Record ID
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307
[ Page 38 of 68, No. 1 ]
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Date
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2013-03 |
Author
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Shekhar Aiyar, Romain Duval, Damien Puy, Yiqun Wu, and Longmei Zhang
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Affiliation
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Asia and Pacific Department, IMF |
Title
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Growth Slowdowns and the Middle-Income Trap |
Summary / Abstract
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The “middle-income trap” is the phenomenon of hitherto rapidly growing economies stagnating at middle-income levels and failing to graduate into the ranks of high-income countries. In this study we examine the middle-income trap as a special case of growth slowdowns, which are identified as large sudden and sustained deviations from the growth path predicted by a basic conditional convergence framework. We then examine their determinants by means of probit regressions, looking into the role of institutions, demography, infrastructure, the macroeconomic environment, output structure and trade structure. Two variants of Bayesian Model Averaging are used as robustness checks. The results—including some that indeed speak to the special status of middle-income countries—are then used to derive policy implications, with a particular focus on Asian economies. |
Keywords
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Growth, slowdown, middle income trap, Bayesian Model Averaging |
URL
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http://www.imf.org/external/pubs/ft/wp/2013/wp1371.pdf
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Remarks
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The Philippines is included in this study. The authors, all from the Asia and Pacific Department of the IMF, examine the role of institutions, demography, infrastructure, the macroeconomic environment, output structure and trade structure in the potential risk of growth slowdown. They conclude that "taken at face value, the empirical results imply that, compared with other Asian economies, Malaysia, the Philippines and China would face a larger risk of growth slowdown stemming from institutions." The authors measure "institutions" from indices on (1) government size, (2) rule of law, (3) freedom to trade internationally, (4) regulation, and (5) financial openness. |
Record ID
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306
[ Page 38 of 68, No. 2 ]
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Date
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2013-03 |
Author
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Michael J. Lamla and Jan-Egbert Sturm
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Affiliation
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KOF Swiss Economic Institute, ETH Zurich, Switzerland |
Title
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Interest Rate Expectations in the Media and Central Bank Communication |
Summary / Abstract
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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
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European Central Bank, monetary policy announcements, central bank communication, media expectations |
URL
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http://d.repec.org/n?u=RePEc:kof:wpskof:13-334&r=mon
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Record ID
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305
[ Page 38 of 68, No. 3 ]
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Date
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2013-02 |
Author
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Wolfgang J. Luhan and Johann Scharler
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Affiliation
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Ruhr-Universität Bochum and University of Innsbruck |
Title
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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
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Taylor principle, interest rate rule, inflation illusion, laboratory experiment |
URL
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http://repec.rwi-essen.de/files/REP_13_402.pdf
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Record ID
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304
[ Page 38 of 68, No. 4 ]
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Date
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2013-03 |
Author
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Phan, Tuan
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Affiliation
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Australian National University |
Title
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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
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Central bank transparency, interest rate forecasts |
URL
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http://mpra.ub.uni-muenchen.de/44676/1/MPRA_paper_44676.pdf
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Record ID
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303
[ Page 38 of 68, No. 5 ]
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Date
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2013-02 |
Author
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Ambrogio Cesa-Bianchi and Alessandro Rebucci
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Affiliation
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Inter-American Development Bank |
Title
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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
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Monetary policy, macroprudential policies, financial crises, real rigidities, credit friction |
URL
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http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=37462291
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Remarks
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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
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302
[ Page 38 of 68, No. 6 ]
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Date
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2013-02 |
Author
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Michael Bleaney and Sharmila Devadas
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Affiliation
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School of Economics, University of Nottingham, and Bank Negara Malaysia |
Title
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Foreign Exchange Inflows in Emerging Markets: How Much Are They Sterilised? |
Summary / Abstract
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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
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Foreign exchange intervention, money, sterilisation, emerging markets |
URL
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http://www.nottingham.ac.uk/economics/documents/discussion-papers/13-01.pdf
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Record ID
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301
[ Page 38 of 68, No. 7 ]
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Date
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2013-01 |
Author
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Mehrotra, Aaron
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Affiliation
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Bank of Finland |
Title
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On the use of sterilisation bonds in emerging Asia |
Summary / Abstract
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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
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Sterilisation bonds, central bank bonds and bills, foreign exchange reserves, Emerging Asia |
URL
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http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/2013/dp0113.pdf
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Record ID
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300
[ Page 38 of 68, No. 8 ]
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Date
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2013-02 |
Author
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Paul Hubert
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Affiliation
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Ofce sciences-po, France |
Title
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The influence and policy signaling role of FOMC forecasts |
Summary / Abstract
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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
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Monetary policy, Forecasts, FOMC, influence, Policy signals, structural Var |
URL
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http://www.ofce.sciences-po.fr/pdf/dtravail/WP2013-03.pdf
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Record ID
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299
[ Page 38 of 68, No. 9 ]
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Date
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2013-01 |
Author
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Nidhaleddine Ben Cheikh
|
Affiliation
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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
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Exchange Rate Pass-Through, Inflation, Smooth Transition Regression |
URL
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http://crem.univ-rennes1.fr/wp/2013/201306.pdf
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Record ID
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298
[ Page 38 of 68, No. 10 ]
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Date
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2012-02 |
Author
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Hyeong Ho Moon, Tae-Hwan Kim, and Seongho Nah
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Affiliation
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Department of Economics, University of California at San Diego, USA, School of Economics, Yonsei University, South Korea, and Bank of Korea, South Korea |
Title
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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
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Nonlinear VAR, impulse response function, asymmetric monetary effect |
URL
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ftp://repec.yonsei.ac.kr/repec/yon/wpaper/2013rwp-53.pdf
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