Selected Reference and Reading Materials compiled by Dan Villanueva


Total records: 676 | Select no. of records per page: 10 | 20 | 30 | 50 | 100 | Show all | Search
Select a Page:   << Previous  1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 Next >>


Record ID

86     [ Page 60 of 68, No. 1 ]

Date

2010-11

Author

John B. Taylor and Volker Wieland

Affiliation

Stanford University and Goethe University of Frankfurt

Title

Surprising comparative properties of monetary models: Results from a new model database

Summary /
Abstract

In this paper we investigate the comparative properties of empirically-estimated monetary models of the U.S. economy. We make use of a new database of models designed for such investigations. We focus on three representative models: the Christiano, Eichenbaum, Evans (2005) model, the Smets and Wouters (2007) model, and the Taylor (1993a) model. Although the three models differ in terms of structure, estimation method, sample period, and data vintage, we find surprisingly similar economic impacts of unanticipated changes in the federal funds rate. However, the optimal monetary policy rules are different in the different models. Simple model-specific policy rules that include the lagged interest rate, inflation and current and lagged output gaps are not robust. Some degree of robustness can be recovered by using rules without interest-rate smoothing or with GDP growth deviations from trend in place of the output gap. However, improvement vis-à-vis other models, comes at the cost of significant performance deterioration in the original model. Model averaging offers a much more effective strategy for improving the robustness of policy rules.

Keywords

monetary policy rules, New-Keynesian models, model uncertainty, robustness, monetary policy transmission.

URL

http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101261&r=mon

Remarks

A must read for central bank monetary policy modelers. Authors check the robustness of popular monetary policy models, including DSGE models, and find that model-specific policy rules are not robust and that model averaging makes policy rules more robust. Therefore, they recommend that central bank modelers eschew reliance on a particular class of models, e.g. DSGE, and that they employ model averaging instead.



Record ID

85     [ Page 60 of 68, No. 2 ]

Date

2010-10

Author

Ali Dib

Affiliation

Bank of Canada

Title

Capital Requirement and Financial Frictions in Banking: Macroeconomic Implications

Summary /
Abstract

The author develops a dynamic stochastic general-equilibrium model with an active banking sector, a financial accelerator, and financial frictions in the interbank and bank capital markets. He investigates the importance of banking sector frictions on business cycle fluctuations and assesses the role of a regulatory capital requirement in propagating the effects of shocks in the real economy. Bank capital is introduced to satisfy the regulatory capital requirement, and serves as collateral for borrowing in the interbank market. Financial frictions are introduced by assuming asymmetric information between lenders and borrowers that creates moral hazard and adverse selection problems in the interbank and bank capital markets, respectively. Highly leveraged banks are vulnerable and therefore pay higher costs when raising funds. The author finds that financial frictions in the interbank and bank capital markets amplify and propagate the effects of shocks; however, the capital requirement attenuates the real impacts of aggregate shocks (including financial shocks), reduces macroeconomic volatilities, and stabilizes the economy.

Keywords

Economic models; Business fluctuations and cycles; Financial markets; Financial stability

Remarks

This DSGE model provides a theoretical explanation for the stringent capital requirements now being contemplated and discussed by central banks all over the world.



Record ID

84     [ Page 60 of 68, No. 3 ]

Date

2010-11

Author

Budina, Nina T ; Tuladhar, Anita

Affiliation

International Monetary Fund

Title

Post-Crisis Fiscal Policy Priorities for the ASEAN-5

Summary /
Abstract

Summary: This paper focuses on post-crisis fiscal priorities in the ASEAN-5 economies - Indonesia, Malaysia, Philippines, Singapore and Thailand. Sound economic fundamentals and timely and forceful policy responses to the crisis, including fiscal stimulus, contributed to rapid economic recovery in the ASEAN-5. As growth rebounds, these economies are beginning to identify, communicate and implement their strategies for unwinding the fiscal stimulus while addressing long-term growth challenges. In this context, the paper highlights the need for fiscal policies to address infrastructure gaps, stimulate private consumption and expand social safety nets. Creating fiscal space to address these challenges will require raising revenues and reorienting public spending rather than increasing borrowing. Supporting structural reforms, aiming to stimulate private infrastructure investment, could help address long-term growth challenges, while easing the burden on fiscal policy.

