in reducing the welfare loss incurred by both technology and labor supply shocks. Therefore, introducing the unemployment rate as an another argument into the Taylor-rule type interest rate rule will be welfare-enhancing. Lastly, controlling CPI inflation is the best option when the policy is not allowed to respond to unemployment rate. Once the unemployment rate is controlled, however, stabilizing power of CPI inflation-based Taylor rule is diminished.

  11. Optimal Monetary Policy with Durable Consumption Goods and Factor Demand Linkages

    DEFF Research Database (Denmark)

    Petrella, Ivan; Santoro, Emiliano

    of production in both sectors, according to an input-output matrix calibrated on the US economy. As shown in a number of recent contributions, this roundabout technology allows us to reconcile standard two-sector New Keynesian models with the empirical evidence showing co-movement between durable and non......-durable spending in response to a monetary policy shock. A main result of our monetary policy analysis is that strategic complementarities generated by factor demand linkages amplify social welfare loss. As the degree of interconnection between sectors increases, the cost of misperceiving the correct production......This paper deals with the implications of factor demand linkages for monetary policy design. We develop a dynamic general equilibrium model with two sectors that produce durable and non-durable goods, respectively. Part of the output produced in each sector is used as an intermediate input...

  12. Optimal monetary policy rules: the problem of stability under heterogeneous learning

    Czech Academy of Sciences Publication Activity Database

    Bogomolova, Anna; Kolyuzhnov, Dmitri

    -, č. 379 (2008), s. 1-34 ISSN 1211-3298 R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:AV0Z70850503 Keywords : monetary policy rules * New Keynesian model * adaptive learning Subject RIV: AH - Economics http://www.cerge-ei.cz/pdf/wp/Wp379.pdf

  13. Monetary Policy Analysis in Serbia

    Directory of Open Access Journals (Sweden)

    Martin Vesna

    2015-09-01

    Full Text Available The paper focuses on analysing monetary policy in Serbia. The National Bank of Serbia chose inflation targeting, which sets price stability as the main objective of monetary policy. To achieve this goal, the central bank uses different monetary policy instruments which analysis can provide us with the understanding of the main directions of their actions but also of the limitations of its application. Only through improvement of both instruments and monetary policy the central bank will create a better foundation for achieving monetary stability. In addition, the implementation of exchange rate policy is entrusted to the National Bank of Serbia, as the main regulator of the financial system. A mere use of managed floating exchange rate, as the chosen exchange rate regime, is an appropriate solution in the current economic circumstances and in accordance with the desired objective of monetary policy.

  14. Monetary and Fiscal Policy Coordination

    OpenAIRE

    Hanif, Muhammad N.; Arby, Muhammad Farooq

    2003-01-01

    Macroeconomic policies are meant to achieve non-inflationary, stable growth. There are two major groups of policy instruments to achieve the purpose; one is related to monetary conditions and the other to fiscal conditions. Monetary instruments are employed by the central bank and fiscal instruments are employed by ministry of finance. The objectives and implications of policy measures taken by the two institutions often conflict with each other and thus call for policy coordination for effec...

  15. Japan's approach to monetary policy

    OpenAIRE

    Giovanni P. Olivei

    2002-01-01

    The goal of monetary policy as conducted by the Bank of Japan is to contribute to the sound development of the national economy through the pursuit of price stability. The objective of price stability, however, is not precisely defined as it has been for other central banks. Following the implementation of the new Bank of Japan Law in 1998, the monetary policy framework is characterized by central bank independence, the primacy of the price stability objective, instrument independence, and po...

  16. Is Monetary Policy Effective During Financial Crises?

    OpenAIRE

    Frederic S. Mishkin

    2009-01-01

    This short paper argues that the view that monetary policy is ineffective during financial crises is not only wrong, but may promote policy inaction in the face of a severe contractionary shock. To the contrary, monetary policy is more potent during financial crises because aggressive monetary policy easing can make adverse feedback loops less likely. The fact that monetary policy is more potent than during normal times provides a rationale for a risk-management approach to counter the contra...

  17. Monetary policy during speculative attacks

    DEFF Research Database (Denmark)

    Bergman, Ulf Michael; Jellingsø, Mads

    2010-01-01

    This paper extends the currency crises model of Aghion, Bacchetta and Banerjee (2000, 2001, 2004) in different directions. Our main result is that a tight monetary policy can have adverse effects beyond the short term and can potentially cause a currency crisis in the medium term, even in cases w...

  18. Monetary Policy after August 2007

    Science.gov (United States)

    Gertler, Mark

    2013-01-01

    In this article, the author describes conceptually how to think about the dramatic changes in monetary policy since the sub-prime crisis of August 2007. He also discusses how to incorporate these changes and related economic concepts in the teaching of an undergraduate class in macroeconomics. A distinction is made between conventional and…

  19. Financial crises and monetary policy

    NARCIS (Netherlands)

    Goderis, B.V.G.

    2005-01-01

    In the last three decades, many countries and regions around the world have suffered from currency crises. This thesis investigates the causes of such crises and assesses the role of monetary policy as a tool to avoid them or limit the damage they impose. In addition, it studies the impact of the

  20. Game of Thrones: Accommodating Monetary Policies in a Monetary Union

    Directory of Open Access Journals (Sweden)

    Dmitri Blueschke

    2018-02-01

    Full Text Available In this paper, we present an application of the dynamic tracking games framework to a monetary union. We use a small stylized nonlinear three-country macroeconomic model of a monetary union to analyze the interactions between fiscal (governments and monetary (common central bank policy makers, assuming different objective functions of these decision makers. Using the OPTGAME algorithm, we calculate solutions for several games: a noncooperative solution where each government and the central bank play against each other (a feedback Nash equilibrium solution, a fully-cooperative solution with all players following a joint course of action (a Pareto optimal solution and three solutions where various coalitions (subsets of the players play against coalitions of the other players in a noncooperative way. It turns out that the fully-cooperative solution yields the best results, the noncooperative solution fares worst and the coalition games lie in between, with a broad coalition of the fiscally more responsible countries and the central bank against the less thrifty countries coming closest to the Pareto optimum.

  1. Financial Plumbing and Monetary Policy

    OpenAIRE

    Manmohan Singh

    2014-01-01

    This paper focuses on how changes in financial plumbing of the markets may impact the monetary policy options as central banks contemplate lift off from zero lower bound (ZLB). Under the proposed regulations, banks will face leverage ratio constraints. As a result of quantitative easing (QE), banks want balance sheet “space” for financial intermediation/ non-depository activities. At the same time, regulatory changes are boosting demand for high quality liquid assets. The paper also discusses...

  2. Asset Pricing and Monetary Policy

    OpenAIRE

    Bingbing Dong

    2014-01-01

    This paper examines the role of money in understanding the behavior of asset prices and whether and how monetary policy should react to asset prices such as stock prices and equity premiums. To do so, I introduce money via the form of transaction cost into a production economy with limited stock market participation where agents with lower inter-temporal elasticity of substitution (IES), called non-stockholders, have no access to stock market. In addition to facilitating transactions of consu...

  3. Endogenous Monetary Policy Regime Change

    OpenAIRE

    Troy Davig; Eric M. Leeper

    2006-01-01

    This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation effects generated by the possibility of regime change can be quantitatively important; (ii) symmetric shocks can have asymmetric effects; (iii) endogenous switching is a natural way to formally model preempt...

  4. Euroization, monetary union and the credibility of monetary policy

    Directory of Open Access Journals (Sweden)

    Luka Brkić

    2008-01-01

    Full Text Available Assessment of exchange-rate arrangements has become an integral feature of recent discussions on reform of the international financial architecture. The upshot of this recent interest in exchange-rate regimes is that a large part of the profession appears to have become converted to ‘the hypothesis of the vanishing middle regime’, for countries well-integrated into world capital markets, there is little, if any, middle ground between floating exchange rates and monetary unification. The literature on optimal currency areas emphasizes that policy independence is crucial if countries face recurrent idiosyncratic disturbances. If member-countries of the EMU show sizeable asymmetry in the timing of business cycle phases and their exposure to exogenous shocks, these countries may be better off retaining their ability to conduct monetary and exchange-rate policies. Consequently,the important empirical issue is whether Europe is a region in which country-specific shocks prevail or whether shocks affect most of these countries in a similar way. Euroization is a relatively rare phenomenon. Yet in recent years it has attracted a lot of attention,which can be proved by an increasing number of studies dealing with this problem, as well as an increasing number of countries taking this course of action. This paper deals with the advantages and disadvantages of euroization (dollarization, not only from the theoretical aspect but also on the basis of experience of other dollarized countries. The unequivocal conclusion is that euroization (dollarization is not a monetary policy instrument that can be recommended to Croatia.

  5. MONETARY POLICY AND ECONOMIC DEVELOPMENT: LESSONS ...

    African Journals Online (AJOL)

    promote monetary stability and a sound financial system in Nigeria under the overall ... default in the money market and, (iv) Excessive borrowing for speculative ..... Crookett, A. (1979): Monetary Theory, Policy and Institutions, Thomas Nelson ...

  6. Monetary Policy Strategy: Lessons from the Crisis

    OpenAIRE

    Frederic S. Mishkin

    2011-01-01

    This paper examines what we have learned and how we should change our thinking about monetary policy strategy in the aftermath of the 2007-2009 financial crisis. It starts with a discussion of where the science of monetary policy was before the crisis and how central banks viewed monetary policy strategy. It will then examine how the crisis has changed the thinking of both macro/monetary economists and central bankers. Finally, it looks how much of the science of monetary policy needs to be a...

  7. Leverage, monetary policy, and firm investment

    OpenAIRE

    Charles X. Hu

    1999-01-01

    In this paper, I investigate whether the effects of monetary policy on firm investment can be transmitted through leverage. I find that monetary contractions reduce the growth of investment more for highly leveraged firms than for less leveraged firms. The results suggest that the board credit channel for monetary policy exists, and that it can operate through leverage, as adverse monetary shocks aggravate real debt burdens and raise the effective costs of investment.

  8. Monetary policy and dynamic adjustment of corporate investment: A policy transmission channel perspective

    Directory of Open Access Journals (Sweden)

    Qiang Fu

    2015-06-01

    Full Text Available We investigate monetary policy effects on corporate investment adjustment, using a sample of China’s A-share listed firms (2005–2012, under an asymmetic framework and from a monetary policy transmission channel perspective. We find that corporate investment adjustment is faster in expansionary than contractionary monetary policy periods. Monetary policy has a significant effect on adjustment speed through monetary and credit channels. An increase in the growth rate of money supply or credit accelerates adjustment. Both effects are significantly greater during tightening than expansionary periods. The monetary channel has significant asymmetry, whereas the credit channel has none. Leverage moderates the relationship between monetary policy and adjustment, with a greater effect in expansionary periods. This study enriches the corporate investment behavior literature and can help governments develop and optimize macro-control policies.

  9. Indicator Accuracy and Monetary Policy: Is Ignorance Bliss?

    OpenAIRE

    Nimark, Kristoffer P.

    2003-01-01

    This paper argues that assuming a common information set shared by the public and the central bank may be inappropriate when one is concerned with the value of information itself. Specifically, we argue that it may lead one to draw the conclusion that monetary policy do not benefit from accurate real time data. This paper sets up a New-Keynesian model with optimal discretionary monetary policy, where we allow for partial and diverse information. The model is used to show that monetary policy ...

  10. Monetary Policy Rules in Some Transition Economies

    Directory of Open Access Journals (Sweden)

    Mohamed El-Hodiri

    2014-12-01

    Full Text Available In this paper we examine the question of whither monetary rules or ad hoc monetary policies were followed during the early stages of transition and in response to the global financial crisis. We study Eastern European countries and thee CIS countries. We find that during the early of transition, both developed economies and economies in transition used the monetary base, as well as the interest rate, as the main tools for monetary policy. However, in response to the global crises, priority was given to the main objective such as containing inflation and supporting economic growth. Monetary authorities had the additional possible choice of alternative objectives, such as stabilization of nominal exchange rate and real effective exchange rate, or increase in reserves. It was found that countries mostly retained priorities of monetary policy and some of them gave a greater importance to the alternative objectives.

  11. The Monetary Policy – Restrictive or Expansive?

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    Adam Szafarczyk

    2007-10-01

    Full Text Available The monetary policy plays an important role in macroeconomic policy of government. There is a question concerning type of this policy expansive or restrictive (easy or tidy monetary policy. Unfortunately, we have a lot of criteria. Each of them gives us other answer. So due to equitation of Irving Fisher we have dominantly expansive monetary policy. This same situation exists when we use nominal value of rediscount interest rate of central bank. Opposite result appears when we use real value of this interest rate or level of obligatory reserve. Taking under consideration liquidity on money market we know, that level of interest rate is too high.

  12. The interaction of fiscal and monetary policy in a monetary union : Balancing credibility and flexibility

    NARCIS (Netherlands)

    Beetsma, R.M.W.J.; Bovenberg, A.L.

    1995-01-01

    This paper explores how decentralized, national fiscal policies interact with a common monetary policy in a monetary union. We show that fiscal policy plays a more important ro le in stabilizing country-specific shocks than with national monetary policies. Whereas monetary u nification with an

  13. Monetary policy and regional output in Brazil

    Directory of Open Access Journals (Sweden)

    Rafael Rockenbach da Silva Guimarães

    2014-03-01

    Full Text Available This work presents an analysis of whether the effects of the Brazilian monetary policy on regional outputs are symmetric. The strategy developed combines the techniques of principal component analysis (PCA to decompose the variables that measure regional economic activity into common and region-specific components and vector autoregressions (VAR to observe the behavior of these variables in response to monetary policy shocks. The common component responds to monetary policy as expected. Additionally, the idiosyncratic components of the regions showed no impact of monetary policy. The main finding of this paper is that the monetary policy responses on regional output are symmetrical when the regional output decomposition is performed, and the responses are asymmetrical when this decomposition is not performed. Therefore, performing the regional output decomposition corroborates the economic intuition that monetary policy has no impact on region-specific issues. Once monetary policy affects the common component of the regional economic activity and does not impact its idiosyncratic components, it can be considered symmetrical.

  14. The role of forecasts in monetary policy

    OpenAIRE

    Jeffery D. Amato; Thomas Laubach

    2000-01-01

    Forecasts of future economic developments play an important role for the monetary policy decisions of central banks. For example, forecasts of goal variables can help central banks achieve their goals and make them more accountable to the public. There are two primary explanations for the benefits of forecasts. The first is that monetary policy affects goal variables such as inflation and output only with substantial lags. Policy actions should, therefore, be based on forecasts of goal variab...

  15. Essays in empirical finance and monetary policy

    NARCIS (Netherlands)

    van Holle, Frederiek

    2017-01-01

    This dissertation consists of three essays. In the first paper, “Stock-Bond Correlations, Macroeconomic Regimes and Monetary Policy”, we link the evolution of stock-bond correlations for an international sample to both local and global regimes in inflation, the output gap and monetary policy. We

  16. An Historical Analysis of Monetary Policy Rules

    OpenAIRE

    John B. Taylor

    1998-01-01

    This paper examines several episodes in U.S. monetary history using the framework of an interest rate rule for monetary policy. The main finding is that a monetary policy rule in which the interest rate responds to inflation and real output more aggressively than it did in the 1960s and 1970s, or than during the time of the international gold standard, and more like the late 1980s and 1990s, is a good policy rule. Moreover, if one defines rule, then such mistakes have been associated with eit...

  17. Monetary Policy Shocks and Portfolio Choice

    OpenAIRE

    Fratzscher, Marcel; Saborowski, Christian; Straub, Roland

    2010-01-01

    The paper shows that monetary policy shocks exert a substantial effect on the size and composition of capital flows and the trade balance for the United States, with a 100 basis point easing raising net capital inflows and lowering the trade balance by 1% of GDP, and explaining about 20-25% of their time variation. Monetary policy easing causes positive returns to both equities and bonds. Yet such a monetary policy easing shock also induces a shift in portfolio composition out of equities and...

  18. MONETARY POLICY AND PARALLEL FINANCIAL MARKETS

    Directory of Open Access Journals (Sweden)

    Adela IONESCU

    2015-07-01

    Full Text Available Monetary policy is one of the economic policy "tools" through which it acts on the currency demand and supply in the economy. The importance of monetary policy results from its primary objective - price stability, plus limiting inflation and maintaining internal and external value of the currency. Responsibility for achieving these objectives rests with the Central Bank, which has a monopoly in the formulation and the implementation of monetary policy targets. Price stability is the primary objective of monetary policy and also the central objective of economic policy, alongside with: sustainable economic growth, full employment of labor force, balance of external payments equilibrium. To achieve these overall objectives of economic policy, monetary policy acts through currency as an instrument of action and it represents the overall action exercised by the monetary authority to influence economic development and to ensure price stability. In economic processes numerous factors emerge to the sale or purchase of capital available for a shorter or longer period and to achieving their aspirations of maximize capital gains, they are negotiating, they are confronting and agreeing within specific market relationships. The entirety of relations between various economic issues, enterprises and individuals, between them and the banking intermediaries, as well as the relationship between banks and other credit institutions on the transfer of cash money as specific form of debt and fructification of capital, form capital markets or credit markets. These markets are carved up according to the nature and purposes of the participants.

  19. EURO ZONE AND ITS MONETARY POLICY

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    Dorel Dumitru CHIRIŢESCU

    2010-03-01

    Full Text Available In this article I have tried to make a short presentation of the Euro Zone and it’s monetary policy. At the present moment the Euro Zone has 16 countries that have adopted the Euro as a national currency and also 4 small countries that have monetary agreements with their neighbours. The monetary policy represents all the regulations of the money supply and interest rates adopted by the European Central Bank in order to control the inflation rate and to stabilize a specific currency, in this case, the Euro. Stabilizing the inflation rate to certain levels is the main goal of the monetary policy. The monetary policy is the second policy, next to the fiscal one which in which a government, in this case the European Union’s official bodies, can impact the economic situation of the Eurozone. The fiscal policy represents the way a government spends, borrows or applies different types of taxes. The Monetary policy can be either expansionary, when unemployement and recessions needs to be combated, or contractionary, when inflation is conbated byt raising the interest rates.

  20. Korea's Post-Crisis Monetary Policy Reforms

    OpenAIRE

    Donghyun Park; Junggun Oh

    2005-01-01

    Korea's financial crisis of 1997–1998 was brought about by the unsustainable combination of large capital inflows and an inefficient financial system. The Bank of Korea contributed to the crisis primarily through its failures as the regulator of the financial system rather than as the conductor of monetary policy. Our paper explores the role of the two major monetary policy reforms Korea has implemented in response to the crisis — the establishment of a new financial regulator and the adoptio...

  1. Expectations, Bond Yields and Monetary Policy

    DEFF Research Database (Denmark)

    Chun, Albert Lee

    2011-01-01

    expectations about inflation, output growth, and the anticipated path of monetary policy actions contain important information for explaining movements in bond yields. Estimates from a forward-looking monetary policy rule suggest that the central bank exhibits a preemptive response to inflationary expectations...... of this type may provide traders and policymakers with a new set of tools for formally assessing the reaction of bond yields to shifts in market expectations...

  2. Monetary policy and insolvency of economic sector

    Directory of Open Access Journals (Sweden)

    Tepavac Rajko

    2012-03-01

    Full Text Available The main task of monetary policy of our central bank is to achieve and preserve stability of prices and currency. Targeted inflation rate has been chosen as operating instrument for gradual realization of low and stable inflation, along with elimination of inflation expectations. Also, a specific inflation corridor is chosen to ensure operations, transparency and ex ante effects of monetary policy. The paper presents analysis on whether there really is a restrictive monetary policy, deflections of real inflation from the programmed one, level of 'restrictiveness' of monetary policy and behavior of bank loans, money supply, nominal and real economic growth. Analysis is carried out and criticism of concepts of monetary regulation of mandatory bank reserves, blocking of financial bank potential through monetary regulation instruments, but also relations between central and business banks through open market policy. Criticism of repo operations and complete disappearance of selective credit policy is provided as well. The problem of almost embedded insolvency of economic sector is highlighted.

  3. CONSIDERATIONS REGARDING MONETARY POLICY IN ROMANIA

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    Pitorac Ruxandra

    2015-07-01

    Full Text Available The main objective of this paper is to study the Romania’s monetary policy, in the period 1996-2013. The research starts with a theoretical review of the monetary policy, whose main purpose is influencing the broad money supply and the lending requirements and the institution in charge of achieving this objective is the Central Bank, highlighting its impact upon the economic activity, through the Keynesian analysis model IS-LM and a correlation between the monetary policy measures and the phases of the economic cycle whose results indicate that during the recession periods it is recommended to reduce interest rates in order to stimulate investments, by raising the money supply, and during the expansion period it is recommended to increase the interest rate in order to cut back the money supply. Starting from this premises, the research takes into account the study of the monetary policy measures adopted by the governmental authority of Romania, making a quantitative analysis of the main macroeconomic indicators: the real interest rate, the lending interest rate, the deposit interest rate and the broad money supply and through a multifactorial regression, highlighting the impact of the interest rates upon the monetary aggregate M2. Moreover, a comparison between the monetary policy measures adopted in Romania and the monetary policies recommended by specialized literature has been done, and the results have indicated that during recession periods the attention of the governmental authorities is focused upon adopting the right measures, but during the expansion periods this doesn’t happen. The results of this research highlight the economic situation in Romania and the way in which the governmental authority intervened, through the monetary policy measures, in order to mitigate the negative effects of the cyclical fluctuations.

  4. Money in monetary policy Information variable? Channel of monetary transmission? What is its role in Poland?

    OpenAIRE

    Tomasz Łyziak; Jan Przystupa; Anna Sznajderska; Ewa Wróbel

    2012-01-01

    The paper provides an overview of the literature on the role of monetary aggregates for conducting monetary policy and attempts to assess the role of these aggregates in the Polish monetary policy. We compare theoretical and empirical arguments which justify or undermine the need for usage of monetary aggregates by central banks, as well as arguments indicating related problems. We describe the most important areas of the discussion on the role of money in monetary policy. We present studies ...

  5. A Monetary Policy Simulation Game

    Science.gov (United States)

    Lengwiler, Yvan

    2004-01-01

    The author presents a computer game that puts the player in the role of a central bank governor. The game is a stochastic simulation of a standard reduced form macro model, and the user interacts with this simulation by manipulating the interest rate. The problem the player faces is in many ways quite realistic--just as a real monetary authority,…

  6. "Financial Bubbles" and Monetary Policy

    Science.gov (United States)

    Tikhonov, Yuriy A.; Pudovkina, Olga E.; Permjakova, Juliana V.

    2016-01-01

    The relevance of this research is caused by the need of strengthening a role of monetary regulators to prevent financial bubbles in the financial markets. The aim of the article is the analysis of a problem of crisis phenomena in the markets of financial assets owing to an inadequate growth of their cost, owing to subjective reasons. The leading…

  7. Information frictions and monetary policy

    Czech Academy of Sciences Publication Activity Database

    Matějka, Filip

    2012-01-01

    Roč. 6, č. 1 (2012), s. 7-24 ISSN 1802-792X Institutional support: RVO:67985998 Keywords : nominal rigidity * information frictions * monetary economics Subject RIV: AH - Economics http://www.vsfs.cz/periodika/acta-2012-01.pdf

  8. Did capital market convergence lower the effectiveness of monetary policy?

    NARCIS (Netherlands)

    Jansen, P.W.

    2009-01-01

    International capital market convergence reduces the ability for monetary authorities to set domestic monetary conditions. Traditionally, monetary policy transmission is channelled through the short-term interest rate. Savings and investment decisions are effected through the response of the bond

  9. Monetary Policy and Financial (InStability

    Directory of Open Access Journals (Sweden)

    Adam Koronowski

    2010-06-01

    Full Text Available This paper presents how monetary policy, restricted only by price stability, may easily become propitious to asset inflation and – eventually – to a financial crisis. This risk is particularly high when the financial system lacks proper regulation and effective supervision. Hasty liberalization, negligence of official oversight and „Greenspan doctrine” which refuted any activist policy promoting financial stability characterized Fed’s monetary policy under the former Fed’s governor. The paper also analyses another aspect of the linkages between monetary policy and financial crises – monetary policy reaction to financial crises. It is not surprising that it consists of cutting interest rates and bail-out of insolvent, systemically important financial institutions. Such policy, especially when run too long and changed too abruptly, not only creates moral hazards but it also sets the stage for another „search for yield” and build-up of another speculative bubble. As a result, monetary policy becomes asymmetric and pro-cyclical. Fed’s reaction to the recent crisis seems to be very much in line with this pattern typical of Fed’s policy in the past. However, this time the scale of flooding the economy with liquidity and – as a consequence – the risks of future major imbalances in the financial system are unprecedented. A general conclusion of the paper says that there can’t be a sound financial and economic system unless money itself is a scarce resource. However trivial this statement is, monetary policy of some central banks seems to miss the point.

  10. Monetary Policy in a Low Inflation Environment

    NARCIS (Netherlands)

    C.A. Ullersma (Cornelis Alexander)

    2007-01-01

    textabstractThis thesis shows that since the mid 1980s a sharp fall in equity and house prices tends to go hand in hand with a reduction of the monetary policy interest rate, which is the central bank’s main instrument to safeguard price stability. In exceptional circumstances, the policy rate can

  11. Monetary Policy and Excessive Bank Risk Taking

    NARCIS (Netherlands)

    Agur, I.; Demertzis, M.

    2010-01-01

    If monetary policy is to aim at financial stability, how would it change? To analyze this question, this paper develops a general-form model with endogenous bank risk profiles. Policy rates affect both bank incentives to search for yield and the cost of wholesale funding. Financial stability

  12. MONETARY POLICY AND THE INFLATION TARGETING STRATEGY

    Directory of Open Access Journals (Sweden)

    Zina V. MARCU căs. CIORAN

    2013-10-01

    Full Text Available The monetary policy is a basic component of the economic policy. It has an important role in fulfilling the main objectives of the economic politics, which is: price stability, insurance of a balanced economic raise, full occupancy of human resources and the external payment balance stability insurance. Inflation is a negative thing affecting the economy both on short and long term. On short term, it erodes the purchasing power of currency and thus, it mostly affects the retirees and those with fixed incomes. On long term, inflation discourages the investments and the economic growth. The purpose of this paper consists in the revision and presentation of the specialized literature concerning the impact the monetary policy has on the main macro-economical variables, especially on inflation, in terms of influence of the monetary authority decision on economic and financial conjunction. It was found that the monetary authorities of any country can evaluate exactly the rhythm and the effects of their actions on the economy by understanding the mechanisms which the monetary policy uses to influence the economy.

  13. Monetary Policy and Price Stability in Nigeria

    Directory of Open Access Journals (Sweden)

    Idoko Ahmed Itodo

    2017-06-01

    Full Text Available Irregular price changes, with its economic consequences of market risks and uncertainties, have been one of the most challenging problems facing the Nigerian economy. Successive financial sector reforms, which seek to enhance the role of monetary policy instruments in macroeconomic management, in view of the theoretical and empirical link between monetary policy and general price level, have been implemented with less than satisfactory results. This paper examines the monetary policy in stabilizing price level in Nigeria. We employ the Vector Autoregressive (VAR model, with in-built differencing to take care of unit root in these time series data, to capture this relationship. From our findings, we discover that, money supply has no significant relationship with price level in Nigeria. This, we believe, may be due to the influence of the large informal financial sector which controls a very significant fraction of money in circulation. Thus, policy reforms that would curb the influence of the informal financial sector should be implemented in order to allow the central monetary authority to work better, and enhance the role of monetary management in Nigeria.

  14. Amplification Effects and Unconventional Monetary Policies

    Directory of Open Access Journals (Sweden)

    Cécile BASTIDON GILLES

    2012-02-01

    Full Text Available Global financial crises trigger off amplification effects, which allow relatively small shocks to propagate through the whole financial system. For this reason, the range of Central banks policies is now widening beyond conventional monetary policies and lending of last resort. The aim of this paper is to establish a rule for this practice. The model is based on the formalization of funding conditions in various types of markets. We conduct a comprehensive analysis of the “unconventional monetary policies”, and especially quantify government bonds purchases by the Central bank.

  15. Essays in Open Economy Monetary Policy

    OpenAIRE

    Castro, Pedro

    2012-01-01

    International economic integration has risen during the last decades and the interdependence between each economy and the rest of the world has become central for policy decisions. My dissertation contributes to the debate about the conduct of monetary policy in a financially integrated world. In the first chapter of the dissertation I discuss the relationship between domestic policies and the currency denomination of foreign debt. Foreign debt is a double-edged sword. It allows countries to ...

  16. MONETARY POLICY TRANSMISSION MECHANISM IN EMERGING COUNTRIES

    Directory of Open Access Journals (Sweden)

    Andreea ROŞOIU

    2013-06-01

    Full Text Available The transmission channels of monetary policy are used by central banks to accomplish the main objective of price stability in the context of sustainable economic growth. The importance of interest rate and exchange rate channels for the emerging countries Romania, Poland, Czech Republic and Hungary is analyzed by using Bayesian VAR approach with Diffuse priors over 1998Q1-2012Q3. Main result of the empirical study is that both channels are effective for the monetary policy transmission mechanism in Hungary and Czech Republic. In Romania and Poland they do not exhibit puzzles, but the impact of the macroeconomic variables is not very significant and shows very high volatility. In the context of monetary integration, exchange rate channel will become irrelevant when these countries adopt Euro currency. This change will lead instead to a powerful interest rate channel.

  17. A Study of Philippine Monetary and Banking Policies

    OpenAIRE

    Bautista, Ernesto D.

    1992-01-01

    This study assesses the Philippine monetary and banking policies with the view of identifying preferred policy options and features of a monetary and banking policy program supportive of overall economic growth and agro-industrial development. It describes the following: the impact of existing monetary and banking policy on short- and long-term economic development and the legislative and administrative measures required to adopt and implement such a monetary and banking policy. It also ident...

  18. Monetary Policy and Nigeria's Economic Development | Akujuobi ...

    African Journals Online (AJOL)

    This study investigated the impact of monetary policy instruments on theeconomic development of Nigeria, using multiple regression technique. Itwas found that cash reserve ratio was significant in impacting on theeconomic development of Nigeria at both 1% and 5% levels of significance,treasury bill at 5.6%, minimum ...

  19. MONEY AND MONETARY POLICY OF THE GOVERNMENT

    Directory of Open Access Journals (Sweden)

    Tsvetan Iliev

    2017-12-01

    Full Text Available In this paper we will clarify the issues related to: the emergence of money - their functions and varieties, the specificity of their demand and supply and the main aspects of the monetary policy of the state with its effects on the economic development.

  20. Monetary policy, banking and heterogeneous agents

    NARCIS (Netherlands)

    Wolski, M.

    2012-01-01

    The influence of heterogeneous expectations on monetary policy performance has gained a lot of attention in the recent years. It proved to be an important factor that, under some circumstances, may even destabilize the economy (Massaro, 2012). This paper investigates the phenomenon of heterogeneous

  1. Monetary policy cooperation may not be counterproductive

    DEFF Research Database (Denmark)

    Jensen, Henrik

    1997-01-01

    This paper qualifies Rogoff's famous (1985) result that international monetary policy cooperation is counterproductive. In a model similar to his, it is shown that if wage-setters are non-atomistic and inflation averse - as policymakers are - cooperation leads to higher employment and possibly...

  2. Signalling, wage controls and monetary disinflation policy

    NARCIS (Netherlands)

    van Wijnbergen, S.J.G.; Persson, T.

    1993-01-01

    Focuses on wage control and monetary disinflation policy. How the crucial variable to control is the money supply and wage and price controls should be avoided because of their macroeconomic costs; The two types of government as being low-inflation governments and high-inflation governments; How

  3. Analysis of monetary and fiscal policy mix

    Directory of Open Access Journals (Sweden)

    2010-12-01

    Full Text Available Economies are constantly hit by various shocks-that effect aggregate demand and aggregate supply and have the potential to generate recession or expansion, respective a high level of unemployment and high inflation rate. Governments use fiscal and monetary policies to try to stabilioze the economy.

  4. Monetary Policy in Chile: a black box?

    OpenAIRE

    Angel Cabrera; Luis Felipe Lagos

    2000-01-01

    This paper studies monetary policy in Chile during the 1986-1997 period. We concentrate in understanding the monetary transmission mechanism by which the Central Bank instrument—the real interest rate—affects total expenditure, output and the inflation rate. The methodology used is structural VARS. We find a weak effect of the interest rate on all the variables. The interest rate has a significant effect on the expenditure-output gap. Both the interest rate and the expenditure-output gap have...

  5. Monetary Transmission and Asset - Liability management by financial institutions in transitional economies - implications for czech monetary policy

    OpenAIRE

    Derviz, Alexis

    2000-01-01

    The paper deals with the transmission of monetary policy within the financial sector. The objective is to link an optimizing stochastic model of portfolio decisions by a representative financial institution with a number of features that this optimizing behavior implies for monetary transmission and credit conditions in a transitional economy. The main example is the intermediation performance of Czech financial sector in the years 1993 to 1999.

  6. Monetary Policy Committee and Monetary Policy Conduct in Nigeria: A Preliminary Investigation

    OpenAIRE

    Ekor, Maxwell; Saka, Jimoh; Adeniyi, Oluwatosin

    2014-01-01

    The study provides an incisive but preliminary investigation into the activities of the monetary policy committee of the central bank of Nigeria and the implications for monetary policy, using the standard deviation measure of volatility and the ordinary least square method. The findings show that the ‘internal’ members and majority of the ‘external’ members have different preferences as shown in the voting patterns. Also, there has been reduction in inflation, money and stock markets vola...

  7. The Monetary Policy in a Changing World

    Directory of Open Access Journals (Sweden)

    Mariana Trandafir

    2015-05-01

    Full Text Available In a context where “the economies’ evolution is driven by the crisis”, the monetary policies are facing, in the post-crisis period, challenges that bring to the forefront of debates the rethinking of objectives, strategies and even implementation tools. This paper presents in a comparative analysis, the relevance of price stability in terms of theoretical fundaments and effectiveness of the concept for the pre and post – crisis periods, in the Eurozone, the US and Japan in an attempt to identify the explicative resorts of the central bank’s monetary behavior. At this time when the central banks are obliged to unconventional measures to save the global economy from the danger of deflation, the topic is important and timely addressed. The paper uses statistical data of official documents taken from the International Monetary Fund, European Union and central bank websites.

  8. Monetary policy, delegation and polarization

    DEFF Research Database (Denmark)

    Schultz, Christian

    1999-01-01

    This paper studies the relation between political polarisation and delegation of stabilisation policy. There is asymmetric information about how the economy works: unlike voters, two political parties know the variance of an employment shock. Prior to an election each party proposes a central...

  9. Australia's approach to monetary policy

    OpenAIRE

    Jane Sneddon Little

    2002-01-01

    According to Australia's Reserve Bank Act, the central bank's broad policy objectives include maintaining the stability of the currency, full employment, and the economic prosperity and welfare of the people of Australia. In 1993 the Reserve Bank of Australia adopted a specific, and thus transparent, inflation target as its operating objective; it aims to keep overall inflation between 2 percent and 3 percent on average over the business cycle.

  10. OPEN MARKETING - A SPECIFIC FORM OF MONETARY POLICY IN ORDER TO MONETARY VOLUME ADJUSTMENT

    Directory of Open Access Journals (Sweden)

    CHIRTOC IRINA- ELENA

    2013-02-01

    Full Text Available : Applying a uniform monetary policy by all European Union member states also require harmonization of monetary policy instruments and national interbank market integration also. Monetary policy instruments used by NBR (National Bank of Romania have evolved over time as a result of alignment with the instruments used by the European Central Bank. Money market operations in Romania have appeared for the first time in 1997. Starting from the wishing of Central Bank to reduce excess liquidity in 2001 they became the most important monetary policy tool used by the National Bank of Rumania. Open market operations are the instrument of monetary policy, central banking in Eastern Europe to work towards monetary contraction or expansion. Open-market operations in recent years have become the most important monetary policy instrument they play an essential role in promoting monetary policy by the central bank. Through open marketing operations the monetary authorities aim to alter bank reserves and thereby influence the amount of currency in circulation. In Romania, the open marketing operations are initiated by the National Bank of Romania, which determines what type of tools will be used while setting terms and conditions of the implementation. Through the use and control of monetary policy instruments, the central bank as the state bank seeks managing liquidity in the economy.

  11. THE REGULATION OF MONEY CIRCULATION ON THE BASIS OF USING METHODS AND INSTRUMENTS OF MONETARY POLICY

    OpenAIRE

    S. Mishchenko; S. Naumenkova

    2013-01-01

    In the article it was researched the instruments and mechanism of safeguarding stability of money market on the basis of implementing the optimal monetary policy regime. It was determined the main directions of appliance the monetary policy methods and instruments to guiding money market stability and it was also investigated the influence of transmission mechanism on providing the soundness of money circulations.

  12. Monetary Policy Implications of Electronic Money

    OpenAIRE

    Berentsen, Aleksander

    1997-01-01

    The term digital money refers to various proposed electronic payment mechanisms designed for use by consumers to make retail payments. Digital money products have the potential to replace central bank currency, thereby affecting the money supply. This paper studies the effect of replacing central bank currency on the narrowly defined stock of money under various assumptions regarding regulatory policies and monetary operations of central banks and the reaction of the banking system.

  13. Housing Bubbles and Monetary Policy: A Reassessment

    OpenAIRE

    O'Meara, Graeme

    2015-01-01

    This study contributes to the ongoing debate over the causes of housing bubbles. The argument that excessively low interest rates were responsible for the run up in house prices over the last decade has received considerable attention in the literature. However, few papers have attempted to quantify the extent of house price overvaluation in countries that have seen housing booms and busts, in addition to quantifying the looseness of monetary policy. For a sample of 10 OECD countries, we es...

  14. Monetary policy strategy in a global environment

    OpenAIRE

    Moutot, Philippe; Vitale, Giovanni

    2009-01-01

    This paper discusses the structural implications of real and financial globalisation, with the aim of drawing lessons for the conduct of monetary policy and, in particular, for the assessment of risks to price stability. The first conclusion of the paper is that globalisation may have played only a limited role in reducing inflation and output volatility in developed economies. Central banks should remain focused on their mandate to preserve price stability. However, the globalisation of fina...

  15. Money and the Transmission of Monetary Policy

    OpenAIRE

    Seth Carpenter; Selva Demiralp

    2009-01-01

    The transmission mechanism of monetary policy has received extensive treatment in the macroeconomic literature. Most models currently used for macroeconomic analysis exclude money or else model money demand as entirely endogenous. Nevertheless, academic research and many textbooks continue to use the money multiplier concept in discussions of money. We explore the institutional structure of the transmission mechanism beginning with open market operations through to money and loans to document...

  16. Monetary and Fiscal Policy Interactions and Limitations: The Need ...

    African Journals Online (AJOL)

    Lwati: A Journal of Contemporary Research ... This 'divorce' of monetary and debt management functions calls for the need for effective coordination of monetary and fiscal policy if overall economic ... Therefore an appropriate combination of monetary and fiscal policy mix is crucial for macroeconomic management.

  17. Optimal Degrees of Transparency in Monetary Policymaking

    DEFF Research Database (Denmark)

    Jensen, Henrik

    2002-01-01

    According to most academics and policymakers, transparency in monetary policymaking is desirable. I examine this proposition in a small theoretical model emphasizing forward-looking private sector behavior. Transparency makes it easier for price setters to infer the central bank's future policy...... intentions, thereby making current inflation more responsive to policy actions. This induces the central bank to pay more attention to inflation rather than output gap stabilization. Then, transparency may be disadvantageous. It may actually be a policy-distorting straitjacket if the central bank enjoys low...

  18. Rules Versus Discretion in Monetary Policy

    OpenAIRE

    Stanley Fischer

    1988-01-01

    This paper examines the case for rules rather than discretion in the conduct of monetary policy, from both historical and analytic perspectives. The paper starts with the rules of the game under the gold standard. These rules were ill-defined and not adhered to; active discretionary policy was pursued to defend the gold standard -- but the gold standard came closer to a regime of rules than the current system. The arguments for rules in general developed by Milton Friedman are described mo ap...

  19. Monetary Policy in the Greenspan Era

    DEFF Research Database (Denmark)

    Christensen, Anders Møller; Nielsen, Heino Bohn

    2009-01-01

    Relationships between the Federal funds rate, unemployment, inflation and the long-term bond rate are investigated with cointegration techniques. We find a stable long-term relationship between the Federal funds rate, unemployment and the bond rate. This relationship is interpretable as a policy...... Taylor-type target, where inflation appears instead of the bond rate, does not seem congruent with the data....... target because deviations are corrected via the Federal funds rate. Deviations of the actual Federal funds rate from the estimated target give simple indications of discretionary monetary policy, and the larger deviations relate to special episodes outside the current information set. A more traditional...

  20. How do monetary policy tools work? An investigation on monetary transmission mechanism in Iran

    Directory of Open Access Journals (Sweden)

    Naser Ali Yadollahzadeh Tabari

    2013-04-01

    Full Text Available Monetary transmission mechanism includes some channels in which monetary policy influences on macroeconomic variables such as the output and inflation. In this study, the effect of monetary policy tools including interest rate, exchange rate and money supply on the variables of monetary policy targets including inflation and output is examined through VECM methodology over the period 1989:2-2007:2. Our findings show that in long-term, monetary supply is the most important variable influencing the price followed by the variables of output and exchange rate, respectively. Exogenous-being of interest rate indicates that this channel is underdeveloped and there is no monetary policy rule like Taylor rule in Iran's economy.

  1. Monetary policy, bank size and bank lending: Evidence from Australia

    OpenAIRE

    Liu, Luke

    2011-01-01

    The transmission of monetary policy may hold the key to explaining the effects of policy on the economy. The objective of the study is to assess the importance of the bank lending channel in the transmission of monetary policy in Australia. In this paper, we found that the effectiveness of monetary policy varies with the size of the bank as well as the type of the loan. For different asset size and different kinds of loans, the effect of monetary policy is different. Thus, policy has distribu...

  2. Monetary and fiscal policy aspects of indirect tax changes in a monetary union

    OpenAIRE

    von Thadden, Leopold; Lipińska, Anna

    2009-01-01

    In recent years a number of European countries have shifted their tax structure more strongly towards indirect taxes, motivated, inter alia, by the intention to foster competitiveness. Against this background, this paper develops a tractable two-country model of a monetary union, characterised by national fiscal and supranational monetary policy, with price-setting firms and endogenously determined terms of trade. The paper discusses a number of monetary and fiscal policy questions which emer...

