Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

306     [ Page 38 of 68, No. 1 ]

Date

2013-03

Author

Michael J. Lamla and Jan-Egbert Sturm

Affiliation

KOF Swiss Economic Institute, ETH Zurich, Switzerland

Title

Interest Rate Expectations in the Media and Central Bank Communication

Summary /
Abstract

While there is ample evidence how central bank communication and interest rate decisions are perceived by financial markets, insights regarding the response of the public is lacking. Media is known to be an important transmitter of news to the public. Based on articles in the Financial Times Europe, we test how expectations on the future course of monetary policy presented in the media are affected by central bank communication and interest rate decisions.

Keywords

European Central Bank, monetary policy announcements, central bank communication, media expectations

URL

http://d.repec.org/n?u=RePEc:kof:wpskof:13-334&r=mon



Record ID

305     [ Page 38 of 68, No. 2 ]

Date

2013-02

Author

Wolfgang J. Luhan and Johann Scharler

Affiliation

Ruhr-Universität Bochum and University of Innsbruck

Title

Monetary Policy, Inflation Illusion and the Taylor Principle – An Experimental Study

Summary /
Abstract

We develop a simple experimental setting to evaluate the role of the Taylor principle, which holds that the nominal interest rate has to respond more than one-for-one to fluctuations in the inflation rate. In our setting, the average inflation rate fluctuates around the inflation target if the computerized central bank obeys the Taylor principle. If the Taylor principle is violated, then the average inflation rate persistently deviates from the target. We find that these deviations from the target are less pronounced, if inflation rates cannot be as readily observed as nominal interest rates. This result is consistent with the interpretation that subjects underestimate the influence of inflation on the real return to savings if the inflation rate is only observed ex post.

Keywords

Taylor principle, interest rate rule, inflation illusion, laboratory experiment

URL

http://repec.rwi-essen.de/files/REP_13_402.pdf



Record ID

304     [ Page 38 of 68, No. 3 ]

Date

2013-03

Author

Phan, Tuan

Affiliation

Australian National University

Title

Should central banks publish interest rate forecasts? - a survey

Summary /
Abstract

As a particular form of transparency, some central banks publish their interest rate forecasts while many others refuse to do that. Whether the publication is good or bad for economic performance and social welfare is now a hotly debated subject. This paper provides a review of the literature in both theoretical and empirical aspects. We also establish a criteria table which could be used as a preliminary guideline for central banks in answering the question whether they should reveal the forecasts, and how to publish the policy rate inclinations. The suggested conclusion is that interest rate projections should be considered as one of the last items that central banks should reveal and they should be very careful in publishing their policy rate forecasts.

Keywords

Central bank transparency, interest rate forecasts

URL

http://mpra.ub.uni-muenchen.de/44676/1/MPRA_paper_44676.pdf



Record ID

303     [ Page 38 of 68, No. 4 ]

Date

2013-02

Author

Ambrogio Cesa-Bianchi and Alessandro Rebucci

Affiliation

Inter-American Development Bank

Title

Does Easing Monetary Policy Increase Financial Instability?

Summary /
Abstract

This paper develops a model featuring both a macroeconomic and a financial stability objective that speaks to the interaction between monetary and macroprudential policies. First, we find that interest rate rigidities in a monopolistic banking system have an asymmetric impact on financial stability: they lead to greater financial instability in response to contractionary shocks, while they act as an automatic financial stabilizer in response to expansionary shocks. Second, we find that when the policy interest rate is the only instrument, a monetary authority subject to the same constraints as private agents cannot always achieve a (constrained) efficient allocation and faces a trade-off between macroeconomic and financial stability in response to contractionary shocks. This has important implications for the role played by U. S. monetary policy in the run-up to the global financial crisis: the model suggests that the weak link in the U. S. policy framework was not the monetary policy stance after 2002, but rather the absence of an effective second policy pillar aimed at preserving financial stability.

Keywords

Monetary policy, macroprudential policies, financial crises, real rigidities, credit friction

URL

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=37462291

Remarks

This paper's conclusion that "... the weak link in the U. S. policy framework was not the monetary policy stance after 2002, but rather the absence of an effective second policy pillar aimed at preserving financial stability" is similar to the conclusion of my paper "Should Policymakers Respond Directly to Financial Stability in Their Interest Rule?" in http://www.seacen.org/file/file/2nd_seacen_cemla/2nd_SC_danvillanueva.pdf



Record ID

302     [ Page 38 of 68, No. 5 ]

Date

2013-02

Author

Michael Bleaney and Sharmila Devadas

Affiliation

School of Economics, University of Nottingham, and Bank Negara Malaysia

Title

Foreign Exchange Inflows in Emerging Markets: How Much Are They Sterilised?

Summary /
Abstract

As some emerging market economies have amassed large quantities of foreign exchange reserves, concern has arisen over the sterilisation of the domestic money stock from these flows. Existing studies focus mostly on narrow (reserve) money, and estimate a high degree of sterilisation. Empirical work on the long-run relationship between money and prices emphasises broad money, yet the long-run effect of foreign exchange inflows on broad money has been almost entirely ignored. Using a sample of quarterly data from 28 countries over the period 1990-2010, it is shown that broad money is sterilised to a significantly smaller degree than reserve money. This pattern is not confined to any particular group of countries and is unrelated to the nature of the flows (e.g. current account versus capital account surpluses). Sterilisation rates have increased in Asia during the recent period of persistent accumulation of foreign exchange reserves.

