Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

518     [ Page 18 of 68, No. 1 ]

Date

2014-02

Author

Dimas M. Fazio, Benjamin M. Tabak, and Daniel O. Cajueiro

Affiliation

Banco Central do Brazil

Title

Inflation Targeting and Banking System Soundness: A Comprehensive Analysis

Summary /
Abstract

Several specialists and authorities blame inflation targeting (IT) regime for not responding to the increasing systemic risk and the development of asset bubbles. Nevertheless, we employ a database with commercial banks from 71 countries between 1998 and 2012, and we present evidence that: banks from IT countries: (i) are, on average, more stable; (ii) have sounder systemically important banks; and (iii) are less affected in times of global liquidity shortage. These results are in line with the existence of a price stability channel towards financial stability. Our conclusions are robust to whether we compare banks from countries that have the same legal origins, whether we control for the responsibility of bank supervision being delegated to other bodies rather than the Central Bank.

Keywords

Inflation targeting, financial crisis, financial stability, bank’s risk.

URL

http://www.bcb.gov.br/pec/wps/ingl/wps347.pdf



Record ID

517     [ Page 18 of 68, No. 2 ]

Date

2014-06

Author

Tamim Bayoumi

Affiliation

Strategy, Policy, and Review Department, IMF

Title

After the Fall: Lessons for Policy Cooperation from the Global Crisis

Summary /
Abstract

A crisis is a terrible thing to waste, and nowhere is this truer than in the arena of international economic policy cooperation. With the world facing the largest and most synchronized plunge in output of the postwar era, policy makers banded together to find solutions. This paper looks at the lessons from what did—and did not—occur in the area of policy cooperation since the crisis. Outcomes seem to be weaker over time in areas such as macroeconomic policies, where institutional procedures were less well defined and there were disagreements over spillovers. By contrast, cooperation seems to have been most effective where there was a consensus that such policies could avoid the risk of highly detrimental outcomes and institutional arrangements were more concrete. Principle amongst these was trade, but bank capital buffers, IMF resources, and derivatives exchanges also fall into this category. Lessons for those interested in promoting cooperation seems to be: it may be more fruitful to: focus on the potential for major costs from a lack of cooperation, rather than the minor gains from fuller coordination; strive for more consensus estimated spillovers; convince policy-makers costs of loss of cooperation are large; and focus on building better and more enduring institutional arrangements.

Keywords

Policy cooperation, institutuinal coarregements; policy spillovers

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp1497.pdf



Record ID

516     [ Page 18 of 68, No. 3 ]

Date

2014-05

Author

Curdia, Vasco; Ferrero, Andrea; Ng, Ging Cee; and Tambalotti, Andrea

Affiliation

Federal Reserve Bank of San Francisco, University of Oxford, University of Chicago and Federal Reserve Bank of New York

Title

Has U.S. monetary policy tracked the efficient interest rate?

Summary /
Abstract

Interest rate decisions by central banks are universally discussed in terms of Taylor rules, which describe policy rates as responding to inflation and some measure of the output gap. We show that an alternative specification of the monetary policy reaction function, in which the interest rate tracks the evolution of a Wicksellian efficient rate of return as the primary indicator of real activity, fits the U.S. data better than otherwise identical Taylor rules. This surprising result holds for a wide variety of specifications of the other ingredients of the policy rule and of approaches to the measurement of the output gap. Moreover, it is robust across two different models of private agents’ behavior.

Keywords

U.S. monetary policy; Interest rate rules; DSGE models; Bayesian model comparison

URL

http://www.frbsf.org/economic-research/files/wp2014-12.pdf



Record ID

515     [ Page 18 of 68, No. 4 ]

Date

2014-05

Author

Thierry Tressel and Thierry Verdier

Affiliation

European Department, IMF

Title

Optimal Prudential Regulation of Banks and the Political Economy of Supervision

Summary /
Abstract

We consider a moral hazard economy in banks and production to study how incentives for risk taking are affected by the quality of supervision. We show that low interest rates may generate excessive risk taking. Because of a pecuniary externality, the market equilibrium may not be optimal and there is a need for prudential regulation. We show that the optimal capital ratio depends on the macro-financial cycle, and that, in presence of production externalities, it should be complemented by a constraint on asset allocation. We show that the political process tends to exacerbate excessive risk taking and credit cycles.

Keywords

Banking Regulation, Regulatory Forbearance, Political Economy

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp1490.pdf



Record ID

514     [ Page 18 of 68, No. 5 ]

Date

2014-05

Author

Ales Bulir, Jaromír Hurník, and Katerina Smidkova

Affiliation

Institute for Capacity Development, IMF

Title

Inflation Reports and Models: How Well Do Central Banks Really Write?

Summary /
Abstract

We offer a novel methodology for assessing the quality of inflation reports. In contrast to the existing literature, which mostly evaluates the formal quality of these reports, we evaluate their economic content by comparing inflation factors reported by the central banks with ex-post model-identified factors. Regarding the former, we use verbal analysis and coding of inflation reports to describe inflation factors communicated by central banks in real time. Regarding the latter, we use reduced-form, new Keynesian models and revised data to approximate the true inflation factors. Positive correlations indicate that the reported inflation factors were similar to the true, model-identified ones and hence mark high-quality inflation reports. Although central bank reports on average identify inflation factors correctly, the degree of forward-looking reporting varies across factors, time, and countries.

Keywords

Inflation targeting, Kalman filter, monetary policy communication

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp1491.pdf



Record ID

513     [ Page 18 of 68, No. 6 ]

Date

2014-05

Author

Jean-Louis Combes, Xavier Debrun, Alexandru Minea, and Rene Tapsoba

Affiliation

African and Fiscal Affairs Departments, IMF

Title

Inflation Targeting and Fiscal Rules: Do Interactions and Sequencing Matter?