  3. Impact of monetary policy changes on the Chinese monetary and stock markets

    Science.gov (United States)

    Tang, Yong; Luo, Yong; Xiong, Jie; Zhao, Fei; Zhang, Yi-Cheng

    2013-10-01

    The impact of monetary policy changes on the monetary market and stock market in China is investigated in this study. The changes of two major monetary policies, the interest rate and required reserve ratio, are analyzed in a study period covering seven years on the interbank monetary market and Shanghai stock market. We find that the monetary market is related to the macro economy trend and we also find that the monetary change surprises both of lowering and raising bring significant impacts to the two markets and the two markets respond to the changes differently. The results suggest that the impact of fluctuations is much larger for raising policy changes than lowering changes in the monetary market on policy announcing and effective dates. This is consistent with the “sign effect”, i.e. bad news brings a greater impact than good news. By studying the event window of each policy change, we also find that the “sign effect” still exists before and after each change in the monetary market. A relatively larger fluctuation is observed before the event date, which indicates that the monetary market might have a certain ability to predict a potential monetary change, while it is kept secret by the central bank before official announcement. In the stock market, we investigate how the returns and spreads of the Shanghai stock market index respond to the monetary changes. Evidences suggest the stock market is influenced but in a different way than the monetary market. The climbing of returns after the event dates for the lowering policy agrees with the theory that lowering changes can provide a monetary supply to boost the market and drive the stock returns higher but with a delay of 2 to 3 trading days on average. While in the bear market, the lowering policy brings larger volatility to the market on average than the raising ones. These empirical findings are useful for policymakers to understand how monetary policy changes impact the monetary and stock markets

  4. On the effects of monetary policy shocks in developing countries

    Directory of Open Access Journals (Sweden)

    Magda Kandil

    2014-06-01

    Full Text Available Using annual data for a sample of developing countries, the time-series evidence indicates the allocation of monetary policy shocks, both expansionary and contractionary, between price inflation and output growth. Subsequently, cross-country regressions evaluate factors that underlie the difference in these allocations and their implications. The real effects of monetary shocks increase as the elasticity of aggregate demand increases with respect to monetary shocks. Nonetheless, capacity constraints hamper the output adjustment to monetary shocks and increase price inflation. Across countries, trend output growth increases with the output response to monetary shocks. Consistent with the stabilizing function of monetary policy, the variability of output growth decreases in the face of monetary fluctuations across countries. In contrast, monetary fluctuations increase the trend and variability of price inflation across countries.

  5. Macroeconomic Activity and Monetary Policy Actions: Some Preliminary Evidence.

    OpenAIRE

    Haslag, Joseph H; Hein, Scott E

    1992-01-01

    Monetary policy is conducted through open market operations, loans at the discount window, and changes in the reserve requirement structure. The purpose of this paper is to formally investigate the notion that the effect of changes in reserve requirement ratios is different from the effect of other policy tools. This is accomplished by decomposing the monetary base into those changes caused by changes in reserve requirement ratios and those caused by other monetary policy actions. Some prelim...

  6. Monetary policy implications of financial innovation: In-depth analysis

    OpenAIRE

    Bernoth, Kerstin; Gebauer, Stefan; Schäfer, Dorothea

    2017-01-01

    In this policy brief, we argue that the financial innovations triggered by the FinTech industry have the potential to affect the transmission of monetary policy as well as the informational content of important monetary indicators. The growing FinTech industry could contribute substantially to the emergence of nonbank finance as a substitute for traditional commercial bank finance. While the overall effect of nonbank finance on monetary policy transmission is not yet clear, we argue that regu...

  7. Bank of England’s monetary policy committee – assessing the importance and the implication upon monetary policy

    OpenAIRE

    Florin Cornel DUMITER; Horatiu Florin SOIM

    2012-01-01

    The monetary policy strategies arround the world have been envolving in the last two decades considerable. In the past, central banks’ have been associated with a „veil of mistery” having at their grounds the so-called policy mistique. Nowadays, the new monetary policy strategy – inflation targeting – promoted by many countries established new coordinates for monetary policy. In this paper we focuse upon the monetary policy committee with a special focus upon the Bank of England’s case, becau...

  8. The Changing Effectiveness of Monetary Policy

    Directory of Open Access Journals (Sweden)

    Jonathan E. Leightner

    2013-11-01

    Full Text Available In the wake of the 2008 financial crisis, many countries are hoping that massive increases in their money supplies will revive their economies. Evaluating the effectiveness of this strategy using traditional statistical methods would require the construction of an extremely complex economic model of the world that showed how each country’s situation affected all other countries. No matter how complex that model was, it would always be subject to the criticism that it had omitted important variables. Omitting important variables from traditional statistical methods ruins all estimates and statistics. This paper uses a relatively new statistical method that solves the omitted variables problem. This technique produces a separate slope estimate for each observation which makes it possible to see how the estimated relationship has changed over time due to omitted variables. I find that the effectiveness of monetary policy has fallen between the first quarter of 2003 and the fourth quarter of 2012 by 14%, 36%, 38%, 32%, 29% and 69% for Japan, the UK, the USA, the Euro area, Brazil, and the Russian Federation respectively. I hypothesize that monetary policy is suffering from diminishing returns because it cannot address the fundamental problem with the world’s economy today; that problem is a global glut of savings that is either sitting idle or funding speculative bubbles.

  9. The Impact of the FOMC's Monetary Policy Actions on the growth of Credit Risk: the Monetary Policy - Liquidity Paradox

    OpenAIRE

    Kwamie Dunbar

    2008-01-01

    Credit risk is influenced by interest rates and market liquidity. This paper examines the direct and indirect impacts of unexpected monetary policy shifts on the growth of corporate credit risk, with the aim of quantifying the size and direction of the response. The results surprisingly indicate that monetary policy and liquidity impulses move counter to each other in their effects on credit risk ("The monetary policy-liquidity paradox"). The analysis indicates that while contractionary monet...

  10. MONETARY POLICY FORCE EFFECT BY MEANS OF BANKS MONEY CREATION

    Directory of Open Access Journals (Sweden)

    Victoria COCIUG

    2014-07-01

    Full Text Available In the context of modern economy, banks play an essential role for sustainable growth, by ensuring economy with financial resources and driving impulses of monetary policy to economy. Monetary authorities influence significantly the bank's ability to fulfill this role. Thus, to achieve macroeconomic objectives, there is promoted particular monetary policy and are implemented various practical regulations for banks. In this article, we want to identify the existing relationship between monetary policy followed by the authorities and the ability of banks to create money with its impact on various practical regulations.

  11. Monetary policy rules for convergence to the Euro

    OpenAIRE

    Orlowski, Lucjan T.

    2008-01-01

    This paper aims to devise a monetary policy instrument rule that is suitable for open economies undergoing monetary convergence to a common currency area. The open-economy convergence-consistent Taylor rule is forward-looking, consistent with monetary framework based on inflation targeting, containing input variables that are relative to the corresponding variables in the common currency area. The policy rule is tested empirically for three inflation targeting countries converging to the euro...

  12. MONETARY POLICY FORCE EFFECT BY MEANS OF BANKS MONEY CREATION

    OpenAIRE

    Victoria COCIUG; Olga TIMOFEI

    2014-01-01

    In the context of modern economy, banks play an essential role for sustainable growth, by ensuring economy with financial resources and driving impulses of monetary policy to economy. Monetary authorities influence significantly the bank's ability to fulfill this role. Thus, to achieve macroeconomic objectives, there is promoted particular monetary policy and are implemented various practical regulations for banks. In this article, we want to identify the existing relationship between monetar...

  13. Examining the volatility of exchange rate: Does monetary policy matter?

    OpenAIRE

    Lim, Shu Yi; Sek, Siok Kun

    2014-01-01

    We conduct empirical analysis on examining the changes in exchange rate volatility under two monetary policy regimes, i.e. the pre- and post- inflation targeting (IT) regimes. In addition, we also investigate if the monetary decisions can have impacts on the volatility of exchange rate. The study is focused in four Asian countries that experienced drastic in the switch of monetary policy from the rigid exchange rate to flexible exchange rate and inflation targeting after the Asian financial c...

  14. Some considerations on using monetary policy to promote financial stability

    Directory of Open Access Journals (Sweden)

    Petria, N.

    2010-12-01

    Full Text Available The current period of crisis on credit markets has highlighted the crucial role of the behaviour of banks in the transmission mechanism of monetary policy. This paper summarises our considerations on how monetary policy, as the main instrument, acts in order to promote financial stability and to stabilize the banking system. Central banks have a variety of tools for implementing monetary policy, but the tool that has received the most attention in literature is the interest rate. We observe that the financial crisis that erupted in the summer of 2007 has refocused attention on other channels of monetary policy, notably the transmission of policy through the supply of credit and overall conditions in the capital markets. Monetary policy has important macroeconomic effects only to the extent that it moves financial market prices that really matter—like long-term interest rates, stock market values, and exchange rates.

  15. Monetary Policy, Determinancy and Learnability in the Open Economy

    NARCIS (Netherlands)

    Bullard, J.; Schaling, E.

    2005-01-01

    We study how determinacy and learnability of global rational expectations equilibrium may be affected by monetary policy in a simple, two country, New Keynesian framework.The two blocks may be viewed as the U.S. and Europe, or as regions within the euro zone.We seek to understand how monetary policy

  16. The International Impact of US Unconventional Monetary Policy

    DEFF Research Database (Denmark)

    Lutz, Chandler

    2015-01-01

    Using a structural factor-augmented vector autoregression model and a large data set of daily time series, we study the impact of US unconventional monetary policy on British and German financial markets. Our findings indicate that a surprise US unconventional monetary policy easing leads...

  17. The Relative Importance of the Channels of Monetary Policy ...

    African Journals Online (AJOL)

    importance channels of monetary policy which are working in Zambia. It answers the ... several ways through which monetary policy affect the balance sheets of economic agents and hence ... economies, especially those with flexible exchange rate regimes. ..... transmission channels work endogenously or exogenously.

  18. The Adoption of Indirect Instruments of Monetary Policy

    OpenAIRE

    Tomás J. T. Baliño; Charles Enoch; William E. Alexander

    1995-01-01

    This paper examines the experience of implementing indirect instruments of monetary policy. The experiences of country studies illustrate the variety of circumstances under which indirect instruments of monetary policy have been introduced. Case Studies are presented for Chile, Egypt, Ghana, Indonesia, Mexico, New Zealand, and Poland.

  19. On the influence of institutional design on monetary policy making

    NARCIS (Netherlands)

    Raes, L.B.D.

    2014-01-01

    This thesis consists of a collection of essays on monetary policy making. These essays focus on institutional aspects which impact monetary policy making. Two chapters focus on analyzing voting records of central banks. A method is proposed to use the observed votes to infer the preferences of

  20. Information and Uncertainty in the Theory of Monetary Policy

    OpenAIRE

    Wagner, Helmut

    2007-01-01

    Theory and practice of monetary policy have changed significantly over the past three decades. A very important part of today's monetary policy is management of the expectations of private market participants. Publishing and justifying the central bank's best forecast of inflation, output, and the instrument rate is argued to be the most effective way to manage those expectations.

  1. Transmission Channels of Monetary Policy: A Broader View

    Directory of Open Access Journals (Sweden)

    Lukáš Kučera

    2016-08-01

    Full Text Available The paper deals with a transmission mechanism of monetary policy under the regime of inflation targeting. It focuses on the expectations channel, the credit view and the cost channel. These channels work side by side and may amplify effects of the traditional view of transmission mechanisms of monetary policy, which emphasises adjustments on the demand side.

  2. The trade-off between monetary policy and bank stability

    NARCIS (Netherlands)

    Lamers, Martien; Mergaerts, Frederik; Meuleman, Elien; Vennet, Rudi Vander

    2016-01-01

    This paper investigates how monetary policy interventions by the European Central Bank and the Federal Reserve affect the stock market perception of bank systemic risk. In a first step, we identify monetary policy shocks using a structural VAR approach by exploiting the changes of the volatility of

  3. Taylor rule and EMU Monetary Policy Determination and ECB's Preferences

    Directory of Open Access Journals (Sweden)

    Svatopluk Kapounek

    2006-01-01

    Full Text Available The aim of the article is to evaluate the preferences of the ECB in monetary policy and to compare them with preferences of the central banks of new EU member countries from Central and Eastern Europe. The ECB's responsibility for the primary objective (price stability often contrasts with the requirement for economic growth stabilization policy from the national governments. There are doubts if the current members of Eurozone constitute an optimum currency area (the Eurozone 12 is recently the combination of rapidly growing and slow-growing - low inflationary countries. The differences between the countries will even expand during the European monetary union enlargement by new EU member countries. Consequently the probability of asymmetric shocks will increase. The main question is the ability of ECB to fulfill the needs of all EMU member countries in terms of optimal monetary policy. In the first part the authors analyze differences between the preferences of the ECB and national authorities (governments. The negative experiences of Ireland, Italy and other EMU members with current status quo help us to understand fear of future member countries from possible impact of common monetary policy on their national economies. The second part of the paper deals with interest rates determination by ECB and compares it with expectations (requirements from EMU member and EMU candidate countries. The main contribution of the article may be seen in central bank's preferences analyses – the preferences are defined as the parameters in Taylor rule (the weights given by ECB and national authorities to the price stability and economic growth stimulation. The hypothesis is defined as following: are the preferences of ECB in line with the preferences of national central banks of EMU candidate countries? The empirical analysis is based on the Taylor rule decomposition. The hypothesis is tested by regression analysis. Time series regression model uses relations

  4. Financial stability and monetary policy -The case of Brazil

    Directory of Open Access Journals (Sweden)

    Benjamin M. Tabak

    2013-12-01

    Full Text Available This paper seeks to examine the effects of monetary policy over banks' loans growth and whether there is a bank lending channel operating in Brazil. Therefore, we employ a detailed high frequency panel data in which we include bank characteristics and ownership control. We contribute to the literature on bank lending channel by showing that during periods of loosening/tightening monetary policy, banks increase/decrease their loans. Additionally,our results illustrate that large, well-capitalized and liquid banks react differentially to the effects of monetary policy shocks. Finally, we show that the impact of monetary policy differs across state-owned, foreign and private domestic banks. These results are important for developing and conducting monetary policy.

  5. Three essays on monetary policy responses to oil price shocks

    Science.gov (United States)

    Plante, Michael

    This dissertation contains three chapters which explore the question of how monetary policy should respond to changes in the price of oil. Each chapter explores the question from the perspective of a different economic environment. The first chapter examines welfare maximizing optimal monetary policy in a closed economy New Keynesian model that is extended to include household and firm demand for oil products, sticky wages, and capital accumulation. When households and firms demand oil products a natural difference arises between the Consumer Price Index (CPI), the core CPI, and the GDP deflator. I show that when nominal wages are flexible then the optimal policy places a heavy emphasis on stabilizing the inflation rate of the core CPI. If aggregate nominal wages are sticky then the central bank should focus on stabilizing some combination of core inflation and nominal wage inflation. Under no case examined is it optimal to stabilize either GDP deflator or CPI inflation. The second chapter examines monetary policy responses to oil price shocks in a small open economy with traded and non-traded goods. Oil and labor are used to produce the traded and non-traded goods and prices are sticky in the non-traded sector. I show analytically that the ratio of the oil and labor cost shares in the traded and non-traded sectors is crucial for determining the dynamic behavior of many macroeconomic variables after a rise in the price of oil. A policy of fixed exchange rates can produce higher or lower inflation in the non-traded sector depending upon the ratio. Likewise, a policy that stabilizes the inflation rate of prices in the non-traded sector can cause the nominal exchange rate to appreciate or depreciate. For the proper calibration, a policy that stabilizes core inflation produces results very close to the one that stabilizes non-traded inflation. Analytical results show that the fixed exchange rate always produces a unique solution. The policy of stabilizing non

  6. Interdependencies Between the Capital Market and the Monetary Policy Decisions

    Directory of Open Access Journals (Sweden)

    Claudia Guni

    2010-12-01

    Full Text Available The declared scope of this work is to highlight the main correlations between the monetary and the capital market, including identifying the adequate objective of monetary policy which might positively influence over the offer on the capital market. The main target of the monetary market consists in the stability of the prices. The link between monetary policy and stock market is extremely important. The stock prices are sensible to economical conditions. Moreover, these prices rapidly change, thus there is a chance for a deviation from the fundamental value, with side-effects for economy.

  7. The role of financial intermediaries in monetary policy transmission

    NARCIS (Netherlands)

    Beck, T.H.L.; Colciago, A.; Pfajfar, D.

    The recent financial crisis has stimulated theoretical and empirical research on the propagation mechanisms underlying business cycles, in particular on the role of financial frictions. Many issues concerning the interactions between banking and monetary policy forced policy makers to redefine

  8. THE REGULATION OF MONEY CIRCULATION ON THE BASIS OF USING METHODS AND INSTRUMENTS OF MONETARY POLICY

    Directory of Open Access Journals (Sweden)

    S. Mishchenko

    2013-05-01

    Full Text Available In the article it was researched the instruments and mechanism of safeguarding stability of money market on the basis of implementing the optimal monetary policy regime. It was determined the main directions of appliance the monetary policy methods and instruments to guiding money market stability and it was also investigated the influence of transmission mechanism on providing the soundness of money circulations.

  9. EFFECTS OF MONETARY POLICY IN ROMANIA - A VAR APPROACH

    Directory of Open Access Journals (Sweden)

    Iulian Popescu

    2012-10-01

    Full Text Available Understanding how monetary policy decisions affect inflation and other economic variables is particularly important. In this paper we consider the implications of monetary policy under the inflation targeting regime in Romania, based on an autoregressive vector method including recursive VAR and structural VAR (SVAR. Therefore, we focus on assessing the extent and persistence of monetary policy effects on gross domestic product (GDP, price level, extended monetary aggregate (M3 and exchange rate. The main results of VAR analysis reflect a negative response of consumer price index (CPI, GDP and M3 and positive nominal exchange rate behaviour to a monetary policy shock, and also a limited impact of a short-term interest rate shock in explaining the consumer prices, production and exchange rate fluctuations.

  10. monetary policy and macroeconomic management: a simulation ...

    African Journals Online (AJOL)

    Admin

    The results show that monetary variables and government finance is linked through the government's net indebtedness to the banking system. ... monetary squeeze would reduce inflation rate faster than if the reduction in ... This reduction in money supply also leads to a reduction in output, .... Methodological Framework.

  11. Interest Rate Dynamics and Monetary Policy Implementation in Switzerland

    OpenAIRE

    Puriya Abbassi; Dieter Nautz; Christian Offermanns

    2010-01-01

    The maturity of the operational target of monetary policy is a distinguishing feature of the SNB's operational framework of monetary policy. While most central banks use targets for the overnight rate to signal the policy-intended interest rate level, the SNB announces a target range for the three-month Libor. This paper investigates the working and the consequences of the SNB's unique operational framework for the behavior of Swiss money market rates before and during the financial crisis.

  12. The Transmission of Monetary Policy through Conventional and Islamic Banks

    NARCIS (Netherlands)

    Zaheer, S.; Ongena, S.; van Wijnbergen, S.J.G.

    2011-01-01

    We investigate the differences in banks’ responses to monetary policy shocks across bank size, liquidity, and type, i.e., conventional versus Islamic, in Pakistan between 2002:II to 2010:I. We find that following a monetary contraction, small banks with liquid balance sheets cut their lending less

  13. The transmission of monetary policy through conventional and Islamic banks

    NARCIS (Netherlands)

    Zaheer, S.; Ongena, S.; van Wijnbergen, S.J.G.

    2013-01-01

    We investigate the differences in banks’ responses to monetary policy shocks across bank size, liquidity, and type—i.e., conventional versus Islamic—in Pakistan between 2002:Q2 and 2010:Q1. We find that following a monetary contraction, small banks with liquid balance sheets cut their lending less

  14. The transmission of monetary policy through conventional and islamic banks

    NARCIS (Netherlands)

    Zaheer, S.; Ongena, S.; van Wijnbergen, S.

    2012-01-01

    We investigate the differences in banks' responses to monetary policy shocks across bank size, liquidity, and type, i.e., conventional versus Islamic, in Pakistan between 2002:II to 2010:I. We find that following a monetary contraction, small banks with liquid balance sheets cut their lending less

  15. Banks' risk appetite, heterogeneity and monetary policy: evidence ...

    African Journals Online (AJOL)

    The study examines the effects of bank heterogeneity on risk appetite under changing monetary policy stance of the monetary authority. The scope of the study covers the period 2005 to 2015 using data obtained from the published accounts of the affected banks and Central Bank of Nigeria (CBN) statistical bulletin, various ...

  16. Inflation Targeting as the Monetary Policy Framework: Bangladesh Perspective

    Directory of Open Access Journals (Sweden)

    Mohammed SAIFUL ISLAM

    2011-06-01

    Full Text Available Inflation targeting strategy has become a widely accepted monetary policy framework in many countries all over the world. Our study finds that the central bank of Bangladesh is neither inflation targeting nor does follow any other rule-guided monetary policy, rather the policy is formulated with substantial discretion under the guidelines of donor agencies. This paper provides the evidence that monetary sector of Bangladesh economy has gained considerable degree of maturity and fulfils a number of prerequisites to adopt inflation targeting strategy. Using data over 1980-2010 we estimate an error correction model in order to examine if interest rate policy could fight the inflation. This is evident that deviation in inflation from target can be corrected via the changes in interest rate. Empirical findings jointly with few descriptive statistics provide strong evidence to recommend inflation targeting as the monetary policy strategy for Bangladesh.

  17. The role of EU institutions in implementing its monetary policy

    Directory of Open Access Journals (Sweden)

    Emilia GEORGIEVA

    2011-06-01

    Full Text Available The main goal of the current article is to illustrate in detail the powers of the EU institutions to implement its monetary policy. The methods used to explore the topic and to draw the conclusions and interpret the findings are based on deduction and induction. On the grounds of the information presented in the article the following conclusions have been drawn: the relations between the EU institutions responsible for implementing its monetary policy (the European Central Bank, the European Parliament, the Council, the European Commission and others are entirely based on fundamental principles laid down for all its institutions; the commitments of the institutions implementing the EU monetary policy are strictly stipulated in its primary legislation and are mostly related to the establishment of the EU Economic and Monetary Union, the framing, planning and implementing of the common monetary policy, the management of the Monetary Union. In the conditions of world financial and economic crisis the EU has attempted to respond adequately to its monetary policy problems, commensurate with the scope and matching the specific nature of this crisis.

  18. Impact Of Monetary Policy On Financial Asset Returns: An Analysis ...

    African Journals Online (AJOL)

    Impact Of Monetary Policy On Financial Asset Returns: An Analysis Of Selected Stocks From The Nigerian Capital Market. ... Journal of Research in National Development. Journal Home · ABOUT THIS JOURNAL · Advanced Search · Current ...

  19. Indirect Monetary Policy Reforms and Output Growth in Nigeria: An ...

    African Journals Online (AJOL)

    BRRE). The efforts in repositioning these banks through the current banking reforms (recapitalization and consolidation) the paper notes are a right step in the right direction. Keywords: Indirect monetary policy, Granger – causality, output growth

  20. monetary policies and credit financing as factors in agricultural ...

    African Journals Online (AJOL)

    controls the supply of money. This assumes the ... input supply, marketing services and of course credit supply. Provision of ... credit in state, assess the impact of credit on agricultural ..... Inflation targeting be a framework for monetary policy.

  1. Financial Inclusion and Monetary Policy: A Review of Recent Studies

    African Journals Online (AJOL)

    Ghana Journal of Development Studies ... in addition to cross-country and regional studies on the impact of financial inclusion on monetary policy using panel data. Keywords: Financial Inclusion, Financial Development, Financial Innovation, ...

  2. The Relative Effectiveness of Monetary and Fiscal Policies in ...

    African Journals Online (AJOL)

    The Relative Effectiveness of Monetary and Fiscal Policies in Economic ... the St. Louis model of the Federal Reserve Bank of USA by Anderson and Jordan 1978. ... the extent of the quantitative impact and relative significance of the variables ...

  3. Analysis of the Effect of Monetary Policy Development on Equity ...

    African Journals Online (AJOL)

    2012-12-01

    Dec 1, 2012 ... square regression (OLS) was run using five monetary policy variables including minimum re- discount ... investment consciousness of investors in .... operator based on information available to ...... This might account for the.

  4. House Prices and the stance of Monetary Policy.

    OpenAIRE

    Jarociński, Marek; Smets, Frank

    2008-01-01

    This paper estimates a Bayesian VAR for the US economy which includes a housing sector and addresses the following questions. Can developments in the housing sector be explained on the basis of developments in real and nominal GDP and interest rates? What are the effects of housing demand shocks on the economy? How does monetary policy affect the housing market? What are the implications of house price developments for the stance of monetary policy? Regarding the latter question, we implement...

  5. The 'Thin film of gold': monetary rules and policy credibility

    OpenAIRE

    Niall Ferguson; Moritz Schularick

    2012-01-01

    This paper asks whether developing countries can reap credibility gains from submitting policy to a strict monetary rule. Following earlier work, we look at the gold standard era (1880-1914) as a "natural experiment" to test whether adoption of a rule-based monetary framework such as the gold standard increased policy credibility. On the basis of the largest possible dataset covering almost sixty independent and colonial borrowers in the London market, we challenge the traditional view that g...

  6. Monetary Policy Instruments and Bank Risks in China

    OpenAIRE

    Zhongyuan Geng; Xue Zhai

    2013-01-01

    The authors use a panel data regression model to examine the effects of main monetary policy instruments on commercial bank risks in China from 1998 to 2011. The interest rate has a positive effect on bank risk while the interest rate margin, the reserve requirement ratio and open market operation have a negative effect. Among the three monetary policy instruments, the reserve requirement ratio has the greatest effect on bank risk, the interest rate (the interest rate margin) the second large...

  7. Monetary Policy Drivers of Bond and Equity Risks

    OpenAIRE

    Luis Viceira; Carolin Pflueger; John Campbell

    2014-01-01

    How do monetary policy rules, monetary policy uncertainty, and macroeconomic shocks affect the risk properties of US Treasury bonds? The exposure of US Treasury bonds to the stock market has moved considerably over time. While it was slightly positive on average over the period 1960-2011, it was unusually high in the 1980s, and negative in the 2000s, a period during which Treasury bonds enabled investors to hedge macroeconomic risks. This paper develops a New Keynesian macroeconomic model wit...

  8. The ECB monetary policy strategy and the money market

    OpenAIRE

    Gaspar, Vítor; Pérez Quirós, Gabriel; Sicilia, Jorge

    2001-01-01

    This paper aims at contributing to the understanding of how the ECB conducts monetary policy as seen from a money market perspective. More specifically it covers two different issues. First, it looks at the 'learning period' for banks since the Eurosystem started implementing the single monetary policy. It shows that during the first three weeks of 1999 the narrow corridor in place during this period was effective in limiting daily volatility of the money market overnight rates. In addition, ...

  9. THE MONETARY POLICY TRANSMISSION MECHANISM THROUGH INTEREST RATE. EMPIRICAL ANALYSIS: ROMANIA

    OpenAIRE

    Gabriel Bistriceanu

    2008-01-01

    Understanding monetary policy transmission is necessary to moentary policy projection and implementation of monetary policy in a efficient manner. I consider that interest rate monetary policy mechanism is very important because the interest rate is now the main instrument used by the majority of central banks in the world in taking monetary policy decissions and by all central banks wich have inflation targeting strategy. In this paper, I analysed monetary policy transmission mechanism throu...

  10. Optimal Policy in OG Models

    DEFF Research Database (Denmark)

    Ghiglino, Christian; Tvede, Mich

    for generations, through fiscal policy, i.e. monetary transfers and taxes. Both situations with and without time discounting are considered. It is shown that if the discount factor is suffciently close to one then the optimal policy stabilizes the economy, i.e. the equilibrium path has the turnpike property...

  11. Optimal Policy in OG Models

    DEFF Research Database (Denmark)

    Ghiglino, Christian; Tvede, Mich

    2000-01-01

    for generations, through fiscal policy, i.e., monetary transfers and taxes. Situations both with and without time discounting are considered. It is shown that if the discount factor is sufficiently close to one then the optimal policy stabilizes the economy, i.e. the equilibrium path has the turnpike property...

  12. An oil demand and supply model incorporating monetary policy

    International Nuclear Information System (INIS)

    Askari, Hossein; Krichene, Noureddine

    2010-01-01

    Oil price inflation may have had a significant role in pushing the world economy into its worst post-war recession during 2008-2009. Reserve currency central banks pursued an overly expansionary monetary policy during 2001-2009, in the form of low or negative real interest rates and accompanied by a rapidly falling US dollar, while paying inadequate attention to the destabilizing effects on oil markets. In this paper, we show that monetary policy variables, namely key interest rates and the US dollar exchange rate, had a powerful effect on oil markets. World oil demand was significantly influenced by interest and dollar exchange rates, while oil supply was rigid. Oil demand and supply have very low price elasticity and this characteristic makes oil prices highly volatile and subject to wider fluctuations than the prices of other commodities. Aggressive monetary policy would stimulate oil demand, however, it would be met with rigid oil supply and would turn inflationary and disruptive to economic growth if there was little excess capacity in oil output. We argue that a measure of stability in oil markets cannot be achieved unless monetary policy is restrained and real interest rates become significantly positive. Monetary tightening during 1979-1982 might imply that monetary policy has to be restrained for a long period and with high interest rates in order to bring stability back to oil markets. (author)

  13. THE INFLUENCES OF INFLATION ON THE MONETARY POLICY INTEREST

    Directory of Open Access Journals (Sweden)

    Popa Coralia Emilia

    2012-12-01

    Full Text Available In the context of sovereign debt crisis in Europe, a crisis entirely felt also in the direct relation between credit institutions, the National Bank of Romania (NBR adopted a monetary policy strategy meant to determine the reinforcement of its image, by initiating in the autumn of 2011 a new series of reduction of the monetary policy interest rate and implicitly the appropriate resizing of liquidity conditions. By increasing the role of liquidity adjustment, the European Central Bank (ECB succeeded to determine in the money market the decrease of interbank rate interests under the interest rate level of monetary policy. The direct inflation targeting strategy used by the European Central Bank in applying its monetary policy has the first criterion of implementation the expression of inflation target in terms of „headline inflation” (consumer price index - CPI given that the economic market in Romania is familiar with this indicator. Also, the main criterion considered by the investment segment of the market to achieve capital infusions in economic transactions is represented by the consumer price index, this one ensuring the necessary transparency related to the effects of inflation phenomenon. A strong argument supporting the use of consumer price index in monetary policy is represented by its upward flexibility towards the limited effectiveness of monetary aggregates in sizing inflationary anticipations. The downward slope of inflation phenomenon, in whose depreciation the evolution of consumer price index, whose positive trend surprised the European Central Bank, played a significant role, determined adjustments in the monetary policy strategy of the National Bank of Romania and at the same time the achievement of the inflationary target proposed with a direct effect on the monetary policy interest rate. The same measure to reduce the key interest rate is outlined in the monetary policy of the European Central Bank and it is

  14. The impact of monetary policy on New Zealand business cycles and inflation variability

    OpenAIRE

    Nathan McLellan; Robert A Buckle; Kunhong Kim

    2004-01-01

    This paper uses the open economy structural VAR model developed in Buckle, Kim, Kirkham, McLellan and Sharma (2002) to evaluate the impact of monetary policy on New Zealand business cycles and inflation variability and the output/inflation variability trade-off. The model includes a forward-looking Taylor Rule to identify monetary policy and the impact of monetary policy is evaluated by deriving a monetary policy index using a procedure suggested by Dungey and Pagan (2000). Monetary policy ha...

  15. Borrowing constraints, multiple equilibria and monetary policy

    NARCIS (Netherlands)

    Assenza, T.

    2007-01-01

    The appealing feature of Kiyotaki and Moore's Financial Accelerator model (Kiyotaki and Moore, 1997, 2002) is the linkage of asset price changes and borrowing constraints. This framework therefore is the natural vehicle to explore the net worth channel of the monetary transmission mechanism. In the

  16. MONETARY POLICY RULE FOR POLAND – RESULTS FOR VARIOUS SPECIFACTIONS

    OpenAIRE

    Pawel Baranowski

    2011-01-01

    The aim of the paper is to analyse monetary policy rules for Poland. We estimate models based on the proposition of Taylor, augmented with interest rate smoothing. We deal with the case of instantaneous as well as forward-looking relationship between interest rate and inflation. In the latter case, the proposition of data-rich reaction function was also considered. The evidence show that Polish monetary authority reaction to inflation is strong, contrary to the output gap. In addition, we fou...

  17. Did capital market convergence lower the effectiveness of the interest rate as a monetary policy tool?

    NARCIS (Netherlands)

    Jansen, Pieter W.

    2006-01-01

    International capital market convergence reduces the ability for monetary authorities to set domestic monetary conditions. Traditionally, monetary policy transmission is channelled through the short-term interest rate. Savings and investment decisions are effected through the response of the bond

  18. MONETARY POLICY TRANSMISSION MECHANISM AND TVP-VAR MODEL

    Directory of Open Access Journals (Sweden)

    Andreea ROŞOIU

    2013-12-01

    Full Text Available The transmission of monetary policy to the economy is a subject of major importance for central banks because, by using these measures, central banks can achieve their purpose of ensuring price stability without neglecting the objective of sustainable economic growth. In order to analyze the evolution of the monetary policy transmission mechanism in Romania, a time varying structural vector autoregression model is estimated, by using a Markov Chain Monte Carlo algorithm for the posterior evolution. The conclusions of the empirical study are: both systematic and non-systematic monetary policy have changed during the investigated period of time, the systematic response of the interest rate to shocks in inflation and unemployment being faster over the recent period. Also, non-policy shocks seem more important than interest rate shocks in explaining inflation and unemployment evolution.

  19. MONETARY POLICY ADJUSTMENT AT THE GLOBAL FINANCIAL CRISIS CONSTRAINTS

    Directory of Open Access Journals (Sweden)

    Adina Criste

    2014-12-01

    Full Text Available The global financial crisis marked a border for central banks, as it raised challenges which constrained them both to extend the range of monetary policy instruments and to redefine their role in the financial system. The present paper aims to identify features of conducting the monetary policy of some central banks, during and after the global financial crisis outbreak. For that purpose, we apply to a comparative analysis between some central banks of European Union (EU, namely Czech National Bank (CNB, National Bank of Hungary (NBH, National Bank of Poland (NBP and National Bank of Romania (NBR. We also assume that the monetary policy could be characterised through both the challenges faced by the central banks and the type of measures adopted, as a reaction to these challenges. Analysis shows that central banks have different levels of burden, according to domestic condition, and also different ”pattern” of monetary policy adjustments, using more or less unconventional or macro-prudential measures. An important conclusion raised from this article refers to the increasing role of these special measures for central banks, which requires defining a new monetary policy framework in the near future.

  20. Development and Application of Econometric Models for Forecasting and Analysis of Monetary Policy Scenarios

    OpenAIRE

    Malugin, Vladimir; Demidenko , Mikhail; Kalechits, Dmitry; Miksjuk , Alexei; Tsukarev , Taras

    2009-01-01

    A system of econometric models designed for forecasting target monetary indicators as well as conducting monetary policy scenarios analysis is presented. The econometric models integrated in the system are represented in the error correction form and are interlinked by means of monetary policy instruments variables, common exogenous variables characterizing external shocks, and monetary policy target endogenous variables. Forecast accuracy estimates and monetary policy analysis results are pr...

  1. Monetary policy and credit conditions: new evidence.

    OpenAIRE

    Steven Ongena

    1995-01-01

    A number of recent papers seek to distinguish between "money" and "credit" theories of the transmission of monetary disturbances using asymmetric information arguments. In credit models money causes output not only through the real interest rate but also through the availability of bank credit. The research described in this paper extends the work of Kashyap, Stein and Wilcox (1993) who construct a model that incorporates a relationship benefit to bank borrowing and then test the implications...

  2. Monetary Policy Frameworks and Real Equilibrium Determinacy

    DEFF Research Database (Denmark)

    Jensen, Henrik

    2002-01-01

    In a simple "prototype" model of monetary policymaking, I examine the issue of real equilibrium determinacy under targeting and instrument rules. The former framework involves minimization of a loss function (under discretion or commitment), whereas the latter involves commitment to an interest...... rate rule. While instrument rules only lead to determinacy under certain conditions, the targeting rules under consideration always secure determinacy. Within an extended model, I argue that econometric estimations of nominal interest rate response functions may tell little about the economy...

  3. The Regional Impact of Monetary Policy in Indonesia

    NARCIS (Netherlands)

    Ridhwan, M.M.; de Groot, H.L.F.; Rietveld, P.; Nijkamp, P.

    2014-01-01

    This paper employs vector autoregressive (VAR) models to measure the impact of monetary policy shocks on regional output in Indonesia. We find substantial cross-regional variation in policy responses in terms of both magnitude as well as timing. Our work adds to the existing literature by providing

  4. Monetary Policy at Work: Lessons from the FOMC Transcripts.

    Science.gov (United States)

    Spencer, Roger W.

    1996-01-01

    Utilizes Federal Open Market Committee (FOMC) transcripts to reveal how the Federal Reserve shapes monetary policy. Analysis of the documents shows the Committee examining a wide variety of indicators and approaches in an attempt to determine the appropriate time for a policy change. Inflationary pressures were a preeminent concern. (MJP)

  5. The Disparate Labor Market Impacts of Monetary Policy

    Science.gov (United States)

    Carpenter, Seth B.; Rodgers, William M., III

    2004-01-01

    Employing two widely used approaches to identify the effects of monetary policy, this paper explores the differential impact of policy on the labor market outcomes of teenagers, minorities, out-of-school youth, and less-skilled individuals. Evidence from recursive vector autoregressions and autoregressive distributed lag models that use…

  6. Conquering Credibility for Monetary Policy Under Sticky Confidence

    Directory of Open Access Journals (Sweden)

    Jaylson Jair da Silveira

    2015-06-01

    Full Text Available We derive a best-reply monetary policy when the confidence by price setters on the monetary authority’s commitment to price level targeting may be both incomplete and sticky. We find that complete confidence (or full credibility is not a necessary condition for the achievement of a price level target even when heterogeneity in firms’ price level expectations is endogenously time-varying and may emerge as a long-run equilibrium outcome. In fact, in the absence of exogenous perturbations to the dynamic of confidence building, it is the achievement of a price level target for long enough that, due to stickiness in the state of confidence, rather ensures the conquering of full credibility. This result has relevant implications for the conduct of monetary policy in pursuit of price stability. One implication is that setting a price level target matters more as a means to provide monetary policy with a sharper focus on price stability than as a device to conquer credibility. As regards the conquering of credibility for monetary policy, it turns out that actions speak louder than words, as the continuing achievement of price stability is what ultimately performs better as a confidence-building device.

  7. The Impact of Monetary Policy on Bank Credit During Economic Crisis: Indonesia's Experience

    OpenAIRE

    Mongid, Abdul

    2008-01-01

    The monetary policy mechanism by which monetary policy was transmitted to thereal economy had emerged as the pivotal discussion topic recently. This paper tried to discussthe impact of Bank Indonesia’s monetary policy on loan bank. By using simple loan bankframework we concluded that monetary policies were able to influence loan bank. Themonetary variables such as discount rate policy, base money and exchange rate policy werevery important in determining the banking credit. As the credit was ...

  8. Monetary Policy Signaling from the Administration to the Federal Reserve.

    OpenAIRE

    Havrilesky, Thomas

    1988-01-01

    This paper develops an index of monetary policy signals from the Administration to the Federal Reserve based on articles which appeared in the Wall Street Journal in which Administration off icials express a desire for easier or tighter monetary policy. In reg ressions, the index has a significant effect on the money supply. In reaction functions, the index responds to variables which measure the state of the economy. Money growth does not respond to the same stat e-of-the-economy measures bu...

  9. Monetary and Fiscal Policies for a Finite Planet

    Directory of Open Access Journals (Sweden)

    Adam Scanlan

    2013-06-01

    Full Text Available Current macroeconomic policy promotes continuous economic growth. Unemployment, poverty and debt are associated with insufficient growth. Economic activity depends upon the transformation of natural materials, ultimately returning to the environment as waste. Current levels of economic throughput exceed the planet’s carrying capacity. As a result of poorly constructed economic institutions, society faces the unacceptable choice between ecological catastrophe and human misery. A transition to a steady-state economy is required, characterized by a rate of throughput compatible with planetary boundaries. This paper contributes to the development of a steady-state economy by addressing US monetary and fiscal policies. A steady-state monetary policy would support counter-cyclical, debt-free vertical money creation through the public sector, in ways that contribute to sustainable well-being. The implication for a steady-state fiscal policy is that any lending or spending requires a careful balance of recovery of money, not as a means of revenue, but as an economic imperative to meet monetary policy goals. A steady-state fiscal policy would prioritize targeted public goods investments, taxation of ecological “bads” and economic rent and implementation of progressive tax structures. Institutional innovations are considered, including common asset trusts, to regulate throughput, and a public monetary trust, to strictly regulate money supply.

  10. Currency Crises and Monetary Policy in an Economy with Credit Constraints

    DEFF Research Database (Denmark)

    Bergman, Ulf Michael; Hassan, Shakill

    This paper revisits the currency crises model of Aghion, Bacchetta and Banerjee (2000, 2001, 2004), who show that if there exist nominal price rigidities and private sector credit constraints, and the credit multiplier depends on real interest rates, then the optimal monetary policy response...

  11. Fiscal policy and its implications for monetary and financial stability

    OpenAIRE

    Bank for International Settlements

    2011-01-01

    The BIS 10th Annual Conference took place in Lucerne, Switzerland on 23-24 June 2011. The event brought together senior representatives of central banks and academic institutions, who exchanged views on the conference theme of "Fiscal policy and its implications for monetary and financial stability". This volume contains the opening address of Stephen Cecchetti (Economic Adviser, BIS), a keynote address from Martin Feldstein, and the contributions of the policy panel on "Fiscal policy sustain...

  12. Virtual Currencies – monetary policy dilemmas and regulatory challenges

    Directory of Open Access Journals (Sweden)

    Daj Alexis

    2018-01-01

    Full Text Available Although the topic of virtual currencies is not completely new, the current technological developments and the extent of the globalisation process appear to have changed the scope of the research efforts needed to cover not only the advantages and opportunities, but also the disadvantages and threats that the expansion of virtual currencies can pose for monetary policy and the safety of the financial system. This paper comprises a brief presentation of the different types of virtual currencies and identifies some of the most significant implications of large-scale virtual currency adoption for monetary authorities and regulators, while providing an overview of the main trends in the evolution of virtual currencies. In the end, one conclusion is evident: whatever monetary policy or regulatory issues arise from the use of virtual currencies, their consequences are far from virtual.

  13. Monetary Policy and Financial Asset Prices: Empirical Evidence from Pakistan

    Directory of Open Access Journals (Sweden)

    Imran Umer Chhapra

    2018-03-01

    Full Text Available Monetary transmission mechanism assumed to be significantly influenced by the effect of policy decisions on financial markets. However, various previous studies have come up with different outcomes. The purpose of this study is to examine the impact of monetary policy on different asset classes (shares and bonds in Pakistan. This study using stock price and bond yield as dependent variable and discount rate, money supply, inflation, and exchange rate are independent variables. Data of all variables have collected from 2010 to 2016, and Vector Autoregressive (VAR technique has applied. The empirical results indicate that there is an impact of monetary policy components on both stock and bond market as an increase in policy rate causes decline in stocks prices and bonds yields. The findings of this study will help the potential investors in making long-term (in general and short-term (in particular investment strategies concerning monetary policy.DOI: 10.15408/sjie.v7i2.7099

  14. The price level and monetary policy

    Directory of Open Access Journals (Sweden)

    Charles P. Kindleberger

    2002-03-01

    Full Text Available Most central banks are required to or choose to stabilize a price index, largely by manipulating short term interest rates. A serious problem is which index to choose among the national income deflator, wholesale prices, the cost of living, with or eliminating highly volatile commodities such as food and energy, to produce a core index, plus others such as housing, including or without imputed rent of owner-occupied houses, or assets, whether equities or houses. No obvious and widely agreed index exists. Even if there were a clear choice, there remains a question whether a central bank should carefully consider action in order to achieve other goals: full employment, adjustment of the balance of payments, of the exchange rate, prevention of bubbles in asset prices, or recovery from financial crises. If so, the question of central bank weapons remains: monetary expansion or contraction, credit controls, for overall or for particular purposes, and moral suasion.

  15. TRANSMISSION MECHANISM OF MONETARY POLICY IN TERMS OF VIETNAM

    Directory of Open Access Journals (Sweden)

    The Dong Phung

    2013-01-01

    Full Text Available In order to conduct an effective monetary policy, the Central bank should have a clear understanding of the mechanism of the money transfer and the importance of different transmission channels, and the impact of these transmission channels on the sectors of the economy, especially on the manufacturing sector.

