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Record ID
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427
[ Page 26 of 68, No. 1 ]
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Date
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2013-10 |
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Author
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Emmanuel Carré, Jézabel Couppey-Soubeyran, Dominique Plihon, and Marc Pourroy
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Affiliation
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CEPN - Centre d'Economie de l'Université Paris Nord, CES - Centre d'économie de la Sorbonne, CEPN, and CES |
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Title
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Central Banking after the Crisis: Brave New World or Back to the Future? Replies to a questionnaire sent to central bankers and economists |
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Summary /
Abstract
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This paper provides a snapshot of the current state of central banking doctrine in the aftermath of the crisis, using data from a questionnaire produced in 2011 and sent to central bankers (from 13 countries plus the euro zone) and economists (31) for a report by the French Council of Economic Analysis to the Prime Minister. The results of our analysis of the replies to the questionnaire are twofold. First, we show that the financial crisis has led to some amendments of pre-crisis central banking. We highlight that respondents to the questionnaire agree on the general principle of a 'broader' view of central banking extended to financial stability. Nevertheless, central bankers and economists diverge or give inconsistent answers about the details of implementation of this 'broader' view. Therefore, the devil is once again in the details. We point out that because of central bankers' conservatism, a return to the status quo cannot be excluded. |
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Keywords
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Central banking; macroprudential policy; financial stability |
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URL
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http://halshs.archives-ouvertes.fr/docs/00/88/13/44/PDF/13073.pdf
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Record ID
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425
[ Page 26 of 68, No. 3 ]
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Date
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2013-03 |
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Author
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Eric S. Rosengren
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Affiliation
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President and Chief Executive Officer, Federal Reserve Bank of Boston |
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Title
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Monetary policy and financial stability |
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Summary /
Abstract
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Remarks by Eric S. Rosengren, President and Chief Executive Officer, Federal Reserve Bank of Boston, to the Business and Industry Association of New Hampshire and the New Hampshire Bankers Association, Saint Anselm College, Manchester, New Hampshire, March 27, 2013. |
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Keywords
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Monetary policy, financial stability |
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URL
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http://www.bostonfed.org/news/speeches/rosengren/2013/032713/032713text.pdf
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Record ID
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424
[ Page 26 of 68, No. 4 ]
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Date
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2013-09 |
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Author
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Pierre-Richard Agénor and Luiz A. Pereira da Silva
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Affiliation
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Banco Central do Brasil |
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Title
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Inflation Targeting and Financial Stability: A Perspective from the Developing World |
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Summary /
Abstract
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This paper discusses recent experiences with inflation targeting (IT), the challenges that it faces since the global financial crisis, and ways to address them. The discussion is conducted from the perspective of upper middle-income countries (MICs). As background for the analysis, the second part provides a review of financial systems in MICs (with a focus on the role of bank credit), the extent to which exposure to capital flows affect economic stability in these countries, and the link between excessive credit growth and financial crises. The third and fourth parts review the main features and evidence on the performance of IT regimes in MICs. The fifth part discusses a number of challenges that IT faces, including fiscal dominance, fear of floating, imperfect credibility, and with respect to an explicit financial stability objective assigned to monetary policy. The issue of complementarity between macroprudential regulation and monetary policy, in the context of an “integrated” IT (or IIT) regime, is taken up next. The nature of monetary policy rules in an IIT regime, and their practical implementation, is also discussed. Our analysis suggests that there are robust arguments to support the view that in an IIT regime monetary policy should react in a state contingent fashion to a credit gap measure – and possibly to the real exchange rate – to address the time-series dimension of systemic risk. However, monetary policy and macroprudential policy are largely complementary instruments. They must be calibrated jointly, in the context of macroeconomic models that account for the type of credit market imperfections observed in MICs and for the fact that macroprudential regimes may affect in substantial ways the monetary transmission mechanism. |
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Keywords
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Inflation targeting; Monetary policy; International finance; Developing countries |
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URL
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http://www.bcb.gov.br/pec/wps/ingl/wps324.pdf
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Record ID
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423
[ Page 26 of 68, No. 5 ]
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Date
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2013-09 |
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Author
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Greene, William H.; Gillman, Max; Harris, Mark; and Spencer, Christopher
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Affiliation
