Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

146     [ Page 54 of 68, No. 1 ]

Date

2011-04

Author

Otmar Issing

Affiliation

President, Center for Financial Studies and Chairman of the Advisory Board of the House of Finance, Goethe University Frankfurt.

Title

Lessons for Monetary Policy: What Should the Consensus Be?

Summary /
Abstract

This paper outlines important lessons for monetary policy. In particular, the role of inflation targeting, which was much acclaimed prior to the financial crisis and since then has not lost much of its endorsement, is critically reviewed. Ignoring the relation between monetary policy and asset prices, as is the case in this monetary policy approach, can lead to financial instability. In contrast, giving, inter alia, monetary factors a role in central banks’ policy decisions, as is done in the ECB’s encompassing approach, helps prevent these potentially harmful side effects and thus allows for fostering financial stability. Finally, this paper makes a case against increasing the central banks’ inflation target.

Keywords

Inflation targeting, asset prices, financial stability, ECB

URL

http://d.repec.org/n?u=RePEc:imf:imfwpa:11/97&r=mon



Record ID

145     [ Page 54 of 68, No. 2 ]

Date

2011-04

Author

Jagjit S. Chadha and Luisa Corrado

Affiliation

University of Kent

Title

Macro-prudential Policy on Liquidity: What does a DSGE Model tell us?

Summary /
Abstract

The financial crisis has led to the development of an active debate on the use of macro-prudential instruments for regulating the banking system, in particular for liquidity and capital holdings. Within the context of a micro-founded macroeconomic model, we allow commercial banks to choose their optimal mix of assets, apportioning these either to reserves or private sector loans. We examine the implications for quantities, relative non-financial and financial prices from standard macroeconomic shocks alongside shocks to the expected liquidity of banks and to the efficiency of the banking sector. We focus on the response by the monetary sector, in particular the optimal reserve-deposit ratio adopted by commercial banks over the business cycle. Overall we find some rationale for Basel III in providing commercial banks with an incentive to hold a greater stock of liquid assets, such as reserves, but also to provide incentives to increase the cyclical variation in reserves holdings as this acts to limit excessive procyclicality of lending to the private sector.

Keywords

Liquidity, interest on reserves, policy instruments, Basel

URL

http://d.repec.org/n?u=RePEc:ukc:ukcedp:1108&r=mon



Record ID

144     [ Page 54 of 68, No. 3 ]

Date

2011-01

Author

Evren Caglar, Jagjit S. Chadha, Jack Meaning, James Warren and Alex Waters

Affiliation

University of Kent

Title

Non-Conventional Monetary Policies: QE and the DSGE literature

Summary /
Abstract

At the zero lower bound, the scale and scope of non-conventional monetary policies have become the key decision variables for monetary policy makers. In the UK, quantitative easing has involved the creation of a fund to purchase medium term dated government bonds with borrowed central bank reserves and so has increased the liquidity of the non-bank financial sector and temporarily eased the budget constraint of HMT. Some of these reserves have been used to increase the extent of capital held by banks and there have also been direct injections of capital into the banking system. We assess some of the issues arising from the three policies by using three separate DSGE models, which take seriously the role of financial frictions. We find that it is possible to correct the effects of a lower zero bound in DSGE models, by (i) offsetting the liquidity premium embedded in long term bonds and/or (ii) adopting countercyclical subsidies to bank capital able and/or (iii) the creation of central bank reserves that reduce the costs of loan supply. But the correct quantitative response and ongoing interaction with standard monetary policy remains an open question.

Keywords

Zero bound, open-market operations, quantitative easing, monetary policy

URL

http://d.repec.org/n?u=RePEc:ukc:ukcedp:1110&r=mon



Record ID

143     [ Page 54 of 68, No. 4 ]

Date

2011-01

Author

Jagjit S. Chadha and Sean Holly

Affiliation

University of Kent

Title

New Instruments of Monetary Policy

Summary /
Abstract

We assess recent developments in monetary policy practice following the financial crisis drawing on papers from a specially convened conference in March 2010. In particular, we consider why central banks throughout the world have injected substantial quantities of liquidity into the financial system and seen their balance sheets expand to multiples of GDP. We outline the rationale for balance sheet operations: (i) portfolio balance of the non-bank financial sector; (ii) an offset for the zero bound; (iii) signalling mechanism about medium term inflation expectations and (iv) the alleviation of the government's budget constraint. We briefly outline the recent experience with QE and draw a distinction between liquidity and macroeconomic stabilisation operations.

Keywords

Zero bound, open-market operations, quantitative easing, monetary policy

URL

http://d.repec.org/n?u=RePEc:ukc:ukcedp:1109&r=mon



Record ID

142     [ Page 54 of 68, No. 5 ]

Date

2011-05

Author

Arbatli, Elif C ; Moriyama, Kenji

Affiliation

Middle East and Central Asia Department, IMF

Title

Estimating a Small Open-Economy Model for Egypt: Spillovers, Inflation Dynamics, and Implications for Monetary Policy

Summary /
Abstract

This paper estimates a small open economy model for Egypt to analyze inflation, output dynamics and monetary policy during 2005-2010. The interest rate channel is found to be relatively weak in Egypt, complicating the use of interest rates as the immediate target of monetary policy. However, the paper also finds a significant level of persistence in the policy rate, making monetary policy pro-cyclical. More active use of interest rate policy, measures to improve domestic debt markets and a gradual move towards inflation targeting can help support a successful disinflation strategy for Egypt.

