Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

579     [ Page 12 of 68, No. 1 ]

Date

2015-01

Author

Maurice Obstfeld

Affiliation

University of California, Berkely and BIS

Title

Trilemmas and trade-offs: living with financial globalisation

Summary /
Abstract

This paper evaluates the capacity of emerging market economies (EMEs) to moderate the domestic impact of global financial and monetary forces through their own monetary policies. Those EMEs that are able to exploit a flexible exchange rate are far better positioned than those that devote monetary policy to fixing the rate - a reflection of the classical monetary policy trilemma. However, exchange rate changes alone do not insulate economies from foreign financial and monetary shocks. While potentially a potent source of economic benefits, financial globalisation does have a downside for economic management. It worsens the trade-offs monetary policy faces in navigating among multiple domestic objectives. This drawback of globalisation raises the marginal value of additional tools of macroeconomic and financial policy. Unfortunately, the availability of such tools is constrained by a financial policy trilemma that is distinct from the monetary trilemma. This second trilemma posits the incompatibility of national responsibility for financial policy, international financial integration and financial stability.

Keywords

Policy trilemma, financial stability, financial globalisation, international policy transmission

URL

http://www.bis.org/publ/work480.pdf



Record ID

578     [ Page 12 of 68, No. 2 ]

Date

2015-01

Author

Karim Barhoumi and Laurent Ferrara

Affiliation

IMF and Banque de France

Title

A World Trade Leading Index (WTLI)

Summary /
Abstract

This paper develops a new monthly World Trade Leading Indicator (WTLI) that relies on nonparametric and parametric approaches. Compared to the CPB World Trade Monitor’s benchmark indicator for global trade the WTLI captures turning points in global trade with an average lead between 2 and 3 months. We also show that this cyclical indicator is able to track the annual growth rate in global trade, suggesting that the recent slowdown is due in part to certain cyclical factors. This new tool can provide policy makers with valuable foresight into the future direction of economic activity by tracking world trade more efficiently.

Keywords

World trade, leading indicators, factor models

URL

http://www.imf.org/external/pubs/ft/wp/2015/wp1520.pdf



Record ID

577     [ Page 12 of 68, No. 3 ]

Date

2014-12

Author

Luis Eduardo Arango, Ximena Chavarro and Eliana González

Affiliation

Banco de la Republica Colombia

Title

Commodity price shocks and inflation within an optimal monetary policy framework: the case of Colombia

Summary /
Abstract

A small open macroeconomic model, in which an optimal interest rate rule emerges to drive the inflation behavior, is used to model inflation within an inflation targeting framework. This set up is used to estimate the relationship between commodity prices shocks and the inflation process in a country that both export and import commodities. We found evidence of a positive, yet small, impact from food international price shocks to inflation. However, these effects are no longer observable once the sample is split in the periods before and after the boom. The lack of effect from oil and energy price shocks we obtain supports the recent findings in the literature of a substantial decrease in the pass-through from oil prices to headline inflation. Thus, our interpretation is that monetary authority has faced rightly the shocks to commodity prices. Inflation expectations are the main determinant of inflation during the inflation targeting regime. Commodity prices movements are to a great extent included in the information set to form expectations.

Keywords

commodity prices, inflation targeting

URL

http://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_858.pdf



Record ID

576     [ Page 12 of 68, No. 4 ]

Date

2014-12

Author

Tobias Adrian and Nellie Liang

Affiliation

Federal Reserve Bank of New York and Board of Governors of the Federal Reserve System

Title

Monetary Policy, Financial Conditions, and Financial Stability

Summary /
Abstract

In the conduct of monetary policy, there exists a risk-return tradeoff between financial conditions and financial stability, which complements the traditional inflation-real activity tradeoff of monetary policy. The tradeoff exists even if monetary policy does not target financial stability considerations independently of its inflation and real activity goals, as the buildup of financial vulnerabilities from persistent accommodative monetary policy when the economy is close to potential increases risks to future financial stability. We review monetary policy transmission channels and financial frictions that give rise to this tradeoff between financial conditions and financial stability, within a monitoring program across asset markets, banking firms, shadow banking, and the nonfinancial sector. We focus on vulnerabilities that affect monetary policies' risk- return tradeoff including (i) pricing of risk, (ii) leverage, (iii) maturity and liquidity mismatch, and (iv) interconnectedness and complexity. We also discuss the extent to which structural and time-varying macroprudential policies can counteract the buildup of vulnerabilities, thus mitigating monetary policy's risk-return tradeoff.