  16. Monetary policy efficiency in the economies of Central Asia

    Czech Academy of Sciences Publication Activity Database

    Isakova, Asel

    2008-01-01

    Roč. 58, 11-12 (2008), s. 525-553 ISSN 0015-1920 Institutional research plan: CEZ:AV0Z70850503 Keywords : monetary policy * Central Asia * dollarization Subject RIV: AH - Economics Impact factor: 0.275, year: 2008 http://journal.fsv.cuni.cz/storage/1147_str_525_553_-_isakova.pdf

  17. Essays on globalization, monetary policy and financial crisis'

    NARCIS (Netherlands)

    Qian, Z.

    2012-01-01

    This thesis focuses on three interlinked topics. Chapter 2 studies the determinants of sovereign CDS spreads in Greece, Ireland, Italy, Portugal and Spain during the recent global financial crisis and European debt crisis. Chapter 3 introduces a model on the interactions between monetary policy

  18. Better Monetary Control may Increase the Inflationary Bias of Policy

    NARCIS (Netherlands)

    O.H. Swank (Otto)

    1994-01-01

    textabstractExplores the implications of imperfect monetary control and uncertainty about the trade-off between output and inflation to discretionary policy. Impact of imperfect control of money growth on policymakers' incentive to create surprises; Consequences of imperfect control of money growth

  19. Fiscal and monetary policies in complex evolving economies

    NARCIS (Netherlands)

    Dosi, G.; Fagiolo, G.; Napoletano, M.; Roventini, A.; Treibich, T.G.

    2014-01-01

    In this paper we explore the effects of alternative combinations of fiscal and monetary policies under different income distribution regimes. In particular, we aim at evaluating fiscal rules in economies subject to banking crises and deep recessions. We do so using an agent-based model populated by

  20. Credit markets and the propagation of monetary policy shocks

    Czech Academy of Sciences Publication Activity Database

    Boháček, Radim; Mendizábal, H. R.

    2007-01-01

    Roč. 39, č. 6 (2007), s. 1429-1455 ISSN 0022-2879 R&D Projects: GA AV ČR IAA700850602 Institutional research plan: CEZ:AV0Z70850503 Keywords : credit * monetary policy shock * heterogeneous agents Subject RIV: AH - Economics Impact factor: 0.947, year: 2007

  1. Interactions between Monetary and Fiscal Policy via Open Market Operations

    NARCIS (Netherlands)

    Schabert, A.

    2004-01-01

    We examine interactions of monetary and fiscal policy in a sticky price model where public debt is non-neutral, as it provides transaction services. This property is brought about by a legal restriction on open market operations by which only government bonds are eligible. Debt creation eases access

  2. The impact of monetary policy on financing of Czech firms

    Czech Academy of Sciences Publication Activity Database

    Aliyev, Ruslan; Hájková, D.; Kubicová, I.

    2015-01-01

    Roč. 65, č. 6 (2015), s. 455-476 ISSN 0015-1920 Institutional support: PRVOUK-P23 Keywords : monetary policy transmission * broad credit view * external finance Subject RIV: AH - Economics Impact factor: 0.449, year: 2015 http://journal.fsv.cuni.cz/mag/article/show/id/1343

  3. Managing heterogeneous and unanchored expectations: a monetary policy analysis

    NARCIS (Netherlands)

    Hommes, C.; Lustenhouwer, J.

    2016-01-01

    We study monetary policy in a New Keynesian model with heterogeneity in expectations. Agents may choose from a continuum of forecasting rules and adjust their expectations based on relative past performance. The extent to which expectations are anchored to the fundamentals of the economy turns out

  4. Monetary and fiscal policy under bounded rationality and heterogeneous expectations

    NARCIS (Netherlands)

    Lustenhouwer, J.E.

    2017-01-01

    The goal of this thesis is to use plausible and intuitive models of bounded rationality to give new insights in monetary and fiscal policy. Particular focus is put on the zero lower bound on the nominal interest rate, forward guidance, and fiscal consolidations. The thesis considers different forms

  5. Treasury bond volatility and uncertainty about monetary policy

    NARCIS (Netherlands)

    Arnold, I.J.M.; Vrugt, E.B.

    2010-01-01

    We show that dispersion-based uncertainty about the future course of monetary policy is the single most important determinant of Treasury bond volatility across all maturities. The link between Treasury bond volatility and uncertainty about macroeconomic variables is much stronger than for the more

  6. Financial Inclusion and Monetary Policy: A Review of Recent Studies

    African Journals Online (AJOL)

    2017-05-01

    May 1, 2017 ... financial inclusion and its implications for monetary policy and financial stability. ... These studies have discussed the implications of financial exclusion for the parameters ... and allocating capital, monitoring firms and exerting corporate ... decisions, and technological innovations and hence economic ...

  7. Monetary Policy, Debt and the Cyclical Behavior of Inventories

    Directory of Open Access Journals (Sweden)

    Abdul Ghafar Ismail

    2007-01-01

    Full Text Available An earlier study on the determinants of inventories investment has been proposed by Lovel (1961. However, the study fails to mention the effects of financial variables. The puzzle prevails on account of imperfect capital markets. This implies that interest rate generally affects inventory investment indirectly through the debt channel. For instance, in the period of tight monetary policy, increasing interest rates have a negative impact on the present value of firms’ collateralizable net worth. In addition, they also weaken firms’ balance sheets as interest expenses also rise up. In imperfect capital markets, this fact indicates an increase in the amount of external financing that firms need, a rise in the premium on external financing that they face, and a reduction in their accumulation of assets, their spending and their production. Given the low adjustment cost that characterizes firms, it will be inventories that firms will initially reduce. Therefore, this paper is contributes to the issue of monetary policy transmission in Malaysia. Our specific attention is limited to the channel of monetary policy on a firm’s inventory. Using micro data, we try to take into account the relevance of the firm’s balance sheet conditions in the transmission of monetary policy.

  8. Monetary Policy and the Taylor Principle in Open Economies

    NARCIS (Netherlands)

    Linnemann, L.; Schabert, A.

    2006-01-01

    Nowadays, central banks mostly conduct monetary policy by setting nominal interest rates. A widely held view is that central banks can stabilize inflation if they follow the Taylor principle, which requires raising the nominal interest rate more than one-for-one in response to higher inflation. Is

  9. Determinacy, Stock Market Dynamics and Monetary Policy Inertia

    DEFF Research Database (Denmark)

    Pfajfar, Damjan; Santoro, Emiliano

    the vantage of equilibrium uniqueness. We show that this reaction function is isomorphic to a rule with an interest rate smoothing term, whose magnitude increases in the degree of aggressiveness towards asset prices growth. As shown by Bullard and Mitra (2007, Determinacy, learnability, and monetary policy...

  10. Monetary and Fiscal Policy Interactions in the Czech Republic

    Directory of Open Access Journals (Sweden)

    Pavel Rezabek

    2018-06-01

    Full Text Available The paper provides empirical analysis of interactions between monetary and fiscal policy in the Czech Republic and document changes in policy conduct across the time. To this end, we build and estimate a six-variable Bayesian VAR and propose some refinements to the modelling framework. These improvements make it possible to better capture the main features of the economic system populated by both macroeconomic policy authorities. The results point to the lack of complementarity between policy actions adopted by the authorities and suggest that there is still enough room for enhancing the effectiveness of economic policies.

  11. The Monetary Policy of the NBU and its Impact on the Placement of Households’ Savings

    Directory of Open Access Journals (Sweden)

    Perepolkina Olena О.

    2018-03-01

    Full Text Available The article researches the efficiency of implementation of monetary policy in Ukraine in the context of determining the optimal ways to place households’ savings. The prospects of making deposits in both national and foreign currency as the most common directions of savings placement are considered. The research has identified that the main risks in the placement of savings by households as deposits in the national currency are the likelihood of bankruptcy of financial institutions, imperfection of the functioning of deposit guarantee system, inflationary fluctuations, and devaluation processes of the national monetary unit. Significant deterrents to the placement of foreign currency deposits are low interest rates, a large number of restrictions in the currency regulation, and a general low level of trust in the banking system. The directions of increasing the efficiency of monetary policy are proposed, that not only will increase the attractiveness of deposits for households, but also will create the basis for macroeconomic stabilization in Ukraine.

  12. Essays on systematic and unsystematic monetary and fiscal policies

    OpenAIRE

    Cimadomo, Jacopo

    2008-01-01

    The active use of macroeconomic policies to smooth economic fluctuations and, as aconsequence, the stance that policymakers should adopt over the business cycle, remaincontroversial issues in the economic literature.In the light of the dramatic experience of the early 1930s’ Great Depression, Keynes (1936)argued that the market mechanism could not be relied upon to spontaneously recover froma slump, and advocated counter-cyclical public spending and monetary policy to stimulatedemand. Albeit ...

  13. Quantification model of the consequences of monetary policy shocks

    Directory of Open Access Journals (Sweden)

    Coralia Emilia POPA

    2017-11-01

    Full Text Available The monetary analysis based on the BVAR (Bayesian Vector Autoregression model is extremely important in the monetary policy implementation strategy, the information provided is important not only for the Central Bank, but also for the economic agents and the population. Therefore, conducting this analysis at the level of Romania helps to understand better the mechanism by which monetary policy is transmitted in order to achieve the set target, namely inflation targeting, but it also provides us with important information regarding the accession to the euro area. The model we are trying to test helps us understand through the correlations between the interest rate, GDP and the inflation rate how monetary policy responds to shocks. The model follows the methodology presented by Sims and Zha (1998 in the paper "Bayesian Methods for Dynamic Multivariate Models and Using the Bayesian Autoregressive Vector". In the analysis of this model, quarterly data for a minimum of three years, three variables are used to make the results relevant. The data needed to model the model are used in logarithmic form, except for the interest rate, and the outcome is applied to a differentiated premium operator. Of the variables used, the interest rate is the only one that does not allow seasonal adjustment.

  14. MONETARY POLICIES AND INDUSTRIAL FLUCTUATIONS IN EAST EUROPEAN COUNTRIES

    Directory of Open Access Journals (Sweden)

    Mihaela IFRIM

    2015-03-01

    Full Text Available Industrial fluctuations are closely related to the evolution of relative prices of produced goods and resources involved in production activity. Industrial fluctuations, as an expression of forces manifested in the real economy, are caused by changes in individuals’ consumption and investment decisions, produced within expansionary monetary policies. The ease of obtaining a bank loan in the context of decreasing interest rates and of larger amounts of money caused an increase in individuals’ demand for goods resulted from longer, capital intensive production processes. The rise in prices of intermediate and capital goods in a faster pace compared to the increase in prices of consumer goods is doubled by the increase of the share of higher order industries in the structure of production. The objective of this paper is to analyze changes in industrial structure of Eastern Europe countries within the policies of quick access to monetary resources. The analyzed states (Bulgaria, the Czech Republic, Hungary, Poland and Romania are part of the European Union and have autonomous monetary policies, meaning that they have not yet adopted the common currency. In all economies analyzed, we find approximately the same patterns of monetary expansion and industrial fluctuations.

  15. Assessing the Impact of the ECB's Monetary Policy on the Stock Markets: A Sectoral View

    OpenAIRE

    Konstantin Kholodilin; Alberto Montagnoli; Oreste Napolitano; Boriss Siliverstovs

    2008-01-01

    This paper analyzes the response of the European stock markets to the monetary policy shocks by the European Central Bank using the heteroskedasticity based approach of Rigobon (2003). We find that monetary policy tightening has a heterogeneous impact on the Euro Area sectors on the day the monetary policy is publicly announced. Furthermore, we provide statistical evidence against the use of the popular event study approach when assessing the impact of monetary policy shocks on the stock mark...

  16. How much monetary policy rules do we need to estimate DSGE model for Russia?

    OpenAIRE

    Shulgin, Andrei

    2014-01-01

    This paper presents a three-sector DSGE model for a small open economy under the intermediate exchange rate regime. The central bank balance sheet equations are added to allow introducing two different monetary policy rules in the model. The principal question is how many independent monetary policy rules we need to describe Russian monetary policy in 2001–2012. To get an answer we perform Bayesian estimation of the DSGE model for four different combinations of monetary policy rules. The main...

  17. Monetary Policy: Its Impact On The Profitability Of Banks In India

    OpenAIRE

    Punita Rao

    2011-01-01

    This purpose of this study is to investigate the impact of monetary policy on the profitability of banks in the context of financial sector reforms in India. We discuss the financial sector reforms and the implication of the banks, the various instruments of monetary policy in India, and the impact of monetary policy on the profitability of banks.

  18. Estimation of transmission mechanism of monetary policy in Serbia

    Directory of Open Access Journals (Sweden)

    Bungin Sanja

    2015-01-01

    Full Text Available Transmission mechanism of monetary policy recently has been subject to several studies in Serbia. The so called 'black box' of monetary policy is investigated with aim to identify the effects of transmission channel in environment where exchange rate has a dominant role in central bank operations. Therefore, it is a challenge to approach this problem in inflation targeting regime where key interest rate is expected to prevail as a main policy instrument. The study employs unrestricted Vector Autoregression model for estimating significance of exchange rate and interest rate channel. As expected, exchange rate has far more stronger influence on inflation, even though there are some signs of interest rate channel existence. Introducing Euribor as endogenous variables in VAR system displayed important impact on real variables.

  19. THE COMPARATIVE ANALISYS OF POLISH MONETARY POLICY WITH THE MONETARY RULE FOR THE YEARS 1995–2007

    OpenAIRE

    Maciej Ryczkowski

    2008-01-01

    According to the research and econometrical model Poland’s monetary policy and the monetary rule are very similar. In many fields both strategies prove to result in the same outcomes. Both aim to guarantee low inflation and long-term economic growth. The difference is that in Poland the control of supply of money is carried out by the control inflation instead of direct control of monetary aggregates as in monetary rule. To sum up, there is no need to separate control of money’s supply in the...

  20. THE IMPACT OF MONETARY POLICY ON BANK CREDIT DURING ECONOMIC CRISIS: INDONESIA’S EXPERIENCE

    Directory of Open Access Journals (Sweden)

    Abdul Mongid

    2017-03-01

    Full Text Available The monetary policy mechanism by which monetary policy was transmitted to thereal economy had emerged as the pivotal discussion topic recently. This paper tried to discussthe impact of Bank Indonesia’s monetary policy on loan bank. By using simple loan bankframework we concluded that monetary policies were able to influence loan bank. Themonetary variables such as discount rate policy, base money and exchange rate policy werevery important in determining the banking credit. As the credit was very important to influencesthe economic activitiy, the result provided evidence that monetary policy was important as atool to control economic activity via credit channel. The validity of this study challenged thehypotheses that monetary policy was death. However, monetary policy maker should carefullyconsider the soundness of the banking industry because it was a strategic partner for monetaryauthority to control the economic activities.

  1. Monetary policy and macroeconomic management: A simulation ...

    African Journals Online (AJOL)

    The dynamic nexus between money supply, fiscal deficit, inflation, output and exchange rate management has generated much debate in economic literature in Nigeria in recent times. To contribute to this debate, this paper uses 3SLS estimation technique as well as carried out policy simulation experiment to investigate ...

  2. MONETARY POLICY AND INFLATION TARGETING IN A SMALL OPEN ECONOMY

    Directory of Open Access Journals (Sweden)

    Antoni Antoni

    2011-09-01

    Full Text Available The danger of inflation has been the focus of many central banks. This paper analyzes the transmission mechanism of monetary policy and inflation targeting in Malaysia with a backward-looking aggregate supply and demand analysis. The manage floating regime applied in the country has an important role in achieving a stable exchange rate against its major trading partners. It also analyzes the policy of maintaining the soundness of interest rate to perceive inflation targeting to increase its economic growth. Using 1991-2004 data and a traditional structural econometric model, it shows that output gap is important in forecasting a domestic inflation rate by controlling the interest rate.  Keywords: Inflation targeting, monetary economics, structural econometric modelJEL classification numbers: E3, E52

  3. Revisiting the impacts of oil price increases on monetary policy implementation in the largest oil importers

    Directory of Open Access Journals (Sweden)

    Nurtac Yildirim

    2015-06-01

    Full Text Available The aim of this paper is to test the impacts of oil price increases on monetary policy implementation in the largest oil importers. For that purpose, we estimate structural vector error correction (SVEC models to show the impacts of oil price increases on industrial production, consumer prices and immediate interest rates which are the elements of Taylor rule for the four largest oil importers (the USA, the EU, China and Japan. Our results indicate that oil price increases transmit to output and inflation and lead to fluctuations in industrial production, consumer prices and immediate interest rates which in turn influence the monetary policy stance in the following periods. The basic conclusion of research is that the channels through which oil prices affect output, inflation and interest rates should be identified by the monetary policy authorities of the USA, the EU, China and Japan. We also emphasize the importance of the determination of the optimal monetary policy framework to eliminate the negative consequences of oil price increases.

  4. Monetary Policy, Investment and Non-Fundamental Shocks

    OpenAIRE

    Fernando Alexandre

    2002-01-01

    Using a sticky price model with endogenous investment and adjustment costs we analyse the benefits of monetary policy reacting to asset prices, when investment is under the influence of a non-fundamental shock, both for inflation-forecast targeting rules and for Taylor rules. We conclude that in this context there are benefits from reacting to asset prices that result from a more stable output gap, which is the consequence of a much lower volatility in firms’ investment. Howeve...

  5. Currency Mismatch, Balance-sheet effect and Monetary Policy

    OpenAIRE

    Nakamura, Chikafumi

    2011-01-01

    This paper analyzes the impact of the currency mismatch between assets and liabilities on monetary policy. The currency mismatch causes macroeconomic instability through balance-sheet effects. To analyze the problem, we apply a small open economy dynamic stochastic general equilibrium model with international credit-market imperfections. As a result, despitethe currency mismatch and high trade openness, a targeting rule to address the terms of trade is not efficient. This result depends on...

  6. Navigating the Great Recession: what role for monetary policy?

    OpenAIRE

    Bank for International Settlements

    2013-01-01

    The 12th BIS Annual Conference took place in Lucerne, Switzerland on 20-21 June 2013. The event brought together a distinguished group of central bank governors, leading academics and former public officials to exchange views on the conference theme of "Navigating the Great Recession: what role for monetary policy?". This volume contains the opening address by Stephen Cecchetti (former Economic Adviser, BIS), a keynote address by Finn Kydland (University of California, Santa Barbara) and the ...

  7. MODELING MONETARY POLICY RULES IN THE MENACOUNTRIES: ISSUES AND EVIDENCE

    OpenAIRE

    Mohamad Husam Helmi

    2011-01-01

    This paper estimates the monetary policy reaction function for two sets of MENAcountries: The inflation target countries, (Turkeyand Israel) and the exchange ratetarget countries, (Jordan and Morocco). We motivateour empirical analysis byanalyzing a simple Taylor rule. This model looks atthe effects of inflation andoutput on setting the interest rate by the centralbank. Furthermore, we extendedour model by adding the exchange rate and the foreign interest rate ...

  8. Liquidity regulation and the implementation of monetary policy

    OpenAIRE

    Morten L. Bech; Todd Keister

    2013-01-01

    In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the liquidity coverage ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to survive a 30-day period of market stress. As monetary policy typically involves targeting the interest rate on loans of one of these assets — central bank reserves — it is important to understand how this regulation may impact the ef...

  9. Consumers' inflation expectations and monetary policy in Europe

    OpenAIRE

    Berk, J.M.

    2000-01-01

    This paper analyses the effects of monetary policy decisions on inflation expectations of European consumers. Using a novel approach that does not assume unbiasedness of expectations, which makes use of survey data on expected future as well as perceived past price developments and allows for non-normal peakedness and asymmetry, we convert qualitative survey responses of consumers in various European countries into quantitative time series of inflation expectations. After checking the rationa...

  10. The Real Interest Rate Spread as a Monetary Policy Indicator

    OpenAIRE

    Browne, Frank; Everett, Mary

    2006-01-01

    This paper employs a consumption-based capital asset pricing model to derive the generalised Fisher equation, in order to estimate the natural rate of interest and corresponding real interest rate spread for the US. Analysis reveals not only is the estimated real interest rate spread a useful measure of the degree of looseness/tightness in the Federal Reserve’s monetary policy stance, but also the variable contributes substantially to an understanding of the evolution of US inflation over the...

  11. THE ROLE OF MONETARY POLICY IN STIMULATING ECONOMIC GROWTH

    Directory of Open Access Journals (Sweden)

    Polyakov Egor Nikolaevich

    2013-05-01

    Full Text Available The paper reviews the conduct of monetary policy in Russia throughout last 10 years. The core method of analysis is ADL modeling. The author explains money supply influence on key macroeconomic variables: investment, consumption, import, inflation, REER. Specifically our results show to what extent GDP growth is determined by money supply growth throughout last 10 years. The author explains efficiency fall of Central Bank expansionary actions throughout last 5 years. The author suggests the set of decisions geared towards increasing the monetary policy efficiency. Ruble devaluation is a key of them. In particular, now the Central Bank of Russia and the Government of the following may be recommended: - gradual devaluation of the ruble by operations in the currency market you with the sterilization of excess money supply; - reduction in the rate of growth of tariffs for electricity, gas, of rail transport to the level of inflation; - reduction in the rate of growth of budget expenditures to the level of inflation. According to the author, these measures will allow monetary policy to revive Russia as an effective tool to stimulate economic growth.

  12. MODELING MONETARY POLICY RULES IN THE MENACOUNTRIES: ISSUES AND EVIDENCE

    Directory of Open Access Journals (Sweden)

    Mohamad Husam Helmi

    2011-07-01

    Full Text Available This paper estimates the monetary policy reaction function for two sets of MENAcountries: The inflation target countries, (Turkeyand Israel and the exchange ratetarget countries, (Jordan and Morocco. We motivateour empirical analysis byanalyzing a simple Taylor rule. This model looks atthe effects of inflation andoutput on setting the interest rate by the centralbank. Furthermore, we extendedour model by adding the exchange rate and the foreign interest rate using similarmodel used by Clarida et al (1998 with using GMM estimator.Findings of this study yield some interesting results,all the central banks in thesample uses interest rate smoothing in managing their monetary policy. Inaddition, The Central bank in Turkey, Israel and Morocco focuses on achievinglow level of inflation. On the other hand, the Monetary Authority in Jordan caresabout stabilizing the output gap. Estimating the extended Taylor rule suggests thehighly significant effect of foreign interest rateon setting the interest rate inTurkey. Taken all together, the results lend support to the importance of followinga rule rather than discretionary in reducing the inflation rate and crediblemonetary policy. In addition, the simple Taylor rule can be applied on MENAcountries but it requires some modification such asadding the exchange rate andthe foreign interest rate.

  13. PROBLEM AND PERSPECTIVE OF ISLAMIC MONETARY POLICY IN INDONESIA

    Directory of Open Access Journals (Sweden)

    Marsuki Marsuki

    2017-03-01

    Full Text Available This article would try to explicate several theoretical and practical concepts on the problems and prospectsof Islamic monetary policy in Indonesia using a critical analysis approach, in accordance with standardscientific references, and would be complemented with descriptions and examples of practice. From theseillustrations and analyses, it appeared that on one hand, Islamic monetary policy would find many difficultiesif implemented fully, considering that there were several fundamental obstacles that would have to besurmounted by such an implementation, primarily the fact that Indonesian Constitution (UUD 1945 was notbased on Islamic law or syariah. On the other hand, despite problems and challenges, the existing conditionwas still open for the possibility for partial implementation of Islamic monetary policy. It was because therewere several conditions which were amenable for an implementation, for instance the facts that majority ofIndonesian population was Muslim, the increasing acceptance of the public for the advantages of Islamicmonetary and financial system, and increasing support by stakeholders of the banking system, especiallythe Indonesian central bank (BI. Moreover, there were facts about financial institutions and existingsyariah banking institutions.

  14. THE ROLE OF MONETARY POLICY IN STIMULATING ECONOMIC GROWTH

    Directory of Open Access Journals (Sweden)

    Егор Николаевич Поляков

    2013-06-01

    Full Text Available The paper reviews the conduct of monetary policy in Russia throughout last 10 years. The core method of analysis is ADL modeling. The author explains money supply influence on key macroeconomic variables: investment, consumption, import, inflation, REER. Specifically our results show to what extent GDP growth is determined by money supply growth throughout last 10 years. The author explains efficiency fall of Central Bank expansionary actions throughout last 5 years. The author suggests the set of decisions geared towards increasing the monetary policy efficiency. Ruble devaluation is a key of them.In particular, now the Central Bank of Russia and the Government of the following may be recommended:- gradual devaluation of the ruble by operations in the currency market you with the sterilization of excess money supply;- reduction in the rate of growth of tariffs for electricity, gas, of rail transport to the level of inflation;- reduction in the rate of growth of budget expenditures to the level of inflation.According to the author, these measures will allow monetary policy to revive Russia as an effective tool to stimulate economic growth.DOI: http://dx.doi.org/10.12731/2218-7405-2013-5-9

  15. Relationship Between Energy Prices, Monetary Policy and Inflation; A Case Study of South Asian Economies

    Directory of Open Access Journals (Sweden)

    Atiq-ur-Rehman

    2014-01-01

    Full Text Available Monetary policy tools, including money supply and interest rate, are the most popular instruments to control inflation around the globe. It is assumed that a tight monetary policy, either in form of reduction in money supply or an increase in interest rate, will reduce inflation by reducing aggregate demand in an economy. However, monetary policy could be counterproductive if cost side effects of monetary tightening prevail. High energy prices may increase the cost of production by reducing aggregate supply in the economy. If tight monetary policy is used to reduce this cost push inflation, the cost side effect of energy prices will add to cost side effects of monetary tightening and will become dominant. In this case, the monetary policy could be counterproductive. Furthermore, simultaneous reduction in aggregate supply and aggregate demand will bring twofold reduction in output. Therefore greater care is needed in the use of monetary policy in the situation of cost push inflation. This article investigates the presence of cost side effect of monetary transmission mechanism, the role of international oil prices in domestic inflation, and implications for monetary policy. The findings suggest that both monetary policy and oil prices have cost side effects on inflation and monetary tightening could be counterproductive if used to reduce energy pushed inflationary trend.

  16. The Realization Mechanism of China's Monetary Policy Objectives: 2001-2010

    Institute of Scientific and Technical Information of China (English)

    Wang Guogang

    2013-01-01

    This article explores the realization mechanism for the final and interim targets of China's monetary policy from 2001 to 2010.It finds that the three significant price surges in the ten years were not the results of loose monetary policy While maintaining rapid economic growth,China avoided the inflation linked with excess monetary supply.The introduction of total new lending in the interim targets also showed the maturing of China's monetary policy target system.To improve China's monetary operation,three measures need to te taken:firstly,basing stabilizing monetary policy on the trend of the non-food price index within the CPI;secondly,readjusting the definition of money according the different characteristics of transaction money and reserve money;and thirdly,including yuan exchange rates into the intermediate objectives of monetary policy.

  17. Expanding Decent Employment in Kenya: The Role of Monetary Policy, Inflation Control, and the Exchange Rate

    OpenAIRE

    Robert Pollin; James Heintz

    2007-01-01

    This IPC Country Study by Robert Pollin and James Heintz examines three policy areas related to monetary policies in Kenya: inflation dynamics and the relationship between inflation and long-run growth; monetary policy targets and instruments; and exchange rate dynamics and the country?s external balance. It concludes with five main policy recommendations

  18. Output gap uncertainty and real-time monetary policy

    Directory of Open Access Journals (Sweden)

    Francesco Grigoli

    2015-12-01

    Full Text Available Output gap estimates are subject to a wide range of uncertainty owing principally to the difficulty in distinguishing between cycle and trend in real time. We show that country desks tend to overestimate economic slack, especially during recessions, and that uncertainty in initial output gap estimates persists several years. Only a small share of output gap revisions is predictable based on output dynamics, data quality, and policy frameworks. We also show that for a group of Latin American inflation targeters the prescriptions from monetary policy rules are subject to large changes due to revised output gap estimates. These explain a sizable proportion of the deviation of inflation from target, suggesting this information is not accounted for in real-time policy decisions.

  19. The monetary policy of the European Central Bank in modern conditions

    Directory of Open Access Journals (Sweden)

    Kavitskaya Irina, L.

    2015-12-01

    Full Text Available The paper presents the monetary policy analysis of the European Central Bank (ECB under the present crisis conditions. The paper systematizes the ECB monetary policy in today's crisis and researches it at different stages of the crisis. A detailed analysis showed that the ECB's monetary policy is significantly different from the actions of other central banks during the current crisis (for example, the Federal Reserve. Thus, the ECB unconventional monetary policy combined with traditional measures, but does not replace them. Often ECB use credit easing instead of quantitative easing. The ECB's monetary policy used not only to combat the financial crisis, such as the Fed, but also to deal with the debt crisis. These features of the ECB’s monetary policy were due to both the institutional characteristics of the European Union, as well as special conditions of flow of the financial crisis in the euro zone.

  20. Impact of monetary policy on the volatility of stock market in pakistan

    OpenAIRE

    Abdul Qayyum; Saba Anwa

    2010-01-01

    This paper addresses the linkages between the monetary policy and the stock market in Pakistan. The estimation technique employed includes Engle Granger two step procedure and the bivariate EGARCH method. The results indicate that any change in the monetary policy stance have a significant impact on the volatility of the stock market. Thus contributing to the ongoing debate in the monetary policy rule literature regarding the proactive and reactive approach.

  1. The Influence of Monetary Policy and Fiscal Policy on the Rural Residents' Consumptionâ «

    OpenAIRE

    Liu, Xinzhi; Li, Lu; Liu, Yusong

    2014-01-01

    This paper conducts an empirical analysis of influence of fiscal expenditure supporting agriculture monetary supply on rural residents’s consumption by adopting a vector auto-regression model, based on the data from 1978 to 2011. The study indicated that: in the short term, fiscal policy is the Granger reason of rural residents’ consumption, monetary policy is not the Granger reason of rural residents’ consumption; in the long term, the comprehensive function of fiscal policy and moneta...

  2. The Impact of Conventional and Unconventional Monetary Policy on Investor Sentiment

    DEFF Research Database (Denmark)

    Lutz, Chandler

    2015-01-01

    This paper examines the relationship between monetary policy and investor sentiment across conventional and unconventional monetary policy regimes. During conventional times, we find that a surprise decrease in the fed funds rate leads to a large increase in investor sentiment. Similarly, when...... the fed funds rate is at its zero lower bound, research results indicate that expansionary unconventional monetary policy shocks also have a large and positive impact on investor mood. Together, our findings highlight the importance of both conventional and unconventional monetary policy...... in the determination of investor sentiment....

  3. Monetary policy change of the Central bank of Poland

    Directory of Open Access Journals (Sweden)

    Kraś Ireneusz

    2015-07-01

    Full Text Available The National Bank of Poland is an institution which, in conjunction with the government is responsible for the implementation of country’s economic policy reinforces its democratic character. Provisions of its operation are governed by the Constitution of The Republic of Poland and by the Act on the National Bank of Poland. To this end, the objective of the present research is to analyse the proposed amendments in the Act on the NBP. The latter concerns the amendment procedures, term of office and the rotations and numbers of Monetary Policy Council. The remaining part of the analyses is dedicated to the issue of dismissal of a MPC’s member in conjunction with the prohibition of occupying other positions, the adoption of the NBP’s financial statements and the separation of instruments of monetary policy’s instruments for stability of domestic financial system. Introduced changes in the proposed draft reduce the independence of the NBP while making it more subject to the Cabinet. Following the result of further consultations on the draft of Act on the NBP, provisions which reduce the independence of the NBP shall be partially removed.

  4. THEORIES OF MONETARY POLICY – FROM THE MERCANTILIST PRAGMATISM TO THE MODERN MONETARY THEORIES

    Directory of Open Access Journals (Sweden)

    Zina CIORAN

    2014-06-01

    Full Text Available The purpose of this article is to perform an incursion into the monetary theories, from the mercantilists to the modern theories. The monetary area is an important component of the economic system which has always been and still is tormented by anxiety and uncertainty. The currency can be considered a barometer that promptly and precisely registers a country’s economic oscillations and the fundamental problems that torment the human society nowadays is mainly expressed in monetary terms. Being one of the major tools the state uses to balance the economy, the monetary politics has permanently generated fervent controversies and discussions. Scientific research of the monetary phenomenon, facing the complexity of the currency problems with a diversity of currency types and with the complex currency role within the company, as well as the explosive evolution of the financial institutions, structures and monetary and financial products has always kept the monetary theory in the beginning of a new research program. The monetary theory center, around which the economists‘ thinking is founded, is formed of: emphasizing the money role in the economy, the money measurement, the money offer and request with their influence factors, the monetary balance theory, the monetary impulse transition modality as well as the monetary behavior on the part of the economic agents. It was established that each economical thinking movement marked the social, economical and political life for a certain amount of time, each school has criticized or supported their predecessors’ ideas contributing to the enrichment of the monetary theory and the economic development, implicitly.

  5. Monetary Policy Transmission and Firms’ Investment: Evidence From the Manufacturing Sector of Pakistan

    Directory of Open Access Journals (Sweden)

    Arslan Majeed

    2017-12-01

    Full Text Available This study explores the effects of monetary policy on firms’ business fixed investment spending through the interest rate and broad credit channels of monetary policy transmission mechanism in Pakistan. Due to the problem of endogeneity, Generalized Method of Moments (GMM two step estimation technique is applied on neo-classical investment model by using disaggregated firm level data of manufacturing sector of Pakistan over the period 1974-2010. The results suggest the relevance of both the interest rate and broad credit channels in Pakistan. Firms’ investment found to be negatively affected by the monetary contraction while positively influenced by cash flow and the sales. Small firms explored to be more sensitive to the monetary tightening as compared to large firms indicating that monetary policy exerts heterogeneous effects. Results highlight the importance of considering the financial conditions of the firms in formulation of monetary policy.

  6. Economic policy of the monetary authorities as factor of achievement of abstract financial stability

    Directory of Open Access Journals (Sweden)

    Tashtamirov M.R.

    2016-11-01

    Full Text Available this article is devoted to the questions of the crisis phenomena in Russian economy in sector of a monetary and credit system and a role of economic policy of the monetary authorities (Bank of Russia in ensuring financial stability. Short assessment of the main macroeconomic indicators of the country economy is given. The author is describing the actions of economic management regarding monetary control. It is inexpedient that the Central Bank for carrying out the tough restriction policy directed to oppression of economic development and further primitivizing of national economy. It is offered to transform monetary policy for ensuring anti-recessionary actions exiting the stagnating condition.

  7. The implications of structural asymmetries for monetary policy and welfare in a small open economy: a linear quadratic framework

    Czech Academy of Sciences Publication Activity Database

    Rychalovska, Yuliya

    -, č. 380 (2008), s. 1-56 ISSN 1211-3298 R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:AV0Z70850503 Keywords : DSGE models * non-traded goods * optimal monetary policy Subject RIV: AH - Economics http://www.cerge-ei.cz/pdf/wp/Wp380.pdf

  8. Monetary Policy Shocks and Stock Returns Reactions: Evidence ...

    African Journals Online (AJOL)

    SIPHAMBE, H.K. (PROF.)

    context is useful to both monetary authorities and investors. ... they should target stock prices or use stock price information as indicators of the monetary ... current account transactions, with remaining controls on the capital account eliminated ...

  9. EFFECTIVENESS AND LIMITATIONS OF MONETARY POLICY INSTRUMENTS IN ROMANIA AND THE EUROPEAN UNION

    Directory of Open Access Journals (Sweden)

    Zina CIORAN

    2014-12-01

    Full Text Available The complexity of the monetary phenomenon as well as the effects that it induces in the social and economic life of the countries around the world have represented and still represent the subject of much controversy and dispute. The current forms of the monetary circulation organization in different countries, internationally as well, represent the result of a continuous process of changes and innovations in the monetary area. The purpose of this article is to present aspects of the monetary policy and its instruments which have evolved according to the historical conditions of each period. The paper is also a presentation of effectiveness and limits of the monetary policy instruments and their role in solving the current economic problems for which the governments seek solutions. As a consequence to the analysis, it can be seen that in most cases it uses a mixture of monetary policy instruments because, when acting in a complementary way, they have a higher efficiency.

  10. Markov Switching Monetary Policy in a two-country DSGE model

    NARCIS (Netherlands)

    Mavromatis, K.

    2013-01-01

    Using real-time data for the US and the Eurozone I find evidence in favor of 1) regime changes in US monetary policy since 1999 and 2) the fact that the responses inflation and output in the Eurozone are sensitive to the regime of US monetary policy. I examine this case theoretically through the

  11. Markov switching monetary policy in a two-country DSGE model

    NARCIS (Netherlands)

    Mavromatis, K.

    2012-01-01

    In this paper I show, using both empirical and theoretical analysis, that changes in monetary policy in one country can have important e.ects on other economies. My ew empirical evidence shows that changes in the monetary policy behaviour of the Fed since the start of the Euro, well captured by a

  12. Credit supply and monetary policy : Identifying the bank balance-sheet channel with loan applications

    NARCIS (Netherlands)

    Jimenez Porras, G.; Ongena, S.; Peydro, J.L.; Saurina, J.

    2012-01-01

    We analyze the impact of monetary policy on the supply of bank credit. Monetary policy affects both loan supply and demand, thus making identification a steep challenge. We therefore analyze a novel, supervisory dataset with loan applications from Spain. Accounting for time-varying firm

  13. A SHARIA RETURN AS AN ALTERNATIVE INSTRUMENT FOR MONETARY POLICY

    Directory of Open Access Journals (Sweden)

    Ashief Hamam

    2011-09-01

    Full Text Available Rapid development in Islamic financial industry has not been supported by sharia monetary policy instruments. This study looks at the possibility of sharia returns as the instrument. Using both error correction model and vector error correction model to estimate the data from 2002(1 to 2010(12, this paper finds that sharia return has the same effect as the interest rate in the demand for money. The shock effect of sharia return on broad money supply, Gross Domestic Product, and Consumer Price Index is greater than that of interest rate. In addition, these three variables are more quickly become stable following the shock of sharia return. Keywords: Sharia return, islamic financial system, vector error correction modelJEL classification numbers: E52, G15

  14. Financial stability, monetary policy and budgetary coordination in EMU

    Directory of Open Access Journals (Sweden)

    Claudiu Tiberiu ALBULESCU

    2012-08-01

    Full Text Available A series of recent studies analyze the impact of financial crisis on the fiscal soundness in the Euro area countries. Even if their documented results present the transmission mechanisms of the financial instability toward the fiscal sector, a more realistic problem is related to the contribution of the fiscal and budgetary disequilibrium to the financial instability propagation. In this line, we show, based on a simple econometric model, that, beside the expansionary monetary policy, the budgetary deficit conducts to the financial stability deterioration. The financial stability of the Euro area is measured based on an aggregate financial stability index, constructed by employing the IMF methodology used for the financial stress index.

  15. The Interaction of Monetary and Fiscal Policy in the Countries of the Visegrad Group

    Directory of Open Access Journals (Sweden)

    Jan Janků

    2014-01-01

    Full Text Available Coordination of or at least absence of conflict between monetary and fiscal policies are key to the successful implementation of economic policy. The article aims to use reaction functions to assess whether the monetary and fiscal policies in the countries of the Visegrad Group are in coordination or in conflict and which variables influence their decisions. The central bank is the representative of monetary policy, which has interest rates as its instrument, and the government as the representative of the fiscal policy which has change revenue or spending as a share of GDP as instrument. To obtain the results, multivariate regression analysis is used. The research period is based on quarterly observations from first quarter of 2000 to the fourth quarter of 2012. Stabilizing role of monetary policy and in some countries also partially stabilizing role of fiscal policy has been found. Another result was that in the case of the Czech Republic, Slovakia and Poland, monetary policy appears to play the dominant role, whereas fiscal policy plays dominant role in Hungary. In the case of Slovakia, some different results may be due to Slovakia’s participation in ERM II, which led to the monetary policy, in addition to maintaining price stability, also aiming to maintain a fixed exchange rate and the subsequent entry of Slovakia into the Eurozone and the de facto loss of autonomous monetary policy.

  16. The reaction of bank lending to monetary policy in Brazil

    Directory of Open Access Journals (Sweden)

    Tony Takeda

    2005-03-01

    Full Text Available This paper evaluates the relevance of the "bank lending channel'' of monetary policy transmission in Brazil. Disaggregated monthly data of the Brazilian banks balance sheets from December 1994 to December 2001 are analyzed. In addition to the short-term interest rate, we consider the effects of another monetary policy instrument frequently used in Brazil, represented by reserve requirements on overall banks deposits - demand, savings, and time deposits. Dynamic panel data techniques are employed. Our results suggest that the impact of reserve requirements is relevant and stronger for larger banks loans. This finding results from the progressive reserve rates required from banks, which affect to a greater extent banks with larger deposit volumes.Este artigo avalia o canal de empréstimos bancários na transmissão da política monetária. A análise foca os dados mensais desagregados do balanço patrimonial dos bancos comerciais brasileiros de dezembro de 1994 a dezembro de 2001. Em adição à taxa básica de juros de curto prazo, este estudo considera também os efeitos de um outro instrumento de política monetária usado freqüentemente no Brasil, representado pelos recolhimentos compulsórios sobre os depósitos à vista, de poupança e a prazo. A partir de técnicas de análise de dados em painel dinâmico, os resultados dos testes sugerem que o impacto dos compulsórios é relevante e é mais forte sobre os empréstimos dos grandes bancos, conclusão que decorre de recolhimentos compulsórios de caráter progressivo, que afetam mais fortemente os bancos com maiores volumes de depósitos.

  17. The Formation of New Monetary Policies: Decisions of Central Banks on the Great Recession

    Directory of Open Access Journals (Sweden)

    Ana Esther Castro

    2014-05-01

    Full Text Available The effect that the Great Recession had on monetary policies has led to the profound reorientation of central banks’ actions from 2007 to 2013. The purpose of this work is to analyze the monetary policies applied by the main central banks, mainly the European Central Bank, the Federal Reserve System of USA and the Bank of Japan, in order to raise thoughts on the guidelines that central banks should follow in the future. In the first section the bases of monetary policy before the crisis are described; in the second we explain the change in the orientation of the role of central banks during the crisis; and finally, we synthesize the bases on which the economic debate is taking place on the orientation of future monetary policies. We conclude that, in so far as the inoperativeness of transmission mechanisms still persists, monetary policies will remain in a process of change.

  18. Learning, Inflation Reduction and Optimal Monetary Policy

    NARCIS (Netherlands)

    Schaling, E.

    2003-01-01

    In this paper we analyze disinflation in two environments.One in which the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector inflation expectations are generated, and one in which the central bank has to learn the private sector

  19. The Narrative Approach for the Identification of Monetary Policy Shocks in a Small Open Economy

    OpenAIRE

    Eleni Angelopoulou

    2007-01-01

    This paper reviews 22 years of UK monetary policy in the pre-inflation targeting period (1971-1992) using official record from the Bank of England Quarterly Bulletin. A transparent definition of policy episodes is used. The empirical analysis shows that output displays the usual hump-shaped response after a shock to the policy indicator. All variables display theory-consistent behaviour. Monetary policy and exchange rate volatility are found to cause substantial output fluctuation in a four y...

  20. MODERN APPROACHES TO THE IMPLEMENTATION OF MONETARY POLICY AND THE REGULATION OF FINANCIAL SYSTEMS

    Directory of Open Access Journals (Sweden)

    Radu CUHAL

    2013-01-01

    Full Text Available This study determines the modern approaches to the implementation of monetary policy and regulation of financial systems. Set of measures to prevent and overcome the financial crisis is grounded taking into consideration different areas of research and the IMF. New tasks of monetary policy in central banks are specified and they are intended to ensure the financial stability of the state (within the common fiscal policy. The main directions of elaboration and implementation of new monetary policy mechanism, which is intended to ensure the effective solution of problems in macro prudential supervision and financial stability, are examined.