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New York University, University of Missouri, Curtin University, and Loughborough University |
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Title
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The Tempered Ordered Probit (TOP) Model with an Application to Monetary Policy |
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Summary /
Abstract
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We propose a Tempered Ordered Probit (TOP) model. Our contribution lies not only in explicitly accounting for an excessive number of observations in a given choice category - as is the case in the standard literature on inflated models; rather, we introduce a new econometric model which nests the recently developed Middle Inflated Ordered Probit (MIOP) models of Bagozzi and Mukherjee (2012) and Brooks, Harris, and Spencer (2012) as a special case, and further, can be used as a specification test of the MIOP, where the implicit test is described as being one of symmetry versus asymmetry. In our application, which exploits a panel data-set containing the votes of Bank of England Monetary Policy Committee (MPC) members, we show that the TOP model affords the econometrician considerable flexibility with respect to modeling the impact of different forms of uncertainty on interest rate decisions. Our findings, we argue, reveal MPC members. asymmetric attitudes towards uncertainty and the changeability of interest rates. |
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Keywords
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Monetary policy committee, voting, discrete data, uncertainty, tempered equations |
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URL
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http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/25891/1/wp2013-4.pdf
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Record ID
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422
[ Page 26 of 68, No. 6 ]
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Date
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2013-11 |
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Author
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Dave Reifschneider, William Wascher and David Wilcox
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Affiliation
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Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board |
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Title
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Aggregate supply in the United States: recent developments and implications for the conduct of monetary policy |
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Summary /
Abstract
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The recent financial crisis and ensuing recession appear to have put the productive capacity of the economy on a lower and shallower trajectory than the one that seemed to be in place prior to 2007. Using a version of an unobserved components model introduced by Fleischman and Roberts (2011), we estimate that potential GDP is currently about 7 percent below the trajectory it appeared to be on prior to 2007. We also examine the recent performance of the labor market. While the available indicators are still inconclusive, some indicators suggest that hysteresis should be a more present concern now than it has been during previous periods of economic recovery in the United States. We go on to argue that a significant portion of the recent damage to the supply side of the economy plausibly was endogenous to the weakness in aggregate demand—contrary to the conventional view that policymakers must simply accommodate themselves to aggregate supply conditions. Endogeneity of supply with respect to demand provides a strong motivation for a vigorous policy response to a weakening in aggregate demand, and we present optimal-control simulations showing how monetary policy might respond to such endogeneity in the absence of other considerations. We then discuss how other considerations--such as increased risks of financial instability or inflation instability--could cause policymakers to exercise restraint in their response to cyclical weakness. |
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Keywords
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Aggregate supply, monetary policy |
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URL
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http://www.federalreserve.gov/pubs/feds/2013/201377/201377pap.pdf
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Record ID
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421
[ Page 26 of 68, No. 7 ]
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Date
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2013-11 |
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Author
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William B. English, J. David López-Salido and Robert J. Tetlow
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Affiliation
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Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board |
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Title
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The Federal Reserve's framework for monetary policy - recent changes and new questions |
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Summary /
Abstract
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In recent years, the Federal Reserve has made substantial changes to its framework for monetary policymaking by providing greater clarity regarding its objectives, its intentions regarding the use of monetary policy--including nontraditional policy tools such as forward guidance and asset purchases--in the pursuit of those objectives, and its broader policy strategy. These changes reflected both a response to changes in economists' understanding of the most effective way to implement monetary policy and a response to specific challenges posed by the financial crisis and its aftermath, particularly the effective lower bound on nominal interest rates. We trace the recent evolution of the Federal Reserve's framework, and use a small-scale macro model and a simple static model to help illuminate the approaches taken with nontraditional monetary policy tools. A number of foreign central banks have made similar innovations in response to similar developments. On balance, the Federal Reserve has moved closer to "flexible inflation targeting," but the Federal Reserve's approach includes a balanced focus on two objectives and the use of a flexible horizon over which policy aims to foster those objectives. Going forward, further changes in central banks' frameworks may be needed to address issues raised by the financial crisis. For example, some have suggested that the sustained period at the effective lower bound points to the need for central banks to establish a different policy objective, such as a higher inflation target or a nominal income target. We use our small-scale model of the U.S. economy to examine the potential benefits and costs of such changes. We also discuss the broad issue of how central banks should integrate financial stability policy and monetary policy. |
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Keywords
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Forward guidance, asset purchase. flexible inflation targeting |