Keywords

Risk taking channel of monetary policy, monetary policy transmission, monetary policy rules, financial stability, financial conditions, macroprudential policy

URL

http://www.imes.boj.or.jp/research/papers/english/14-E-13.pdf



Record ID

575     [ Page 12 of 68, No. 5 ]

Date

2014-12

Author

Lars E.O. Svensson

Affiliation

Riksbank

Title

Forward Guidance

Summary /
Abstract

Forward guidance about future policy settings, in the form of a published policy-rate path, has for many years been a natural part of normal monetary policy for several central banks, including the Reserve Bank of New Zealand and the Swedish Riksbank. The Swedish and New Zealand experience of a published policy-rate path is examined, especially to what extent the market has anticipated the path (the predictability of the path) and to what extent market expectations line up with the path after publication (the credibility of the path). The recent Swedish experience is very dramatic. In particular, it shows a case with a large discrepancy between a high and rising Riksbank path and a low and falling market path, with the market path providing a good forecast of the future policy rate. The discrepancy is explained by the Riksbank’s leaning against the wind in recent years and related circumstances. The New Zealand experience is less dramatic, but shows cases where the market implements either a substantially tighter or easier policy than intended by the RBNZ. There are also cases of the market being ahead of the RBNZ and the RBNZ later following the market.

Keywords

Forward guidance, monetary policy

URL

http://www.nber.org/papers/w20796.pdf

Remarks

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

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Record ID

574     [ Page 12 of 68, No. 6 ]

Date

2014-10

Author

John B. Taylor

Affiliation

Stanford University

Title

Inflation Targeting In Emerging Markets: The Global Experience

Summary /
Abstract

This paper assesses the emerging market experience with inflation targeting in recent years. It places this experience in the broader context of global monetary policy. It shows that a shift away from rules based policy by many developed country central banks has adversely affected the inflation targeting performance of the emerging market countries. First, it has created direct economic spillovers, which have blurred the good effects of inflation targeting. Second, it has led to policy spillovers in which emerging market central banks have been driven to deviate from their inflation targeting rules. The implication of this research is that emerging market countries should stick to the type of inflation targeting they adopted a decade or more ago with macroprudential policy simply focused on getting the overall risk environment right.

Keywords

Inflation targeting, global experience, emerging markets, monetary policy

URL

http://www.hoover.org/sites/default/files/14112_-_taylor_-_inflation_targeting_in_emerging_markets_-_the_global_experience.pdf



Record ID

573     [ Page 12 of 68, No. 7 ]

Date

2014-11

Author

Elisabetta Gualandri and Mario Noera

Affiliation

Center for Research in Banking and Finance and Bocconi University, Milan

Title

MONITORING SYSTEMIC RISK: A SURVEY OF THE AVAILABLE MACROPRUDENTIAL TOOLKIT

Summary /
Abstract

Understanding the nature of systemic risk and identifying the channels of diffusion of the shocks are the necessary prerequisite to anticipate and manage successfully the insurgence of financial crises. In order to prevent financial distress and manage instability, the macroprudential regulator needs to track and measure systemic risks ex-ante. The aim of the paper is twofold: on one side, it reviews the theoretical frameworks which allow to assess the different dimensions of systemic risk and, on the other, it classifies accordingly and analyzes the methodologies available to assess in advance the occurrence of systemic distress. The paper classifies the different definitions of systemic risk and discusses their significance during the 2007-08 crisis. It presents the tools available to extract real time information on market perception of risk from market prices of securities and derivatives (i.e. CDS and equity options). The analysis is extended to the methods focused on the measurement of the financial fragility due to the networks linkages within the financial system. On the basis of the available empirical research, the paper also reviews the capacity of the different methods to spot in advance the insurgence of the crisis prior to 2007-08 and draws some preliminary conclusions on the completeness and consistency of the toolkit available to policy makers.

