Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

136     [ Page 55 of 68, No. 1 ]

Date

2006-03

Author

Andrew Berg, Philippe Karam, and Douglas Laxton

Affiliation

IMF

Title

Practical Model-Based Monetary Policy Analysis—A How-To Guide

Summary /
Abstract

This paper provides a how-to guide to model-based forecasting and monetary policy analysis. It describes a simple structural model, along the lines of those in use in a number of central banks. This workhorse model consists of an aggregate demand (or IS) curve, a price-setting (or Phillips) curve, a version of the uncovered interest parity condition, and a monetary policy reaction function. The paper discusses how to parameterize the model and use it for forecasting and policy analysis, illustrating with an application to Canada. It also introduces a set of useful software tools for conducting a model-consistent forecast.

Keywords

Monetary Policy, Forecasting and Simulation, Model construction and estimation, computational techniques

URL

http://www.imf.org/external/pubs/ft/wp/2006/wp0681.pdf



Record ID

135     [ Page 55 of 68, No. 2 ]

Date

2011-04

Author

Anand, Rahul ; Ding, Ding ; Peiris, Shanaka J.

Affiliation

APD, IMF

Title

Toward Inflation Targeting in Sri Lanka

Summary /
Abstract

This paper develops a practical model-based forecasting and policy analysis system (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulations suggest that an open-economy inflation targeting rule can reduce macroeconomic volatility and anchor inflationary expectations given the size and type of shocks faced by the economy. Sri Lanka could aim to target a broad inflation range initially due to its susceptibility supply-side shocks while enhancing exchange rate flexibility and strengthening the effectiveness of monetary policy in the transition to an inflation forecast targeting regime.

Keywords

Inflation Targeting, Monetary Policy, Bayesian Estimation

URL

http://www.imf.org/external/pubs/ft/wp/2011/wp1181.pdf



Record ID

134     [ Page 55 of 68, No. 3 ]

Date

2011-04

Author

Nina Skrove Falch and Ragnar Nymoen

Affiliation

University of Oslo

Title

The Accuracy of a Forecast Targeting Central Bank

Summary /
Abstract

This paper evaluates inflation forecasts made by Norges Bank which is recognized as a successful forecast targeting central bank. It is reasonable to expect that Norges Bank produces inflation forecasts that are on average better than other forecasts, both ‘naïve’ forecasts, and forecasts from econometric models outside the central bank. The authors find that the superiority of the Bank’s forecast cannot be asserted, when compared with genuine ex-ante real time forecasts from an independent econometric model. The 1-step Monetary Policy Report forecasts are preferable to the 1-step forecasts from the outside model, but for the policy relevant horizons (4 to 9 quarters ahead), the forecasts from the outsider model are preferred with a wider margin. An explanation in terms of too high speed of adjustment to the inflation target is supported by the evidence. Norges Bank’s forecasts are convincingly better than ‘naïve’ forecasts over the second half of our sample, but not over the whole sample, which includes a change in the mean of inflation.

Keywords

Inflation forecasts; monetary policy; forecast comparison; forecast targeting central bank; econometric models

URL

http://folk.uio.no/rnymoen/failjun10.pdf



Record ID

133     [ Page 55 of 68, No. 4 ]

Date

2011-03

Author

William Poole Robert H. Rasche and David C. Wheelock

Affiliation

NBER

Title

The Great Inflation: Did the Shadow Know Better?

Summary /
Abstract

The Shadow Open Market Committee was formed in 1973 in response to rising inflation and the apparent unwillingness of U.S. policymakers to implement policies necessary to maintain price stability. This paper describes how the Committee’s policy views differed from those of most Federal Reserve officials and many academic economists at the time. The Shadow argued that price stability should be the primary goal of monetary policy and favored gradual adjustment of monetary growth to a rate consistent with price stability. This paper evaluates the Shadow’s policy rule in the context of the New Keynesian macroeconomic model of Clarida, Gali, and Gertler (1999). Simulations of the model suggest that the gradual stabilization of monetary growth favored by the Shadow would have lowered inflation with less impact on output growth and less variability in inflation or output than a one-time reduction in monetary growth. We conclude that the Shadow articulated a policy that would have outperformed the policies actually implemented by the Federal Reserve during the Great Inflation era.

URL

http://www.nber.org/papers/w16910.pdf



Record ID

132     [ Page 55 of 68, No. 5 ]

Date

2011-03

Author

Money and Capital Markets Department (MCM)

Affiliation

IMF

Title

Macroprudential Policy - An Organizing Framework - Background Paper

Summary /
Abstract

MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.

Keywords

Macroprudential policy, financial stability, systemic risk

URL

http://www.imf.org/external/np/pp/eng/2011/031411a.pdf



Record ID

131     [ Page 55 of 68, No. 6 ]

Date

2011-02

Author

Monetary and Capital Markets, Research, and Strategy, Policy, and Review Departments

Affiliation

IMF

Title

Assessing Reserve Adequacy - Supplementary Information

Summary /
Abstract

The dramatic increase in reserves holdings over the past decade has resumed since the global financial crisis, even at an accelerated pace. While the crisis has heightened perceptions of the importance of holding adequate reserves, there is little consensus on what constitutes an adequate level from a precautionary perspective: traditional metrics are narrowly-based and often provide conflicting signals; while newer approaches tend to be hostage to stylized modeling assumptions and calibrations. As a result, assessments tend to rely on comparisons with peers, probably amplifying the upward trend as perceived needs rise in line with actual holdings.