  1. Modern approaches to the implementation of monetary policy and the regulation of financial systems

    Directory of Open Access Journals (Sweden)

    Basistîi Nicolae

    2013-01-01

    Full Text Available This study determines the modern approaches to the implementation of monetary policy and regulation of financial systems. Set of measures to prevent and overcome the financial crisis is grounded taking into consideration different areas of research and the IMF.New tasks of monetary policy in central banks are specified and they are intended to ensure the financial stability of the state (within the common fiscal policy.The main directions of elaboration and implementation of new monetary policy mechanism, which is intended to ensure the effective solution of problems in macro prudential supervision and financial stability, are examined.

  2. Financial Constraints and the Response of Business Investment to Monetary Policy Shocks

    Directory of Open Access Journals (Sweden)

    Haase Timothy J.

    2016-09-01

    Full Text Available In this study I investigate what impact monetary policy shocks have on firms’ fixed investment, the less liquid portion of gross investment that requires more planning. I account for firms facing financial constraints firms by utilizing a common measure of asset size, which is used in previous literature. I use two exogenous, continuous series of monetary policy shocks to show that constrained firms have statistically different responses to policy than unconstrained firms. Specifically, I find that constrained firms’ fixed investment significantly responds more to monetary policy shocks than unconstrained firms.

  3. Monetary policy and bank behavior: Empirical evidence from India

    OpenAIRE

    Ghosh, Saibal

    2006-01-01

    The paper develops an empirical model to explore the role that bank characteristics play in influencing the monetary transmission process. Employing data on Indian commercial banks for the period 1992-2004, the findings indicate that for banks classified according to size and capitalization, a monetary contraction lowers bank lending, although large and well-capitalized banks are able to shield their loan portfolio from monetary shocks.

  4. Interest rate transmission mechanism of monetary policy in the selected EMU candidate countries

    Directory of Open Access Journals (Sweden)

    Mirdala Rajmund

    2009-01-01

    Full Text Available The stable macroeconomic environment, as one of the primary objectives of the Visegrad countries in the 1990s, was partially supported by the exchange rate policy. Fixed exchange rate systems within gradually widen bands (Czech Republic, Slovak Republic and crawling peg system (Hungary, Poland were replaced by the managed floating in the Czech Republic (May 1997, Poland (April 2000, Slovak Republic (October 1998 and fixed exchange rate to euro in Hungary (January 2000 with broad band (October 2001. Higher macroeconomic and banking sector stability allowed countries from the Visegrad group to implement the monetary policy strategy based on the interest rate transmission mechanism. Continuous harmonization of the monetary policy framework (with the monetary policy of the ECB and the increasing sensitivity of the economy agents to the interest rates changes allowed the central banks from the Visegrad countries to implement monetary policy strategy based on the key interest rates determination. In the paper we analyze the impact of the central banks' monetary policy in the Visegrad countries on the selected macroeconomic variables in the period 1999-2008 implementing SVAR (structural vector autoregression approach. We expect that higher sensitivity of domestic variables to interest rates shocks can be interpreted as a convergence of monetary policies in candidate countries towards the ECB's monetary policy.

  5. Impact of Monetary Policy and Fiscal Policy on Indonesian Stock Market

    Directory of Open Access Journals (Sweden)

    Rossanto Dwi HANDOYO

    2015-05-01

    Full Text Available This paper attempts to investigate the effect of fiscal and monetary policy on Indonesian Stock price as well as main sectors stock price such as agricultural, mining, manufacture, and financial sector indexes. We consider the world oil price as a foreign variable that will influence domestic economy as in regular small open economy model. In this paper, we employ the Monte Carlo algorithm to Near-SVAR models (If some of the VAR equations have regressors not included in the others. We find that there is a positive stock price response to monetary policy shock both aggregated and sectoral stock price. In term of interaction between fiscal policy shock and stock market, we find that all sectors respond negative relationship. From this empirical finding, fiscal policy crowd out private sector activity in market, thus, its effect will be impotent in economy. We also provide the evidence that not only both policies are able to influence the stock price individually, but also the interaction between monetary and fiscal policy is important in explaining stock market performance.

  6. The Long-Run Effects of the Fed’s Monetary Policy on the Dynamics among Major Asset Classes

    Directory of Open Access Journals (Sweden)

    Miao Jia

    2016-09-01

    Full Text Available It is well known that government monetary policies significantly impact financial markets. There have been numerous studies examining the relationship between monetary policy and the prices of financial assets, including equities and bonds. Little, however, has been done to explore the impact of major financial assets on changes in monetary policies.

  7. The effect of monetary policy of Central Bank on activities of Tehran Stock Exchange

    Directory of Open Access Journals (Sweden)

    Hossein Vazifehdust

    2013-08-01

    Full Text Available This paper examines the relationship between monetary policy and activity of the Tehran Stock Exchange. The statistical population of the research consists of all companies listed in Tehran Stock Exchange and central bank monetary policy variables including time series generated by the central bank seasonally. For the purpose of data analysis, econometric autoregressive system models, and two-stage ADF regression with unit roots test, co-integration and reliability were used to determine level of effect and type of effect of the four components of monetary policy on exchange activity. The results of this study show that there is a strong relation between share price index and monetary policy variables and between monetary policy variables and trading volume. However, the relation between monetary policy variables and cash yield index was not so strong, but monetary policy variables’ effect on stock exchange activity was acceptable considering strong relation between the two first variables. It is suggested that if this work is done using non-linear models, it will yield better results.

  8. Temporary oil production, current account deterioration and the role of monetary and fiscal policy

    International Nuclear Information System (INIS)

    Harvie, C.

    1992-01-01

    This paper extends earlier work on the macroeconomic adjustment processes arising for an economy experiencing a temporary period of oil production. Emphasis is placed on developments in the current account, as reflected in foreign asset stock movements, after oil production ceases, as well as on the role that monetary, fiscal or fiscal/monetary policy can play in influencing current-account developments during this same period. The results presented suggest that, to improve the performance of the current account, irrespective of the wage adjustment mechanism operative, after oil production ceases, the major thrust of macroeconomic policy should operate through fiscal rather than monetary policy. However developments in non-oil output would be influenced by the wage adjustment mechanism. With wage indexation, a tight fiscal policy after oil production ceases leads to a higher level of non-oil output than in the no policy response case, or one where monetary policy alone is used. With no wage indexation, the use of monetary and/or fiscal policy leads to lower levels of non-oil output. The use of fiscal policy also has the added benefit of contributing to a lower consumer price level, again irrespective of the operative wage adjustment mechanism. If the emphasis of policy operates through monetary policy, irrespective of the wage adjustment mechanism, the current-account problem will be exacerbated since foreign assets stocks will be lower. In addition, non-oil output and consumer prices will be lower. (Author)

  9. Financial structure and monetary policy transmission in transition countries

    NARCIS (Netherlands)

    Elbourne, A.; de Haan, J.

    Using the structural vector autoregressive methodology, we present estimates of monetary transmission for the new and future EU member countries in Central and Eastern Europe. Unlike most previous research we include ten transition countries. We examine to what extent monetary transmission in these

  10. Monetary Policy in Small Open Economies: The Role of Exchange Rate Rules

    OpenAIRE

    Santacreu, Ana Maria

    2015-01-01

    Understanding the costs and benefits of alternative monetary policy rules is important for economic welfare. Within the context of a small open economy model and building on the work of Mihov and Santacreu (2013), the author analyzes the economic implications of two monetary policy rules. The first is a rule in which the central bank uses the nominal exchange rate as its policy instrument and adjusts the rate whenever there are changes in the economic environment. The second is a standard int...

  11. The impact of Monetary Policy on the economic growth of Nigeria ...

    African Journals Online (AJOL)

    Studies show that CBN Monetary Policy measures are effective in regulating both the monetary and real sector aggregates such as employment, prices, level of output and the rate of economic growth. Empirical findings from this study indicate that average price and labour force have significant influence on Gross Domestic ...

  12. International Monetary Policy Coordination in a New Keynesian Model with NICE Features

    Science.gov (United States)

    Poutineau, Jean-Christophe; Vermandel, Gauthier

    2018-01-01

    The authors provide a static two-country new Keynesian model to teach two related questions in international macroeconomics: the international transmission of unilateral monetary policy decisions and the gains coming from the coordination monetary rules. They concentrate on "normal times" and use a thoroughly graphical approach to…

  13. Firm Size and Monetary Policy Transmission: A Theoretical Model on the Role of Capital Investment Expenditures

    NARCIS (Netherlands)

    Raabe, K.; Arnold, I.; Kool, C.J.M.

    This paper presents a dynamic investment model that explains differences in the sensitivity of small- and large-sized firms to changes in the money market interest rate. In contrast to existing studies on the firm size effects of monetary policy, the importance of firms as monetary transmission

  14. Monetary Policy of the Federal Reserve System from the Perspective of Exit Strategies

    Directory of Open Access Journals (Sweden)

    Aleksandra Nocoń

    2015-07-01

    Full Text Available Central banks, after the experience of the global financial crisis, are now starting the implementation of the exit strategies, which are the process of normalization of monetary policy. The pace of monetary policy normalization process depends on the market reaction to central bank's decisions and macroeconomic conditions, in which they will be implemented. The main aim of the study is to present the principles of the exit strategy of the Federal Reserve System (Fed, on the background of the changes that have occurred in the United States within the monetary policy during the global financial crisis.

  15. Does financial inclusion affect monetary policy in SAARC countries?

    Directory of Open Access Journals (Sweden)

    Sanjaya Kumar Lenka

    2016-12-01

    Full Text Available Alike the role of heart for human body, finance is the focal point of an economy, whereas savings and investment are its tubes and vessels. Hence, a solid financial system is a fundamental character of an enduring economy. The frozen financial system endures longer if its foundation is concrete and subsists in the people of grass-root level. They are those, who live in villages and small towns, earn meager income, work in primary sector, spend more on food, and have lesser social securities. In this setting, the process of bringing these people into the main stream of financial activities is called financial inclusion. This study describes the impact of financial inclusion on monetary policy of South Asian Association for Regional Cooperation (SAARC countries from 2004–2013. The study uses principal component analysis (PCA to construct a Financial Inclusion Index that serves as a proxy variable for the accessibility of financial inclusion in the SAARC countries. Adding to it, three different models like FEM, REM, and Panel-corrected standard errors are used for the analysis. In this study, an empirical result of generalized least square(GLS estimation shows that financial inclusion, exchange rate, and interest rate are negatively associated with inflation in SAARC countries.

  16. Fiscal and Monetary Policy for The Development of Indonesian Plantation

    Directory of Open Access Journals (Sweden)

    Suharyadi Suharyadi

    2011-09-01

    Full Text Available The global monetary crisis in 2007-2008 and the focus of development on climate changesmake it important to promote a healthy economic growth based on the local resources, Theeconomic crisis, which has slowed down the economic growth and has caused job losseswhich result in increasing unemployment and poverty, should alter the focus of Indonesianeconomic development in the future to be based on renewable and sustainable local resources.Indonesia is an agricultural and maritime country so these two aspects should be thecore of the growth. In agricultural culture, plantation sector is the source of sustainable economicgrowth because of its geographical, demographic, and cultural potentials. The problemsin plantation sector are the low growth of areas and productivity as well as its limitedend-products. The research findings indicated that in order to increase areas, there should bea guarantee on investment, interest rate, and little retribution or good governance. To increaseproductivity, we need a guarantee on fertilizer price, interest rate, and wages, as wellas pricing factors to avoid market distortion. This is very important relating to the economicstimulus policy which is essential to revitalize from the economic doom in the future.Keywords: plantation sector, area, productivity, investment, interest rate, and wages

  17. Customs unions, currency crises, and monetary policy coordination: The case of the Eurasian Economic Union

    Directory of Open Access Journals (Sweden)

    Evgeny Vinokurov

    2017-09-01

    Full Text Available After achieving substantial progress in establishing a common customs territory and regulations, customs unions face potential disruptions due to a lack of monetary policy coordination. These disruptions might appear in the form of currency shocks and the ensuing trade conflicts. We approach this issue by looking at the case of the Eurasian Economic Union (EAEU. The volatility of national currencies in 2014–2015 resulted in sizable shifts in competitiveness, culminating in a currency crisis in some member states. This raises the questions of how to gradually achieve a more coordinated monetary policy, what monetary policy options are available, and what would be their relative impact on macroeconomic stability. Using a set of modeling tools and econometric models, we review three monetary regimes, which represent moves from fully independent exchange rate policy through increased policy coordination to joint exchange rate setting.

  18. Rules and Discretion in Monetary Policy: Is the Response of the Stock Market Rational?

    Directory of Open Access Journals (Sweden)

    Ion-Iulian MARINESCU

    2015-04-01

    Full Text Available We investigate the effects of the monetary policy conduct on the domestic capital market for a sample of developed countries where the capital market plays a significant role in the economy. We break down the policy rate innovations in rules-based and discretionary components in order to determine the degree of prudentiality in the monetary policy conduct and we study their accounts with respect to capital market rationality. The rules-based component is determined using an interpolated vanilla Taylor-rule policy rate at the event date and the discretionary component is obtained by subtracting the rules-based rate from the target monetary policy rate innovation. Using an event study approach, we analyze the impact of monetary policy components on the returns of the stock market and we determine that the conduct of the monetary policy can cause irrational responses of the capital market. More than that, we show, for the analyzed countries, that if the general level of discretion in the monetary policy is high the response of the stock market becomes increasingly erratic, indicating that forward guidance may help reduce uncertainty on capital markets.

  19. Monetary Policy Delelgation and Transparency of Policy Targets: A Positive Analysis

    Science.gov (United States)

    2011-06-01

    neoclassical time- inconsistency framework, monetary policy is modeled as a two-stage game between the private sector and the central bank as...simple neoclassical model and keep it to a minimum complexity which suffices to derive the results. The applied game-theoretic framework stands in the...accountability may imply that central banks choose lo be opaque. Applying the theory of bureau- cracy to the ECB. Forder (2002) argues that central banks

  20. The Vietnamese lending rate, policy-related rate, and monetary policy post-1997 Asian financial crisis

    Directory of Open Access Journals (Sweden)

    Chu V. Nguyen

    2015-12-01

    Full Text Available Asymmetries in the Vietnamese lending central bank’s policy-related rate spread were documented. Empirical results revealed that the spread adjusts to the threshold faster when the central bank’s policy-related rates decrease relative to the lending rates than when the central bank’s policy-related rates move in the opposite direction. Additionally, the empirical findings indicate that Vietnamese commercial banks exhibit competitive rate setting behavior which may be attributable to graft maximization by bank’s management. The results also show bidirectional Granger causality between the Vietnamese lending rate and the central bank’s policy-related rate, indicating that the lending rate and the central bank’s policy-related rate affect each other’s movements. These results suggest that monetary authority can use its countercyclical monetary policy instruments to achieve its macroeconomics objectives. However, the estimation results of the GARCH (2, 3-in-Mean model suggest that they should intervene more frequently and by small policy measures to minimize the conditional variance of the spread to minimize the magnitude of the cycle of the lending rate.

  1. Financial Stability and Monetary Policy: Need for International Surveillance

    OpenAIRE

    Gary Hufbauer; Daniel Danxia Xie

    2010-01-01

    In this article, we propose a new monetary framework that defines a broader set of assets, De Facto Money (DFM), as the benchmark for improving financial stability. DFM is defined as traditional monetary aggregates plus other liquid assets such as stocks and bonds. Empirical evidence for the USA, other Organisation for Economic Co-operation and Development countries, and a few emerging countries lends strong support for the connection between exceptionally fast growth of DFM and subsequent fi...

  2. Talking about monetary policy: the virtues (and vice?) of central bank communication

    OpenAIRE

    Alan Blinder

    2009-01-01

    Central banks, which used to be so secretive, are communicating more and more these days about their monetary policy. This development has proceeded hand in glove with a burgeoning new scholarly literature on the subject. The empirical evidence, reviewed selectively here, suggests that communication can move financial markets, enhance the predictability of monetary policy decisions, and perhaps even help central banks achieve their goals. A number of theoretical drawbacks to greater communica...

  3. The Implementation of Monetary Policy in an Emerging Economy: The Case of Chile

    OpenAIRE

    Christian A Johnson; Rodrigo Vergara

    2005-01-01

    Central bank authorities base implementation of monetary policy on an analysis of multiple variables known as monetary policy indicators. In a small open economy such as Chile, these indicators may include in-flation misalignments, unemployment, GDP growth, money growth, the current account balance, exchange rate volatility and international re-serves. A neural network approach is used to establish the correspond-ing weights considered by the Board of the Central Bank of Chile dur-ing the per...

  4. The Bank of Canada's Monetary Policy Framework; Have Recent Changes Enhanced Central Bank Credibility?

    OpenAIRE

    Takatoshi Ito; Brenda Gonzalez-Hermosillo

    1997-01-01

    In recent years the Bank of Canada has made important changes in the way it conducts monetary policy. In particular, the bank has adopted explicit inflation targets and introduced significant changes to its operational framework designed to increase transparency and reduce market uncertainty. This paper examines the key issues associated with the recent changes in the Bank of Canada’s monetary policy framework and analyzes various indicators of central bank credibility.

  5. Is the quantity of government debt a constraint for monetary policy?

    OpenAIRE

    Mitra, Srobona

    2015-01-01

    This paper derives an interest rate rule for monetary policy in which the interest rate response of the central bank toward an increase in expected inflation falls as debts increase beyond a certain threshold level. A debt-constrained interest rate rule and the threshold level of debt are jointly estimated for Canada during the first decade of its inflation targeting regime of the 1990s. There are three main findings of this paper. First, a high government debt could constrain monetary policy...

  6. Monetary policy, bank size and bank lending: evidence from Australia(new version)

    OpenAIRE

    liu, luke

    2012-01-01

    This study explores how monetary policy changes flow through the banking sector in Australia. Drawing on data between 2004 and 2010, we divide banks into three groups according to their size, and examine the impact of cash rate change on lending of different types of loans. We found the response of bank lending after a monetary policy change varies with the size of the bank as well as the types of loan.

  7. Implementation of Monetary Policy: How Do Central Banks Set Interest Rates?

    OpenAIRE

    Benjamin M. Friedman; Kenneth N. Kuttner

    2010-01-01

    Central banks no longer set the short-term interest rates that they use for monetary policy purposes by manipulating the supply of banking system reserves, as in conventional economics textbooks; today this process involves little or no variation in the supply of central bank liabilities. In effect, the announcement effect has displaced the liquidity effect as the fulcrum of monetary policy implementation. The chapter begins with an exposition of the traditional view of the implementation of ...

  8. EXPANSIONARY MONETARY POLICY AND THE OPPORTUNITIES FOR RESURGENCE OF INVESTMENT GROWTH IN UKRAINE

    Directory of Open Access Journals (Sweden)

    A. Ignatyuk

    2014-12-01

    Full Text Available This article is analyzed the basic tools of the expansionary monetary policy and its impact on investment growth. It is proposed transformation of monetary policy to activate the innovation processes, in particular by introducing macro-prudential limitations of investment alternatives for the population and strengthening the role of banks with state capital. In article is suggested the methods of National bank, together with the Government to stimulate investment by the use of the allocation of funds through the instruments of monetary expansion.

  9. MONEY: FROM STATISTICAL DEFINITION TO MONETARY POLICY FOR ADOPTING EURO.

    Directory of Open Access Journals (Sweden)

    Zapodeanu Daniela

    2011-07-01

    Full Text Available Abstract: The evolution of monetary aggregates is closely related to the economic cycle, especially the evolution of GDP. The study aims to analyse the primary monetary aggregates (M1, the secondary (M2 and the tertiary (M3 in three Central and Eastern European countries: Romania, Bulgaria and Poland. The countries were chosen as follows: Romania and Bulgaria on the basis of the economic and geographical closeness and Poland as a benchmark for the first group. The data used are money supply, monetary aggregates: primary, secondary and tertiary, in Romania, Poland and Bulgaria, for the period January 2004 - March 2011, the monthly series are obtained from central bank websites, Poland's Central Bank and Bulgarian National Statistical Institute. The evolution of monetary aggregates of the three countries was compared with the Euro area and it was noticed a high degree of similarity between countries more developed economically as compared to less developed countries. From the viewpoint of optimum currency areas, it is necessary that the countries that adopt the Euro would respond symmetrically to external shocks and also have similar economic behaviour. Our study aims, in this respect, to analyse the components and the characteristics of the monetary aggregates, as well as the trends existing within them. The analysis of the correlation between monetary aggregates will show how the way in which the monetary mass and aggregates behave and which the sense of connection established between these countries is. We find that Romania and Bulgaria have a similar comportment, the correlation between these being the highest, we observe some differences between Romania and Bulgaria versus Poland.

  10. Monetary-Fiscal-Trade Policy and Economic Growth in Pakistan: Time Series Empirical Investigation

    Directory of Open Access Journals (Sweden)

    Syed Tehseen Jawaid

    2011-01-01

    Full Text Available This study empirically examines the effect of monetary, fiscal and trade policy on economic growth in Pakistan using annual time series data from 1981 to 2009. Money supply, government expenditure and trade openness are used as proxies of monetary, fiscal and trade policy respectively. Cointegration and error correction model indicate the existence of positive significant long run and short run relationship of monetary and fiscal policy with economic growth. Result also indicates that monetary policy is more effective than fiscal policy in Pakistan. In contrast, trade policy has insignificant effect on economic growth both in the short run and in the long run. In light of the findings, it is suggested that the policy makers should focus more on monetary policy in order to ensure economic growth in the country. It is also recommended that further research should be conducted to find out such components of exports and imports which lead to the ineffectiveness of trade policy to enhance economic growth in Pakistan.

  11. THE CRUCIAL ROLE OF CENTRAL BANK TRANSPARENCY IN ASSESSING THE MONETARY POLICY COMMITTEE MECHANISM

    Directory of Open Access Journals (Sweden)

    Dumiter Florin Cornel

    2012-12-01

    Full Text Available In the past, central banks used to be very reserved regarding their activities, strategies and monetary policy decisions and actions. As central banks become more and more independent, transparency gained importance based upon accountability arguments. An important fact for adopting an increasing central bank transparency lies in its importance of influencing the development of expectations. The concept of central bank transparency has emerged in the economic literature relatively later than some other key concepts. The widespread agreement of an inflation targeting regime and a more transparent central bank is desired by the most central banks around the world in the context of the need of the public disclosure of macroeconomic models, the quarterly time series for indicators like: inflation, output, budgetary deficit, public debt, interest rate, inflation expectations, the public announcement of the monetary policy decisions, objectives and targets, the publication of some key monetary tools like: inflation report, financial stability report, monetary policy committee report, annual report. These are all key issues in the construction of a more transparent and independent central bank in the context of a good global governance. Moreover, for the fruitful success of the central bank, latum sensu, and monetary policy, stricto sensu, it must be encompassed a complex monetary policy committee mechanism. This complex mechanism must by edowed with the collegial approach of the monetary policy committee, structure of the voting mechanism within the committee, the importance of the person which announces the changes within the interest rates and the public disclosure of these information’s enriched in a communication strategy. This communication strategy is very important for assessing and public understanding of the central bank’s actions but also for communicating the objectives, targets and forward looking approaches of the monetary

  12. Non-Standard Monetary Policies Implemented By The European Central Bank After The Financial Crisis

    Directory of Open Access Journals (Sweden)

    Meryem Filiz Baştürk

    2017-07-01

    Full Text Available The financial crisis which began in the U.S. in 2007 influenced all economies on a global scale followingthe collapse of Lehman Brothers in September 2008. As a response to the crisis, central banksstarted to implement non-standard monetary policy tools as well as short-term interest rates alsoknown as standard policy tools in order to help monetary policy transmission channels work effectively.The European Central Bank (ECB implemented non-standard monetary policies as in additionto the standard policy tools during this period. The non-standard monetary policies introducedby the ECB were different from those implemented by other central banks (Fed, Bank of England interms of implementation and results. Firstly, the policies of the ECB were not specific to one singlecountry. Secondly, the banking system was the major source of finance in Europe, which had an impacton the policies. In this regard, the ECB introduced a policy of enhanced credit support consistingof five main elements in order to maintain price stability over the medium term following the crisis.By 2010, public debt in some member countries of the European Union reached high levels, requiringthem to take additional measures. The Securities Markets Programme was introduced to that end.Initially focusing on the debt securities of Greece, Ireland, and Portugal, the Securities Markets Programmewas expanded in August 2011 to cover the debt securities of Italy and Spain. In addition, twoLong-term Refinancing Operations (LTROs were introduced. This article presents a descriptive analysisof the non-standard monetary policy tools introduced by the ECB following the financial crisis.However, the monetary policy implemented in the Euro zone is not specific to one single country, andevery country has a different financial structure, both of which limit the effectiveness of the policiesimplemented. The changing structure of the monetary policy implemented in the aftermath of the crisisaims to

  13. Anti-crisis monetary policy on the example of selected central banks in 2007-2011

    Directory of Open Access Journals (Sweden)

    Łukasz Kluczyński

    2015-04-01

    Full Text Available The purpose of this article was to present the actions of the monetary authorities in the light of the recent financial crisis. Destabilization of global markets and the economic recession that began with the collapse of Lehman Brothers meant that the standard monetary policy emerged ineffective in combating the crisis. The article shows how two major central banks of the world that is, the FED and the ECB, through modifying the existing instruments of monetary policy and the introduction of completely new tools tried to restore liquidity in the financial markets, after the standard monetary policy instruments have been insufficient and ineffective. In contrast, activities of the NBP also shown, which were primarily preventive aspect.

  14. Fiscal and monetary policies in the South Pacific Island countries: an evaluation.

    Science.gov (United States)

    Jayaraman, T K

    2000-06-01

    This paper evaluates the fiscal and monetary policies of South Pacific Island Countries (SPICs) in terms of its efficacy on economic growth. To this effect, the backgrounds on the existing fiscal and monetary policies are discussed with emphasis on their inefficiencies and limitations. In addition, the findings of an empirical study conducted in the countries of Fiji, Tonga, Vanatau, and Samoa regarding the efficacy of the policies are presented. The results, which were subjected to various tests of statistical significance, indicate that both policies were ineffective in all four SPICs. However, monetary policy had a positive impact on growth in Fiji, Tonga, and Vanatau. In view of such, several policy implications are cited, including 1) that delays and inefficiencies involved in the execution of public projects should be minimized; 2) quality and components of public expenditures is of critical significance; and 3) financial sectors should be improved.

  15. Integration of Monetary and Fiscal Policy of the Countries of the Visegrad Group

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    Kappel Stanislav

    2014-09-01

    Full Text Available The aim of this paper is to evaluate mutual interaction of monetary and fiscal policies in the countries of the Visegrad group, i.e. in the Czech Republic, Slovakia, Poland and Hungary. The relationship of monetary and fiscal policy - their coordination, cooperation or mutual antagonism - are basic determinants of successful implementation for economic policy of the state. Fiscal and monetary policies usually have different aims, and some conflict situations may arise in practical economic and political decision- making. Each policy has to make its decision with regard to the other one. Methodical approaches of this contribution are based on the game theory, which deals with the analysis of a wide range of decision situations with more participants (players and it is primarily focused on the conflict situations. This game-theoretical approach is responsible for creating the theoretical model which is then dealt with in the empirical analysis. We find a distinctly stabilizing role of monetary policy and relatively problematic stabilizing role of fiscal policy in the analyzed countries. The dominant role of monetary policy is statistically confirmed in the case of the Czech Republic and Hungary.

  16. Hazardous Times for Monetary Policy : What do Twenty-three Million Bank Loans Say about the Effects of Monetary Policy on Credit Risk?

    NARCIS (Netherlands)

    Jiminez, G.; Ongena, S.; Saurina, J.

    2007-01-01

    We investigate the impact of the stance and path of monetary policy on the level of credit risk of individual bank loans and on lending standards. We employ the Credit Register of the Bank of Spain that contains detailed monthly information on virtually all loans granted by all credit institutions

  17. Hazardous times for monetary policy : What do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking?

    NARCIS (Netherlands)

    Jiménez, G.; Ongena, S.; Peydro, J.L.; Saurina, J.

    2014-01-01

    We identify the effects of monetary policy on credit risk-taking with an exhaustive credit register of loan applications and contracts. We separate the changes in the composition of the supply of credit from the concurrent changes in the volume of supply and quality, and the volume of demand. We

  18. Interaction between Fiscal and Monetary Policy in a Dynamic Nonlinear Model

    Science.gov (United States)

    Bertella, Mario A.; Rego, Henio A.; Neris, Celso; Silva, Jonathas N.; Podobnik, Boris; Stanley, H. Eugene

    2015-01-01

    The objective of this study is to verify the dynamics between fiscal policy, measured by public debt, and monetary policy, measured by a reaction function of a central bank. Changes in monetary policies due to deviations from their targets always generate fiscal impacts. We examine two policy reaction functions: the first related to inflation targets and the second related to economic growth targets. We find that the condition for stable equilibrium is more restrictive in the first case than in the second. We then apply our simulation model to Brazil and United Kingdom and find that the equilibrium is unstable in the Brazilian case but stable in the UK case. PMID:25799581

  19. The narrative approach for the identification of monetary policy shocks in small open economies

    OpenAIRE

    Eleni Angelopoulou

    2007-01-01

    This paper reviews 22 years of UK monetary policy (1971-1992) using official record from the Quarterly Bulletin of the Bank of England. A definition of policy shocks, which allows for the exclusion of cases of interest rate increases, which were unrelated to the monetary policy objectives, is used. The empirical analysis shows that output displays the usual hump-shaped response after a shock to the policy indicator but adjustment to pre-shock levels is slow. Other variables also display theor...

  20. Interaction between fiscal and monetary policy in a dynamic nonlinear model.

    Science.gov (United States)

    Bertella, Mario A; Rego, Henio A; Neris, Celso; Silva, Jonathas N; Podobnik, Boris; Stanley, H Eugene

    2015-01-01

    The objective of this study is to verify the dynamics between fiscal policy, measured by public debt, and monetary policy, measured by a reaction function of a central bank. Changes in monetary policies due to deviations from their targets always generate fiscal impacts. We examine two policy reaction functions: the first related to inflation targets and the second related to economic growth targets. We find that the condition for stable equilibrium is more restrictive in the first case than in the second. We then apply our simulation model to Brazil and United Kingdom and find that the equilibrium is unstable in the Brazilian case but stable in the UK case.

  1. The impact of monetary policy on output and inflation in India: A frequency domain analysis

    Directory of Open Access Journals (Sweden)

    Salunkhe Bhavesh

    2017-01-01

    Full Text Available In the recent past, several attempts by the RBI to control inflation through tight monetary policy have ended up slowing the growth process, thereby provoking prolonged discussion among academics and policymakers about the efficacy of monetary policy in India. Against this backdrop, the present study attempts to estimate the causal relationship between monetary policy and its final objectives; i.e., growth, and controlling inflation in India. The methodological tool used is testing for Granger Causality in the frequency domain as developed by Lemmens et al. (2008, and monetary policy has been proxied by the weighted average call money rate. In view of the fact that output gap is one of the determinants of future inflation, an attempt has also been made to study the causal relationship between output gap and inflation. The results of empirical estimation show a bi-directional causality between policy rate and inflation and between policy rate and output, which implies that the monetary authorities in India were equally concerned about inflation and output growth when determining policy. Furthermore, any attempt to control inflation affects output with the same or even greater magnitude than inflation, thereby damaging the growth process. The relationship between output gap and inflation was found to be positive, as reported in earlier studies for India. Furthermore, the output gap causes inflation only in the short-tomediumrun.

  2. Revival of Legacy of Tooke and Gibson: Implications for Monetary Policy

    Directory of Open Access Journals (Sweden)

    Rehman Atiq-ur

    2015-05-01

    Full Text Available The monetary policy rules used by central banks these days are based on the assumption that inflation could be reduced by increasing interest rate. On contrary, Tooke (1774-1858, the forefather of monetary economics, was of the view that the relationship between interest rate and inflation should be positive. His view was based on simple logic, ‘interest is a part of cost, and therefore, the increase in interest rate should increase inflation by increasing cost of production (Tooke, 1838’. Tooke’s view has got support from a number of empirical evidence including Gibson (1923 who found positive correlation between two variables for UK data over a period of 200 years. On the other hand, mainstream economic thinking on which the actual monetary practices are based ignored any possibility of positive relationship between interest rate and inflation throughout the history. The existence of Tooke’s cost side effects of monetary policy is a serious concern because if these effects exist than the use of monetary policy would be counterproductive. Using the data from entire globe, I attempt to explore the nature of relationship between the interest rate and inflation. I found that the data supports the perception of Tooke and Gibson and denies that the effectiveness of monetary policy currently adapted by the correlation between interest rate and inflation is positive. The results are robust to sample size, sample period, and various definitions of interest rate and inflation.

  3. UNCONVENTIONAL MONETARY POLICY: CHANGING EUROPEAN CENTRAL BANK’S PERSPECTIVE ON FINANCIAL GOVERNANCE

    Directory of Open Access Journals (Sweden)

    Bogdan Munteanu

    2017-06-01

    Full Text Available The paper aims to look at the European Central Bank governance in terms of decisions taken to deploy a new kit of unconventional monetary policy measures, in order to respond to a new economic paradigm characterized by dynamic change in evolution, high volatility and enhanced financial risks. As an institution, the European Central Bank is led by the Governing Council and the decisions taken on how to use monetary policy impact an entire financial system. European Central Banking governance is about safeguarding the common currency and ensuring a future for the economic and monetary area to emerge stronger. For this purpose, when conventional monetary policies reach limits in their effects, it is time for the European Central Bank governance to analyse and assume the decision to deploy the arsenal of unconventional monetary policies. The experience of recent years showed a positive effect of the European Central Bank’s unconventional monetary measures, but costs could rise in case of extensive use of such measures. When these measures are used in combination, the effect is amplified and the European Central Bank needs to assess when it is time to withdraw the support, how to communicate and what exit strategy should use, what the costs are and impact can expect.

  4. Food infl ation in Lesotho: Implications for monetary policy | Thamae ...

    African Journals Online (AJOL)

    This implies that shocks to food inflation have had a more lasting adverse impact on food prices than is the case for nonfood inflation. The findings also support the existence of a significant transmission of shocks between food and nonfood prices. As a result, the monetary authorities have to be vigilant when supply shocks ...

  5. An empirical analysis of Singapore’s monetary and exchange rate policies in the 1990s

    Directory of Open Access Journals (Sweden)

    R.C. MAYSAMI

    1998-03-01

    Full Text Available The economy of Singapore has remained relatively unscathed from the Asian currency crisis of 1997 and 1998 which has severely crippled the markets of Hong Kong, Indonesia, and Malaysia. The Monetary Authority of Singapore, which has overseen the country's financial development since the 1960s, has maintained sound monetary policy which has saved the economy from ruin. The government, unlike those of other countries, has also regulated real estate loans and land development and has strengthened its basic services of telecommunications and transport. The present work seeks to re-examine the conflict between monetary stability and exchange rate objectives. The authors seek to find out which policy goal the Monetary Authority of Singapore has been and should be more interested in.

  6. The co-movement of monetary policy and its time-varying nature: A DCCA approach

    Science.gov (United States)

    Rohit, Abhishek; Mitra, Subrata Kumar

    2018-02-01

    Employing a novel methodology of DCCA cross-correlation coefficient (ρDCCA), this study attempts to provide fresh evidences for the co-movement of monetary policies of the advanced (AEs) as well as the emerging economies (EMEs) vis-à-vis the United States. A higher degree of monetary co-movement as measured by ρDCCA values, is identified for the AEs as compared to the EMEs. Lower co-movement of monetary policy is especially noticeable in the short run for EMEs. We further investigate the time-varying nature of such co-movements for the AEs by splitting the period (1980-2014) into four sub periods and also by performing a rolling window estimation for the entire period to reveal smoother dynamics. Significant evidence of higher monetary coordination is revealed for sub-periods with stronger trade and financial linkages.

  7. A Simple Model of Monetary Policy and Currency Crises

    OpenAIRE

    Philippe AGHION; Philippe BACCHETTA; Abhijit BANERJEE

    1999-01-01

    This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it both makes more difficult to borrow and may decrease the foreign currency debt burden. In some cases it is actually best to decrease the interest rate. We also show how these issues are related to development of the financia...

  8. Examining the reaction of monetary policy to exchange rate changes: A nonlinear ARDL approach

    Science.gov (United States)

    Manogaran, Lavaneesvari; Sek, Siok Kun

    2017-04-01

    Previous studies showed the exchange rate changes can have significant impacts on macroeconomic performance. Over fluctuation of exchange rate may lead to economic instability. Hence, monetary policy rule tends to react to exchange rate changes. Especially, in emerging economies where the policy-maker tends to limit the exchange rate movement through interventions. In this study, we seek to investigate how the monetary policy rule reacts to exchange rate changes. The nonlinear autoregressive distributed lag (NARDL) model is applied to capture the asymmetric effect of exchange rate changes on monetary policy reaction function (interest rate). We focus the study in ASEAN5 countries (Indonesia, Malaysia, Philippines, Thailand and Singapore). The results indicated the existence of asymmetric effect of exchange rates changes on the monetary reaction function for all ASEAN5 countries in the long-run. Where, in majority of the cases the monetary policy is reacting to the appreciation and depreciation of exchange rate by raising the policy rate. This affirms the intervention of policymakers with the `fear of floating' behavior.

  9. A Critical Review on Interest Rate as a Tool of Monetary Policy

    OpenAIRE

    diyah putriani; pras towo

    2016-01-01

    Objectives: This research is aimed to critically review the relationship between interest rate and economic downturnMethods: Meta-analysis.Results: The existing monetary policy will always create higher inflation rate overtime triggering economic crisis in the long run. This is not merely about how the monetary authority strictly manages the supply and demand for money in the economy.Conclusion:This paper concludes that interest rate give negative contribution to the economic growth.

  10. A Critical Review on Interest Rate as a Tool of Monetary Policy

    Directory of Open Access Journals (Sweden)

    diyah putriani

    2016-04-01

    Full Text Available Objectives: This research is aimed to critically review the relationship between interest rate and economic downturnMethods: Meta-analysis.Results: The existing monetary policy will always create higher inflation rate overtime triggering economic crisis in the long run. This is not merely about how the monetary authority strictly manages the supply and demand for money in the economy.Conclusion:This paper concludes that interest rate give negative contribution to the economic growth.

  11. Effects of Fiscal Policy and Monetary Policy on the Stock Market in Poland

    OpenAIRE

    Yu Hsing

    2013-01-01

    The focus of this paper is to examine potential impacts of fiscal and monetary policies on stock market performance in Poland. Applying the GARCH model and based on a sample during 1999.Q2 to 2012.Q4, this paper finds that Poland’s stock market index is not affected by the ratio of government deficits or debt to GDP and is negatively influenced by the money market rate. The stock index and the ratio of M3 to GDP show a quadratic relationship with a critical value of 46.03%, suggesting that th...

  12. Comparisons of different monetary policies in China with yield curve information

    OpenAIRE

    Pang, Iris Ai Jao

    2010-01-01

    This work compares the effectiveness of quantity-based and price-based monetary policies in China using FAVAR. This essay is the pioneer to identify the 1-year lending rate and deposit rate as the policy rates, and includes yield curve information in the analysis. It is found that effects of tightening monetary policies in China follow largely the stylized facts of long run neutrality of money on real activities, a long term fall in inflation and a short term rise in interest rates.

  13. Adjustment to Monetary Policy and Devaluation Under Two-Tier and Fixed Exchange Rate Regimes

    OpenAIRE

    Joshua Aizenman

    1983-01-01

    The purpose of this paper is to determine whether a two-tier exchange rate regime is more effective than a fixed rate regime in increasing acountry's ability to pursue an independent monetary policy in the short run.The analysis compares adjustment to a monetary policy and to a devaluation in the two exchange rate regimes in a portfolio model under imperfect asset substitutability. It is shown that the two policies have in the short run larger effects on interest rates under a two-tier regime...

  14. The Asymmetric Effects of Monetary Policy and Bank Credits in Taiwan Banking Industry - A Dynamic Panel Data Analysis

    OpenAIRE

    Jui-Chuan Chang; Ching-Chuan Tsong; Chieh-Tsung Wu

    2010-01-01

    This paper investigates whether distributional effect arising from the impact of monetary policy on bank credits will be different when monetary policy is asymmetric. Methodologically, we use a set of high frequency panel data for Taiwan commercial banks and adopt Arellano and Bond's (1991) generalized method of moments approach to conduct our empirical analysis. First of all, we investigate whether there exist the distributional effects of monetary policy on bank lending behavior which is as...

  15. The Bank Lending Channel of Monetary Policy Transmission in A Dual Banking System

    Directory of Open Access Journals (Sweden)

    Mansor H. Ibrahim

    2017-02-01

    Full Text Available This paper examines the impact of monetary policy on bank lending in a dual banking system, i.e. Malaysia. Making use of an unbalanced panel data set of 38 Islamic and conventional banks covering mostly 2001-2014, we find evidence that variations in monetary policy affect lending growth of Islamic banks and, to some extent, conventional banks. The results further reveal that, in conformity with studies using aggregate Islamic financing data, the Islamic financing growth reacts more strongly to monetary policy changes. Moreover, we find no marked difference between full-fledged Islamic banks and Islamic bank subsidiaries in their responses to monetary policy. While we also document some evidence indicating the significant relations between bank-specific variables and lending growth, the bank-specific variables do not seem to have any role in impacting the potency of the bank lending channel. Finally, we find that lending growth is directly related to economic growth, suggesting procyclicality of bank lending/financing in Malaysia. These results have important implications for effective implementation of monetary policy and further development of Islamic banks in Malaysia.

  16. Impulse-response analysis of monetary policy – Visegád group countries case

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    Kateřina Myšková

    2013-01-01

    Full Text Available In this paper, we focus on comparability of monetary policies of Visegrád group countries (V4. Main objective of central banks function in V4 countries lies in maintaining price stability. For this purpose, inflation targeting regime is realized in a medium-term focus in V4, which means that there is a certain lag between monetary policy operation and its influence on an inflation target. Central bank does not have a direct impact on its ultimate goals. Therefore, any monetary policy analysis and assumption of its effectiveness comes out from an essential existence of a working transmission mechanism. Thus, changes in settings of monetary policy instruments have to be able to inflict causal changes on intermediary markets and via these markets on target markets. This situation can be modeled by the vector autoregressive (VAR model with suitable variables. Our main task is to compare a relationship between VAR model responses to predefined impulses for all V4 pairs. We use calibration technique for this purpose. Specifically, we will utilize one-dimensional calibration model with a linear calibration function for deriving unknown parameters. Moreover, we will test a significance of estimated parameters. We distinguish between model parameters for before-crisis- and during-crisis- data, because we suppose that financial crisis affects VAR model parameters significantly. Different responses in each country can mean the inability of the common monetary policy for V4 at present.

  17. CENTRAL BANK TRANSPARENCY AND EVALUATION OF MONETARY POLICY COMMUNACATIONS

    Directory of Open Access Journals (Sweden)

    V. Romanchukevych

    2018-01-01

    Full Text Available The article reveals approaches to evaluate transparency of the central banks and, operating indices, measures it for the National bank of Ukraine. The quantitative analysis of the informational disclosure of the central banks of Ukraine, Czech Republic, Poland, and Russia is allocated. The aspects of the communications of the National Bank of Ukraine in the process of the monetary regime transformation are explored.