Keywords

Small open economy model, monetary policy, transmission mechanism

URL

http://www.imf.org/external/pubs/ft/wp/2011/wp11108.pdf



Record ID

141     [ Page 54 of 68, No. 6 ]

Date

2011-05

Author

Roger, Scott ; Vlcek, Jan

Affiliation

Money and Capital Markets Department, IMF

Title

Macroeconomic Costs of Higher Bank Capital and Liquidity Requirements

Summary /
Abstract

This paper uses a DSGE model with banks and financial frictions in credit markets to assess the medium-term macroeconomic costs of increasing capital and liquidity requirements. The analysis indicates that the macroeconomic costs of such measures are sensitive to the length of the implementation period as well as to the adjustment strategy used by banks, and the scope for monetary policy to respond to the regulatory changes.

Keywords

Capital and liquidity requirements, financial frictions, macro-financial linkages

URL

http://www.imf.org/external/pubs/ft/wp/2011/wp11103.pdf



Record ID

140     [ Page 54 of 68, No. 7 ]

Date

2011-04

Author

Issing, Otmar

Affiliation

Research Department, IMF

Title

Lessons for Monetary Policy: What Should the Consensus Be?

Summary /
Abstract

This paper outlines important lessons for monetary policy. In particular, the role of inflation targeting, which was much acclaimed prior to the financial crisis and since then has not lost much of its endorsement, is critically reviewed. Ignoring the relation between monetary policy and asset prices, as is the case in this monetary policy approach, can lead to financial instability. In contrast, giving, inter alia, monetary factors a role in central banks’ policy decisions, as is done in the ECB’s encompassing approach, helps prevent these potentially harmful side effects and thus allows for fostering financial stability. Finally, this paper makes a case against increasing the central banks’ inflation target.

Keywords

Inflation targeting, asset prices, financial stability, ECB

URL

http://www.imf.org/external/pubs/ft/wp/2011/wp1197.pdf



Record ID

139     [ Page 54 of 68, No. 8 ]

Date

2011-04

Author

Baldacci, Emanuele ; McHugh, James ; Petrova, Iva

Affiliation

Fiscal Affairs Department, IMF

Title

Measuring Fiscal Vulnerability and Fiscal Stress: A Proposed Set of Indicators

Summary /
Abstract

This paper proposes a set of fiscal indicators to assess rollover risks using the conceptual framework developed by Cottarelli (2011). These indicators provide early warning signals about the manifestation of these risks, giving policymakers the opportunity to adjust policies before extreme fiscal stress events. Two aggregate indices are calculated: an index of fiscal vulnerability and an index of fiscal stress. Results show that both indices are elevated for advanced economies, reflecting unfavorable medium-term debt dynamics and aging-related spending pressures. In emerging economies, solvency risks are lower, but the composition of public debt remains a source of risk and the fiscal position is weaker than before the crisis.

Keywords

Fiscal vulnerability, fiscal stress, fiscal indicators

URL

http://www.imf.org/external/pubs/ft/wp/2011/wp1194.pdf



Record ID

138     [ Page 54 of 68, No. 9 ]

Date

2010-03

Author

Carlos Montoro

Affiliation

BIS

Title

Oil shocks and optimal monetary policy

Summary /
Abstract

In practice, central banks have been confronted with a trade-off between stabilising inflation and output when dealing with rising oil prices. This contrasts with the result in the standard New Keynesian model that ensuring complete price stability is the optimal thing to do, even when an oil shock leads to large output drops. To reconcile this apparent contradiction, this paper investigates how monetary policy should react to oil shocks in a microfounded model with staggered price-setting and with oil as an input in a CES production function. In particular, we extend Benigno and Woodford (2005) to obtain a second order approximation to the expected utility of the representative household when the steady state is distorted and the economy is hit by oil price shocks. The main result is that oil price shocks generate an endogenous trade-off between inflation and output stabilisation when oil has low substitutability in production. Therefore, it becomes optimal for the monetary authority to stabilise partially the effects of oil shocks on inflation and some inflation is desirable. We also find, in contrast to Benigno and Woodford (2005), that this trade-of is reduced, but not eliminated, when we get rid of the effects of monopolistic distortions in the steady state. Moreover, the size of the endogenous “cost-push” shock generated by fluctuations in the oil price increases when oil is more difficult to substitute by other factors.

Keywords

Optimal Monetary Policy, Welfare, Second Order Solution, Oil Price Shocks, Endogenous Trade-off

URL

http://www.bis.org/publ/work307.pdf



Record ID

137     [ Page 54 of 68, No. 10 ]

Date

2011-04

Author

Acosta Ormaechea, Santiago ; Coble Fernandez, David O

Affiliation

WHD, IMF

Title

Monetary Transmission in Dollarized and Non-Dollarized Economies: The Cases of Chile, New Zealand, Peru and Uruguay

Summary /
Abstract

The paper conducts a comparative study of the monetary policy transmission in two economies that run a well-established IT regime, Chile and New Zealand, vis-à-vis two economies operating under relatively newer IT regimes, and which are exposed to a significant degree of dollarization, Peru and Uruguay. It is shown that the traditional interest rate channel is effective in Chile and New Zealand. For Peru and Uruguay, the exchange rate channel is instead more relevant in the transmission of monetary policy. This latter result follows from the limited impact of the policy rate in curbing inflationary pressures in these two countries, in combination with the fact that they have a relatively large and persistent exchange rate pass through. Finally, it is shown that the on-going de-dollarization process of Peru and Uruguay has somewhat strengthened their monetary transmission through the interest rate channel.

Keywords

Monetary Policy Transmission; IT Regimes; Dollarization

URL

http://www.imf.org/external/pubs/ft/wp/2011/wp1187.pdf



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