The metric proposed in the main paper is based on outflows—principally in relation the relevant stock of underlying foreign liabilities or domestic assets—during periods of exchange market pressure (EMP). Especially as it remains the primary reason countries accumulate reserves for insurance purposes, the metric is based on balance of payments drains experienced during EMP episodes—i.e., a measure of sufficient reserves periods of pressure and ahead of a full-blown crisis.

URL

http://www.imf.org/external/np/pp/eng/2011/021411c.pdf



Record ID

130     [ Page 55 of 68, No. 7 ]

Date

2011-03

Author

Marco Lo Duca and Tuomas A. Peltonen

Affiliation

European Central Bank

Title

Macro-financial vulnerabilities and future financial stress: assessing systemic risks and predicting systemic events

Summary /
Abstract

This paper develops a framework for assessing systemic risks and for predicting (out-of-sample) systemic events, i.e. periods of extreme financial instability with potential real costs. We test the ability of a wide range of “stand alone” and composite indicators in predicting systemic events and evaluate them by taking into account policy makers’ preferences between false alarms and missing signals. Our results highlight the importance of considering jointly various indicators in a multivariate framework. We find that taking into account jointly domestic and global macrofinancial vulnerabilities greatly improves the performance of discrete choice models in forecasting systemic events. Our framework shows a good out-of-sample performance in predicting the last financial crisis. Finally, our model would have issued an early warning signal for the United States in 2006 Q2, 5 quarters before the emergence of money markets tensions in August 2007

Keywords

Early warning Indicators, Asset Price Booms and Busts, Financial Stress, Macro-Prudential Policies

URL

http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1311.pdf



Record ID

129     [ Page 55 of 68, No. 8 ]

Date

2011-01

Author

Rochelle M. Edge and Refet S. Gurkaynak

Affiliation

Federal Reserve Board and Bilkent University

Title

How useful are estimated DSGE model forecasts?

Summary /
Abstract

DSGE models are a prominent tool for forecasting at central banks and the competitive forecasting performance of these models relative to alternatives--including official forecasts--has been documented. When evaluating DSGE models on an absolute basis, however, we find that the benchmark estimated medium scale DSGE model forecasts inflation and GDP growth very poorly, although statistical and judgmental forecasts forecast as poorly. Our finding is the DSGE model analogue of the literature documenting the recent poor performance of macroeconomic forecasts relative to simple naive forecasts since the onset of the Great Moderation. While this finding is broadly consistent with the DSGE model we employ--ie, the model itself implies that under strong monetary policy especially inflation deviations should be unpredictable--a "wrong" model may also have the same implication. We therefore argue that forecasting ability during the Great Moderation is not a good metric to judge the usefulness of model forecasts.

Keywords

Economic forecasting ; Inflation (Finance) ; Econometric models

URL

http://www.federalreserve.gov/pubs/feds/2011/201111/201111pap.pdf



Record ID

128     [ Page 55 of 68, No. 9 ]

Date

2011-03

Author

Timothy Cogley, Bianca de Paoli, Christian Matthes, Nikolov Kalin, and Tony Yates

Affiliation

New York University, Bank of England, Universitat Pompeu Fabra, European Central Bank, and Bank of England

Title

A Bayesian approach to optimal monetary policy with parameter and model uncertainty

Summary /
Abstract

This paper undertakes a Bayesian analysis of optimal monetary policy for the United Kingdom. We estimate a suite of monetary policy models that include both forward and backward-looking representations as well as large and small-scale models. We find an optimal simple Taylor-type rule that accounts for both model and parameter uncertainty. For the most part, backward-looking models are highly fault tolerant with respect to policies optimised for forward-looking representations, while forward-looking models have low fault tolerance with respect to policies optimised for backward-looking representations. In addition, backward-looking models often have lower posterior probabilities than forward-looking models. Bayesian policies therefore have characteristics suitable for inflation and output stabilisation in forward-looking models.

Keywords

Monetary policy models, model and parameter uncertainty, backward and forward Looking representations, Bayesian analysis and estimation

URL

http://www.bankofengland.co.uk/publications/workingpapers/wp414.pdf



Record ID

127     [ Page 55 of 68, No. 10 ]

Date

2011-02

Author

Strategy Policy and Review Department

Affiliation

IMF

Title

2011 Triennial Surveillance Review and Review of the 2007 Decision: Concept Note

Summary /
Abstract

Over the past three years, the IMF has worked to assist members in addressing the repercussions of the global financial crisis while also tackling gaps in its surveillance framework that the crisis laid bare. This reform agenda has drawn extensively from the recommendations of the 2008 Triennial Surveillance Review (TSR), as well as subsequent IMF and IEO reviews of the Fund's performance in the run-up to the crisis. This TSR provides an opportunity to take stock of the steps taken and to assess recent experience with surveillance.

Keywords

Bilateral and Multilateral Surveillance, Financial Crisis, Risk Management

URL

http://www.imf.org/external/np/pp/eng/2011/021411.pdf



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