  18. Endogenous Fluctuations and the Role of Monetary Policy

    OpenAIRE

    Motolese, Maurizio; Kurz, Mordecai; Jin, Hehui

    2002-01-01

    This paper studies the dynamic volatility properties of a monetary economy in which agents hold Rational Beliefs (see Kurz (1994), (1997)) rather than Rational Expectations. Except for this feature the examined Rational Belief Equilibrium (in short, RBE) is entirely standard: markets are competitive, prices are flexible and all information is symmetric. The paper demonstrates a) The RBE paradigm offers an integrated theory of real and financial volatility with a high volume of trade. Most vol...

  19. THE ASSET PRICE CHANNEL AND ITS ROLE IN MONETARY POLICY TRANSMISSION

    Directory of Open Access Journals (Sweden)

    Dan Horatiu

    2013-07-01

    Full Text Available his paper addresses the subject of the monetary policy transmission mechanism by focusing on the asset price channel, which is the monetary transmission channel responsible for the propagation of the effects induced by the monetary policy decisions made by the central bank that affect the price of assets. We will analyze the asset price channel by taking a close look at its structure, internal processes and the way it delivers monetary policy throughout the economy, ultimately influencing key variables such as the unemployment rate and the levels of consumption and production. After an introduction dealing with the entire monetary transmission mechanism, its role and purposes, we will focus on the particularities of the asset price channel and the two main ways in which it delivers monetary policy decision effects: through changes in Tobin’s q value, which is the ratio between the market value of a given company and its replacement cost of capital, and through the effect of wealth, both of financial and housing nature, on consumption. In our study, we will consider theoretical aspects and observations, but also empirical evidence that highlights that the exact way in which the asset price channel functions may differ from one economy to another due to differences in the structures of the respective economies and differences in psychology and cultural values of consumers. The deep understanding of the asset price transmission channel is very important for any central bank, as this is the channel that governs key aspects of monetary policy transmission linked to the market value of assets and individual wealth. These values have, as we will see in more detail throughout the paper, an important impact on both consumption and investment, two economic actions that can help the economy, but can also prove to be a crucial element in starting and perpetuating an economic crisis.

  20. Vector Autoregressions with Parsimoniously Time Varying Parameters and an Application to Monetary Policy

    DEFF Research Database (Denmark)

    Callot, Laurent; Kristensen, Johannes Tang

    the monetary policy response to inflation and business cycle fluctuations in the US by estimating a parsimoniously time varying parameter Taylor rule.We document substantial changes in the policy response of the Fed in the 1970s and 1980s, and since 2007, but also document the stability of this response...

  1. MONETARY POLICY SHOCKS AND ISLAMIC BANKS DEPOSITS IN INDONESIAN DUAL BANKING SYSTEM AFTER THE FINANCIAL CRISIS

    Directory of Open Access Journals (Sweden)

    Ahmad Affandi

    2017-03-01

    Full Text Available Use of riba (usury in the economic system remained a key factor that led to financial crisis since theinception of modern economy in the late of 17th century. Implementation of interest based monetary policystipulated rampant speculation as common practices in the global financial sector. Although Islamic bankingwas governed by syariah (Divine Law, which was assumed to be resilient from distress, the volatility ofinterest movement would generally affect Islamic banks operations in a dual banking system. This paperwould look at this issue and would empirically explore the dynamic inter-relationships between deposits ofIslamic banks with monetary policy variables in Indonesia. In terms of market share, as of 2009, Islamicbanking asset in Indonesia was a meager 2%. The industry had been affected by few monetary policy shockson its deposits and financing. The study would employ vector auto regression model (VAR to explore thedynamics between the variables. The study would focus on data from 2004 to 2008 or performance after theAsian financial crisis. The results from these tests determined that shariah based deposits played significantrole in transmitting monetary policy effects to the economy. This study found that Islamic banking depositsin Indonesia were not sensitive to monetary policy changes. This study also concluded that IndonesianIslamic banks were resilient to financial crisis.

  2. Assessment of the monetary policy transmission mechanism in the new EU member states

    Directory of Open Access Journals (Sweden)

    Bungin Sanja

    2016-01-01

    Full Text Available In order to completely understand and analyse the transmission mechanism, it is necessary to observe all factors conditioning its overall efficiency as well as the efficiency of individual transmission channels. This paper focuses on countries that have successfully passed the transition period and have experience with implementing different monetary policy regimes. The evolution of monetary policy resulted in the development of instruments through which central banks influence the real sector activity by means of a transmission mechanism. The empirical analysis based on econometric tools investigates the efficiency of transmission mechanism channels, or more precisely, their significance in the monetary targeting regime. With a view to reaching the conclusion about the direction in which it is necessary to develop the structure of the real and financial sector, aimed at a better functioning of monetary policy instruments, the paper features a theoretical analysis of the characteristics of the monetary policy in the developed economies, as well as the structural characteristics of these economies.

  3. Money supply growth and inflation – the monetary policy strategy of the European Central Bank

    Directory of Open Access Journals (Sweden)

    Svatopluk Kapounek

    2007-01-01

    Full Text Available The main aim of this article is to find out whether there is a significant relationship between money supply growth and inflation in the Eurozone. For this reason, the monetary policy strategy of the European Central Bank (ECB has been evaluated. Since the establishment of the ECB in January 1999 to May 2003 the ECB‘s monetary policy strategy consisted of three main elements: a quantitative definition of price stability, a prominent role for money in the assessment of risks to price stability (aggregate M3 as a reference value, and a broadly based assessment of the outlook for price developments. Nevertheless, since May 2003 M3 or any other monetary aggregate has lost its prominent role in the ECB‘s strategy. Therefore the nowadays ECB‘s monetary policy strategy consists of a quantitative definition of the primary objective of price stability and an analytical framework based on two pillars – economic analysis and monetary analysis. These two pillars are used by the ECB‘s Governing Council in the overall assessment of risks to price stability and in monetary policy decisions.The empirical part of this article is based on time series correlation between money supply growth and inflation in selected member countries of the Economic and Monetary Union (EMU - Eurozone during the period 1995–2005. The time series are divided into two parts. The first part covers data for selected member countries of the European Union from 1995 till 1998, i.e. before the establishment of the EMU. Whereas the second part includes data for the whole Eurozone since its official start in 1999 to 2005. The time series are adjusted by SARIMA models.

  4. A structural dynamic factor model for the effects of monetary policy estimated by the EM algorithm

    DEFF Research Database (Denmark)

    Bork, Lasse

    This paper applies the maximum likelihood based EM algorithm to a large-dimensional factor analysis of US monetary policy. Specifically, economy-wide effects of shocks to the US federal funds rate are estimated in a structural dynamic factor model in which 100+ US macroeconomic and financial time...... series are driven by the joint dynamics of the federal funds rate and a few correlated dynamic factors. This paper contains a number of methodological contributions to the existing literature on data-rich monetary policy analysis. Firstly, the identification scheme allows for correlated factor dynamics...... as opposed to the orthogonal factors resulting from the popular principal component approach to structural factor models. Correlated factors are economically more sensible and important for a richer monetary policy transmission mechanism. Secondly, I consider both static factor loadings as well as dynamic...

  5. Floating against the tide : Spanish monetary policy, 1870-1931

    OpenAIRE

    Martín-Aceña, Pablo; Martínez Ruiz, Elena; Nogues-Marco, Pilar

    2011-01-01

    The gold standard began to emerge as a universal monetary system in the late 1870s, and it had spread throughout the world economy by 1900. It was unusual for nations to be off the gold standard, and it meant that they were detached from the international financial community. Spain never joined the gold standard club in any of its varieties, either before or after 1914. Unlike the vast majority of the European currencies, the peseta’s exchange rate fluctuated, sometimes widely, against gold a...

  6. TRANSITION TO INFLATION TARGETING IN UKRAINE: NEW TOOLS FOR MONETARY POLICY

    Directory of Open Access Journals (Sweden)

    S. Naumenkova

    2015-03-01

    Full Text Available Positive experience of inflation targeting in many countries influenced the decision to implement this framework in Ukraine. Authors consider the appropriateness of retaining inflation target under conditions of deteriorating currency market. Uncertainty of forecasts is aggravated by fragile impact of monetary policy on Ukrainian economy in conditions of growing nonlinearity of macroeconomic processes. The authors suggest the possibility of using two channels of transmission mechanism, namely, exchange rate and interest rate, and recommend additional tools to specify targets of monetary policy for the National Bank of Ukraine.

  7. The Impact of the Great Recession on Monetary and Fiscal Policy in Developed Market Economies

    Directory of Open Access Journals (Sweden)

    Šehović Damir

    2015-03-01

    Full Text Available Background: With the occurrence of the crisis in 2007, which caused the largest economic contraction since the Great Depression in the thirties, it has become evident that the previous understanding of strategies, effects and roles of monetary and fiscal policy should be redefined. Objectives: The aim of this paper is to illustrate a possible expected change in monetary and fiscal policy in developed market economies that could occur as a consequence of the Great Recession. Methods/Approach: The paper provides a comparative analysis of various primary economic variables related to the developed OECD countries, as well as the empirical testing of the selected theoretical assumptions. Results: The changes in monetary policy refer to the question of raising target inflation, considering a possible use of aggregate price level targeting and paying attention to the role of central banks in suppressing the formation of an asset bubble. The success of fiscal policy in attaining stabilization depends on the size of possible fiscal measures and creation of automatic stabilizers. Conclusions: For the most part, monetary and fiscal policies will still stay unchanged, although some segments of these policies need to be improved.

  8. Overdeterminacy and endogenous cycles: Trygve Haavelmo’s business cycle model and its implications for monetary policy

    OpenAIRE

    Kallåk Anundsen , André; Sigurd Holmsen Krogh, Tord; Nymoen, Ragnar; Vislie, Jon

    2011-01-01

    This paper presents the business cycle model that Trygve Haavelmo developed as part of his research program in macroeconomic and monetary theory. Driven by a mismatch between the marginal return to capital and the rate of return required by capital owners, this model generates endogenous cycles. The theory leads to a distinct analysis of the scope and limitations of monetary policy. A main message of the model is that care should be taken when conducting 'autonomous' monetary policy and that ...

  9. IS THERE A LINK BETWEEN MONETARY POLICY AND RISK PERCEPTION IN EASTERN EUROPEAN COUNTRIES IMPLEMENTING INFLATION TARGETING REGIME?

    Directory of Open Access Journals (Sweden)

    Aydan Kansu

    2013-04-01

    Full Text Available Following the recent financial crisis of August 2007 in US, economists and policy makers hold the view that monetary policy may have an effect on real economic activity through ‘risk taking channel’ which indicates the risk behavior of economic agents and the linkages between monetary policy and perception of risk. In this study, we examine whether changes in monetary policy stance influence the risk perceptions and generates any impact on the real side of the economy in Czech Republic, Poland, Russian Federation and Turkey implementing inflation targeting. In the context of a SVAR model, we find that monetary policy does not affect risk perception reflected by stock price variability and any attempt by central banks to stimulate real economic activity through monetary policy also appears to be ineffective in these countries.

  10. Balance of Payments of East Asian Countries: Impact of the Coordinated Monetary Policy

    Directory of Open Access Journals (Sweden)

    Yana Valeryevna Dyomina

    2014-03-01

    Full Text Available The paper examines the equilibrium state of balance of payments of East Asian countries by means of the monetary policy instruments. For this purpose the author determines the value of the equilibrium exchange rate of AMU (Asian Monetary Unit against the U.S. dollar. The equilibrium exchange rate is the one that smoothes values of net merchandise exports and net capital exports. The author employs panel data regression analysis (using statistics of trade and capital (foreign direct investment flows between East Asian countries and the United States to obtain quantitative estimation of trade and investment effects of the coordinated monetary policy. The paper shows that transition of East Asian region (China, Japan, Republic of Korea, Indonesia, Malaysia, Vietnam, the Philippines and Thailand to the single currency (AMU will have a negative effect on the balance of payments of the studied countries: this will increase the mismatch between commodity and capital flows

  11. Two Different Views on Monetary Policy Impact: The New Consensus and Post-Keynesian Economics

    Directory of Open Access Journals (Sweden)

    Marius-Corneliu Marinas

    2007-09-01

    Full Text Available The objective of this study is to make a synthesis of the differences between two new macroeconomic views. A New Consensus has arisen among neoclassical and New-Keynesian economists, such as Romer, Taylor and Walsh. This new view seeks to redefine the application of monetary policy by re-specifying the most appropriate monetary rule, which is used for inflation targeting. The framework of the monetary policy impact requires the usage of a expectations augmented Phillips curve, characterized through the lack of trade-off inflation-unemployment in the long-run. Post-keynesian macroeconomic critical, whose promoters are Arestis, Lavoie and Satterfield, argues that for most of the production levels obtained output change has no effect on inflation. This is a re-formulation of the Keynesian aggregate supply curve, which is entirely horizontal.

  12. Inflation Expectations and Monetary Policy Design : Evidence from the Laboratory (Replaces CentER DP 2009-007)

    NARCIS (Netherlands)

    Pfajfar, D.; Zakelj, B.

    2011-01-01

    Using laboratory experiments within a New Keynesian macro framework, we explore the formation of inflation expectations and its interaction with monetary policy design. The central question in this paper is how to design monetary policy in the environment characterized by heterogeneous expectations.

  13. THE IMPACT OF MONETARY AND FISCAL POLICIES ON PUBLIC FINANCIAL MANAGEMENT

    Directory of Open Access Journals (Sweden)

    Loredana Ciurlău

    2012-01-01

    Full Text Available Fiscal policy is the main component of financial policy. Being a component of economic policy, taxation must lead to economic objectives. Maintaining equilibria macroeconomic cannot be blamed solely in charge of monetary policy, fiscal policy and that the revenue must have a role in support and to bear the load efforts to stabilise. Large deficits are dangerous for current account, because they are associated with a greater risk of producing an adjustment steep in the exchange rate and high volatility of exchange rate has major implications on the stability and macroeconomic monetary, in general. This means that countries should his election budgets so as to cope with growing demand from the private sector and to take necessary safeguard measures against potential crises, whereas the extent fiscal deficit contributes directly to the magnitude current account deficit.

  14. Nonverbal contention and contempt in U.K. parliamentary oversight hearings on fiscal and monetary policy.

    Science.gov (United States)

    Schonhardt-Bailey, Cheryl

    2017-01-01

    In parliamentary committee oversight hearings on fiscal policy, monetary policy, and financial stability, where verbal deliberation is the focus, nonverbal communication may be crucial in the acceptance or rejection of arguments proffered by policymakers. Systematic qualitative coding of these hearings in the 2010-15 U.K. Parliament finds the following: (1) facial expressions, particularly in the form of anger and contempt, are more prevalent in fiscal policy hearings, where backbench parliamentarians hold frontbench parliamentarians to account, than in monetary policy or financial stability hearings, where the witnesses being held to account are unelected policy experts; (2) comparing committees across chambers, hearings in the House of Lords committee yield more reassuring facial expressions relative to hearings in the House of Commons committee, suggesting a more relaxed and less adversarial context in the former; and (3) central bank witnesses appearing before both the Lords and Commons committees tend toward expressions of appeasement, suggesting a willingness to defer to Parliament.

  15. Credit Market Distortions, Asset Prices And Monetary Policy

    DEFF Research Database (Denmark)

    Pfajfar, Damjan; Santoro, Emiliano

    2014-01-01

    -side effects limit the size of the policy rate response to inflation that is consistent with determinacy, so that inflation-targeting policies may not be capable of ensuring REE uniqueness. In this case it is advisable to combine policy rate responses to inflation with an appropriate reaction to the output gap...

  16. Perspectives on Monetary Policy and Cost of Capital: Evidence from Turkey

    Directory of Open Access Journals (Sweden)

    Turguttopbas Neslihan

    2017-05-01

    Full Text Available The target of monetary policy is generally set as to create an environment of manageable employment and affordable long-term interest rates. However, priorities of central banks may differ depending on economic and financial circumstances of individual countries. Modern approaches to monetary policy transmission can be grouped under two headings, Money View and Credit View. The money view concentrates on interest rates to explain the effects of monetary policy on aggregate spending by creating an interest rate channel. The credit channel transmission approach focuses on the supply of credits by banks following a monetary policy shift in interest rates. In 2010, the Central Bank of Turkey (CBT developed an interest rate corridor shaped by one-week and overnight repo lending to the financial banks to absorb excessive volatility caused by short-term capital inflows. Under this framework, the CBT implements its monetary policy in two ways; firstly it can alter the interest rates of weekly repo as well as O/N lending rate. Secondly, it can configure the funding structure it provides to the financial intermediaries. In such a framework, the interest rate transmission mechanism has been operated by two benchmark interest rates, one of which is the weighted average of the cost of funds provided by the CBT and the other is the interest rate in Borsa Istanbul (BIST money market transactions at an overnight maturity. There is a strong co-movement between the interest rates and they are affected by the movements in the CBT lending rate in both directions. Interest rates applied to deposits and loans by banks are affected by the policy rate (CBT Average Funding Rate and the market rate (BIST O/N Repo Rate.

  17. Monetary Policy, Risk-Taking, and Pricing : Evidence from a Quasi-Natural Experiment

    NARCIS (Netherlands)

    Ioannidou, V.; Ongena, S.; Peydro, J.L.

    2009-01-01

    We analyse the impact of monetary policy on bank risk-taking and pricing. Bolivia provides us with an excellent experimental setting to identify this impact. Its small economy is not synchronized with the US economy but its banking system is almost fully dollarized. Consequently the US federal funds

  18. The Effect of Monetary Policy on Exchange Rates : How to Solve the Puzzles

    NARCIS (Netherlands)

    Kumah, F.Y.

    1996-01-01

    Recent empirical research on the effects of monetary policy shocks on exchange rate fluctuations have encountered the exchange rate puzzle and th e forward discount bias puzzle.The exchange rate puzzle is the tendency of the domestic currency (of non-US G-7 countries) to depreciate against the US

  19. Committee Structure and its Implications for Monetary Policy Decision-making

    NARCIS (Netherlands)

    J.M. Berk (Jan Marc); B.K. Bierut

    2003-01-01

    textabstractWe investigate the implications for the setting of interest rates when monetary policy decisions are taken by a committee, in which a subset of members may meet prior to the voting in the committee and therefore has the possibility to reach consensus ex ante to vote unanimously ex post.

  20. Committee structure and its implications for monetary policy decision-making

    NARCIS (Netherlands)

    Bierut, B.K.; Berk, J.M.

    2003-01-01

    We investigate the implications for the setting of interest rates when monetary policy decisions are taken by a committee, in which a subset of membersmay meet prior to the voting in the committee and therefore has the possibility to reach consensus ex ante to vote unanimously ex post. We allow

  1. Industries and the bank lending effects of bank credit demand and monetary policy in Germany

    NARCIS (Netherlands)

    Raabe, K.; Arnold, I.J.M.; Kool, C.J.M.

    2006-01-01

    This paper presents evidence on the industry effects of bank lending in Germany and asks whether bank lending to single industries depends on industry-specific bank credit demand or on monetary policy as determinant of bank credit supply. To this end, we estimate individual bank lending functions

  2. Money, the Banking System and Monetary Policy in Canada: A Teaching Unit.

    Science.gov (United States)

    Curtis, Douglas C. A.; Staunton, Ted, Ed.

    One of a series of teaching units designed to introduce secondary school students to the Canadian economy, this handbook contains instructional materials on Canada's monetary system and policy. Material is organized and presented in terms of specific topic readings and illustrative activities. The topics covered in six sections are money, the…

  3. The Simple Analytics of Monetary Policy: A Post-Crisis Approach

    Science.gov (United States)

    Friedman, Benjamin M.

    2013-01-01

    The standard workhorse models of monetary policy now commonly in use, both for teaching macro-economics to students and for supporting policymaking within many central banks, are incapable of incorporating the most widely accepted accounts of how the 2007-9 financial crisis occurred and are incapable too of analyzing the actions that monetary…

  4. The effects of monetary policy in the Czech Republic: an empirical study

    Czech Academy of Sciences Publication Activity Database

    Morgese Borys, Magdalena; Horvath, R.

    -, č. 922 (2008), s. 1-27 Grant - others:Česká národní banka(CZ) A3/07 Institutional research plan: CEZ:AV0Z70850503 Keywords : monetary policy transmission * vector autoregression * sectoral prices Subject RIV: AH - Economics http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp922.pdf

  5. Is the U.S. Fed voting record informative about future monetary policy?

    Czech Academy of Sciences Publication Activity Database

    Horváth, R.; Šmídková, K.; Zápal, Jan

    2012-01-01

    Roč. 62, č. 6 (2012), s. 478-484 ISSN 0015-1920 Institutional support: PRVOUK-P23 Keywords : monetary policy * voting record * transparency Subject RIV: AH - Economics Impact factor: 0.340, year: 2012 http://journal.fsv.cuni.cz/storage/1259_478-484_---horvath.pdf

  6. State Manipulation and Asymptotic Inefficiency in a Dynamic Model of Monetary Policy

    DEFF Research Database (Denmark)

    Jensen, Henrik; Lockwood, Ben

    2000-01-01

    . In a dynamic version of a well-known monetary policy game we show that such asymptotic efficiency may not be possible, as the presence of a state variable introduces the possibility of state manipulation. Moreover, the lowest inflation rate in Nash threats equilibrium may be increasing as players become more...

  7. What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?

    OpenAIRE

    Jeremy C. Stein; Anil K. Kashyap

    2000-01-01

    We study the monetary-transmission mechanism with a data set that includes quarterly observations of every insured U.S. commercial bank from 1976 to 1993. We find that the impact of monetary policy on lending is stronger for banks with less liquid balance sheets--i.e., banks with lower ratios of securities to assets. Moreover, this pattern is largely attributable to the smaller banks, those in the bottom 95 percent of the size distribution. Our results support the existence of a "bank lending...

  8. Monetary policy implementation and money demand instability during the financial crisis

    Directory of Open Access Journals (Sweden)

    Svatopluk Kapounek

    2011-01-01

    Full Text Available The author focuses on the money endogeneity in the context of common monetary policy implementation in the euro area. The empirical analysis shows money demand function instability during the financial crisis. The instability is described by decrease in credit money creation and money velocity changes. The cointegration tests identifed long-run positive relationship between monetary aggregates and economic activity. Concurrently, the economic activity is treated to be weakly exogenous in the model.The conclusions are discussed with Postkeynesians’ assumption, that central banks cannot fix the stock of money in a country. The causality is directed from economic activity to money demand.

  9. The Impact of Non-Conventional Monetary Policy of NBP on Short Term Money Market

    Directory of Open Access Journals (Sweden)

    Ewa Dziwok

    2015-07-01

    Full Text Available In the situation of financial crisis large numbers of central banks have started to ease monetary conditions. The National Bank of Poland, following central banks of biggest economies, started to offer unconventional methods to increase liquidity: foreign exchange swaps. The aim of the paper is twofold: to calculate the risk premium understood as a difference between an implied forward rate and a reference rate. The second is to show the sensitivity of the risk premium (a difference between to market disturbances and than to monetary policy easing.

  10. An Assessment of Malaysian Monetary Policy During the Global Financial Crisis of 2008-09

    OpenAIRE

    Selim Elekdag; Subir Lall; Harun Alp

    2012-01-01

    Malaysia was hit hard by the global financial crisis of 2008-09. Anticipating the downturn that would follow the episode of extreme financial turbulence, Bank Negara Malaysia (BNM) let the exchange rate depreciate as capital flowed out, and preemptively cut the policy rate by 150 basis points. Against this backdrop, this paper tries to quantify how much deeper the recession would have been without the BNM's monetary policy response. Taking the most intense year of the crisis as our baseline (...

  11. An endogenous Taylor condition in an endogenous growth monetary policy model

    OpenAIRE

    Le, Mai Vo; Gillman, Max; Minford, Patrick

    2007-01-01

    The paper derives a Taylor condition as part of the agent's equilibrium behavior in an endogenous growth monetary economy. It shows the assumptions necessary to make it almost identical to the original Taylor rule, and that it can interchangably take a money supply growth rate form. From the money supply form, simple policy experiments are conducted. A full central bank policy model is derived that includes the Taylor condition along with equations comparable to the standard aggregate-demand/...

  12. Welfare Implications of Alternative Monetary Policy Rules: A New Keynesian DSGE Model for Turkey

    Directory of Open Access Journals (Sweden)

    Yağcıbaşı Özge Filiz

    2017-12-01

    Full Text Available In recent years, there has been extensive research on the conduct of monetary policy in small open economies that are subject to inflation and output fluctuations. Policymakers should decide whether to implement strict inflation targeting or to respond to the changes in output fluctuations while conducting monetary policy rule. This study aims to examine the response of alternative monetary policy rules to Turkish economy by means of a DSGE model that is subject to demand and technology shocks. The New Keynesian model we used is borrowed from Gali (2015 and calibrated for the Turkish economy. Welfare effects of alternative Taylor rules are evaluated under different specifications of central bank loss function. One of the main findings of this paper is that in the case of a technology shock, strict inflation targeting rules provide the minimum welfare loss under all loss function configurations. On the contrary, the losses are weakened if the monetary authority responds to output fluctuations in the presence of a demand shock. Finally, there exists a trade-off between the volatility of output and inflation in case of a technology shock, while the volatility of both variables moves in the same direction in response to a demand shock.

  13. Alternative Monetary Policy Rules in a Small Open Economy with Financial Frictions: The Case of Korea

    Directory of Open Access Journals (Sweden)

    Yongseung Jung

    2011-09-01

    Full Text Available This paper first shows an empirical result of VAR that Korean economy has experienced a severe economic contraction to an exogenous country spread shock. To analyze the effect of alternative monetary policy on the economy, the paper sets up a multi-sector small open economy new Keynesian (NK hereafter model with financial frictions due to asymmetric information between firms and financial intermediaries along the line of Bernanke et al. (1999. It shows that the small economy with financial frictions is more vulnerable to the exogenous shocks such as the foreign exchange rate shock under the fixed exchange rate regime than under the flexible exchange regime. It also shows that the interest rate rule that responds to financial market conditions is better than any other interest rate rules only if it does not react to the exchange rate fluctuations. Moreover, an interest rate rule that responds to the exchange rate fluctuations, i.e. the monetary policy under the managed floating exchange rate regime is inferior to the monetary policy rules that do not respond to the exchange rate fluctuations. Finally, it shows that the monetary authority needs to stabilize a narrow price index such as domestic price index rather than a general price index such as consumer price index under the financial friction circumstances.

  14. Monetary Policies And Credit Financing As Factors In Agricultural ...

    African Journals Online (AJOL)

    Global Journal of Agricultural Sciences ... cheap interest rate polices has negative effect on credit supply while policies associated with plough ... credit was influenced mainly by the availability of credit subsidies and availability of guarantees.

  15. Effects of Fiscal and Monetary Policy in the Great Recession

    Directory of Open Access Journals (Sweden)

    Gonzalo Caballero

    2013-09-01

    Full Text Available World economy is living a time of change, and the complexity of change has implied a new research agenda on the role of economic policy in society. The role, types and effects of economic policy have been major issues in economic science since its origins. Jean Tinbergen (1956 [1] established the basis for the traditional theory of economic policy in economics and he tried to show how economic knowledge could be organized to regulate and guide economic systems. Nevertheless, this traditional approach has been improved through several contributions, for example when Eggertsson (1997 [2] incorporated the existence of incomplete knowledge, endogenous politics and institutional change in the theory of economic policy.

  16. Monetary and Fiscal Policy Interactions in the Euro Area

    National Research Council Canada - National Science Library

    Carlberg, Michael

    2004-01-01

    .... The focus is on the union central bank, the German government, and the French government. The policy targets are price stability in the union, fall employment in Germany, and fall employment in France...

  17. The importance and role of the Central Bank in the creation of a healthy monetary and investment policy

    Directory of Open Access Journals (Sweden)

    Šmigić-Miladinović Jasmina

    2016-01-01

    Full Text Available The paper's starting point is finding an answer to the question: What kind of monetary policy should be followed by the Central bank in new market circumstances? As a major monetary institution, the Central bank should provide credibility for its monetary policy, which is particularly important during a macroeconomic stabilisation. In order to choose the most appropriate monetary policy, its creators should be familiar with the monetary policy's effects on economic activities, first of all on investment activities and the period in which they may occur. The Central bank uses its special status and authorisations to control monetary trends, to keep and handle foreign exchange reserves, to keep banks' required reserves, to manage the country's debt, to be the final creditor of the banking system, to take care of the banking system's liquidity. That is why the Central bank has become important for the functioning of the whole financial market, and especially the monetary market. The Central bank has both direct and indirect influence on the most important events on financial markets, financial system, as well as a wider influence - on a country's whole economy. In order to envisage the financial market's impact on monetary and investment policies, one should begin with the Central bank's role on the financial market, and at the same time analyse the financial market's instruments and institutions.

  18. Monetary Policy Objectives During the Crisis: An Overview of Selected Southeast European Countries

    Directory of Open Access Journals (Sweden)

    Krstevska Aneta

    2015-01-01

    Full Text Available The recent global crisis brought many challenges to the central bankers worldwide, including the issue of monetary policy objectives. In this view, besides price stability maintenance, a special attention by central bankers during the crisis was given to the output stabilization. This paper explores this issue on the case of a group of countries from Southeast Europe (SEE. For this purpose, rather simple analysis of the policy rate and output gap as well as output gap variability by countries have been provided, aimed at giving some initial insights of the monetary policy and output stabilization during the crisis. Our findings pointed that the central banks in the analysed SEE countries paid attention to the output stabilization, specifically during the crisis period and that was presumably enabled by controllable inflation developments.

  19. Inflation, exchange rate and efficacy of monetary policy in Nigeria: The empirical evidence

    Directory of Open Access Journals (Sweden)

    BigBen Chukwuma Ogbonna

    2016-01-01

    1986 – 2008. Estimates from a vector auto regression model (VAR of key macroeconomic variables demonstrate the weak link between money supply and inflation in the both time horizons, which suggests that the hypothesis that money supply is not an effective policy instrument for management of inflationary developments cannot be rejected for Nigeria. The results further suggest that in both time horizons, exchange rate has been identified as a singular most promising macroeconomic fundamental for both internal and external sectors adjustments. However, the deregulation of the domestic economy as occasioned by SAP has significantly diluted the efficacy of exchange rate as a monetary policy instrument for the management of Nigeria’s aggregate money stock and trade balance developments. These notwithstanding, the Central Bank of Nigeria can continue to play a stabilizing role in the economy through the continuation of prudent monetary policies and frequent interventions in exchange rate management to smooth out shocks.

  20. Monetary Policy and Industrial Output in the BRICS Countries: A Markov-Switching Model

    Directory of Open Access Journals (Sweden)

    Kutu Adebayo Augustine

    2017-12-01

    Full Text Available This paper examines whether the five BRICS countries share similar business cycles and determines the probability of any of the countries moving from a contractionary regime to an expansionary regime. The study further examines the extent to which changes in monetary policy affect industrial output in expansions relative to contractions. Employing the Peersman and Smets (2001 Markov-Switching Model (MSM and monthly data from 1994.01–2013.12, the study reveals that the five BRICS countries have similar business cycles. The results further demonstrate that the BRICS countries’ business cycles are characterized by two distinct growth rate phases: a contractionary regime and an expansionary regime. It can also be observed that the area-wide monetary policy has significantly large effects on industrial output in recessions as well as in booms. It has also been established that there is a high probability of moving from state one (recession to state two (expansion and that on average, the probabilities of staying in state 2 (expansion are high for each of the five countries. It is, therefore, recommended that the BRICS countries should sustain uniform policy consistency (monetary policy, especially as they formulate and implement economic policies to stimulate industrial output.

  1. Monetary Policy of the CIVETS Countries in Years 2006-2013

    Directory of Open Access Journals (Sweden)

    Krystyna Mitręga-Niestrój

    2015-07-01

    Full Text Available CIVETS countries refer to a group of countries consisting of Columbia, Indonesia, Vietnam, Egypt, Turkey and the Republic of South Africa, considered leaders of emerging markets. They are countries with dynamically developing economies, moderate debt level, and they have successfully managed to overcome the last financial and economic crisis within a short period of time. Similarly, as in case of the majority of countries, their monetary policy constitutes a significant element of macroeconomic policy, having influence not only on the condition of the banking sector, but the economy as a whole. Central banks of the CIVETS countries focused on inflation target as the goal of monetary policy. They used first of all the interest rate channel as well as instruments regulating liquidity of interbank money market of a standard character (open market operations, refinanced credits and reserve requirement, as well as non-standard monetary policy instruments in order to execute the policy of supporting liquidity of the banking sector in years 2006-2013.

  2. Foreign Shocks, Monetary Policy, and Macroeconomic Fluctuations in a Small Open Economy: A SVAR Study of Malaysia

    Directory of Open Access Journals (Sweden)

    Zulkefly Abdul Karim

    2016-06-01

    Full Text Available This paper investigates the effect of foreign shocks upon domestic macroeconomic fluctuations and monetary policy, and examines the effectiveness of domestic monetary policy as a stabilization policy in Malaysia. Monetary policy variables (interest rate and money supply have been measured through a non-recursive structural VAR (SVAR identification scheme, which allows the monetary authority to set the interest rate and money supply after observing the current value of foreign variables, domestic output and inflation. The results show the important role of foreign shocks in influencing Malaysian monetary policy and macroeconomic variables. There is a real effect of monetary policy, that is, a positive shock in money supply increases domestic output. In contrast, a positive interest rates shock has a negative effect on domestic output growth and inflation. The effects of money supply and interest rate shocks on the exchange rate and stock prices are also consistent with standard economic theory. In addition, domestic monetary policy is able to mitigate the negative effect of external shocks upon domestic economy.

  3. Monetary Policy and Credit Demand in India and Some EMEs

    OpenAIRE

    B L Pandit; Pankaj Vashisht

    2012-01-01

    Impact of changes in policy rate of interest on demand for bank credit is examined for seven emerging market economies including India for the period 2002 to 2010. Panel data techniques are used after ruling out the presence of unit roots. The results show that when other determinants, like domestic demand pressure, export demand and impact of stock market signals are controlled for, change in policy rate of interest is an important determinant of firms’ demand for bank credit. The results ...

  4. Credit Market Distortions, Asset Prices and Monetary Policy

    NARCIS (Netherlands)

    Pfajfar, D.; Santoro, E.

    2012-01-01

    Abstract: We study the conditions that ensure rational expectations equilibrium (REE) determinacy and expectational stability (E-stability) in a standard sticky-price model augmented with the cost channel. We allow for varying degrees of passthrough of the policy rate to bank-lending rates. Strong

  5. Credit Market Distortions, Asset Prices and Monetary Policy

    NARCIS (Netherlands)

    Pfajfar, D.; Santoro, E.

    2012-01-01

    Abstract: We study the conditions that ensure rational expectations equilibrium (REE) determinacy and expectational stability (E-stability) in a standard sticky-price model augmented with the cost channel. We allow for varying degrees of pass-through of the policy rate to bank-lending rates. Strong

  6. Monetary Policy Shocks and Risk Premia in the Interbank Market

    DEFF Research Database (Denmark)

    Wingender, Asger Moll

    2011-01-01

    Unexpected changes in the federal funds rate are shown to have significant effects on risk premia in the money market. The spread between interbank lending rates and U.S. Treasury bills tends to narrow when the FOMC decides to cut interest rates by more than the expectation implied by federal funds...... futures. However, rate cuts taking place at unscheduled FOMC meetings can increase risk premia during periods of financial distress, consistent with the view that central bank actions under such circumstances are perceived as signals that policy makers have private information of further unfavorable...... developments in financial markets....

  7. MANAGEMENT OF SUSTAINABLE SOCIO-ECONOMIC DEVELOPMENT OF REGIONS WITHIN FISCAL AND MONETARY POLICY IN RUSSIA

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    T. Usmanova

    2016-01-01

    Full Text Available Strategy of social and economic development of regions has to be a basis for formation budgetary and tax and a monetary policy. Formation of strategic plans have to provide an exit to the new level of innovative economic and social development of Russia. Adaptation of the current legislation is necessary for the solution of the set major problems regarding budgetary and tax and a monetary policy in the Russian Federation. The important direction of development of social and economic development of territories is the clustering and formation of projects of the public-private partnership (PPP. Within integration of the countries into the world economy the organizations as systems in the form of clusters and the PPP projects can only be the competitive. Within formation of the organizations as systems it is necessary to provide formation of standards of a sustainable development (SEU for social protection of the population and increase of the human capital.

  8. Strategic interaction between fiscal and monetary policies in an export-oriented economy

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    Merzlyakov Sergey

    2012-01-01

    Full Text Available Solving the problem of stabilizing the economy is directly tied to the necessity of keeping the main macroeconomic variables stable. However, macroeconomic stability is not in the general case a purely fiscal or a purely monetary problem. How the central bank and the government interact is of principle importance. We investigate the impact of macroeconomic policies on the dynamics of the exchange rate, inflation, output and stabilization fund and consider different forms of strategic interaction between the government and the central bank. In this paper we build a stylized model of an export-oriented economy. We use numerical examples for our analysis and practical conclusions. The effective interaction of fiscal and monetary policies is possible under a cooperative Stackelberg game interaction with the government as leader. It is shown that the independence of the central bank does not play a crucial role.

  9. The Impact of United States Monetary Policy in the Crude Oil futures market

    Science.gov (United States)

    Padilla-Padilla, Fernando M.

    This research examines the empirical impact the United States monetary policy, through the federal fund interest rate, has on the volatility in the crude oil price in the futures market. Prior research has shown how macroeconomic events and variables have impacted different financial markets within short and long--term movements. After testing and decomposing the variables, the two stationary time series were analyzed using a Vector Autoregressive Model (VAR). The empirical evidence shows, with statistical significance, a direct relationship when explaining crude oil prices as function of fed fund rates (t-1) and an indirect relationship when explained as a function of fed fund rates (t-2). These results partially address the literature review lacunas within the topic of the existing implication monetary policy has within the crude oil futures market.

  10. Monetary policy and banking supervision: still at arm's length? A comparative analysis

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    Donato Masciandaro

    2012-12-01

    Full Text Available By the early 2000s an increasing number of countries had adopted a well-defined central bank framework, characterized by two intertwined features: stronger specialization for the banking authority in achieving monetary policy goals, and a lessening of its traditional responsibilities for the safeguard of financial stability within its institutional perimeter. The fundamental effect was that Central Bank Involvement in Supervision (CBIS generally decreased. But then, after the Financial Crisis erupted in 2008, reforms have been undertaken and projects are being discussed to reconsider the role of the central bank in the field of supervisory tasks. The main research question is then: how is CBIS moving? This article offers two contributions. Firstly, the economics of the relationship between central banking, monetary policy and banking supervision is reviewed. Secondly, the current situation of CBIS in 88 countries around the world is analyzed.

  11. Restoring international competitiveness in Croatia: The role of fiscal and monetary policy

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    Ćorić Tomislav

    2013-01-01

    Full Text Available Croatia has joined the European Union as a country with several substantial structural problems, of which the most important is weak competitiveness. Although competitiveness can be viewed from the ‘institutional’ perspective, which includes World Development Indicators (WDI and Doing Business reports, in this paper the authors focus on the more standard view of competitiveness based on unit labour costs (ULC and real effective exchange rate (REER. As a small, open and highly dollarized/euroised economy that has to coordinate its economic policy with the EU policy framework, Croatia has limited space for increasing international competitiveness using monetary policy measures aimed at (nominal devaluation of the national currency. Therefore economic policy stakeholders should focus on decreasing unit labour costs and real effective exchange rate mainly through the process of internal devaluation, which is based on adequate fiscal policy measures. In this paper the authors analyse the role of monetary and fiscal policy in the deteriorating real effective exchange rate and unit labour costs since 2000, and their current capabilities and restrictions in restoring international competitiveness. The Structural VAR model (SVAR is used to estimate the effects of foreign (banking capital, credit growth, and current public expenditure on REER and ULC. The preliminary hypothesis of the paper is that monetary policy should continue to support bank lending activities and the role of fiscal policy is to achieve an internal devaluation, which will increase the competitiveness of the Croatian economy. Restoring international competitiveness is necessary due to its impact on net exports and consequently the economic recovery of the national economy, which has faced recession conditions for five years in a row. Also, restoring competitiveness is one of the most important preconditions for the success of a small country joining the single European market.

  12. Effects of Fiscal Policy and Monetary Policy on the Stock Market in Poland

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    Yu Hsing

    2013-10-01

    Full Text Available The focus of this paper is to examine potential impacts of fiscal and monetary policies on stock market performance in Poland. Applying the GARCH model and based on a sample during 1999.Q2 to 2012.Q4, this paper finds that Poland’s stock market index is not affected by the ratio of government deficits or debt to GDP and is negatively influenced by the money market rate. The stock index and the ratio of M3 to GDP show a quadratic relationship with a critical value of 46.03%, suggesting that they have a positive relationship if the M3/GDP ratio is less than 46.03% and a negative relationship if the M3/GDP ratio is greater than 46.03%. Furthermore, Poland’s stock index is positively associated with industrial production and stock market performance in Germany and the U.S. and negatively affected by the nominal effective exchange rate and the inflation rate.

  13. U.S.Stock Market Crashes and Their Aftermath: Implications for Monetary Policy

    OpenAIRE

    Eugene White; Frederic Mishkin

    2002-01-01

    This paper examines fifteen historical episodes of stock market crashes and their aftermath in the United States over the last one hundred years. Our basic conclusion from studying these episodes is that financial instability is the key problem facing monetary policy makers and not stock market crashes, even if they reflect the possible bursting of a bubble. With a focus on financial stability rather than the stock market, the response of central banks to stock market fluctuations is more lik...

  14. US stock market crashes and their aftermath: Implications for monetary policy

    OpenAIRE

    Mishkin, Frederic S.; White, Eugene N.

    2002-01-01

    This paper examines fifteen historical episodes of stock market crashes and their aftermath in the United States over the last one hundred years. Our basic conclusion from studying these episodes is that financial instability is the key problem facing monetary policy makers and not stock market crashes, even if they reflect the possible bursting of a bubble. With a focus on financial stability rather than the stock market, the response of central banks to stock market fluctuations is more lik...

  15. Enhanced Debt Management: solving the eurozone crisis by linking debt management with fiscal and monetary policy

    OpenAIRE

    Werner, Richard A.

    2014-01-01

    Unconventional approaches to suit unusual circumstances have become acceptable in monetary policy, a formerly highly conservative discipline. In this paper it is argued that unconventional approaches should also be considered in sovereign debt management, in order to contribute to resolving the eurozone sovereign debt crisis. First, the Troika crisis lending to indebted sovereign borrowers in the eurozone is reviewed and compared with standard IMF post-crisis lending. The main difference and ...

  16. Fiscal and monetary policy interactions in an endogenous growth model with financial intermediaries

    OpenAIRE

    Espinosa, Marco A.; Yip, Chong K.

    1995-01-01

    We review some inflationary and growth claims surrounding fiscal and monetary policy interactions. While financial intermediation has long been acknowledged as a key mechanism in the transmission of these interactions, only recently have economists incorporated the explicit modeling of such intermediaries in their analyses. Here we model financial intermediaries explicitly. We find that the relation between growth and inflation depends crucially on the agents' degree of relative risk aversion...