Summary /
Abstract

The paper examines the joint impact of inflation targeting (IT) and fiscal rules (FR) on fiscal behavior and inflation in a broad panel of advanced and developing economies over the period 1990-2009. The main contribution of the paper is to show that, as suggested by the theoretical literature, interactions between FR and IT matter a great deal for policy outcomes. Specifically, the combination of FR and IT appears to deliver more disciplined macroeconomic policies than each of these institutions in isolation. In addition, the sequencing of the monetary and fiscal reforms plays a role: adopting FR before IT delivers stronger results than the reverse sequence.

Keywords

Inflation targeting, fiscal rules, institutional reform sequencing

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp1489.pdf



Record ID

512     [ Page 18 of 68, No. 7 ]

Date

2013-12

Author

Sir Christopher Pissarides

Affiliation

Co-recipient of the 2010 Nobel Memorial Prize in Economic Sciences, is the Regius Professor of Economics at LSE, European Studies Professor at the University of Cyprus and Chairman of the Council of National Economy of the Republic of Cyprus. Between 1999 and 2007, he was director of CEP’s macroeconomics research programme; and he is now Chairman of the new Centre for Macroeconomics at LSE.

Title

Tough choices for a troubled euro

Summary /
Abstract

Nobel laureate Christopher Pissarides was once a passionate believer in the benefits of European monetary union. He now thinks that either the euro should be dismantled or the direction of economic policy dramatically reversed so as to promote growth and jobs and avoid creating a lost generation of educated young people.

Keywords

Euro, monetary union, inflation, growth, unemployment

URL

http://cep.lse.ac.uk/pubs/download/cp409.pdf



Record ID

511     [ Page 18 of 68, No. 8 ]

Date

2014-05

Author

Benjamin M. Friedman

Affiliation

William Joseph Maier Professor of Political Economy, Harvard University

Title

Has the Financial Crisis Permanently Changed the Practice of Monetary Policy? Has It Changed the Theory of Monetary Policy?

Summary /
Abstract

I argue in this paper that one of the two forms of hitherto unconventional monetary policy that many central banks have implemented in response to the 2007 financial crisis – large-scale asset purchases, or to put the matter more generically, use of the central bank’s balance sheet as a distinct tool of monetary policy – is likely to become part of the standard toolkit of monetary policymaking in normal times as well. As intended, these purchases have lowered long-term interest rates relative to short-term rates, and lowered interest rates on more-risky compared to less-risky obligations. Moreover, their introduction fills a conceptual vacuum that has long stood at the heart of monetary policy analysis and implementation. By contrast, forward guidance on the future trajectory of monetary policy has been less successful. Public statements by central banks about their actions and intentions will no doubt continue, but transparency for the sake of transparency is not the same as the deliberate attempt to shape market expectations for purposes of achieving specific monetary policy objectives. Finally, there is a conceptual component to all this as well. In contrast to the last century or more of monetary theory, which has focused on central banks’ liabilities, the basis for the effectiveness of central bank asset purchases turns on the role of the asset side of the central bank’s balance sheet. The implications for monetary theory are profound.

Keywords

Financial Crisis, Monetary Policy, Monetary Theory

URL

http://www.nber.org/papers/w20128.pdf



Record ID

510     [ Page 18 of 68, No. 9 ]

Date

2014-05

Author

Neslihan Kaya

Affiliation

Central Bank of the Republic of Turkey

Title

A Comparison of Optimal Policy Rules for Pre and Post Inflation Targeting Eras : Empirical Evidence from Bank of Canada

Summary /
Abstract

In this paper, we derive policy rules of Bank of Canada for different preferences over the goal variables in their loss functions. The optimal rules are derived for the pre and post inflation-targeting eras. According to the results, the monetary policy rule of the Bank of Canada for the pre inflation-targeting era is best described with a loss function that attaches equal weight to inflation, interest rate smoothing incentive and the output gap in the loss function. In the post-inflation targeting era the optimal interest rate attaches the highest weight to inflation rate in the loss function; followed by the interest rate smoothing incentive and then the output gap. The inclusion of the exchange rate as another goal variable in the loss function does not significantly alter the results in approximating the actual policy rate of Bank of Canada. Next, simulations of demand (positive) and supply (negative) shocks are carried out for the post-IT period for two cases where the monetary policy rule is mimicked by (i) an ad-hoc Taylor rule and (ii) the derived optimal rule. The results indicate that the ad-hoc Taylor rule brings down inflation rates more quickly compared to the derived optimal rule, but only at the cost of higher contraction in output and more volatile interest rates.

Keywords

Inflation targeting, optimal monetary policy rule, linear-quadratic regulator problem

URL

http://www.tcmb.gov.tr/research/discus/2014/WP1413.php



Record ID

509     [ Page 18 of 68, No. 10 ]

Date

2014-03

Author

Alexander J. Gill

Affiliation

Duke University

Title

Ben Bernanke: Theory and Practice

Summary /
Abstract

Ben Bernanke researched monetary policy for over 25 years prior to becoming a policymaker, and his two-term career as Chairman of the Federal Reserve featured a severe recession coupled with a financial crisis, a chief subject of Bernanke's research. His reaction to economic events is noteworthy in its originality and breadth, but its intellectual underpinnings are, with a few exceptions discussed in the paper, not without written precedent. This paper will summarize and connect Bernanke's research and policymaking and show that the two are closely aligned.

Keywords

Economic thought, history of economic thought, central banking, Fed, Bernanke

URL

http://hope.econ.duke.edu/sites/default/files/Ben_Bernanke_Theory_and_Practice%20WP.pdf



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