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URL
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http://www.federalreserve.gov/pubs/feds/2013/201376/201376pap.pdf
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Record ID
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420
[ Page 26 of 68, No. 8 ]
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Date
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2013-11 |
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Author
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Dennis P. J. Botman, Irineu E. Carvalho Filho, and Raphael W. Lam
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Affiliation
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Asia and Pacific Department, IMF |
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Title
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The Curious Case of the Yen as a Safe Haven Currency: A Forensic Analysis |
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Summary /
Abstract
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During risk-off episodes, the yen is a safe haven currency and on average appreciates against the U.S. dollar. We investigate the proximate causes of yen risk-off appreciations. We find that neither capital inflows nor expectations of the future monetary policy stance can explain the yen’s safe haven behavior. In contrast, we find evidence that changes in market participants’ risk perceptions trigger derivatives trading, which in turn lead to changes in the spot exchange rate without capital flows. Specifically, we find that risk-off episodes coincide with forward hedging and reduced net short positions or a buildup of net long positions in yen. These empirical findings suggest that offshore and complex financial transactions should be part of spillover analyses and that the effectiveness of capital flow management measures or monetary policy coordination to address excessive exchange rate volatility might be limited in certain cases. |
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Keywords
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Safe Haven, Yen Volatility, Capital Flows, Derivatives |
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URL
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http://www.imf.org/external/pubs/ft/wp/2013/wp13228.pdf
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Record ID
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419
[ Page 26 of 68, No. 9 ]
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Date
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2013-10 |
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Author
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Dominic Quint and Pau Rabanal
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Affiliation
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Institute for Capacity Development, IMF |
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Title
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Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area |
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Summary /
Abstract
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In this paper, we study the optimal mix of monetary and macroprudential policies in an estimated two-country model of the euro area. The model includes real, nominal and financial frictions, and hence both monetary and macroprudential policy can play a role. We find that the introduction of a macroprudential rule would help in reducing macroeconomic volatility, improve welfare, and partially substitute for the lack of national monetary policies. Macroprudential policy would always increase the welfare of savers, but their effects on borrowers depend on the shock that hits the economy. In particular, macroprudential policy may entail welfare costs for borrowers under technology shocks, by increasing the countercyclical behavior of lending spreads. |
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Keywords
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Monetary Policy, EMU, Basel III, Financial Frictions. |
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URL
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http://www.imf.org/external/pubs/ft/wp/2013/wp13209.pdf
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Record ID
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418
[ Page 26 of 68, No. 10 ]
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Date
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2013-10 |
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Author
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Daniela Prates and Barbara Fritz
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Affiliation
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Instituto de Economia, Universidade de Campinas, Brasil and Institute for Latin American Studies, FreieUniversität Berlin, Germany |
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Title
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Beyond capital controls: the regulation of foreign currency derivatives markets in South Korea and Brazil after the global financial crisis |
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Summary /
Abstract
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Besides the management of capital flows, some emerging economies have been facing policy dilemmas related to foreign (nonresident) and domestic (residents) operations of Foreign Currency (FX) derivatives in the post-global crisis setting. In a context of abundant liquidity and historical low interest rates in the advanced economies, searching for yield foreign investors as well as domestic agents generally obtain huge profits, through these markets, from the interest rate differentials between advanced and emerging economies. Yet, the regulation of FX derivatives in the emerging economies has not received due attention both in the academic literature and in the international financial institutions, even though these could be crucial for the emerging economies with high degree of financial openness and liquid as well as deep FX derivatives markets, such as Brazil and South Korea. The paper aims at analyzing the Brazilian and Korean approach for FX derivatives regulation after the global financial crisis. Therefore, it seeks to contribute to the debate on financial regulation brought about by the global crisis. The two cases show the relevance of the institutional features of FX derivatives market for the drawing of the financial regulatory toolkit. In the case of Brazil we found that a third type of financial regulation, which we have labeled as FX derivative regulation, was needed to curb the currency appreciation trend, along with capital controls and traditional prudential financial regulations. |
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Keywords
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Foreign Currency derivatives regulation, capital flows, capital controls, prudential regulation |
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URL
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http://finance-and-trade.htw-berlin.de/fileadmin/working_paper_series/wp_07_2013_Prates_Fritz_Beyond_Capital_Controls.pdf
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