Keywords

Systemic risk, financial crisis, prudential regulation, financial institutions.

URL

http://www.cefin.unimore.it/new/wp-content/uploads/2014/11/Cefin_WP_50.pdf



Record ID

572     [ Page 12 of 68, No. 8 ]

Date

2014-12

Author

Frederic S. Mishkin and Eugene N. White

Affiliation

NBER

Title

Unprecedented Actions: The Federal Reserve’s Response to the Global Financial Crisis in Historical Perspective

Summary /
Abstract

Interventions by the Federal Reserve during the financial crisis of 2007-2009 were generally viewed as unprecedented and in violation of the rules—notably Bagehot’s rule—that a central bank should follow to avoid the time-inconsistency problem and moral hazard. Reviewing the evidence for central banks’ crisis management in the U.S., the U.K. and France from the late nineteenth century to the end of the twentieth century, we find that there were precedents for all of the unusual actions taken by the Fed. When these were successful interventions, they followed contingent and target rules that permitted pre-emptive actions to forestall worse crises but were combined with measures to mitigate moral hazard.

Keywords

Federal Reserve, Global Financial Crisis

URL

http://www.nber.org/papers/w20737.pdf

Remarks

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers
You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.



Record ID

571     [ Page 12 of 68, No. 9 ]

Date

2014-11

Author

Luis F. Melo Velandia, Rubén A. Loaiza Maya and Mauricio Villamizar-Villegas

Affiliation

Banco de la Republica Colombia

Title

Bayesian Combination for Inflation Forecasts: The Effects of a Prior Based on Central Banks’ Estimates

Summary /
Abstract

Typically, central banks use a variety of individual models (or a combination of models) when forecasting inflation rates. Most of these require excessive amounts of data, time, and computational power; all of which are scarce when monetary authorities meet to decide over policy interventions. In this paper we use a rolling Bayesian combination technique that considers inflation estimates by the staff of the Central Bank of Colombia during 2002-2011 as prior information. Our results show that: 1) the accuracy of individual models is improved by using a Bayesian shrinkage methodology, and 2) priors consisting of staff's estimates outperform all other priors that comprise equal or zero-vector weights. Consequently, our model provides readily available forecasts that exceed all individual models in terms of forecasting accuracy at every evaluated horizon.

Keywords

Bayesian shrinkage, inflation forecast combination, internal forecasts, rolling window estimation

URL

http://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_853.pdf



Record ID

570     [ Page 12 of 68, No. 10 ]

Date

2014-10

Author

Truman, Edwin M.

Affiliation

Peterson Institute for International Economics

Title

The Federal Reserve engages the world (1970-2000): an insider's narrative of the transition to managed floating and financial turbulence

Summary /
Abstract

This paper traces the evolution of the Federal Reserve and its engagement with the global economy over the last three decades of the 20th century: 1970 to 2000. The paper examines the Federal Reserve’s role in international economic and financial policy and analysis covering four areas: the emergence and taming of the great inflation, developments in US external accounts, foreign exchange analysis and activities, and external financial crises. It concludes that during this period the US central bank emerged to become the closest the world has to a global central bank.

Keywords

Federal Reserve; Federal Open Market Committee; inflation; macroeconomic policies; monetary policy; external balance; exchange rates; exchange market intervention; financial crises; third world debt crises; Mexican crisis; Asian financial crises

URL

http://www.dallasfed.org/assets/documents/institute/wpapers/2014/0210.pdf



Total records: 676 | Select no. of records per page: 10 | 20 | 30 | 50 | 100 | Show all | Search
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