Keywords

Foreign exchange intervention, money, sterilisation, emerging markets

URL

http://www.nottingham.ac.uk/economics/documents/discussion-papers/13-01.pdf



Record ID

301     [ Page 38 of 68, No. 6 ]

Date

2013-01

Author

Mehrotra, Aaron

Affiliation

Bank of Finland

Title

On the use of sterilisation bonds in emerging Asia

Summary /
Abstract

We document recent developments in the use of sterilisation bonds by six central banks in emerging Asia, and discuss the implications for monetary policy and the financial sector. An important development in the sterilisation of foreign exchange interventions in past years has been the frequent use of central banks’ own paper. There has been an attempt to lengthen the maturity structure of sterilisation bills, and maturities have risen, especially in 2010–11. The choice of sterilisation instrument is likely to depend partly on their relative costs. In particular, as the yield on central bank securities has fallen relative to the rate of remuneration of required reserves, some central banks in Asia have increasingly used central bank securities for sterilisation.

Keywords

Sterilisation bonds, central bank bonds and bills, foreign exchange reserves, Emerging Asia

URL

http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/2013/dp0113.pdf



Record ID

300     [ Page 38 of 68, No. 7 ]

Date

2013-02

Author

Paul Hubert

Affiliation

Ofce sciences-po, France

Title

The influence and policy signaling role of FOMC forecasts

Summary /
Abstract

Policymakers at the Federal Open Market Committee (FOMC) publish forecasts since 1979. We examine the effects of publishing FOMC inflation forecasts in two steps using a structural VAR model. We assess whether they influence private inflation expectations and the underlying mechanism at work: do they convey policy signals for forward guidance or help interpreting current policy decisions? We provide original evidence that FOMC inflation forecasts are able to influence private ones. We also find that FOMC forecasts give information about future Fed rate movements and affect private expectations in a different way than Fed rate shocks. This body of evidence supports the use of central bank forecasts to affect inflation expectations especially while conventional policy instruments are at the zero lower bound.

Keywords

Monetary policy, Forecasts, FOMC, influence, Policy signals, structural Var

URL

http://www.ofce.sciences-po.fr/pdf/dtravail/WP2013-03.pdf



Record ID

299     [ Page 38 of 68, No. 8 ]

Date

2013-01

Author

Nidhaleddine Ben Cheikh

Affiliation

University of Rennes 1 - CREM UMR CNRS 6211, France

Title

Nonlinear Mechanism of the Exchange Rate Pass-Through: Does Business Cycle Matter?

Summary /
Abstract

This paper examines the presence of nonlinear mechanism in the exchange rate pass-through (ERPT) to CPI inflation for 12 euro area (EA) countries. Using logistic smooth transition models, we explore the existence of nonlinearity with respect to economic activity along the business cycle. Our results provide a strong evidence of nonlinearity in 6 out of 12 EA countries with significant differences in the degree of ERPT between the periods of expansion and recession. However, we find no clear direction in this regime-dependence of pass-through to business cycle. In some countries, ERPT is higher during expansions than in recessions; however, in other countries, this result is reversed. These cross-country differences in the nonlinear mechanism of pass-through would have important implications for the design of monetary policy and the control of inflation in the EA context.

Keywords

Exchange Rate Pass-Through, Inflation, Smooth Transition Regression

URL

http://crem.univ-rennes1.fr/wp/2013/201306.pdf



Record ID

298     [ Page 38 of 68, No. 9 ]

Date

2012-02

Author

Hyeong Ho Moon, Tae-Hwan Kim, and Seongho Nah

Affiliation

Department of Economics, University of California at San Diego, USA, School of Economics, Yonsei University, South Korea, and Bank of Korea, South Korea

Title

On measuring the nonlinear effect of interest rates on inflation and output

Summary /
Abstract

While economists are interested in the reaction of the interest rate to changes in the inflation rate, central bankers are usually more interested in the reverse causal relationship, i.e., the response of inflation (and output) to a change in the official interest rate as administrated by the central bank. Whether the reverse causal relationship is linear or nonlinear is an empirical issue. We investigated the reverse causal relationship by employing the LSTVAR model proposed by Weise (1999). We found strong evidence in favor of nonlinearity. As a consequence of the nonlinearity, we discovered various types of asymmetric effects of the interest rate on inflation and output. An asymmetric effect of monetary shocks of different sizes was uncovered, which implies that when the unexpected change in the official rate is doubled (i.e. from 0.25% to 0.5%), its effect on inflation and output is likely to be more than doubled. However, this finding is upheld only when the economy is in recession. The opposite result, in which the effect is smaller, is supported when the economy is expanding. Regarding the other asymmetric effect of monetary shocks with different signs, we found that central banks can expect that increasing the official rate by some certain amount (e.g. 0.25%) is likely to have much larger effect on inflation and output than decreasing the rate by the same amount (e.g. -0.25%) regardless of the state of the economy.

Keywords

Nonlinear VAR, impulse response function, asymmetric monetary effect

URL

ftp://repec.yonsei.ac.kr/repec/yon/wpaper/2013rwp-53.pdf



Record ID

297     [ Page 38 of 68, No. 10 ]

Date

2013-01

Author

Beechey, Meredith and Österholm, Pär

Affiliation

Sveriges Riksbank and National Institute of Economic Research

Title

Central Bank Forecasts of Policy Interest Rates: An Evaluation of the First Years

Summary /
Abstract

In recent years the central banks of Norway and Sweden have published their endogenous policy interest-rate forecasts. In this paper, we evaluate those forecasts alongside policy-rate expectations inferred from market pricing. We find that for both economies there are only small differences in relative forecasting precision between the central bank and market-implied measures. However, both types of forecast fail tests for unbiasedness and efficiency at longer horizons.

Keywords

Monetary policy; Market expectations; Norges Bank; Sveriges Riksbank

URL

http://www.konj.se/download/18.11e05f6313b817f634fdb1/WP128.pdf



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