  17. The Monetary Policy in the System of State Regulation of the Indian Economy

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    Natalia V. Galistcheva

    2015-01-01

    Full Text Available The main task of this research is the analysis of India's monetary policy and its place in the system of state regulation of the economy. The article highlights the main directions of the Indian monetary policy in 1990-2000s aiming to raise competitiveness of the Indian goods on the foreign markets as well as stimulating the inflow of foreign capital in necessary volumes into the national economy. The author focuses on the main instruments of the modern Indian monetary policy, pursued in line with providing the undervalued rupee, which include the manipulating of the bank rate and currency interventions, directed mainly at sterilization of excessive inflow of foreign currency to the country. The article also underlines all the advantages and costs of the monetary policy. One of its main advantages is stimulation of national production's exports and among costs there are difficulties of importing machines and equipment into the country, increase of inflation rate as a result of massive inflow of export revenue, difficulties at external debt's service. The author notes the gradual nature of introduction of current account rupee convertibility and reasons for delay in achieving its full convertibility. Among them there are rather high level of fiscal deficit of the consolidated budget, essential average annual level of inflation, problems of non-performed assets in the economy, high liquidity ratio for commercial banks. The article also presents statistical data on the present state of the Indian foreign exchange reserves as well as dynamics in nominal and real effective exchange rate of rupee in 2005/06 - 2013/14 fiscal year.

  18. International Monetary Instability Between the Wars: Structural Flaws or Misguided Policies?

    OpenAIRE

    Barry Eichengreen

    1989-01-01

    This paper reassesses the history of the international monetary system between the wars. It confirms the generality of several widely held interpretations of recent experience with floating exchange rates. There is a positive association between nominal exchange rate variability and real exchange rate variability. But policies of intervention which reduce nominal exchange rate variability do not guarantee a proportionate reduction in nominal exchange rate risk or in real exchange rate variabi...

  19. International Monetary Stability Between the Wars: Structural Flaws or Misguided Policies?

    OpenAIRE

    Eichengreen, Barry

    1989-01-01

    This paper examines the international monetary system between the Wars. It confirms the generality of several widely held interpretations of recent experience with floating exchange rates. There is a positive association between nominal exchange rate flexibility and nominal exchange rate variability, and between nominal and real exchange rate variability. But policies which reduce nominal exchange rate variability do not guarantee a proportionate reduction in nominal exchange rate risk or in ...

  20. Sustainable monetary policy : lessons and evidence from the bank suspension period, 1797-1821

    OpenAIRE

    Newby, Elisa Maria Susanna

    2008-01-01

    This thesis re-examines the suspension of the gold standard rule in Britain between 1797 and 1821 within the framework of the theory of credible and time consistent monetary policy. By combining both historical and theoretical analysis the thesis challenges the prevailing theory in which the gold standard is considered as a contingent rule and the suspension as an exogenously credible regime. Firstly, the thesis analyses what made the suspension credible in the absence of the gold standar...

  1. Modelling the monetary policy reaction function of the Colombian Central Bank

    OpenAIRE

    Otero, Jesus; Ramírez, Manuel

    2008-01-01

    This paper proposes a simple Ordered Probit model to analyse the monetary policy reaction function of the Colombian Central Bank. There is evidence that the reaction function is asymmetric, in the sense that the Bank increases the Bank rate when the gap between observed inflation and the inflation target (lagged once) is positive, but it does not reduce the Bank rate when the gap is negative. This behaviour suggests that the Bank is more interested in fulfilling the announced inflation target...

  2. Monetary policy transmission mechanism in Poland. What do we know in 2011?

    OpenAIRE

    Tomasz Łyziak; Oksana Demchuk; Jan Przystupa; Anna Sznajderska; Ewa Wróbel

    2012-01-01

    In the light of the results of empirical studies presented in the Report and the literature available45 it may be concluded that the form of the monetary policy transmission mechanism in Poland is consistent with structural features of the Polish economy and coincides with those characteristic of more developed European economies, e.g. the euro area. Although the financial intermediation system is less developed than in the euro area, Poland, like the new EU Member States is characterised by ...

  3. Exchange Rate Pass-through and Monetary Policy in South Africa

    OpenAIRE

    Aron, Janine; Farrell, Greg; Muellbauer, John; Sinclair, Peter

    2010-01-01

    Understanding how import prices adjust to exchange rates helps anticipate inflation effects and monetary policy responses. This paper examines exchange rate passthrough to the monthly import price index in South Africa during 1980-2009. A methodological innovation allows various short-run pass-through estimates to be calculated simply without recourse to a full structural model, yet without neglecting the long-run relationships between prices or the effects of previous import price changes, a...

  4. Monetary Policy Rules, Learning and Stability: a Survey of the Recent Literature (In French)

    OpenAIRE

    Martin ZUMPE (GREThA UMR CNRS 5113)

    2010-01-01

    This paper presents the literature about econometric learning and its impact on the performances of monetary policy rules in the framework of the new canonical macroeconomic model. Rational expectations which are a building block of the original model can thus be replaced by expectations based on estimation algorithms. The permanent updating of these estimations can be interpreted as a learning proces of the model’s agents. This learning proces induces additional dynamics into the model. The ...

  5. On the nexus of monetary policy and financial stability: Is the financial system more resilient?

    OpenAIRE

    Mora, Patricia Palhau; Januska, Michael

    2016-01-01

    Monetary policy and financial stability are closely intertwined, and the resilience of the financial system carries weight in this relationship. This paper explores whether the financial system is more resilient as a result of the G20's post-crisis agenda for financial regulatory reform. It summarizes the agenda's key measures and implementation schedules, both internationally and in Canada, reviews the effectiveness of the reform measures in preventing and addressing financial imbalances, an...

  6. Central banks' use in East Asia of money market instruments in the conduct of monetary policy

    OpenAIRE

    Robert F. Emery

    1992-01-01

    The paper examines the greater use in the past decade of money market instruments in the conduct of monetary policy by the central banks, or their equivalent, in six of the main East Asian developing economies. Some of these economies have been successful in using various money market instruments to control liquidity, while others have been much less successful. A common theme in the case of the successful economies has been one of employing money market instruments that have yields based on ...

  7. Inflation and Monetary Policy in Russia: Transition Experience and Future Recommendations

    OpenAIRE

    Marek Dabrowski; Wojciech Paczynski; Lukasz Rawdanowicz

    2002-01-01

    This paper seeks the main factors behind inflation in Russia over the period 1996–2001. It presents a succinct description of Russian monetary policy and inflation developments. The econometric analysis establishes a long-run relationship between demand for the real money balances on the one side and the real income and short-term interest rate on the other side. It also presents several specifications of modeling shortrun dynamics of inflation. An account is made for the change in the exchan...

  8. Monetary Policy and Real Estate Prices: A Disaggregated Analysis for Switzerland

    OpenAIRE

    Berlemann, Michael; Freese, Julia

    2010-01-01

    Most empirical studies found that monetary policy has a significant effect on house prices while stock markets remain unaffected by interest rate shocks. In this paper we conduct a more detailed analysis by studying various sub-segments of the real estate market. Em-ploying a new dataset for Switzerland we estimate vector autoregressive models and find substitution effects between house and apartment prices on the one hand and rental prices on the other. Interestingly enough, commercial prope...

  9. The asymmetric effects of oil price and monetary policy shocks. A nonlinear VAR approach

    International Nuclear Information System (INIS)

    Rahman, Sajjadur; Serletis, Apostolos

    2010-01-01

    In this paper we investigate the asymmetric effects of oil price shocks and monetary policy on macroeconomic activity, using monthly data for the United States, over the period from 1983:1 to 2008:12. In doing so, we use a logistic smooth transition vector autoregression (VAR), as detailed in Terasvirta and Anderson (1992) and Weise (1999), and make a distinction between two oil price volatility regimes (high and low), using the realized oil price volatility as a switching variable. We isolate the effects of oil price and monetary policy shocks and their asymmetry on output growth and, following Koop et al. (1996) and Weise (1999), we employ simulation methods to calculate Generalized Impulse Response Functions (GIRFs) to trace the effects of independent shocks on the conditional means of the variables. Our results suggest that in addition to the price of oil, oil price volatility has an impact on macroeconomic activity and that monetary policy is not only reinforcing the effects of oil price shocks on output, it is also contributing to the asymmetric response of output to oil price shocks. (author)

  10. The asymmetric effects of oil price and monetary policy shocks. A nonlinear VAR approach

    Energy Technology Data Exchange (ETDEWEB)

    Rahman, Sajjadur [Department of Economics, University of Saskatchewan, Saskatoon (Canada); Serletis, Apostolos [Department of Economics, University of Calgary, Calgary (Canada)

    2010-11-15

    In this paper we investigate the asymmetric effects of oil price shocks and monetary policy on macroeconomic activity, using monthly data for the United States, over the period from 1983:1 to 2008:12. In doing so, we use a logistic smooth transition vector autoregression (VAR), as detailed in Terasvirta and Anderson (1992) and Weise (1999), and make a distinction between two oil price volatility regimes (high and low), using the realized oil price volatility as a switching variable. We isolate the effects of oil price and monetary policy shocks and their asymmetry on output growth and, following Koop et al. (1996) and Weise (1999), we employ simulation methods to calculate Generalized Impulse Response Functions (GIRFs) to trace the effects of independent shocks on the conditional means of the variables. Our results suggest that in addition to the price of oil, oil price volatility has an impact on macroeconomic activity and that monetary policy is not only reinforcing the effects of oil price shocks on output, it is also contributing to the asymmetric response of output to oil price shocks. (author)

  11. The adaptation of monetary policy to the constraints of the global financial crisis by central banks of ASEAN-5 countries

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    Sorina BOTIŞ

    2015-12-01

    Full Text Available Global financial crisis represented an important test for central banks, generating multiple challenges that gave rise to both expanding their monetary policy tools and redefining its role in the financial system. The present work aims to identify the characteristics of the monetary policy by the central banks of the five countries belonging to ASEAN-5 Group(Indonesia, Malaysia, the Philippines, Singapore and Thailand, during and after the outbreak of the international financial crisis. For this purpose we carried out a comparative analysis between the five central bank s belonging to the Group, both in terms of the challenges of the monetary policy and the type of measures taken in response to the first. The analysis shows that central banks have different levels of responsibilities, corresponding to the internal economic and financial realities, and also different ways of adaptation and adjustment of their monetary policy.

  12. MONETARY POLICY BEFORE AND AFTER THE FINANCIAL CRISIS. EVIDENCE FROM INFLATION TARGETING COUNTRIES IN CENTRAL AND EASTERN EUROPE

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    Ioana Plescau

    2017-07-01

    Full Text Available The aim of our study is to review the monetary framework and instruments adopted by the inflation-targeting countries in Central and Eastern Europe, from 2005-ownwards. We employ a qualitative approach and develop a comparative analysis of the changes that occurred in the conduct of monetary policy after the 2008 financial crisis. The results highlight that the central banks in our sample have adjusted their policy in order to counteract the effects of the financial crisis and adopt different instruments to fulfill this aim. The contribution of our study is twofold. First, we offer a review of the literature regarding the adjustments in the monetary policy after the crisis and their effectiveness. Second, we make a comparative analysis between countries with respect to the path of monetary policy from conventional to unconventional and assess the (potential way back.

  13. Impact of the joint-stock reform of commercial banks on the effectiveness of monetary policy in China

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    Fang Xianming

    2016-01-01

    Full Text Available Over the past decade, the Chinese government has conducted the joint-stock reform of state-owned commercial banks. The joint-stock reform improves the marketization level of the ownership structure of commercial banks and consequently leads to impacts on the effectiveness of monetary policy. This paper first presents the impacting mechanisms of the joint-stock reform of commercial banks on the effectiveness of monetary policy and then constructs an empirical model to test those impacts. The empirical results show that the increasing degree of joint-stock reform of commercial banks enhances the effectiveness of expansionary monetary policy but weakens the effectiveness of contractionary monetary policy in China.

  14. Risk premium shocks, monetary policy and exchange rate pass-through in the Czech Republic, Hungary and Poland

    OpenAIRE

    Vonnák, Balázs

    2010-01-01

    This paper investigates the role of monetary policy in a small open economy, where exchange rate shocks are important. VAR models are estimated for the Czech Republic, Hungary and Poland. Contemporaneous and sign restrictions are imposed in order to identify the effect of monetary policy and risk premium shocks. Estimates from the same model for Canada, Sweden and the UK are used as benchmark for developed economies with low inflation. The results suggest that the typical size a of risk premi...

  15. Correlation and regression analysis of tools influencing on targets of monetary policy of Central Bank of the Russian Federation

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    Gordyachkova O. V.

    2016-07-01

    Full Text Available the article presents the correlation and regression analysis of the influence of the Central Bank tools of Russian monetary policy on its aims. Such analysis is the basic method of estimating monetary policy efficiency by means of quantity-related parameters. The results outlined by the authors prove the lack of efficiency of influencing tools: inflation, money supply and the exchange rate.

  16. The interplay between money market development and changes in monetary policy operations in small European countries, 1980 - 2000

    OpenAIRE

    Forssbæck, Jens; Oxelheim, Lars

    2007-01-01

    We study the interplay between money market development and changes in monetary policy operating procedures in 11 European countries from c. 1980 up to the launch of EMU. Aspects of money market development such as the size and structure of different market segments, and institutional and regulatory changes, are addressed. We recount and empirically examine the extent of reorientation of monetary policy instruments away from quantitative direct control instruments toward indirect market-based...

  17. Limitations to Keynesian demand management through monetary policy: whither Cartesian policy control

    OpenAIRE

    Heise, Arne

    2004-01-01

    During a distinguished career, Basil Moore has made numerous important contributions to macroeconomics and monetary economics, and is renowned as the progenitor of the ‘horizontalist’ analysis of endogenous money. More recently, he has embraced complexity theory as part of an ongoing effort to understand macroeconomics as an evolving, path-dependent process. This book celebrates and explores Basil Moore’s interests in and contributions to monetary and macroeconomic theory.

  18. Inside the Impossible Triangle:Monetary Policy Autonomy in a Credible Target Zone

    OpenAIRE

    W. Jos Jansen

    2003-01-01

    This paper examines the trade-off between exchange rate stability and monetary autonomy for a target zone. Using the guilder-mark target zone in the pre-EMU period as a case study, we empirically estimate how much policy discretion the Dutch central bank still enjoyed and how much had been ceded to the German central bank. The sum of these two measures is an estimate of the policy autonomy under a free float. We find that the narrow guilder-mark target zone still permitted a modest degree of ...

  19. Integration of Government Bond Market in the Euro Area and Monetary Policy

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    Lukić Velimir

    2016-01-01

    Full Text Available This paper combines analysis of evolution in euro area government bond market integration and interference of European Central Bank with functioning of respective market recently. Since the introduction of euro, government bond yields converged in the euro area, bonds of different countries have become close substitutes in the perception of investors, and overall integration of the market was rather high. At the end of 2008, dramatic shift occurred and ever since disintegrative forces were set in motion. The paper presents the following measures of integration of the government bond markets: yield spreads, dispersion in yield spreads and beta coefficient. All three measures suggest unprecedented market disintegration as of 2010. The paper highlighted relevance of sovereign bond market for the smooth functioning of the monetary policy transmission mechanism in a monetary union context. Three ECB’s programmes aimed at sovereign debt crisis resolution were analysed in details. They proved successful in lowering peripheral countries’ yields and spreads, and calming the markets. If one takes central bank function of the lender of last resort for banks, then these programmes may be viewed as the “buyer of last resort” device for government bonds. Although warranted by exceptional circumstances and need for swift response, a due caution should be paid to these programmes since they pose certain challenges for conduct of monetary policy and might even have unintended consequences.

  20. In the absence of fiscal union, the Eurozone needs a more flexible monetary policy: A reply

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    Pietro Alessandrini

    2016-09-01

    Full Text Available The authors (A&F reply to Andrea Terzi’s comment on their previous paper, published in the December 2015 issue of this Review. Andrea Terzi’s two main objections to A&F analysis are: that diverging current-account (CA balances enhanced the fragility of the member countries of the euroarea, but were not the cause of the liquidity crisis that occurred between 2010 and 2012; and that A&F’s quantity-theoretic view of monetary policy implementation is not applicable to a floating currency like the euro, or to the Target2 payment system. To these objections, the authors reply that the policy prescription for targeting current-account balances is based on the proposition that relevant underlying factors such as losses of competitiveness, sticky real exchange rates, persistent trade deficits, sudden stops in capital flows, and vanishing liquidity can account for a liquidity crisis independent of fiscal irresponsibility; and that their original model simply shows that, in the aftermath of the financial crisis, the size of the balance sheets of major central banks has exploded. Considering the high correlation between the size of central banks’ balance sheets and the monetary base, the obvious question is: if the quantity of the monetary base is not a useful concept, why are we having an indigestion of quantitative easing? JEL: E42, E52, E58.

  1. In the absence of fiscal union, the Eurozone needs a more flexible monetary policy

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    Pietro Alessandrini

    2015-12-01

    Full Text Available This paper makes three points. The first is that external imbalances between Member States are relevant for the performance of a monetary union when the latter is not backed by a strong political commitment and a solid political framework. Eurozone policymakers have ignored these inter-member imbalances and have instead concentrated on union-wide imbalances, so much so that statistical data on the former phenomenon still remain largely incomplete. There are signs that a correction is in the making, which we hope will lead to a comprehensive quantitative knowledge of intra-EMU imbalances. The second objective of the paper is to design specific policies aimed at reducing inter-member external disequilibria, for example by fixing targets on current-account imbalances symmetrically applied to both deficit and surplus countries. The contrast between the keen attention of the EZ policymakers on national fiscal imbalances and the belated and lukewarm attention given to external imbalances is striking. The third aim of the paper is to propose a more flexible monetary policy aimed at controlling the distribution of liquidity among Member States, resulting from inter-member external imbalances. Our proposal is that National Central Banks should add a risk premium cost to official interest rates on banks that accumulate “excessive” borrowings or deposits to compensate, respectively, for outflows and inflows of the monetary base due to the effect of external imbalances. JEL classification: E42, E52, E58

  2. Monetary policy as a source of risk in international business financings and investments

    Directory of Open Access Journals (Sweden)

    Paun Cristian

    2017-07-01

    Full Text Available This paper aims at explaining the volatility of two main macroeconomic variables (interest rate and exchange rate that impact the cost of international capital and, consequently, the international financing decision. Firstly, the main economic theories are called to illustrate the relevant determinants of these variables from the perspective of demand and supply of capital sides. The state intervention through monetary policy is introduced to emphasize the alteration of these prices (the price of capital, the price of foreign currencies. The paper is presenting the role of these prices in international financing decision (based on the theoretical model used to estimate cost of international capital, their impact on the foreign direct investment decision and on the international portfolio investment decision. Finally, the paper describe the economic consequences of the monetary public intervention on the financing and investment decision in direct connection with the business cycle theory. The paper associates the monetary policy to the business cycles. The paper comments the unsound solutions proposed against the economic crises and that continued to harm negatively these prices generating the seeds for next international economic recession. The paper is a theoretical one, containing some very interesting research hypothesis and opening the paths for presumable further empirical researches.

  3. Monetary policy efficiency in the euro zone: some empirical evidence of money demand stability and endogeneity

    Directory of Open Access Journals (Sweden)

    Kapounek, S.

    2010-12-01

    Full Text Available The primary target of most central banks in developed economies is to maintain price stability. When there is no threat to the fulfilment of the primary target, the central bank focuses on its secondary target which is defined as support of a sustainable economic growth and full employment. Even though, a substantial part of the discussions regarding the targets of the central banks focus on price stability, the real target is to support a sustainable economic growth, especially to stabilize the fluctuation in the economic activity.This paper focuses on the current problems of monetary policy implementation in the Eurozone. Firstly, the author focus on the money demand function estimation and its stability. Another problem lies in the Postkeynesians´ assumptions of money endogeneity. Although central banks may have certain control over the money supply, they cannot fix the stock of money in a country. Different trends in monetary aggregates fluctuation contribute to reject the money exogeneity hypothesis.

  4. The role and importance of ECB's monetary policy in the global economic crisis

    Directory of Open Access Journals (Sweden)

    Stakić Nikola

    2014-01-01

    Full Text Available This paper presents the role and importance of the European Central Bank (ECB in the context of measures and effects that are being taken to repair the consequences of the current economic crisis. The ECB, together with the European single currency, the euro, symbolizes long-lasting monetary integration of the EU states. Such form of integration has created the possibility of a supranational action of ECB in the banking sector and financial markets in general. Along with the other most important central banks in the world, the ECB applies various unconventional instruments of monetary policy to stimulate economic growth and development. In this context, the paper explains the nature and mechanism of such measures in order to influence on the insufficient liquidity in the financial markets.

  5. The impact of monetary policy and exchange rate regime on real GDP and prices in the Republic of Macedonia

    Directory of Open Access Journals (Sweden)

    Zeqiri Izet

    2010-09-01

    Full Text Available This paper investigates the relative costs and benefits associated with introducing a more active monetary and a different exchange rate regime in the Republic of Macedonia. In this finding, the econometrics result show that introducing a more active monetary policy and a different strategy of the exchange rate targeting in order to promote rapid economic growth could easy disturb macroeconomic stability (after having achieved it at a substantial cost without any significant economic benefits. Therefore, introducing a more active monetary policy and a different strategy of the exchange rate regime is likely to incur more costs than benefits, since changes of the monetary policy and exchange rate regime type do not show a persistent effect on real GDP, while changes of money stock and exchange rate regime do show a strong and persistent effect on prices level.

  6. Smart unconventional monetary (SUMO) policies: giving impetus to green investment. Climate Report no. 46

    International Nuclear Information System (INIS)

    Ferron, Camille; Morel, Romain

    2014-07-01

    Today, given the amount of investment needed to reach a 2-degree emissions reduction target and the tight budgetary constraints of governments worldwide, public spending alone will not be sufficient alone. Therefore, there is a double need to not only shift private financial flows from 'brown' sectors to 'green' sectors, but also to leverage new sources of financing. Addressing the second challenge, this study reviews three families of proposed funding mechanisms based on unconventional monetary policies targeting 'green' or 'climate' investments. These 'Smart Unconventional Monetary' (or SUMO) policies include: (i) the use of Special Drawing Rights (SDRs) issued by the International Monetary Fund (IMF), (ii) green quantitative easing and (iii) the issuance of Carbon Certificates. Proponents of these mechanisms assert that they have a strong potential to provide substantial low-cost financing for green projects and reduce the risks linked to green investments for private investors. Furthermore, they could have further macro-economic co-benefits in specific circumstances. For example, implemented jointly with appropriate 'demand-side' mechanisms, a SUMO policy mechanism, even if short-term, could help trigger investment, bank lending and growth in Europe and pave the way for a longer-term green policies' framework. Nevertheless, this analysis has identified that the implementation of such mechanisms has a number of challenges to overcome. The first challenge is to convince policy makers that these mechanisms, even if they resort to unconventional monetary policies, will not lead to inflation. The second challenge is the difficulty to reach multilateral agreements in the short run, because of geopolitical and institutional barriers. The third challenge is the necessity to involve the private sector. Furthermore, to facilitate their contribution to low-carbon investment, this analysis suggests that

  7. The impact of fiscal and monetary policies on unemployment problem in Nigeria (managerial economic perspective

    Directory of Open Access Journals (Sweden)

    Nick Attamah

    2015-06-01

    Full Text Available This paper investigates the impact of fiscal and Monetary Policies on Unemployment Problem in Nigeria and covers the periods 1980 to 2013. To achieve this, fiscal policy was captured here by government expenditures and revenues respectively while monetary policy was proxied by broad Money Supply (M2, Interest and Exchange rates respectively. The methodology adopted was econometric analysis employing OLS techniques and unit roots of the series were examined using the Augmented Dickey-Fuller after which the co-integration tests was conducted using the Engle Granger approach. Error correction models were estimated to take care of the short run dynamics. It was found that while government expenditure had a positive relationship with unemployment problem in Nigeria, the result of government revenue was negative and insignificant on unemployment problem. For monetary policy, it was found that money supply and exchange rate had positive and significant impact while interest rate has only a positive relationship on unemployment problem in Nigeria. This meets the a priori expectation. The study also revealed that increases in interest and exchange rates escalate unemployment by increasing cost of production which discourages the private sector from employing large workforce. On the other hand, national productivity measured by real GDP had a negative and significant impact on unemployment rate in Nigeria. This paper recommends that for an effective combat to unemployment problem in Nigeria, there should be a systematic diversion of strategies, thus more emphasis should be laid on aggressively pursuing entrepreneurial development and increased productivity. Again government should aggressively focus on investment, employment generation and economic growth that has mechanism to trickle does to the masses

  8. Further Monetary Easing Policies under the Non-negativity Constraints of Nominal Interest Rates: Summary of the Discussion Based on Japan's Experience

    OpenAIRE

    Oda, Nobuyuki; Okina, Kunio

    2001-01-01

    This paper examines issues surrounding monetary policy under zero interest rates based on one and a half year fs experience in Japan. After reviewing the market development in Japan, it summarizes the transmission mechanism of monetary policy under zero nominal interest rates, and considers what would be the likely policy options if a central bank were to conduct further monetary easing. Specifically, a more detailed policy announcement is regarded as feasible, less costly, and the less risky...

  9. The Effectiveness of Monetary Policy Towards Stock Index Case Study : Jakarta Islamic Index 2006-2014

    Directory of Open Access Journals (Sweden)

    Lak lak Nashat el Hasanah

    2016-06-01

    Full Text Available Fluctuation in economy situation is an important indicator for investor decision making. The investor actions are base on the minimum risk while having maximum profit. One of it is observing the condition of macro variables within monetary policy. This research aims to analyze the impact of inflation, money supply, exchange rate, and birate towards stock of jakarta islamic Index. The type data used is times series periode 2006-2014. Multiple linier regression with chow test and dummy variable approach to compare and to know the behavior of each independent variables. The result shows partially that birate and exchange rate negatively impact Jakarta Islamic Index before global monetary crisis in 2008, while inflation and money supply not that significantly impact. After global monetary crisis in 2008, partially, birate variable and money supply significantly giving positive influence to Jakarta Islamic Index, while at same time exchange rate and inflation are not significantly influencial. Simultaneously, inflation, money supply, exchange rate, and birate influence Jakarta islamic Index.

  10. The impact of monetary policy on the economic growth of a small and open economy: The case of South Africa

    Directory of Open Access Journals (Sweden)

    V Khabo

    2014-08-01

    Full Text Available This study evaluates the impact of monetary policy on the economic growth of a small and open economy like that of South Africa. Structuralists contend that changes in money supply (M3 and inflation (CPI are not significantly related to changes in economic growth (GDP, while orthodox economists argue that they are. Stucturalists also hold that monetary authorities cannot control M3, whereas orthodox economists believe they can. To structuralists, when monetary authorities pursue an expansionary policy, the opposite effect is achieved. Orthodox economists counter this argument. The ADT test statistic against the McKinnon critical values was used and it was found (i that money supply changes and inflation are significantly related to changes in economic growth, and (ii whereas monetary authorities can control M3 through the repo rate,  they cannot keep it within set targets.

  11. Assessing Volatilities of Monetary Policy and their Effects on the Islamic and Conventional Stock Markets in Indonesia

    Directory of Open Access Journals (Sweden)

    M Shabri Abd Majid

    2018-03-01

    Full Text Available The main objective of this study is to empirically assess the volatilities of the monetary policy instruments and their effects on the Indonesian Islamic and conventional stock market. The changes in exchange rate, interest rates, and money supply and their effects on the stock markets are investigated using the using the Generalized Autoregressive Conditional Heteroskedasticity frameworks. As a big-open economy, the capital market of Indonesia is vulnerable to the global monetary shocks changes, thus the US federal funds rate is also incorporated into the GARCH model. The study documented that, with the exception of the US interest rate, the volatilities of all monetary policy variables of interest rate, exchange rate, and money supply were documented affecting the volatilities of both Islamic and conventional stock markets. These findings imply that the volatilities of Islamic and conventional stock markets have similar determinants, thus to stabilize the markets, the investigated monetary policy variables should be controlled for by the policy-makers. Any monetary policy design imposed by the policy-makers would have a similar effect on both conventional and Islamic stocks in Indonesia.DOI: 10.15408/sjie.v7i2.7352

  12. Non-linear effects of the U.S. Monetary Policy in the Long Run

    OpenAIRE

    Olmos, Lorena; Sanso Frago, Marcos

    2014-01-01

    We find non-linearities in the U.S. long-run relationships among trend inflation, growth rate and financial frictions. Moreover, our results show that mismeasurements of the natural rate of interest deviate the trend inflation from its target, which is especially clear when monetary policy reacts preventively against inflation deviations. The long-run growth rate, the trend inflation and the natural rate of interest, specified as time-varying, are jointly estimated over the period 1960:Q1-201...

  13. Monetary policy and inflation targeting in a small open-economy

    OpenAIRE

    Abdul Karim, Zulkefly; Md. Said, Fathin Faezah; Jusoh, Mansor; Md. Thahir, Md. Zyadi

    2009-01-01

    This paper investigates the transmission mechanism of monetary policy and inflation targeting in a small open-economy by using backward-looking of aggregate supply (AS) and aggregate demand (AD) framework. Since September 1998 until July 2005, Malaysia has implemented a currency pegged to the U.S dollar in responding to the Asian financial crisis. However, since the 21st of July 2005 until at present, the Central Bank of Malaysia (CBM) has eliminated pegging with the U.S dollar and moved to t...

  14. BAYESIAN APPROACH TO THE ANALYSIS OF MONETARY POLICY IMPACT ON RUSSIAN MACROECONOMICS INDICATORS

    Directory of Open Access Journals (Sweden)

    Sheveleva O. A.

    2017-12-01

    Full Text Available In this paper the interaction between the production macroeconomic indicators of the Russian economy and MIBOR (the main operational benchmark of the Bank of Russia, as well as the relationship between the inflation indicators and money supply were investigated with Bayesian approach. Conjugate Normal Inverse Wishart Prior was used. According to the study, tough monetary policy has a deterrent effect on the Russian economy. The growth of the money market rate causes a reduction in investments and output in the main sectors of the economy, as well as a drop in the income of the population with an increase in the unemployment rate.

  15. Le politiche monetarie in Italia dalla Golden age alle “oil crisis” nelle Relazioni della Banca d’Italia (Monetary Policy in Italy According to the 'Relazioni' of the Bank of Italy

    Directory of Open Access Journals (Sweden)

    Donatella Strangio

    2017-03-01

    Full Text Available Monetary policy, in recent years, is often invoked as a panacea for a severe recession that is affecting Europe, in particular Italy from 2010. This paper will examine how monetary policy reacted in times of crisis before the currency reform implemented with EMS, the main step towards the single currency. In this paper we were used the sources of the Relations of the Bank of Italy to highlight the role played by this institution in the monetary policy and the use of this policy.

  16. Why monetary board: Monetary board and endogenic price flexibility

    Directory of Open Access Journals (Sweden)

    Bašić Tamara

    2004-01-01

    Full Text Available The paper presents a model which proves that a unilateral exchange rate fixing, i.e. monetary board, as opposed to certain opinions, is an optimal policy since it increases flexibility of nominal prices, which is the ultimate goal of a flexible exchange rate policy. A suitable calibration of the model shows that the higher the initial price flexibility, the lower the difference needed for "utility increase" in getting the producers to switch from fixed to flexible prices. The results obtained in all cases indicate that exchange rate fixing increases price flexibility, which proves that a unilateral exchange rate fixing, i.e. monetary board, could be an optimal monetary policy.

  17. Optimal patent policies: A survey

    DEFF Research Database (Denmark)

    Poulsen, Odile

    2002-01-01

    This paper surveys some of the patent literature, in particular, it focuses on optimal patent policies. We compare two situations. The first where the government only has a single policy tool to design the optimal patent policy, namely the optimal patent length. In the second situation......, the government uses two policy tools, the optimal breadth and length. We show that theoretical models give very different answers to what is the optimal patent policy. In particular, we show that the optimal patent policy depends among othet things on the price elasticity of demand, the intersectoral elasticity...... of research outputs as well as the degree of compettition in the R&D sector. The actual law on intellectual property, which advocates a unique patent length of 20 years is in general not supported by theoretical models....

  18. Monetary burden of health impacts of air pollution in Mumbai, India: implications for public health policy.

    Science.gov (United States)

    Patankar, A M; Trivedi, P L

    2011-03-01

    Mumbai, a mega city with a population of more than 12 million, is experiencing acute air pollution due to commercial activity, a boom in construction and vehicular traffic. This study was undertaken to investigate the link between air pollution and health impacts for Mumbai, and estimate the monetary burden of these impacts. Cross-sectional data were subjected to logistic regression to analyse the link between air pollution and health impacts, and the cost of illness approach was used to measure the monetary burden of these impacts. Data collected by the Environmental Pollution Research Centre at King Edward Memorial Hospital in Mumbai were analysed using logistic regression to investigate the link between air pollution and morbidity impacts. The monetary burden of morbidity was estimated through the cost of illness approach. For this purpose, information on treatment costs and foregone earnings due to illness was obtained through the household survey and interviews with medical practitioners. Particulate matter (PM(10)) and nitrogen dioxide (NO(2)) emerged as the critical pollutants for a range of health impacts, including symptoms such as cough, breathlessness, wheezing and cold, and illnesses such as allergic rhinitis and chronic obstructive pulmonary disease (COPD). This study developed the concentration-response coefficients for these health impacts. The total monetary burden of these impacts, including personal burden, government expenditure and societal cost, is estimated at 4522.96 million Indian Rupees (INR) or US$ 113.08 million for a 50-μg/m(3) increase in PM(10), and INR 8723.59 million or US$ 218.10 million for a similar increase in NO(2). The estimated monetary burden of health impacts associated with air pollution in Mumbai mainly comprises out-of-pocket expenses of city residents. These expenses form a sizable proportion of the annual income of individuals, particularly those belonging to poor households. These findings have implications for public

  19. Monetary Policy under the Border between Price Stability and Financial Stability

    Directory of Open Access Journals (Sweden)

    Irina-Raluca BADEA

    2015-09-01

    Full Text Available The international financial crisis drew the line for the international and national authorities that conducted and implemented faulty monetary and financial policies, regardless the potential risks that might arise. It was only after the crisis burst when everyone realized the impact the systemic risk can have on the global financial system and, consequently, on every national economy. The conventional point of view is that inflation is the main source of financial instability, but recent evidence points out the fact that reaching the inflation target does not necessarily mean that the financial system is stable. What is the most important is that any source of financial instability should be diminished if not erased, hence preserving financial stability has become an important goal for the authorities, who dispute whether to include it on the objectives list of central banks or authorize another institution to achieve it. Therefore, the main goal of this paper is framing the present monetary policy framework with respect to its objectives and strategies and the necessity to reconsider it in a realistic manner in order to prevent another collapse in case of an economic downturn.

  20. Preferences of the Central Reserve Bank of Peru and optimal monetary rules in the inflation targeting regime

    Directory of Open Access Journals (Sweden)

    Nilda Mercedes Cabrera Pasca

    2012-03-01

    Full Text Available This study aims to identify the preferences of the monetary authority in the Peruvian regime of inflation targeting through the derivation of optimal monetary rules. To achieve that, we used a calibration strategy based on the choice of values of the parameters of preferences that minimize the square deviation between the true interest rate and interest rate optimal simulation. The results showed that the monetary authority has applied a system of flexible inflation targeting, prioritizing the stabilization of inflation, but without disregarding gradualism in interest rates. On the other hand, concern over output stabilization has been minimal, revealing that the output gap has been important because it contains information about future inflation and not because it is considered a variable goal in itself. Finally, when the smoothing of the nominal exchange rate is considered in the loss function of the monetary authority, the rank order of preferences has been maintained and the smoothing of the exchange rate proved insignificant.

  1. The impact of monetary policy on bank lending rate in South Africa

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    B.T. Matemilola

    2015-03-01

    Full Text Available The pass-through of the policy rates to bank lending rate is an important subject matter because it measures the effectiveness of monetary policy to control inflation or stabilize the economy. This study investigates the long-run interest rate pass-through of the money market rate to the bank lending rate and asymmetric adjustment of the bank lending rate. The study applies the momentum threshold autoregressive and asymmetric error correction models. The asymmetric error correction results reveal that bank lending rate adjusts to a decrease in the money market rate in South Africa. The findings suggest that the South African commercial banks adjust their lending rate downward but the lending rate appears rigid upward, which supports the customer reaction hypothesis.

  2. Monetary compensations in climate policy through the lens of a general equilibrium assessment: The case of oil-exporting countries

    International Nuclear Information System (INIS)

    Waisman, Henri; Rozenberg, Julie; Hourcade, Jean Charles

    2013-01-01

    This paper investigates the compensations that major oil producers have claimed for since the Kyoto Protocol in order to alleviate the adverse impacts of climate policy on their economies. The amount of these adverse impacts is assessed through a general equilibrium model which endogenizes both the reduction of oil exportation revenues under international climate policy and the macroeconomic effect of carbon pricing on Middle-East's economy. We show that compensating the drop of exportation revenues does not offset GDP and welfare losses because of the time profile of the general equilibrium effects. When considering instead compensation based on GDP losses, the effectiveness of monetary transfers proves to be drastically limited by general equilibrium effects in opened economies. The main channels of this efficiency gap are investigated and its magnitude proves to be conditional upon strategic and policy choices of the Middle-East. This leads us to suggest that other means than direct monetary compensating transfers should be discussed to engage the Middle-East in climate policies. - Highlights: • We endogenize the interplay between climate policy, oil markets and the macroeconomy. • We quantify the transfers to compensate climate policy losses in oil-exporting countries. • We assess the general equilibrium effect of monetary transfers in opened economies. • The macroeconomic efficiency of transfers is altered by general equilibrium effects. • Monetary compensation schemes are not efficient for oil exporters in climate policy

  3. Beurteilung der Wirksamkeit und mögliche Risiken der aktuellen Geldpolitik des Eurosystems. Assessment of effectiveness and potential risks of the Eurosystems recent monetary policy

    Directory of Open Access Journals (Sweden)

    Armin Rohde

    2015-12-01

    Full Text Available In the present article effectiveness and potential risks of recently implemented non-conventional monetary policy measures by the Eurosystem are discussed. The goal of research is to show that an additional use of non-conventional monetary policy measures is meaningless to stimulate lending behaviour of the banking system in the Euro-area. At the background of the state of conventional monetary policy today, which in short is characterized by unlimited and free of charge allotment possibilities of central bank money to monetary financial institutions, there exist no monetary policy restrictions which prevent lending behaviour of the banking system. So alternative intentions of the European Central Bank are discussed in this article, why non-conventional monetary policy measures had been implemented. In this context it is shown, that the use of single non-conventional monetary policy measures as well as the whole arrangements of the recently very expansive monetary policy involve considerable potential risks, which can inflict severe problems to monetary policy in the future.

  4. Factors Impacting Bank Net Interest Margin and the Role of Monetary Policy: Evidence from Turkey

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    Muhammed Hasan Yılmaz

    2017-10-01

    Full Text Available In this study, we investigate factors affecting net interest margin (NIM of commercial banks in Turkey. Especially, our results highlight the relation between unconventional monetary policy shocks and bank margins. To this end, first, we conduct an identification analysis about which parameters of asymmetric interest corridor framework are important in explaining variations in NIM. Using industry-level data, we show that there exists a pass through from BIST interbank overnight repo/reverse repo market rate and weighted average cost of funding (WACF to bank loan and deposit rates. As a result of reduced-form Vector Autoregression (VAR analysis we find the existence of a transmission mechanism from BIST rate and WACF to commercial loan rate, consumer loan rate and deposit rate. Same pass through to loan and deposit rates is also shown in individual bank level with the Panel Vector Autoregression (Panel VAR analysis in the case of 16 commercial banks in Turkey during the period 2011Q1-2016Q1. After the identification analysis, we examine the relationship between NIM and policy rates through System Generalized Method of Moments (GMM techniques by controlling bank specific, industry related and macroeconomic factors. We find that a change in the monetary policy rate has significant and positive impact on NIM. Among bank-specific factors, equity ratio and operating expenses are found to be significantly affecting NIM during the sample period. Our empirical findings also stress the significance of lag values of NIM. Estimations conducted with standardized variables indicate that economic significance of lag values and bank specific variables are larger than that of policy.

  5. OPTIMIZATION OF THE RUSSIAN MACROECONOMIC POLICY FOR 2016-2020

    Directory of Open Access Journals (Sweden)

    Gilmundinov V. M.

    2016-12-01

    Full Text Available This paper is concerned with the methodological issues of economic policy elaboration and optimization of economic policy instruments’ parameters. Actuality of this research is provided by growing complexity of social and economic systems, important state role in their functioning as well as multi-targets of economic policy with limited number of instruments. Considering a big variety of internal and external restrictions of social and economic development of modern Russia it has wide range of applications. Extension of the dynamic econometric general equilibrium input-output model of the Russian economy with development of the sub-model of economic policy optimization is a key purpose of this study. The sub-model of economic policy optimization allows estimating impact of economic policy measures on target indicators as well as defining optimal values of their parameters. For this purpose, we extend Robert Mundell’s approach by considering dynamic optimization and wider range of economic policy targets and measures. Use of general equilibrium input-output model allows considering impact of economic policy on different aggregate markets and sectors. Approbation of suggested approach allows us to develop multi-variant forecast for the Russian economy for 2016-2020, define optimal values of monetary policy parameters and compare considered variants by values of social losses. The obtained results could be further used in theoretical as well as applied researches concerned with issues of economic policy elaboration and forecasting of social and economic development.

  6. Comparison of Monetary Policy Actions and Central Bank Communication on Tackling Asset Price Bubbles-Evidence from China's Stock Market.

    Science.gov (United States)

    Sun, Ou; Liu, Zhixin

    2016-01-01

    We examine the different effects of monetary policy actions and central bank communication on China's stock market bubbles with a Time-varying Parameter SVAR model. We find that with negative responses of fundamental component and positive responses of bubble component of asset prices, contractionary monetary policy induces the observed stock prices to rise during periods of large bubbles. By contrast, central bank communication acts on the market through expectation guidance and has more significant effects on stock prices in the long run, which implies that central bank communication be used as an effective long-term instrument for the central bank's policymaking.

  7. Is monetary policy really neutral in the long-run? Evidence for some emerging and developed economies

    OpenAIRE

    Reginaldo Pinto Nogueira

    2009-01-01

    The traditional economic theory suggests that changes in the money supply or in the interest rates can influence the business cycle, but not the long-run potential output. In other words, monetary policy is neutral over the long-run. In this paper we use some new developments in econometrics to test for the existence of a long-run relationship between the monetary policy instrument used by most Central Banks - short-term interest rates - and real output. Using annual data for 14 emerging and ...

  8. Moneta, attività liquide, velocità di circolazione e politica monetaria. (Money, liquid assets, velocity and monetary policy

    Directory of Open Access Journals (Sweden)

    G. GARVY

    2014-07-01

    Full Text Available The present article analyses the significance of the rise in liquid assets in relation to GNP, the related increase in the velocity of money and the declining role of money as a financial asset in the U.S. economy. Moreover, the significance of these developments for monetary policy is considered. The author argues that far from being inimical to the execution of monetary policy, changes in velocity are actually another aspect of the system of checks and balances which characterise the operations of the economic system.JEL: E40, E50, E52

  9. A Natural Experiment in Monetary Policy Covering Three Episodes of Growth and Decline in the Economy and the Stock Market

    OpenAIRE

    Milton Friedman

    2005-01-01

    The third of three episodes in a major natural experiment in monetary policy that started more than 80 years ago is just now coming to an end. The experiment consists in observing the effect on the economy and the stock market of the monetary policies followed during and after three very similar periods of rapid economic growth in response to rapid technological change: the booms of the 1920s in the United States, the 1980s in Japan and the 1990s in the United States. In this experiment, the ...

  10. Fiscal, Monetary Policies and Institutions’ Role (Political, Social and Economic in Pakistan

    Directory of Open Access Journals (Sweden)

    Tariq HUSSAIN

    2012-06-01

    Full Text Available The purpose of this study is to test the fundamental relationship between fiscal, monetary policies and institutions in Pakistan from 1976 to 2008. These policies are roadmap in the progress of a country. No doubt both these policies are useful tools in the hands of the government to increase the per capita GDP of the country. Such policies depict the performance level of institutions of a country. Better institutions leads to higher level of growth. Institutions perform significant role in the progress of any country. The growth targets can be achieved through institutions. Higher the quality of institutions, higher the performance would be shown by economy. Countries can reach middle-income levels despite some corruption, but further growth requires much better institutions (Easterly, 2001, pp. 234-235, 245-248, Rodrik, 2003, pp. 16-17.Kwiatkowski et al (1992 test is used to test unit root and short run relationship is analyzed through ECM. Auto regressive distributed lags (ARDL shows that there is long run relationship among growth policies and institutions’ role in Pakistan.

  11. The financial crisis and global health: the International Monetary Fund's (IMF) policy response.

    Science.gov (United States)

    Ruckert, Arne; Labonté, Ronald

    2013-09-01

    In this article, we interrogate the policy response of the International Monetary Fund (IMF) to the global financial crisis, and discuss the likely global health implications, especially in low-income countries. In doing so, we ask if the IMF has meaningfully loosened its fiscal deficit targets in light of the economic challenges posed by the financial crisis and adjusted its macro-economic policy advice to this new reality; or has the rhetoric of counter-cyclical spending failed to translate into additional fiscal space for IMF loan-recipient countries, with negative health consequences? To answer these questions, we assess several post-crisis IMF lending agreements with countries requiring financial assistance, and draw upon recent academic studies and civil society reports examining policy conditionalities still being prescribed by the IMF. We also reference recent studies examining the health impacts of these conditionalities. We demonstrate that while the IMF has been somewhat more flexible in its crisis response than in previous episodes of financial upheaval, there has been no meaningful rethinking in the application of dominant neoliberal macro-economic policies. After showing some flexibility in the initial crisis response, the IMF is pushing for excessive contraction in most low and middle-income countries. We conclude that there remains a wide gap between the rhetoric and the reality of the IMF's policy and programming advice, with negative implications for global health.

  12. Internal and external transmissions of monetary and fiscal policies in the EMU

    NARCIS (Netherlands)

    Aarle, B. van; Garretsen, J.H.; Moorsel, C. van

    2001-01-01

    With the introduction of Economic and Monetary Union (EMU), the sovereignty of national monetary institutions has been replaced by a common monetary institution, the European Central Bank (ECB) and national currencies have been replaced by a common currency, the euro. EMU therefore implies the loss

  13. Planning nature in urbanized countries. An analysis of monetary and non-monetary impacts of conservation policy scenarios in the Netherlands.

    Science.gov (United States)

    Sijtsma, Frans J; van der Bilt, Willem G M; van Hinsberg, Arjen; de Knegt, Bart; van der Heide, Martijn; Leneman, Hans; Verburg, René

    2017-03-01

    Planning and conserving nature areas are challenging tasks in urbanized and intensively used countries like the Netherlands. This paper supports decision making and public policy debate about these tasks in both an empirical and a methodological way. Empirically, we explore policy alternatives by determining the potential consequences of different nature policy scenarios in the Netherlands. Methodologically, we employ a mixed monetary and non-monetary evaluation method known as multi-criteria cost-benefit analysis (MCCBA). We evaluate four new future directions of Dutch nature policy that address four dominant stakeholder demands: biodiversity conservation, the provision of ecosystem services, recreational potential as well as economic gains. To balance compact presentation of evaluation outcomes on the one hand and information richness of results on the other, we distinguish between two impact indicator sets: three "headline" and ten "elaborate" indicators. Using these indicators we discuss the quantitative assessment of the four nature policy scenarios by comparing them to two other scenarios, reflecting the 2010 stand-still baseline situation (2010) as well as a reference policy (Trend). In total, we evaluate six scenarios; four present new directions and two reflect existing or recently (2010) halted practices. Our findings first of all show that even in an urbanized country like the Netherlands, with its intensive competition among land use functions, serious gains in national and international biodiversity are possible. Second, we find that it is doubtful whether stimulating the provision of regulating ecosystem services in a country which applies intensive and profitable agricultural techniques is beneficial. Other countries or areas that are less suitable for intensive agricultural practices may be more logical for this. Finally we demonstrate that increasing urban recreational green space - a common challenge for many urban areas - can only be achieved at

  14. La politica monetaria in Italia dal 1947 al 1978 (Monetary policy in Italy from 1947 to 1978

    Directory of Open Access Journals (Sweden)

    A. FAZIO

    2014-03-01

    Full Text Available Since the Second World War, monetary policy in Italy has taken on a fundamental role in the control of the production cycle, the balance daily payments and prices. The present study analyzes the reasons for and effects of monetary policy over the last decade, when destabilizing impulses, both internal and external, became more frequent and intense and as a result required numerous interventions. The author also considers  the stabilization policies of 1947-48 as well as those of the sixties, the control of interest rates and the evolution of monetary aggregates during the periods of development of the fifties and sixties, highlighting the similarities and differences in the instruments and performance with respect to the actions taken in the most recent period. The description is implemented in chronological order, situating the analysis of monetary policy actions in the context of economic developments, and in relation to other economic policy measures.JEL: E52, E43 

  15. Monetary policy and the causality between inflation and money supply in Indonesia

    Directory of Open Access Journals (Sweden)

    Gatot Sasongko

    2018-05-01

    Full Text Available Conceptually and empirically, inflation volatility in Indonesia is a monetary and fiscal phenomenon. This study focuses on the macroeconomic policy and public policy especially causality between two variables namely inflation and money supply in Indonesia. This study uses Indonesian macroeconomic data of inflation and money supply from the Bank of Indonesia publication during 2007.1–2017.7. Inflation is measured by the consumer price index, reflects the annual percentage change in costs of acquiring a basket of goods and services to the average consumers that may change at specified intervals. Meanwhile, money supply is measured by the currency, demand deposits, time deposits, and saving deposits. Methodically, this study uses the Granger Causality model to determine the causality between inflation and money supply. The results show that there is a one-way causality between inflation and money supply in Indonesia. These findings imply that money supply causes inflation, but not vice versa. This condition implies that the role of Indonesian Government and Bank of Indonesia were very crucial in managing and controlling macroeconomic policy and public policy. Then, analysis of money supply and inflation also related to impacting factors such as money laundering, role of banks, taxation, tax evasion, and corruption.

  16. Determining the optimal monetary policy instrument for Nigeria

    OpenAIRE

    Udom, Solomon I.; Yaaba, Baba N.

    2015-01-01

    It is considered inapt for central banks to adjust reserve money (quantity of money) and interest rate (price of money) at the same time. Thus, necessitates the need for a choice instrument. Enough evidence abounds in microeconomic theory on the undesirability of manipulating both price and quantity simultaneously in a free market structure. The market, in line with the consensus among economists, either controls the price and allows quantity to be determined by market forces, or influence qu...

  17. Search Frictions, Job Flows and Optimal Monetary Policy

    OpenAIRE

    Shoujian Zhang

    2014-01-01

    Job creation and job destruction are investigated in an economy featured by search frictions in both labour and goods markets. We show that both the unemployment rate and the endogenous job destruction rate increase when the inflation rate rises, because the demand declines due to the increase in the cost of holding money. Our numerical exercises suggest that the destruction of lower productivity jobs and the creation of higher productivity jobs may be inefficiently low under the zero nominal...

  18. Eloquence is The Key – the Impact of Monetary Policy Speeches on Exchange Rate Volatility

    Directory of Open Access Journals (Sweden)

    Adrian Cantemir Călin

    2015-06-01

    Full Text Available During the last years the monetary policy initiatives of the main central banks have been profoundly influenced by quantitative easing (QE. Blessing, curse, effective instruments or a simple fad, these unconventional measures have occupied the center stage of academic and public attention. In this context, this paper focuses on a wide set of public speeches delivered by officials belonging to the most relevant central banks. These statements cover a large pallet of topics including areas such as QE, tapering, financial stability, unemployment or interest rates. The aim of this study is to investigate the impact that these speeches have on the volatility of exchange rates. For this purpose, the methodology relies on an econometric event study that incorporates three volatility models and intraday five-minute frequencies. The results indicate the fact that public statements have a clear, evident, significant and robust impact on the observed assets.

  19. Using wavelets to decompose the time frequency effects of monetary policy

    Science.gov (United States)

    Aguiar-Conraria, Luís; Azevedo, Nuno; Soares, Maria Joana

    2008-05-01

    Central banks have different objectives in the short and long run. Governments operate simultaneously at different timescales. Many economic processes are the result of the actions of several agents, who have different term objectives. Therefore, a macroeconomic time series is a combination of components operating on different frequencies. Several questions about economic time series are connected to the understanding of the behavior of key variables at different frequencies over time, but this type of information is difficult to uncover using pure time-domain or pure frequency-domain methods. To our knowledge, for the first time in an economic setup, we use cross-wavelet tools to show that the relation between monetary policy variables and macroeconomic variables has changed and evolved with time. These changes are not homogeneous across the different frequencies.

  20. The Effect of Monetary Policy on Exchange Rates during Currency Crises; The Role of Debt, Institutions and Financial Openness

    NARCIS (Netherlands)

    S.C.W. Eijffinger (Sylvester); B. Goderis

    2007-01-01

    textabstractThis paper examines the effect of monetary policy on the exchange rate during currency crises. Using data for a number of crisis episodes between 1986 and 2004, we find strong evidence that raising the interest rate: (i) has larger adverse balance sheet effects and is therefore less

  1. The Effect of Monetary Policy on Exchange Rates During Currency Crises : The Role of Debt, Institutions and Financial Openness

    NARCIS (Netherlands)

    Eijffinger, S.C.W.; Goderis, B.V.G.

    2007-01-01

    This paper examines the effect of monetary policy on the exchange rate during currency crises. Using data for a number of crisis episodes between 1986 and 2004, we find strong evidence that raising the interest rate: (i) has larger adverse balance sheet effects and is therefore less effective in

  2. Monetary Policy Rules, Supply Shocks, and the Price-Level Elasticity of Aggregate Demand: A Graphical Examination.

    Science.gov (United States)

    Kyer, Ben L.; Maggs, Gary E.

    1995-01-01

    Utilizes two-dimensional price and output graphs to demonstrate the way that the price-level elasticity of aggregate demand affects alternative monetary policy rules designed to cope with random aggregate supply shocks. Includes graphs illustrating price-level, real Gross Domestic Product (GDP), nominal GDP, and nominal money supply targeting.…

  3. The impact of the International Monetary Fund's macroeconomic policies on the AIDS pandemic.

    Science.gov (United States)

    Baker, Brook K

    2010-01-01

    Expansion of funding for HIV/AIDS, especially treatment, is under attack over concerns about cost effectiveness and financial constraints. The International Monetary Fund is deeply implicated in the history of the AIDS pandemic, the underlying weakness of health systems, and the ideology of constrained resources that underlies most attacks on AIDS funding. The IMF imposed structural violence on developing countries in the 1980s and 1990s through neoliberal and macroeconomic reforms that intensified individual and communal vulnerability to infection and dismantled already weak health systems. This same macroeconomic fundamentalism has recently been repackaged and renamed. IMF fundamentalist policies continue to prioritize low inflation, constricted government spending, robust foreign currency reserves, and prompt repayment of debt at the expense of investments in health and more expansionary, pro-growth and job-creation policies. Several recent surveys have concluded that the IMF reluctantly relaxed overly restrictive policy prescriptions in response to the global economic crisis, but this relaxation was temporary at best and only extended to countries previously acceding to IMF orthodoxy. AIDS activists are campaigning for billions of dollars to fulfill the promise of universal access. If IMF pressures persist, developing countries will continue to undermine the additionality of donor health financing by substituting donor for domestic financing, refusing to invest in recurrent costs for medicines and health workers, and neglecting needed investments in health infrastructure and health system strengthening.

  4. The asymmetry of U.S. monetary policy: Evidence from a threshold Taylor rule with time-varying threshold values

    Science.gov (United States)

    Zhu, Yanli; Chen, Haiqiang

    2017-05-01

    In this paper, we revisit the issue whether U.S. monetary policy is asymmetric by estimating a forward-looking threshold Taylor rule with quarterly data from 1955 to 2015. In order to capture the potential heterogeneity for regime shift mechanism under different economic conditions, we modify the threshold model by assuming the threshold value as a latent variable following an autoregressive (AR) dynamic process. We use the unemployment rate as the threshold variable and separate the sample into two periods: expansion periods and recession periods. Our findings support that the U.S. monetary policy operations are asymmetric in these two regimes. More precisely, the monetary authority tends to implement an active Taylor rule with a weaker response to the inflation gap (the deviation of inflation from its target) and a stronger response to the output gap (the deviation of output from its potential level) in recession periods. The threshold value, interpreted as the targeted unemployment rate of monetary authorities, exhibits significant time-varying properties, confirming the conjecture that policy makers may adjust their reference point for the unemployment rate accordingly to reflect their attitude on the health of general economy.

  5. Monetary and Fiscal Policy Interaction and the Relationship between the Central Bank and the Government. (The Case of Republic of Moldova

    Directory of Open Access Journals (Sweden)

    Corina Chironachi

    2015-08-01

    Full Text Available In this paper the author is analyzing the impact of fiscal and monetary policies on the dynamics of the exchange rate, inflation and other macroeconomic variables. The author investigates the forms of strategic interaction between the Government and the Central Bank in designing and implementing these policies. As a result, the author concludes the necessity of institutions cooperation in the development and implementation of monetary and fiscal policy measures, but also concluded that the responsible institutions must remain independent in achieving an efficient monetary and fiscal policy of the Republic of Moldova.

  6. Optimal human capital policies

    Czech Academy of Sciences Publication Activity Database

    Boháček, Radim; Kapička, M.

    2008-01-01

    Roč. 55, č. 1 (2008), s. 1-16 ISSN 0304-3932 Institutional research plan: CEZ:AV0Z70850503 Keywords : dynamic optimal taxation * income taxation Subject RIV: AH - Economics Impact factor: 1.429, year: 2008

  7. Monetary or environmental appeals for saving electricity? –Potentials for spillover on low carbon policy acceptability

    International Nuclear Information System (INIS)

    Steinhorst, Julia; Matthies, Ellen

    2016-01-01

    The acceptability of low carbon policies is an important precondition for energy system transitions, such as the German Energiewende. This long-term experimental study examines the potential for behavioural spillover on the acceptability of low carbon policies, caused by a framed intervention to promote electricity saving behaviour. Clients of a German energy provider were randomly assigned to continuously receive electricity saving tips with either monetary framing (saving potential in €) or environmental framing (saving potential in CO_2). The control group did not receive any information. In two follow-up surveys, four (N=333) and nine months (N=258) later, participants rated the acceptability of several low carbon policies. A pre-survey assessed the personal ecological norm for saving electricity. Participants with strong personal ecological norms reported generally higher policy acceptability. After environmental framing they also indicated higher acceptability compared to the monetary framing or control group. These results indicate that information campaigns should be designed carefully in order to promote positive spillover effects. Environmental framing of private-sphere behaviour can increase the disposition for further pro-environmental behaviour in the public sphere, e.g. policy acceptability. When appealing to monetary benefits in pro-environmental behaviour, there is a risk of inhibiting positive spillover effects. - Highlights: •Policy acceptability may be influenced by type of framing and individual factors. •We examined long-term spillover effects in association with type of framing. •Framing (environmental vs. monetary) interacts with personal ecological norms. •For strong personal ecological norms, environmental framing increases acceptability. •Also, strong personal ecological norms increase low carbon policy acceptability.

  8. In the absence of fiscal union, the Eurozone needs a more flexible monetary policy: A comment

    Directory of Open Access Journals (Sweden)

    Andrea Terzi

    2016-09-01

    Full Text Available The article is a comment on Alessandrini and Fratianni (2015 (A&F, on how can the euro area cope with inter-regional differences in the absence of fiscal union. A&F develop a model to support their proposals, against which twomain remarks are raised here. First, diverging current account imbalances shaped the eurozone countries’ vulnerability, but were not a cause of the euroarea 2010-2012 liquidity crisis. Second, A&F’s quantity-theoretic view of monetary policy implementation is inapplicable to a floating currency like the euro, or to the Target2 payment system. A&F’s proposal of adding a current account constraint to the existing fiscal constraint for EA countries could have a positive impact if a country running a large current account balance and having fiscal room, as defined by the EU rules, were pressed to engage in expansionary fiscal policy. The problem with such a double constraint, however, is that the stronger the impact on the other EA countries, the sooner fiscal room would be exhausted. This criticism however does not imply that in the absence of fiscal union there is no stable solution; a coordinated pro-quota fiscal expansion would provide such stable solution. JEL: E42, E52, E58

  9. Budget, fiscal and monetary policy in Poland and demand for transport – forwarding – logistics industry services

    Directory of Open Access Journals (Sweden)

    Ryszard Rolbiecki

    2013-06-01

    Full Text Available Macroeconomic policy of a country does not always have an effect on the demand for transport. The lack of a clear relation between the nature of macroeconomic policy and changes in demand for transport services is a consequence of the overall complexity of the economic system. It can also be a result of the lack of consistency between budget and monetary policy. Macroeconomic policy as a tool to control global demand only indirectly affects the changes in demand for transport. Transport activity is in fact determined by changes in the real economy, which directly influence the increase or decrease in demand for transport services.

  10. Monetary policy and wage bargaining in the EMU: restrictive ECB policies, high unemployment, nominal wage restraint and inflation above the target

    Directory of Open Access Journals (Sweden)

    Eckhard Hein

    2002-09-01

    Full Text Available Assessing the effects of monetary policy and wage bargaining on employment andinflation in the European Monetary Union (EMU, the first step sees development of a Post-Keynesian competitive claims model of inflation with endogenous money. In this model the NAIRU is considered to be a short-run limit to employment enforced by independent and conservative central banks. In the long run, however, the NAIRU will follow actual unemployment and is therefore also dependent on the forces determining aggregate demand, including monetary policies. But the NAIRU may also be reduced through effectively co-ordinated wage bargaining, as has been shown by institutional political economists. Applying these considerations to the economic performance of the EMU, different scenarios determined by wage bargainingcoordination and the European Central Bank's (ECB monetary policies are developed. It is shown that the first phase of the EMU was dominated by uncoordinated wage bargaining across the EMU and an "anti-growth-bias" of theECB. Thus the euro area was plagued with nominal wage restraint, highunemployment and inflation above the ECB target. Economic performance will improve if the ECB abandons its asymmetric monetary strategy. This may be facilitated by a higher degree of effective wage bargaining co-ordination across the EMU.

  11. Planning nature in urbanized countries. An analysis of monetary and non-monetary impacts of conservation policy scenarios in the Netherlands

    Directory of Open Access Journals (Sweden)

    Frans J. Sijtsma

    2017-03-01

    Full Text Available Planning and conserving nature areas are challenging tasks in urbanized and intensively used countries like the Netherlands. This paper supports decision making and public policy debate about these tasks in both an empirical and a methodological way. Empirically, we explore policy alternatives by determining the potential consequences of different nature policy scenarios in the Netherlands. Methodologically, we employ a mixed monetary and non-monetary evaluation method known as multi-criteria cost-benefit analysis (MCCBA. We evaluate four new future directions of Dutch nature policy that address four dominant stakeholder demands: biodiversity conservation, the provision of ecosystem services, recreational potential as well as economic gains. To balance compact presentation of evaluation outcomes on the one hand and information richness of results on the other, we distinguish between two impact indicator sets: three “headline” and ten “elaborate” indicators. Using these indicators we discuss the quantitative assessment of the four nature policy scenarios by comparing them to two other scenarios, reflecting the 2010 stand-still baseline situation (2010 as well as a reference policy (Trend. In total, we evaluate six scenarios; four present new directions and two reflect existing or recently (2010 halted practices. Our findings first of all show that even in an urbanized country like the Netherlands, with its intensive competition among land use functions, serious gains in national and international biodiversity are possible. Second, we find that it is doubtful whether stimulating the provision of regulating ecosystem services in a country which applies intensive and profitable agricultural techniques is beneficial. Other countries or areas that are less suitable for intensive agricultural practices may be more logical for this. Finally we demonstrate that increasing urban recreational green space − a common challenge for many urban areas

  12. Banks' Stability: The effect of Monetary Policies in the light of Global Financial Crisis

    Directory of Open Access Journals (Sweden)

    Wael Bakhit

    2014-04-01

    Full Text Available This paper employs a quarterly time series to determine the timing of structural breaks for interest rates in USA over the last 60 years. The Chow test is used for investigating the non-stationary, where the date of the potential break is assumed to be known. Moreover, an empirically examination of the financial sector to check if it is positively related to deviations from an assumed interest rate as given in a standard Taylor rule. The empirical analysis is strengthened by analysing the rule from a historical perspective and look at the effect of setting the interest rate by the central bank on financial imbalances. The empirical evidence indicates that deviation in monetary policy has a potential causal factor in the build up of financial imbalances and the subsequent crisis where macro prudential intervention could have beneficial effect. Thus, my findings tend to support the view which states that the probable existence of central banks has been one source of global financial crisis since the past decade.

  13. The Role of Monetary and Fiscal Policies in Ensuring Macroeconomic Stability in Romania

    Directory of Open Access Journals (Sweden)

    Ana-Maria SĂNDICĂ

    2015-06-01

    Full Text Available The purpose of this paper is to make an analysis of the dynamics of macroeconomic mechanisms of propagation of shocks in the Romanian economy based on a dynamic stochastic general equilibrium model (DSGE that is based on optimizing behaviour of economic agents, using micro-foundations incorporating nominal rigidities in prices and wages. The model developed is Neo-Keynesian type model and is described based on the Christiano et al (2005 and Smets and Wouters (2003. It incorporates persistence in consumption, sticky prices and wages in Calvo sense, costs of adjustment of investment, variable capacity utilization and fixed costs in production. The model takes into account also the liquidity constraints consumers - rule of thumb, element introduced by Galí et al (2007. Another assumption of the model is the consideration of imports as an input in production, under the approach of McCallum and Nelson (2001. Changes over the standard dynamic stochastic equilibrium are related to inflation inertia generated by the learning process. An innovative element is the consideration of two monetary regimes considering adopting inflation targeting strategy in Romania in August 2005. Structural break is explicitly considered by considering two sub-samples and the estimation process of parameters is in two stages similar to the approach proposed by Jakab (2008.

  14. Working Paper - WP/12/08- Exchange Rate Pass-through to Import Prices, and Monetary Policy in South Africa

    OpenAIRE

    Janine Aron; Greg Farrell; John Muellbauer; Peter Sinclair

    2012-01-01

    Understanding how import prices adjust to exchange rates helps anticipate inflation effects and monetary policy responses. This paper examines exchange rate pass-through to the monthly import price index in South Africa during 1980–2009. Various short-run pass-through estimates are calculated simply without recourse to a full structural model, yet without neglecting the long-run relationships between prices or the effects of previous import price changes, and controlling for domestic and fore...

  15. The M2 slowdown and depository intermediation: implications for monetary policy

    OpenAIRE

    John B. Carlson; Katherine A. Samolyk

    1992-01-01

    An examination of credit flow rechanneling away from depository institutions over the past decade in response to evolving financial markets and regulatory structure, and a discussion of how this trend has complicated monetary policymaking.

  16. Forecasting and Monetary Policy Analysis in Low-Income Countries; Food and non-Food Inflation in Kenya

    OpenAIRE

    Michal Andrle; Andrew Berg; R. Armando Morales; Rafael Portillo; Jan Vlcek

    2013-01-01

    We develop a semi-structural new-Keynesian open-economy model, with separate food and non-food inflation dynamics, for forecasting and monetary policy analysis in low-income countries and apply it to Kenya. We use the model to run several policy-relevant exercises. First, we filter international and Kenyan data (on output, inflation and its components, exchange rates and interest rates) to recover a model-based decomposition of most variables into trends (or potential values) and temporary mo...

  17. Housing and the Monetary Transmission Mechanism

    OpenAIRE

    Frederic S. Mishkin

    2007-01-01

    The housing market is of central concern to monetary policy makers. To achieve the dual goals of price stability and maximum sustainable employment, monetary policy makers must understand the role that housing plays in the monetary transmission mechanism if they are to set policy instruments appropriately. In this paper, I examine what we know about the role of housing in the monetary transmission mechanism and then explore the implications of this knowledge for the conduct of monetary policy...

  18. MONETARY AGGREGATES - INSTRUMENT OF THE POLICY PROMOTED BY THE NATIONAL BANK OF ROMANIA

    Directory of Open Access Journals (Sweden)

    CORALIA EMILIA POPA

    2012-12-01

    Full Text Available A summary analysis of the economic theory and practice indicates the fact that the attempts to establish and delimit the importance of the economic-financial last resorts to the effects produced in macro and micro-economy have not lead to infallible truth. The goal of these last resorts is to organize an economic system in difficulty, to try to minimize its imperfections and non-functionalities. The society development has brought along the need to improve these attempts, so that together with other administrative methods to produce viable and productive solutions for the economy progress. This paper aims at emphasizing the advantages of using monetary aggregates, as well as their limitations under the direct influence of monetary factors, considering that these indicators are commonly used in many models of monetary analysis, especially in Neo-Keynesian ones.

  19. Monetary policy and financial (in)stability : An integrated micro-macro approach

    NARCIS (Netherlands)

    De Graeve, F.; Kick, T.; Koetter, M.; DeGraeve, F.

    Evidence on central banks' twin objective, monetary and financial stability, is scarce. We suggest an integrated micro macro approach with two core virtues. First, we measure financial stability directly at the bank level as the probability of distress. Second, we integrate a microeconomic hazard

  20. Monetary Policy Transmission and the Labour Market in the Non‑eurozone Visegrad Group Countries in 2000–2014. Evidence from a SVAR Analysis

    Directory of Open Access Journals (Sweden)

    Włodarczyk Przemysław

    2017-12-01

    Full Text Available This paper is aimed at filling the gap in existing economic research by delivering new evidence on the money‑labour nexus in the emerging markets of the non‑eurozone Visegrad group countries (i.e. Czech Republic, Hungary and Poland. Analyses are based on the Strucutral VAR (SVAR models of the monetary transmission mechanism, estimated using monthly data from the 2000:1-2014:2 period. In order to obtain impulse responses, the short‑run restrictions set, based on the monetary transmission theory, is imposed. Two different identification schemes are considered. The results confirm that there exists a nexus between monetary policy, employment, and unemployment. According to the obtained estimates monetary policy shocks invoked lagged, hump‑shaped reactions of output, employment and unemployment in each of the analysed countries.

  1. Is the Proposed East African Monetary Union an Optimal Currency Area? A Structural Vector Autoregression Analysis

    OpenAIRE

    Steven K. Buigut; Neven Valev

    2004-01-01

    The treaty of 1999 to revive the defunct East African Community (EAC) ratified by Kenya, Uganda, and Tanzania came into force on July 2000 with the objective of fostering a closer co-operation in political, economic, social, and cultural fields. To achieve this, an East Africa Customs Union protocol was signed in March 2004. A Common Market, a Monetary Union, and ultimately a Political Federation of East Africa states is planned. Though the question of a monetary union has been discussed in t...

  2. Post Inflation Targeting Monetary Policy: A Study of Britain, Japan and the United States

    Directory of Open Access Journals (Sweden)

    Mehdi Siamak MONADJEMI

    2014-05-01

    Full Text Available There is now considerable disquiet about the appropriate monetary strategy that central banks should follow in the aftermath of the global financial crisis. Several influential commentators have called for the abandonment of inflation targeting. Empirical research examining three major economies demonstrates that inflation targeting was effective prior to the crisis and a more flexible form of targeting may still be appropriate after the crisis.

  3. Liquidity, Financial Intermediation, and Monetary Policy in a New Monetarist Model

    OpenAIRE

    Williamson, Stephen

    2009-01-01

    A model of monetary exchange with private financial intermediation is constructed. Claims on financial intermedaries of two types are traded in transactions: circulating notes and deposits. There can be a role for the government in supplying liqudity, and level changes in the money supply accomplished through open market operations can be nonneutral. A Friedman rule is suboptimal, due to costs of maintaining the stock of currency. The model is used to address some issues related to current mo...

  4. The Rise and Fall of Money Growth Targets as Guidelines for U.S. Monetary Policy

    OpenAIRE

    Benjamin M. Friedman

    1996-01-01

    A familiar question raised by the Federal Reserve System's evolving use of money growth targets over the past twenty years is whether monetary policymakers had sound economic reasons for changing their procedures as they did -- either in adopting money growth targets in the first place, or in subsequently abandoning them, or in both instances. This paper addresses that question by comparing two kinds of evidence based on U.S. time-series data: first, evidence bearing on what Federal Reserve p...

  5. Optimal Temporal Policies in Fluid Milk Advertising

    OpenAIRE

    Vande Kamp, Philip R.; Kaiser, Harry M.

    1998-01-01

    This study develops an approach to obtain optimal temporal advertising strategies when consumers' response to advertising is asymmetric. Using this approach, optimal strategies for generic fluid milk advertising in New York City are determined. Results indicate that pulsed advertising policies are significantly more effective in increasing demand than a uniform advertising policy. Sensitivity analyses show that the optimal advertising policies are insensitive to reasonable variations in inter...

  6. Offshore E-money issuers and monetary policy (originally published in October 2001)

    OpenAIRE

    Krueger, Malte

    2005-01-01

    This paper is included in the First Monday Special Issue #3: Internet banking, e-money, and Internet gift economies, published in December 2005. Special Issue editor Mark A. Fox asked authors to submit additional comments regarding their articles. E-money four years later In the late 1990s, there was a lively debate about the implications of the newly emerging e-money on the ability of central banks to control monetary aggregates.[1] What caught the imagination of many observers was ...

  7. Designing Appropriate Exchange Rate Regimes for East Asia: Inflation Targeting and Monetary Policy Rules

    OpenAIRE

    Tony Cavoli; Ramkishen Rajan

    2003-01-01

    While favoring relatively more flexible regimes, emerging economies in East Asia and elsewhere appear to heavily manage their currencies despite being officially described as “floaters”. In other words, revealed preferences of regional monetary authorities appear to indicate a high degree of “fear of floating”. The paper first explores the reasons for this fear of floating. It then goes on to examine the case for and operational mechanics behind an open inflation targeting regime which ha...

  8. Comparison of Monetary Policy Actions and Central Bank Communication on Tackling Asset Price Bubbles—Evidence from China’s Stock Market

    Science.gov (United States)

    Sun, Ou; Liu, Zhixin

    2016-01-01

    We examine the different effects of monetary policy actions and central bank communication on China’s stock market bubbles with a Time-varying Parameter SVAR model. We find that with negative responses of fundamental component and positive responses of bubble component of asset prices, contractionary monetary policy induces the observed stock prices to rise during periods of large bubbles. By contrast, central bank communication acts on the market through expectation guidance and has more significant effects on stock prices in the long run, which implies that central bank communication be used as an effective long-term instrument for the central bank’s policymaking. PMID:27851796

  9. National monetary policy by regional design: the evolving role of the Federal Reserve banks in Federal Reserve System policy

    OpenAIRE

    David C. Wheelock

    1999-01-01

    This paper examines the history of Federal Reserve Bank input into Federal Reserve System monetary policymaking. From the Fed's founding in 1914 through the Great Depression, the Reserve Banks held the balance of power. Dissatisfaction with the Fed's performance, however, led to a wholesale reorganization in 1935 that greatly enhanced the authority of the Federal Reserve Board, but retained a role for the Federal Banks through the membership of their presidents on the FOMC, as well as in sett...

  10. Financial market implications of monetary policy coincidences: Evidence from the UK and Euro Area government-bond markets

    OpenAIRE

    Arestis, Philip; Phelps, P

    2017-01-01

    Relatively little is known about the financial market impact of international monetary surprises arising on the same trading day. This paper estimates a suite of multi-security factor models, which captures international monetary surprise effects on UK and Euro Area government-bond markets over the period 1999–2014. In doing so, we shed light on the relative importance of coinciding, non-coinciding monetary surprises and non-monetary surprises across the yield curve. We find some support for ...

  11. Exchange rate regimes and monetary arrangements

    Directory of Open Access Journals (Sweden)

    Ivan Ribnikar

    2005-06-01

    Full Text Available There is a close relationship between a country’s exchange rate regime and monetary arrangement and if we are to examine monetary arrangements then exchange rate regimes must first be analysed. Within the conventional and most widely used classification of exchange rate regimes into rigid and flexible or into polar regimes (hard peg and float on one side, and intermediate regimes on the other there, is a much greater variety among intermediate regimes. A more precise and, as will be seen, more useful classification of exchange rate regimes is the first topic of the paper. The second topic is how exchange rate regimes influence or determine monetary arrangements and monetary policy or monetary policy regimes: monetary autonomy versus monetary nonautonomy and discretion in monetary policy versus commitment in monetary policy. Both topics are important for countries on their path to the EU and the euro area

  12. Il livello dei prezzi e la politica monetaria (The Price Level and Monetary Policy

    Directory of Open Access Journals (Sweden)

    Charles P. Kindleberger

    2002-06-01

    Full Text Available Most central banks are required or choose to stabilize a price index, largely by manipulating short term interest rates. A serious problem is what index to choose among the national income deflator, wholesale prices, the cost of living, with or eliminating highly volatile commodities such as food and energy, to produce a core index, plus others such as housing, including or without imputed rent of owner-occupied houses, or assets, whether equities or houses. No obvious and widely agreed index exists. Even if there were a clear choice, there remains a question whether a central bank should carefully consider action to achieve other goals: full employment, adjustment of the balance of payments, of the exchange rate, prevention of bubbles in asset prices, or recovery from financial crises. If so, the question of central bank weapons remains: monetary expansion or contraction, credit controls, overall or for particular purposes, and moral suasion.

  13. Revival of Legacy of Tooke and Gibson: Further Evidence and Implications for Monetary Policy

    Directory of Open Access Journals (Sweden)

    Atiq-ur-Rehman

    2017-09-01

    Full Text Available Traditional economics assumes that interest rate effects inflation by changing the aggregate demand (Barth and Ramay, 2002. On the other hand, many economists in recent years have explored the cost side effects of monetary transmission and found very strong evidences in favour of cost channel. One of such studies is that by Rehman (2015 which explores the relationship between interest rate and inflation for a large data set comprising various measures of interest rate and inflation from countries around the globe. Rehman (2015 computes the correlation between two variables and he finds that the correlation between two variables is either positive or insignificant. Rehman argues that the finding is quite robust and does not change with a change in measure of interest rate and/or inflation. If the correlation between interest rate and inflation is positive then using interest rate to control inflation would be counterproductive. Thus it will endorse the warning of Wright Patman, a US congressman and Chairman of Joint Economic Committee who argues that “senseless of trying to fight inflation by raising interest rate, throwing the gasoline on fire to put out the flames would be as logical”. Findings of Rehman (2015 are based on correlation coefficients. The correlation without having control variables could only provide a clue and could be subject to serious missing variable bias. However, Rehman (2015 argues that thousands of similar clues from the entire globe collectively become very strong evidence. However, given the importance of the topic, it is necessary to do a more careful analysis and summarize the relationship between two variables which is not subject to missing variable bias. Therefore, this paper applies more sophisticated econometric techniques including Granger Causality and Static Long Run Solution to find the impact of interest rate and inflation.

  14. The Role of Competition and State Aid Policy in Financial and Monetary Law

    OpenAIRE

    Philip Marsden; Ioannis Kokkoris

    2010-01-01

    During the financial crisis, companies and lenders found themselves in distressed situations. Competition authorities across the globe had to deal with controversial issues such as the application of the 'failing firm' defence in merger transactions as well as assessment of emergency aid granted by states. This article considers competition policy in periods of crisis, in particular the failing firm defence in merger control and its state aid policy. Oxford University Press 2010, all rights r...

  15. Free movement of capital in the context of the implementation of monetary policy in EMU and the European Union

    Directory of Open Access Journals (Sweden)

    Majlinda Tafaj

    2015-11-01

    Full Text Available Free movement of capital has been one of the main objectives of Article 3 of the EC Treaty, as part of the development of the common market. Nowadays, the domestic market and almost all of other freedoms (eg. workers, goods and services depends on the freedom of movement of capital. Unlike other freedoms, freedom of movement is more liberalized. European investment, cross-border transfers, bank accounts, purchases and authorization of purchases of real estate, inheritance etc., are included in the free movement of capital. Free movement of capital has lost somehow its sense with the entry into force of EMU and the introduction of the Euro. This liberalization aimed at realizing a collaboration and coordination of economic policies and to some extent even political at the higher levels of the central banks where the fulfillment of the convergence criteria (four criteria, was a prerequisite for a country to adopt the single currency. But EMU and its implementation in the third phase brought significant consequences with regard to the institutional, economic and monetary policy having an impact directly on the free movement of capital in the EU, which will be the object of analysis in this paper.

  16. The monetary value of the man.rem and optimization in radiation therapy (brachytherapy)

    International Nuclear Information System (INIS)

    Ennow, K.R.; Jessen, K.A.

    1979-01-01

    The personnel exposed by sources used for intracavitary radiation therapy in Denmark receive more than 40% of the collective dose recorded by personal dosemeters in Denmark. As the application of after-loading technique has become generally accepted by the medical profession in Denmark as a replacement to a considerable degree for manual radium therapy, the most promising suggestion for reduction of radiation doses is the introduction of after-loading facilities in all radiation therapy centres. Such facilities are now being planned in Denmark but their realization will entail great expense and therefore the financial aspects of these plans will be very important. At present the advantage of after-loading cannot be simply demonstrated to the politicians holding the purse strings, i.e. in terms of improved therapeutical gain, e.g. increased survival, although the incidence of complications has been shown to be lower, but the reduction in personnel radiation doses by the change to after-loading will be evident and be an important part of the cost-benefit analysis. By detailed investigation of all expenditures and savings, cost-benefit analysis has been carried out in order to isolate the relationship between expense and the collective dose reduction. If after-loading facilities are established in Denmark today with the intention of reducing the risk for employees and without any expectation of improvements in treatment, the monetary value of the man.rem implied is 10,000 kr. or 2000 US dollars. (author)

  17. Optimization of Overflow Policies in Call Centers

    DEFF Research Database (Denmark)

    Koole, G.M.; Nielsen, B.F.; Nielsen, T.B.

    2015-01-01

    . A Markov decision chain is used to determine the optimal policy. This policy outperforms considerably the ones used most often in practice, which use a fixed threshold. The present method can be used also for other call-center models and other situations where performance is based on actual waiting times...

  18. IMPLEMENTING FISCAL OR MONETARY POLICY IN TIME OF CRISIS? RUNNING GRANGER CAUSALITY TO TEST THE PHILLIPS CURVE IN SOME EURO ZONE COUNTRIES

    Directory of Open Access Journals (Sweden)

    Nico Gianluigi

    2014-12-01

    Full Text Available This paper aims to provide empirical evidence about the theoretical relationship between inflation and unemployment in 9 European countries. Based on two major goals for economic policymakers namely, to keep both inflation and unemployment low, we use the ingredients of the Phillips curve to orient fiscal and monetary policies. These policies are prerogative for the achievement of a desirable combination of unemployment and inflation. More in detail, we attempt to address two basic issues. One strand of the study examines the size and sign of the impact of unemployment rate on percentage changes in inflation. In our preferred econometric model, we have made explicit the evidence according to which one unit increase (% in unemployment reduces inflation of roughly 0.73 percent, on average. Next, we turn to the question concerning the causal link between inflation and unemployment and we derive a political framework enables to orient European policymakers in the implementation of either fiscal or monetary policy. In this context, by means of the Granger causality test, we mainly find evidence of a directional causality which runs from inflation to unemployment in 4 out of 9 European countries under analysis. This result implies that political authorities of Austria, Belgium, Germany and Italy should implement monetary policy in order to achieve pre-established targets of unemployment and inflation. In the same context, a directional causality running from unemployment to inflation has been found in France and Cyprus suggesting that a reduction in the unemployment level can be achieved through controlling fiscal policy. However, succeeding in this goal may lead to an increasing demand for goods and services which, in turn, might cause a higher inflation than expected. Finally, while there is no statistical evidence of a causal link between unemployment and inflation in Finland and Greece, a bidirectional causality has been found in Estonia. This

  19. A Mathematical Model and Programme Support for Determination of the Values of the Marginal Reserve Requirement as Instrument of Monetary Policy

    Directory of Open Access Journals (Sweden)

    Kristina Šorić

    2007-09-01

    Full Text Available This paper studies the problem of interdependence between central bank and commercial bank goals. The basic central bank task is to achieve and to maintain price stability. Croatian external debt has been increasing for years and so the activities of the Croatian National Bank are designed to correct this situation. In order to stop the further increase of the external debt, the Croatian National Bank uses several monetary policy instruments, among which is the marginal reserve requirement. On the other hand, the goal of commercial banks is to maximise profits. Banks take loans from abroad at a lower interest rate and invest this money in Croatia at a higher interest rate, thus fulfilling their goal. In order to obtain the desired effects of the marginal reserve requirement, its optimal percentage value should be determined. This problem is modelled as a bi-level mixed 0-1 programming problem. The objective of the leader (Croatian National Bank is to minimize the increase in household loans by setting different percentages of the reserve requirements for loans extended to households and for those granted to enterprises. The objective of the followers (banks is to maximize profits. In order to solve this NP-hard problem a heuristic is proposed. In order to verify the model, the paper ends with simulations and the presentation of computational results.

  20. A perspective on the U.S. economic outlook and monetary policy

    OpenAIRE

    Charles I. Plosser

    2013-01-01

    Presented by Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia, Global Interdependence Center's Central Banking Series: Recovery 2013 — Strength or Stagnation?, Milan, Italy, May 16, 2013 ; Note: President Plosser presented similar remarks on May 14, 2013, before the SNS (Center for Business and Policy Studies) and the SIFR (The Institute for Financial Research) in Stockholm, Sweden.

  1. Monetary policy and the transaction role of money in the United States

    NARCIS (Netherlands)

    Kriwoluzky, A.; Stoltenberg, C.A.

    2012-01-01

    We argue that the declining importance of money in saving transaction costs can explain the well-known fact that U.S. interest rate policy was passive in the pre-Volcker period and active after 1982. To identify the declining role of money in transactions as the driving force for the change in

  2. On dynamics in a Keynesian model of monetary stabilization policy with debt effect

    Science.gov (United States)

    Asada, Toichiro; Demetrian, Michal; Zimka, Rudolf

    2018-05-01

    In this paper, a four-dimensional model of flexible prices with the central bank's stabilization policy, describing the development of the firms' private debt, the output, the expected rate of inflation and the rate of interest is analyzed. Questions concerning the existence of limit cycles around its normal equilibrium point are investigated. The bifurcation equation is found. The formulae for the calculation of its coefficients are gained. A numerical example is presented by means of numerical simulations.

  3. Fiscal Policy and the Implementation of the Walsh Contract for Central Bankers

    OpenAIRE

    Haizhou Huang; A. Jorge Padilla

    2002-01-01

    We develop a simple macroeconomic model where the time inconsistency of optimal monetary policy is due to tax distortions. If fiscal policy is exogenously fixed at its optimal level, a Walsh contract (Walsh, 1995) offered to an independent central bank implements the optimal monetary policy. When fiscal policy is determined endogenously, however, this contract is subject to strategic manipulation by the government, which results in a suboptimal policy mix. Implementing the optimal policy mix ...

  4. Aspettative. Corsi dei cambi a termine e riflessi sulla politica monetaria. (Expectations, foreign exchange forwards and reflections on monetary policy

    Directory of Open Access Journals (Sweden)

    A. FERRO

    2014-03-01

    Full Text Available L'articolo fornisce un'analisi preliminare sui rapporti che si possono stabilire tra i tassi di cambio a termine e i tassi di cambio secondo le aspettative di diverse ipotesi . Gli autori evidenziano le implicazioni di politica monetaria che i vari tipi di aspettative comportano. Per verificare in particolare il ruolo delle aspettative nella determinazione dei tassi di cambio, si procederà attraverso un paio di semplici test empirici che si riferiscono al prezzo a termine del marco tedesco contro la sterlina sul mercato di Francoforte nei primi quattro mesi del 1976.The paper provides preliminary analysis on the relationships that can be established between the rates of the forward exchange rate and the spot exchange rates at the various expectations hypothesis. The authors go on to highlight the implications of monetary policy that the various kinds of expectations entail. To test specifically the role of expectations in the determination of exchange rates at the end we will proceed through a couple of simple empirical tests that refer to the spot and forward prices of the Deutsche Mark against the pound on the Frankfurt market in the first four months of 1976. JEL: E52, E42, F31

  5. Aspettative. Corsi dei cambi a termine e riflessi sulla politica monetaria. (Expectations, foreign exchange forwards and reflections on monetary policy

    Directory of Open Access Journals (Sweden)

    A. FERRO

    1977-06-01

    Full Text Available L'articolo fornisce un'analisi preliminare sui rapporti che si possono stabilire tra i tassi di cambio a termine e i tassi di cambio secondo le aspettative di diverse ipotesi . Gli autori evidenziano le implicazioni di politica monetaria che i vari tipi di aspettative comportano. Per verificare in particolare il ruolo delle aspettative nella determinazione dei tassi di cambio, si procederà attraverso un paio di semplici test empirici che si riferiscono al prezzo a termine del marco tedesco contro la sterlina sul mercato di Francoforte nei primi quattro mesi del 1976. The paper provides preliminary analysis on the relationships that can be established between the rates of the forward exchange rate and the spot exchange rates at the various expectations hypothesis. The authors go on to highlight the implications of monetary policy that the various kinds of expectations entail. To test specifically the role of expectations in the determination of exchange rates at the end we will proceed through a couple of simple empirical tests that refer to the spot and forward prices of the Deutsche Mark against the pound on the Frankfurt market in the first four months of 1976. JEL: E52, E42, F31

  6. A VAR Analysis of Kenya’s Monetary Policy Transmission Mechanism; How Does the Central Bank’s REPO Rate Affect the Economy?

    OpenAIRE

    Kevin C Cheng

    2006-01-01

    This paper examines the impact of a monetary policy shock on output, prices, and the nominal effective exchange rate for Kenya using data during 1997–2005. Based on techniques commonly used in the vector autoregression literature, the main results suggest that an exogenous increase in the short-term interest rate tends to be followed by a decline in prices and appreciation in the nominal exchange rate, but has insignificant impact on output. Moreover, the paper finds that variations in the sh...

  7. Optimal selling rules for monetary invariant criteria: tracking the maximum of a portfolio with negative drift

    OpenAIRE

    Elie, Romuald; Espinosa, Gilles-Edouard

    2013-01-01

    Considering a positive portfolio diffusion $X$ with negative drift, we investigate optimal stopping problems of the form $$ \\inf_\\theta \\Esp{f\\left(\\frac{X_\\theta}{\\Sup_{s\\in[0,\\tau]}{X_s}}\\right)}\\;,$$ where $f$ is a non-increasing function, $\\tau$ is the next random time where the portfolio $X$ crosses zero and $\\theta$ is any stopping time smaller than $\\tau$. Hereby, our motivation is the obtention of an optimal selling strategy minimizing the relative distance between the liquidation val...

  8. Fiscal and monetary policies in light of the increasing debt service Las políticas fiscal y monetaria a la luz del creciente servicio de la deuda

    Directory of Open Access Journals (Sweden)

    González Jorge Iván

    1996-06-01

    Full Text Available The progressive increase in the servicing of the debt reflects a weakening of the structure of public finance and an intensification of the policy of monetary stabilization. In the last few years, the external debt has been replaced by internal debt. In an imperfect capital market, such as that which exists in Colombia, this handling of monetary policy distorts the interest rate and turns it into merely the expression of the immediate objectives of monetary policy.El progresivo aumento del servicio de la deuda refleja un debilitamiento en la estructura de las finanzas públicas y en la intensificación de la política de estabilización monetaria. En los últimos años, la deuda externa ha sido sustituida por deuda interna. En un mercado imperfecto de capitales, como el que existe en Colombia, este manejo de política monetaria distorsiona la tasa de interés y la convierte en mera expresión de los objetivos inmediatos de la política monetaria.

  9. State dependent optimization of measurement policy

    Science.gov (United States)

    Konkarikoski, K.

    2010-07-01

    Measurements are the key to rational decision making. Measurement information generates value, when it is applied in the decision making. An investment cost and maintenance costs are associated with each component of the measurement system. Clearly, there is - under a given set of scenarios - a measurement setup that is optimal in expected (discounted) utility. This paper deals how the measurement policy optimization is affected by different system states and how this problem can be tackled.

  10. Transparency and corruption: an optimal taxation policy

    OpenAIRE

    Jellal, Mohamed; Bouzahzah, Mohamed

    2013-01-01

    Under Principal-Agent-Supervisor paradigm, we examine in this paper how a tax collection agency changes optimal schemes in order to lessen the occurrence of corruption between the tax collector and the taxpayer. Indeed, the Principal, who maximizes the expected net fiscal revenue, reacts by decreasing tax rates when the supervisor is likely to engage in corrupt transaction with taxpayer. Therefore, the optimal policy against collusion and corruption may explain the rational of the greater rel...

  11. State dependent optimization of measurement policy

    International Nuclear Information System (INIS)

    Konkarikoski, K

    2010-01-01

    Measurements are the key to rational decision making. Measurement information generates value, when it is applied in the decision making. An investment cost and maintenance costs are associated with each component of the measurement system. Clearly, there is - under a given set of scenarios - a measurement setup that is optimal in expected (discounted) utility. This paper deals how the measurement policy optimization is affected by different system states and how this problem can be tackled.

  12. Dual Effects of Monetary Policy on Corporate Investment%货币政策影响公司投资的双重效应研究

    Institute of Scientific and Technical Information of China (English)

    张西征; 刘志远; 王静

    2012-01-01

    In this paper, we analyze dual effects of monetary policy on corporate investment through micro level. We distinct demand effect and supply effect of monetary policy on corporate investment by panel vector auto-regression techniques ( PVAR) and the orthogonal impulse response functions, using panel data of listed companies to test hypothesized model. The results show that, monetary policy has both demand effect and supply effect on corporate investment; monetary policy has different effect on corporate's investment under different financing constraints. That is, the demand effect of lower financing constraints firms is stronger than that of higher financing constraints firms, and the supply effect of higher financing constraints firms is stronger than that of lower financing constraints firms. This research provides macro monetary policy theory with micro economic foundation.%从微观层面分析货币政策影响公司投资的双重效应,采用面板向量自回归技术,通过正交化的脉冲响应函数,区分货币政策影响公司投资的需求效应和供给效应,使用中国上市公司面板数据进行实证检验.研究结果表明,货币政策对公司投资的影响既存在需求效应又存在供给效应;对不同融资约束公司,货币政策影响其投资的双重效应存在非对称性,货币政策对低融资约束公司投资影响的需求效应强于高融资约束公司,对高融资约束公司投资影响的供给效应强于低融资约束公司.研究结果为宏观货币政策理论提供微观经济基础的支持.

  13. The Ethics of U.S. Monetary Policy in Response to the Financial Crisis of 2007-2009

    Directory of Open Access Journals (Sweden)

    George Bragues

    2009-07-01

    Full Text Available Since the financial crisis first erupted in the summer of 2007, the US Federal Reserve has sought to contain negative spillovers into the real economy by dramatically loosening monetary policy. Initially, this was done by lowering its key lending rates, but as the crisis has worsened, and rates have approached closer to zero, it has resorted to expanding its balance sheet in a historically unprecedented fashion. The Fed’s total assets have more than doubled to nearly $2 trillion since the summer of 2007.Much of the debate surrounding the wisdom of this extraordinary increase in the production of money has revolved around its expediency–in other words, will it actually work to rescue the economy? Very little has been said, at least explicitly, about whether it is the morally right thing to do.This paper seeks to fill this gap by providing a moral analysis of the Fed’s response to the financial crisis. For this purpose, we apply Aristotelian virtue theory, Lockean natural rights philosophy, Kantian deontology, and Benthamite utilitarianism. The idea is that if a consensus, or a strong majority, can be reached from differing philosophic assumptions and starting points, then the resulting judgment ought to be compelling for all neutral observers. On the basis that the Fed’s efforts are likely to result in a marked rise in inflation, we argue that every one of these four moral theories ultimately renders a negative judgment. As such, we conclude that the Fed is pursuing an immoral course.

  14. Financial stability, wealth effects and optimal macroeconomic policy combination in the United Kingdom: A new-Keynesian dynamic stochastic general equilibrium framework

    Directory of Open Access Journals (Sweden)

    Muhammad Ali Nasir

    2016-12-01

    Full Text Available This study derives an optimal macroeconomic policy combination for financial sector stability in the United Kingdom by employing a New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE framework. The empirical results obtained show that disciplined fiscal and accommodative monetary policies stance is optimal for financial sector stability. Furthermore, fiscal indiscipline countered by contractionary monetary stance adversely affects financial sector stability. Financial markets, e.g. stocks and Gilts show a short-term asymmetric response to macroeconomic policy interaction and to each other. The asymmetry is a reflection of portfolio adjustment. However in the long-run, the responses to suggested optimal policy combination had homogenous effects and there was evidence of co-movement in the stock and Gilt markets.

  15. Monetary Romanticism

    DEFF Research Database (Denmark)

    Ravn Sørensen, Anders

    2013-01-01

    the interrelation between monetary organisation and nationalism. In the conflict between the Danish state and the Duchies of Schleswig-Holstein in the nineteenth century, banks and currencies were mobilised as political symbols to promote an agenda of regional nationalism. The local Schleswig-Holstein currency...

  16. Monetary shocks and stock returns: identification through the impossible trinity

    OpenAIRE

    Ali K. Ozdagli; Yifan Yu

    2012-01-01

    This paper attempts to identify how monetary policy shocks affect stock prices by using Mundell and Fleming's theory of the "Impossible Trinity." According to this theory, it is impossible to simultaneously have a fixed exchange rate, free capital movement (an absence of capital controls), and an independent monetary policy. The authors present evidence that Hong Kong's monetary policy is heavily dependent on the monetary policy of the United States, a stance which is consistent with this the...

  17. Managing charging loads of electric vehicles by monetary incentives. A model-based optimization; Monetaere Anreize zur Steuerung der Ladelast von Elektrofahrzeugen. Eine modellgestuetzte Optimierung

    Energy Technology Data Exchange (ETDEWEB)

    Paetz, Alexandra-Gwyn; Kaschub, Thomas; Kopp, Martin; Jochem, Patrick; Fichtner, Wolf [Karlsruher Institut fuer Technologie, Karlsruhe (Germany). Inst. fuer Industriebetriebslehre und Industrielle Produktion

    2013-03-15

    Electric mobility is supposed to contribute to climate policy targets by reducing CO{sub 2}-emissions in the transportation sector. Increasing penetration rates of electric vehicles (EV) can lead to new challenges in the electricity sector, especially with regard to local distribution networks. Thus the management of charging loads is discussed as a key issue in energy economics. Due to their long parking times, high electricity and power demand, EV seem to be predestined for load management. Monetary incentives as dynamic pricing can be suitable for that: They reflect the current supply situation, pass the information to the consumers and can thus lead to a corresponding charging behaviour. In this article we analyse this interaction between dynamic pricing and charging loads. For this reason we have developed the optimization model DS-Opt+. It models a total number of 4,000 households in two residential areas of a major city with regard to its electricity demand, its mobility behaviour and its equipment of photovoltaic systems. Four different pricing models are tested for their effects on charging behaviour and thus the total load of the residential area. The results illustrate that only fairly high penetration rates of EV lead to remarkably higher electricity demand and require some load management. The tested dynamic pricing models are suitable for influencing charging loads; load-based tariffs are best in achieving a balanced load curve. In our analysis uncontrolled charging strategies are superior regarding a balanced load curve than controlled strategies by time-varying tariffs. Our results lead to several implications relevant for the energy industry and further research.

  18. Monetary transmission and business cycle asymmetry

    NARCIS (Netherlands)

    Kakes, Jan

    1998-01-01

    This paper investigates asymmetric effects of monetary policy over the business cycle. A two-state Markov Switching Model is employed to model both recessions and expansions. For the United States and Germany, strong evidence is found that monetary policy is more effective in a recession than during

  19. The determination of optimal climate policy

    International Nuclear Information System (INIS)

    Aaheim, Asbjoern

    2010-01-01

    Analyses of the costs and benefits of climate policy, such as the Stern Review, evaluate alternative strategies to reduce greenhouse gas emissions by requiring that the cost of emission cuts in each and every year has to be covered by the associated value of avoided damage, discounted by a an exogenously chosen rate. An alternative is to optimize abatement programmes towards a stationary state, where the concentrations of greenhouse gases are stabilized and shadow prices, including the rate of discount, are determined endogenously. This paper examines the properties of optimized stabilization. It turns out that the implications for the evaluation of climate policy are substantial if compared with evaluations of the present value of costs and benefits based on exogenously chosen shadow prices. Comparisons of discounted costs and benefits tend to exaggerate the importance of the choice of discount rate, while ignoring the importance of future abatement costs, which turns out to be essential for the optimal abatement path. Numerical examples suggest that early action may be more beneficial than indicated by comparisons of costs and benefits discounted by a rate chosen on the basis of current observations. (author)

  20. Monetary management in a monetary union

    DEFF Research Database (Denmark)

    Thygesen, Niels

    1991-01-01

    The design and implementation of monetary policy in the EMU raises a number of difficult conceptual issues, though less complex than those of the transition. The Delors Report (1989) addressed three issues, in particular: (1) the appropriate mandate for the European system of Central Banks (ESCB)......, and on the desirable degree of decentralization within the ESCB of operational and supervisory authority. Some preliminary reflections on these issues are found in the final section......The design and implementation of monetary policy in the EMU raises a number of difficult conceptual issues, though less complex than those of the transition. The Delors Report (1989) addressed three issues, in particular: (1) the appropriate mandate for the European system of Central Banks (ESCB......): (2) the relationship of the ESCB to national and EEC political authorities, and (3) the accountability of the ESCB for its implementation of its mandate. The paper pays special attention to the interaction of these three issues. The Delors Report was less specific on the desing of instruments...

  1. The Interaction Between FX and Credit Risk as an Example of Intersection of Monetary and Financial Stability Policy Goals – The Case of Serbia

    Directory of Open Access Journals (Sweden)

    Jović Željko

    2016-05-01

    Full Text Available The financial system of Serbia is highly bank-centric and euroised, which is a common specific feature of financial systems in developing countries. High level of euroisation represents an adequate environment for the development of emphasized interaction of foreign exchange and credit risks; therefore, creation of the spillover mechanism of foreign exchange risk to credit risk is immanent for euroised systems. Although maintaining the stability of the dinar exchange rate is a secondary goal of the National Bank of Serbia in relation to price and financial stability as the primary goals, in terms of existence of the aforesaid spillover mechanism, maintaining stability of the dinar exchange rate represents the area where there is an interaction between the goals of monetary policy (price stability and those of financial stability policy (maintaining and strengthening the financial system’s stability. In order to explore whether the spillover mechanism of foreign exchange risk to credit risk exists in Serbia’s financial system, the vector autoregressive (VAR model is applied on data from the Serbian banking sector to quantify the impact of changes in the dinar exchange rates on the rate of non-performing loans (NPLs; the sample was formed in the period of increased instability of the dinar exchange rate, from 31 January 2008 to 31 December 2010. As we have quantitatively confirmed the impact of increase in the dinar exchange rate on the increase of 90-120 days past due NPLs, we can conclude that the existence of expressed interaction between foreign exchange risk and credit risk in the Serbian financial system represents a paradigm of the regulator’s need to achieve contemporary goals of monetary and financial stability policy by maintaining relative stability of the dinar exchange rates. Depreciation of the local currency has inflationary pressure on price stability and simultaneously influences the achievement of financial stability goals

  2. Gelişen Piyasa Ekonomilerinde Alternatif Para Politikası Stratejileri, Türkiye Ekonomisi Açısından Bir Değerlendirme(Alternative Monetary Policy Strategies in Emerging Countries, An Assessing For Turkish Economy

    Directory of Open Access Journals (Sweden)

    Şehnaz Bakır YİĞİTBAŞ

    2009-01-01

    Full Text Available This paper assesses the advantages and disadvantages of alternative monetary policy strategies involves for emerging market countries. Then it discusses two emerging market countries which illustrate what it takes to make inflation targeting work well, Chile and Brazil. The next topic that assessing inflation targeting as a monetary policy strategy for Turkey. The conclusion from this analysis is that inflation targeting is more complicated in Turkey. In order to improve inflation targeting’s performance in Turkey, the role of communication and transparency which is crutial for the process of building credibility, should be increased.

  3. Fiscal Deficits, Monetary Reform and Inflation Stabilization in Romania.

    NARCIS (Netherlands)

    van Wijnbergen, S.J.G.; Budina, N.

    2001-01-01

    Investigates the consistency between inflation, monetary reform and fiscal policy in Romania. Offers a framework for the assessment of the fiscal and monetary interactions of Romanian economy; Shows impact of inflation on fiscal inconsistency measure; Considers importance of consolidating public

  4. RISKS AND CONSTRAINTS FOR THE MONETARY STABILITY

    Directory of Open Access Journals (Sweden)

    Camelia MILEA

    2013-09-01

    Full Text Available Starting from the definition according to which monetary stability requires an appropriate level of liquidity in an economy with dynamic objectives, of growth and job creation, non-inflationary in terms of price stability, based on the analysis of the effects of some relevant economic phenomena and on the economic literature, in this article, the author has highlighted some of the risks to monetary stability. One of the major risks is represented by the loss of its instruments, i.e. the instruments for liquidity management, through monetary and exchange rate policies. Another important risk is represented by the capital fluctuation due to various shocks: exchange rate, political, financial and capital account liberalization. Also, as a result of the analysis of relevant studies and of the effects of the European integration in terms of monetary stability, the author has shown the elements on which depends monetary stability. Among these, there are: the existence of an institutional framework with a clear goal and a proper degree of responsibility, strong operational independence of monetary policy, monetary policy implementation with a view to ensuring an appropriate balance between discipline and discretion, the level of the interest rate of monetary policy, the efficiency of the transmission mechanism of monetary policy, the existence of a viable and stable financial system, the existence of enough instruments at hand for the central bank, the structure and soundness of the financial and banking system. The paper is a capitalization of the research project “Global Risks for the Financial and Monetary Stability. Implications for Romania and European Union” elaborated in 2013, at “Victor Slăvescu” Centre for Financial and Monetary Research.

  5. Vertical integration and optimal reimbursement policy.

    Science.gov (United States)

    Afendulis, Christopher C; Kessler, Daniel P

    2011-09-01

    Health care providers may vertically integrate not only to facilitate coordination of care, but also for strategic reasons that may not be in patients' best interests. Optimal Medicare reimbursement policy depends upon the extent to which each of these explanations is correct. To investigate, we compare the consequences of the 1997 adoption of prospective payment for skilled nursing facilities (SNF PPS) in geographic areas with high versus low levels of hospital/SNF integration. We find that SNF PPS decreased spending more in high integration areas, with no measurable consequences for patient health outcomes. Our findings suggest that integrated providers should face higher-powered reimbursement incentives, i.e., less cost-sharing. More generally, we conclude that purchasers of health services (and other services subject to agency problems) should consider the organizational form of their suppliers when choosing a reimbursement mechanism.

  6. IS QUANTITATIVE EASING A N APPROPRIATE WAY F OR T HE SUCCESS O F MONETARY POLICY I N A POST - CRISIS PERIOD?

    Directory of Open Access Journals (Sweden)

    PETRE PRISECARU

    2015-12-01

    Full Text Available Quantitative easing is an unorthodox monetary policy focused on buying large quantities of bonds, mainly government bonds, by central bank in order to increase the reserves of commercial banks and thus to support private bank lending. It first started in Japan 14 year ago and this country experienced 3 rounds of QE with limited success. ,A fter that it spread in USA and UK with a certain degree of success and finally it was adopted by ECB in March 2015. Although huge amounts of money were injected in the banks it is difficult to assess to what extent liquidity trap was overcome and economic recovery after the recent crisis was helped. The opinions of different financial analysts and technocrats are divided and their arguments are not based on serious analyses using reliable st atistical data and clear scientific evidence.

  7. Visualising Pareto-optimal trade-offs helps move beyond monetary-only criteria for water management decisions

    Science.gov (United States)

    Hurford, Anthony; Harou, Julien

    2014-05-01

    Water related eco-system services are important to the livelihoods of the poorest sectors of society in developing countries. Degradation or loss of these services can increase the vulnerability of people decreasing their capacity to support themselves. New approaches to help guide water resources management decisions are needed which account for the non-market value of ecosystem goods and services. In case studies from Brazil and Kenya we demonstrate the capability of many objective Pareto-optimal trade-off analysis to help decision makers balance economic and non-market benefits from the management of existing multi-reservoir systems. A multi-criteria search algorithm is coupled to a water resources management simulator of each basin to generate a set of Pareto-approximate trade-offs representing the best case management decisions. In both cases, volume dependent reservoir release rules are the management decisions being optimised. In the Kenyan case we further assess the impacts of proposed irrigation investments, and how the possibility of new investments impacts the system's trade-offs. During the multi-criteria search (optimisation), performance of different sets of management decisions (policies) is assessed against case-specific objective functions representing provision of water supply and irrigation, hydropower generation and maintenance of ecosystem services. Results are visualised as trade-off surfaces to help decision makers understand the impacts of different policies on a broad range of stakeholders and to assist in decision-making. These case studies show how the approach can reveal unexpected opportunities for win-win solutions, and quantify the trade-offs between investing to increase agricultural revenue and negative impacts on protected ecosystems which support rural livelihoods.

  8. War on Poverty--Victory or Defeat? Hearing before the Subcommittee on Monetary and Fiscal Policy of the Joint Economic Committee, Congress of the United States, Ninety-Ninth Congress, First Session (June 20, 1985).

    Science.gov (United States)

    Joint Economic Committee, Washington, DC.

    This document presents a transcript of a Joint Subcommittee on Monetary and Fiscal Policy hearing on the impact of the Federal "War on Poverty" programs. Testimony and submissions for the record included: (1) a paper by Lowell Gallaway et al., "The 'New' Structural Poverty: A Quantitative Analysis," which examines the effects…

  9. Modern Paradigm in Macroeconomic Monetary Theories

    Directory of Open Access Journals (Sweden)

    Daniel Lipară

    2016-01-01

    We appreciated that in order to achieve macroeconomic stability a mix between monetary andfiscal policies is needed, fixed rules should be applied in interdependence with discretionarygovernment measures and acting upon incomes is the best way to fight against inflation.

  10. Squilibri finanziari, cambio del dollaro e politica monetaria internazionale. (Financial imbalances, the dollar exchange rate and international monetary policy.

    Directory of Open Access Journals (Sweden)

    R. TRIFFIN

    2013-12-01

    Full Text Available L'aumento continuo e spettacolare del dollaro sul mercato globale dei cambi, nonostante l'altrettanto spettacolare disavanzo delle partite correnti della bilancia dei pagamenti, è una cosa che nessun economista avrebbe sognato . Tutti saranno d'accordo che la risposta al puzzle sta nel fatto che le operazioni in conto corrente costituiscono ormai solo una piccola parte dei movimenti valutari lordi,  dominata di fattop da movimenti di capitali. Ciò che deve essere spiegato  allora è l'enorme volume di capitale netto totale che finanzia il deficit. Il presente lavoro considera questo paradosso, il ruolo del dollaro nel sistema monetario mondiale e le prospettive a medio e lungo termine per il sistema finanziario mondiale.The continuous and spectacular rise of the dollar on the global foreign exchange market, despite the equally spectacular current account deficit of the U.S. balance of payments, is something that no economist would have dreamed to be possible. Everyone will agree that the answer to the puzzle lies in the fact that the transactions in the current account now constitute only a small part of the gross currency movements, in fact dominated by capital movements. What needs to be explained then is the sheer volume of the total net capital that finances the deficit. The present work considers this paradox, the dollar’s role in the world monetary system and medium and long-term perspectives for the world financial system.JEL: E52, F31, E42,

  11. Central bank transparency, private information and the predictability of monetary policy in the financial markets : theoretical, experimental and empirical evidence

    NARCIS (Netherlands)

    Middeldorp, M.H.

    2010-01-01

    Central banks worldwide have become considerably more communicative about their policies and forecasts. An important reason is that democratic societies expect such transparency from public institutions. Central bankers, supported by a significant body of empirical research, also believe that

  12. MONETARY EXPECTATIONS OF THE ROMANIAN EXECUTIVES REGARDING THE ADHERATION

    Directory of Open Access Journals (Sweden)

    Ramona DUMITRIU

    2006-01-01

    Full Text Available This paper explores the monetary expectations induced to the managers of Romanian firms by adheration. It is based on an investigation among twenty Romanian executives regarding the impact on adheration over monetary aspects: inflation, exchange rates and adoption of euro. We conclude that the results of the monetary policy in the last years made the executives confident that the Romanian authorities could maintain the monetary stability after theadheration.

  13. Monetary transmission and bank lending in the Netherlands

    OpenAIRE

    Kakes, Jan

    1998-01-01

    This paper investigates the role of bank lending in the monetary transmission process in the Netherlands. We observe significant differences between the responses of corporate and household lending following a monetary shock. We also find that banks hold a buffer stock of securities which they use to offset monetary shocks. The main implication of our study is that a bank lending channel is not likely to be an important transmission mechanism of monetary policy.

  14. Optimal Policy under Restricted Government Spending

    DEFF Research Database (Denmark)

    Sørensen, Anders

    2006-01-01

    Welfare ranking of policy instruments is addressed in a two-sector Ramsey model with monopoly pricing in one sector as the only distortion. When government spending is restricted, i.e. when a government is unable or unwilling to finance the required costs for implementing the optimum policy...... effectiveness canexceed the welfare loss from introducing new distortions. Moreover, it is found that the investment subsidy is gradually phased out of the welfare maximizing policy, which may be a policy combining the two subsidies, when the level of government spending is increased.Keywords: welfare ranking......, indirect and direct policy instruments, restricted government spending JEL: E61, O21, O41...

  15. Extreme Trust Region Policy Optimization for Active Object Recognition.

    Science.gov (United States)

    Liu, Huaping; Wu, Yupei; Sun, Fuchun; Huaping Liu; Yupei Wu; Fuchun Sun; Sun, Fuchun; Liu, Huaping; Wu, Yupei

    2018-06-01

    In this brief, we develop a deep reinforcement learning method to actively recognize objects by choosing a sequence of actions for an active camera that helps to discriminate between the objects. The method is realized using trust region policy optimization, in which the policy is realized by an extreme learning machine and, therefore, leads to efficient optimization algorithm. The experimental results on the publicly available data set show the advantages of the developed extreme trust region optimization method.

  16. Dynamic mobility applications policy analysis : policy and institutional issues for intelligent network flow optimization (INFLO).

    Science.gov (United States)

    2014-12-01

    The report documents policy considerations for the Intelligent Network Flow Optimization (INFLO) connected vehicle applications : bundle. INFLO aims to optimize network flow on freeways and arterials by informing motorists of existing and impen...

  17. Financing and funding health care: Optimal policy and political implementability.

    Science.gov (United States)

    Nuscheler, Robert; Roeder, Kerstin

    2015-07-01

    Health care financing and funding are usually analyzed in isolation. This paper combines the corresponding strands of the literature and thereby advances our understanding of the important interaction between them. We investigate the impact of three modes of health care financing, namely, optimal income taxation, proportional income taxation, and insurance premiums, on optimal provider payment and on the political implementability of optimal policies under majority voting. Considering a standard multi-task agency framework we show that optimal health care policies will generally differ across financing regimes when the health authority has redistributive concerns. We show that health care financing also has a bearing on the political implementability of optimal health care policies. Our results demonstrate that an isolated analysis of (optimal) provider payment rests on very strong assumptions regarding both the financing of health care and the redistributive preferences of the health authority. Copyright © 2015 Elsevier B.V. All rights reserved.

  18. PRICE RIGIDITY AND MONETARY NON-NEUTRALITY IN DEVELOPING COUNTRIES: EVIDENCE FROM NIGERIA

    Directory of Open Access Journals (Sweden)

    Nathaniel E. Urama

    2013-04-01

    Full Text Available In an attempt to find out the degree of monetary non-neutrality in Nigeria we started from finding out the size of price rigidity in the country. Computation with Ball and Romer method showed that price rigidity is optimal decision for firms in Nigeria only when the menu cost is well above 2.28% of the firm’s revenue which is on the high side, showing the likelihood of weak price rigidity in the country. Confirming this, the IRFs of the SVAR shows that the response of inflation to nominal shock has only one period lag. These combined results led to a small though persistent response of output to the nominal shock. The result of the study therefore points towards large nominal and small real effect of monetary policy in Nigeria and conclude that monetary policy will be a better option for contractionary plan but not for an expansionary plan.

  19. Did Korean Monetary Policy Help Soften the Impact of the Global Financial Crisis of 2008-2009?

    OpenAIRE

    Subir Lall; Selim Elekdag; Harun Alp

    2012-01-01

    Korea was one of the Asian economies hardest hit by the global financial crisis. Anticipating the downturn that would follow the episode of extreme financial stress, the Bank of Korea (BOK) let the exchange rate depreciate as capital flowed out, and preemptively cut the policy rate by 325 basis points. But did it work? This paper seeks a quantitative answer to the following question: Were it not for an inflation targeting framework underpinned by a flexible exchange rate regime, how much deep...

  20. Rational optimization of reliability and safety policies

    International Nuclear Information System (INIS)

    Melchers, Robert E.

    2001-01-01

    Optimization of structures for design has a long history, including optimization using numerical methods and optimality criteria. Much of this work has considered a subset of the complete design optimization problem--that of the technical issues alone. The more general problem must consider also non-technical issues and, importantly, the interplay between them and the parameters which influence them. Optimization involves optimal setting of design or acceptance criteria and, separately, optimal design within the criteria. In the modern context of probability based design codes this requires probabilistic acceptance criteria. The determination of such criteria involves more than the nominal code failure probability approach used for design code formulation. A more general view must be taken and a clear distinction must be made between those matters covered by technical reliability and non-technical reliability. The present paper considers this issue and outlines a framework for rational optimization of structural and other systems given the socio-economic and political systems within which optimization must be performed

  1. Il ruolo degli aggregati creditizi come obiettivi intermedi o indicatori della politica monetaria. (A note on credit aggregates as targets or indicators of monetary policy

    Directory of Open Access Journals (Sweden)

    G. VACIAGO

    2013-12-01

    Full Text Available Con l'aumento della deregolamentazione e l'innovazione finanziaria in molti sistemi bancari nazionali, è stato suggerito che l'attuale enfasi sul controllo della massa monetaria non è più appropriato. Invece, una definizione più ampia di credito dovrebbe essere introdotto e movimenti degli aggregati creditizi dovrebbe essere controllato. L'autore sostiene che non vi è alcun meccanismo di trasmissione diretta tra un aggregato ampio credito e variazioni del debito privato e di governo, e che le autorità hanno limitato la capacità di controllare un tale aggregato. Quindi la sua scelta come l'obiettivo principale della politica monetaria sarebbe inopportuno.With increasing deregulation and financial innovation in many domestic banking systems, it has been suggested that the present emphasis on controlling the money stock is no longer appropriate. Instead, a broader definition of credit should be introduced and movements in credit aggregates should be controlled. The author argues that there is no direct transmission mechanism between a broad credit aggregate and changes in private and government debt, and that the authorities have limited ability to control such an aggregate. Therefore its choice as the main target for monetary policy would be inappropriate.JEL: E52

  2. In Lands of Foreign Currency Credit, Bank Lending Channels Run Through? The Effects of Monetary Policy at Home and Abroad on the Currency Denomination of the Supply of Credit

    OpenAIRE

    Steven Ongena; Ibolya Schindele; Dzsamila Vonnak

    2014-01-01

    We analyze the differential impact of domestic and foreign monetary policy on the local supply of bank credit in domestic and foreign currencies. We analyze a novel, supervisory dataset from Hungary that records all bank lending to firms including its currency denomination. Accounting for time-varying firm-specific heterogeneity in loan demand, we find that a lower domestic interest rate expands the supply of credit in the domestic but not in the foreign currency. A lower foreign interest rat...

  3. Uganda; Financial System Stability Assessment, including Reports on the Observance of Standards and Codes on the following topics: Monetary and Financial Policy Transparency, Banking Supervision, Securities Regulation, and Payment Systems

    OpenAIRE

    International Monetary Fund

    2003-01-01

    This paper presents findings of Uganda’s Financial System Stability Assessment, including Reports on the Observance of Standards and Codes on Monetary and Financial Policy Transparency, Banking Supervision, Securities Regulation, Insurance Regulation, Corporate Governance, and Payment Systems. The banking system in Uganda, which dominates the financial system, is fundamentally sound, more resilient than in the past, and currently poses no threat to macroeconomic stability. A major disruption ...

  4. The E-Monetary Theory

    OpenAIRE

    Ngotran, Duong

    2016-01-01

    We develop a dynamic model with two types of electronic money: reserves for transactions between bankers and zero-maturity deposits for transactions in the non-bank private sector. Using this model, we assess the efficacy of unconventional monetary policy since the Great Recession. After quantitative easing, keeping the interest on reserves at zero too long will create deflation. The central bank can safely get out of the ``low rate-cum-deflation'' trap by ``raising rate and raising money sup...

  5. Optimal government policies in models with heterogeneous agents

    Czech Academy of Sciences Publication Activity Database

    Boháček, Radim; Kejak, Michal

    -, č. 272 (2005), s. 1-55 ISSN 1211-3298 Institutional research plan: CEZ:AV0Z70850503 Keywords : optimal macroeconomic policy * optimal taxation * distribution of wealth and income Subject RIV: AH - Economics http://www.cerge-ei.cz/pdf/wp/Wp272.pdf

  6. A bivariate optimal replacement policy for a multistate repairable system

    International Nuclear Information System (INIS)

    Zhang Yuanlin; Yam, Richard C.M.; Zuo, Ming J.

    2007-01-01

    In this paper, a deteriorating simple repairable system with k+1 states, including k failure states and one working state, is studied. It is assumed that the system after repair is not 'as good as new' and the deterioration of the system is stochastic. We consider a bivariate replacement policy, denoted by (T,N), in which the system is replaced when its working age has reached T or the number of failures it has experienced has reached N, whichever occurs first. The objective is to determine the optimal replacement policy (T,N)* such that the long-run expected profit per unit time is maximized. The explicit expression of the long-run expected profit per unit time is derived and the corresponding optimal replacement policy can be determined analytically or numerically. We prove that the optimal policy (T,N)* is better than the optimal policy N* for a multistate simple repairable system. We also show that a general monotone process model for a multistate simple repairable system is equivalent to a geometric process model for a two-state simple repairable system in the sense that they have the same structure for the long-run expected profit (or cost) per unit time and the same optimal policy. Finally, a numerical example is given to illustrate the theoretical results

  7. MONETARY TRANSMISSION CHANNELS IN FLEXIBLE MONETARY AND EXCHANGE RATE REGIMES: THE CASE OF SELECTED TRANSITION ECONOMIES

    Directory of Open Access Journals (Sweden)

    Kosta JOSIFIDIS

    2010-01-01

    Full Text Available The paper explores selected monetary transmission channels in the case of transition economies. Namely, an exchange rate channel, an interest rate channel, direct and indirect influence to an exchange rate, are focused. Specific (former transition economies are differentiated according the combination of implemented monetary and exchange rate regimes: exchange rate as a nominal anchor and rigid exchange rate regimes, exchange rate as a nominal anchor and intermediate exchange rate regimes, and implicit/explicit inflation targeting monetary regime and floating (managed/free exchange rate regime. The monetary transmission is tracked during different phases in a transition process towards the EU and compared between different nominal anchors and exchange rate regimes. In order to track the influence of a monetary policy instruments (impulses to different goals of a monetary policy (responses during the period from 6-24 months, we use VAR and VEC models. Monthly frequency of following time series are used in the models: nominal exchange rates, consumer price indexes, foreign exchange reserves, and reference interest rates. The aim of the paper is to point to the distinction between de jure and de facto exchange rate regimes, and to the adequacy of used combination of monetary and exchange rate regimes having in mind revealed features of investigated monetary transmission channels.

  8. The changing U.S. financial system : some implications for the monetary transmission mechanism

    OpenAIRE

    Gordon H. Sellon

    2002-01-01

    An important part of monetary policy is the monetary transmission mechanism, the process by which monetary policy actions influence the economy. While the transmission mechanism involves a number of channels, including exchange rates, bank credit, and asset prices, most economists consider interest rates to be the principal avenue by which monetary policy affects economic activity.> In recent decades, significant changes in the structure of financial markets and institutions in the United Sta...

  9. Carbon Sequestration and Optimal Climate Policy

    International Nuclear Information System (INIS)

    Grimaud, Andre; Rouge, Luc

    2009-01-01

    We present an endogenous growth model in which the use of a non-renewable natural resource generates carbon-dioxide emissions that can be partly sequestered. This approach breaks with the systematic link between resource use and pollution emission. The accumulated stock of remaining emissions has a negative impact on household utility and corporate productivity. While sequestration quickens the optimal extraction rate, it can also generate higher emissions in the short run. It also has an adverse effect on economic growth. We study the impact of a carbon tax: the level of the tax has an effect in our model, its optimal level is positive, and it can be interpreted ex post as a decreasing ad valorem tax on the resource

  10. Have any lessons been learned as a result of the past two decades of laissez faire in fiscal/monetary policy, energy/environment policy (or lack thereof)?

    International Nuclear Information System (INIS)

    Schreyer, E.

    2009-01-01

    'Full text:' The complexity that surrounds many aspects of technological change and of political and economic policy exists side by side with fundamental (in inconvenient) givens. The overwhelming desire to continue “business as usual” policies with respect to resource use; non-accountability in rates of resource depletion; emissions buildup and projected climate impact has resulted in the loss of a quarter century in moderating the pace of these eventually unsustainable practices. This paper's focus is on the necessity of adopting the precautionary principle in formulating practical public policy to reduce the threat of climate change; to shift the rate of fossil fuel depletion from fast track to slow and measured pace and to implement economic stimuli through renewable energy projects, etc. (author)

  11. Trade Liberalization and Optimal Environmental Policies in Vertical Related Markets

    Directory of Open Access Journals (Sweden)

    Yan-Shu Lin

    2012-12-01

    Full Text Available This paper establishes a symmetric two-country model with vertically related markets. In the downstream market, there is one firm in each country selling a homogeneous good, whose production generates pollution, to its home and the foreign markets a la Brander (1981. In the intermediate good market, there is also one upstream firm in each country, supplying the intermediate good only to its own country’s downstream market. The upstream firms can choose either price or quantity to maximize their profits. With this setting, the paper examines the optimal environmental policy and how it is affected by the tariff on the final good. It is found that, under free trade, the optimal final-good output with imperfect intermediate-good market will have the same output level as that with perfect intermediate-good market after imposing the optimal emission tax. The optimal environmental tax is smaller and the optimal environmental policy is less likely to be a green strategy under trade liberalization if the market structure in the intermediate good market is imperfect than perfect competition. On the other hand, the optimal environmental tax is necessarily higher if the upstream firm chooses price than quantity. Moreover, the optimal environmental policy is less likely to be a green strategy under trade liberalization if the upstream firms choose quantity than price to maximize their profits.

  12. Aggregate Stability in Monetary Economy with Consumption Tax and Taylor Rule

    OpenAIRE

    Fujisaki, Seiya

    2016-01-01

    We analyze aggregate stability of a monetary economy with an interest-rate control type of monetary policy and endogenous consumption tax rate under balanced-budget rule, in terms of equilibrium determinacy. We find the effect of the response to income in monetary policy on macroeconomic stability depends on whether the consumption tax rate is adequately high.

  13. Financial crisis and monetary policy

    NARCIS (Netherlands)

    Karatas, B.

    2014-01-01

    Written in the midst of the Global Financial Crisis, the goal of this dissertation is to investigate causes of financial crises in general in order to provide empirical evidence of the driving forces of various crises types. Specifically, this thesis analyses the most common types of financial

  14. Regulatory change and monetary policy

    OpenAIRE

    Bank for International Settlements

    2015-01-01

    Report submitted by a Working Group established by the Committee on the Global Financial System and the Markets Committee. The Group was chaired by Ulrich Bindseil (European Central Bank) and William R Nelson (Federal Reserve Board). Financial regulation is evolving, as policymakers seek to strengthen the financial system in order to make it more robust and resilient. Changes in the regulatory environment are likely to have an impact on financial system structure and on the behaviour of finan...

  15. Optimal Replacement and Management Policies for Beef Cows

    OpenAIRE

    W. Marshall Frasier; George H. Pfeiffer

    1994-01-01

    Beef cow replacement studies have not reflected the interaction between herd management and the culling decision. We demonstrate techniques for modeling optimal beef cow replacement intervals and discrete management policies by incorporating the dynamic effects of management on future productivity when biological response is uncertain. Markovian decision analysis is used to identify optimal beef cow management on a ranch typical of the Sandhills region of Nebraska. Issues of breeding season l...

  16. Estimation of weights for the Monetary Conditions Index in Poland

    OpenAIRE

    Andrzej Toroj

    2008-01-01

    In this paper, we follow the econometric approach to assess relative importance of real interest rate and real exchange rate for the monetary conditions in Poland, quantified as weights for Monetary Conditions Index (MCI). We consider both single- and multiple-equation specifications proposed in the literature with an application to Poland. Although MCI is nowadays broadly considered a rather obsolete indicator in monetary policy conduct, we argue that the econometric framework used for this ...

  17. Global Implications of Self-Oriented National Monetary Rules

    OpenAIRE

    Maurice Obstfeld; Kenneth Rogoff

    2003-01-01

    It is well known that if international linkages are relatively small, the potential gains to international monetary policy coordination are typically quite limited. But what if goods and financial markets are tightly linked? Is it then problematic if countries unilaterally design their institutions for monetary stabilization? Are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination? We argue that under p...

  18. Storage Policies and Optimal Shape of a Storage System

    NARCIS (Netherlands)

    Zaerpour, N.; De Koster, René; Yu, Yugang

    2013-01-01

    The response time of a storage system is mainly influenced by its shape (configuration), the storage assignment and retrieval policies, and the location of the input/output (I/O) points. In this paper, we show that the optimal shape of a storage system, which minimises the response time for single

  19. Handling Practicalities in Agricultural Policy Optimization for Water Quality Improvements

    Science.gov (United States)

    Bilevel and multi-objective optimization methods are often useful to spatially target agri-environmental policy throughout a watershed. This type of problem is complex and is comprised of a number of practicalities: (i) a large number of decision variables, (ii) at least two inte...

  20. Optimal Control via Reinforcement Learning with Symbolic Policy Approximation

    NARCIS (Netherlands)

    Kubalìk, Jiřì; Alibekov, Eduard; Babuska, R.; Dochain, Denis; Henrion, Didier; Peaucelle, Dimitri

    2017-01-01

    Model-based reinforcement learning (RL) algorithms can be used to derive optimal control laws for nonlinear dynamic systems. With continuous-valued state and input variables, RL algorithms have to rely on function approximators to represent the value function and policy mappings. This paper