Keywords

Fiscal policy, fiscal reforms, revenue measures, government expenditures, infrastructure

URL

http://www.imf.org/external/pubs/cat/longres.cfm?sk=24343.0

Remarks

This is a nice template on how to draft a policy analysis paper, applying sound macroeconomic principles and yet very readable.



Record ID

83     [ Page 60 of 68, No. 4 ]

Date

2010-10

Author

Jaromír Baxa Roman Horváth Bořek Vašíček

Affiliation

Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic Universitat Autonoma de Barcelona

Title

How Does Monetary Policy Change? Evidence on Inflation Targeting Countries

Summary /
Abstract

We examine the evolution of monetary policy rules in a group of inflation targeting countries (Australia, Canada, New Zealand, Sweden and the United Kingdom), applying a moment-based estimator in a time-varying parameter model with endogenous regressors. Using this novel flexible framework, our main findings are threefold. First, monetary policy rules change gradually, pointing to the importance of applying a time-varying estimation framework. Second, the interest rate smoothing parameter is much lower than typically reported by previous time-invariant estimates of policy rules. External factors matter for all countries, although the importance of the exchange rate diminishes after the adoption of inflation targeting. Third, the response of interest rates to inflation is particularly strong during periods when central bankers want to break a record of high inflation, such as in the UK or Australia at the beginning of the 1980s. Contrary to common wisdom, the response becomes less aggressive after the adoption of inflation targeting, suggesting a positive anchoring effect of this regime on inflation expectations. This result is supported by our finding that inflation persistence as well as the policy neutral rate typically decreased after the adoption of inflation targeting.

Keywords

Taylor rule, inflation targeting, monetary policy, time-varying parameter model, endogenous regressors

URL

http://d.repec.org/n?u=RePEc:fau:wpaper:wp2010_26&r=mon



Record ID

82     [ Page 60 of 68, No. 5 ]

Date

2010-09

Author

Martin Seneca

Affiliation

Central Bank of Iceland

Title

A DSGE model for Iceland

Summary /
Abstract

This paper presents a dynamic stochastic general equilibrium (DSGE) model for a small open economy fitted to Icelandic data. The model has been developed at the Central Bank of Iceland as a tool for policy analysis and forecasting purposes in support of inflation targeting. As the existing macroeconometric model at the Central Bank, the model is a dynamic quarterly model. But it differs by being fully founded on well-defined microeconomic decision problems of agents in the economy. This allows for a structural interpretation of shocks to the economy. The model features endogenous capital accumulation subject to investment adjustment costs, variable capacity utilisation, habit formation in consumption, monopolistic competition in goods and labour markets, as well as sticky prices and wages. The home economy engages freely in international trade, while international financial intermediation is subject to endogenous costs. Monetary policy is conducted by an inflation targeting central bank. The model is fitted to Icelandic data for the sample period 1991-2005 through a combination of calibration and formal Bayesian estimation. The paper presents the estimation results, and it discusses the model's properties. Finally, first applications are shown to illustrate the model's potential in guiding monetary policy.

Keywords

Central bank DSGE modeling, inflation targeting, monetary policy

URL

http://d.repec.org/n?u=RePEc:ice:wpaper:wp50&r=mon

Remarks

This paper should be useful to central bank monetary policy modeling using DSGE and IT frameworks, at least for comparative purposes. It is actually being used by the Central Bank of Iceland.



Record ID

81     [ Page 60 of 68, No. 6 ]

Date

2010-09

Author

Il Houng Lee and Woon Gyu Choi

Affiliation

International Monetary Fund

Title

Monetary Transmission of Global Imbalances in Asian Countries

Summary /
Abstract

The paper explores the linkages between the global and domestic monetary gaps, and estimates the effects of monetary gaps on output growth, inflation, and net saving rates using panel data for 20 Asian countries for 1980-2008. We find a significant pass-through of the global monetary gap to domestic monetary gaps, which in turn affect output growth and inflation, in individual emerging market and developing countries in Asia. Notably, we provide evidence that the global monetary condition is partly responsible for the current account surplus in Asia. We also draw implications for monetary policy coordination for global rebalancing.

Keywords

Asia , Balance of trade , Capital flows , Economic integration , Economic models , Export competitiveness , Globalization , Inflation , Monetary policy , Production growth , Reserves , Savings

URL

http://www.imf.org/external/pubs/ft/wp/2010/wp10214.pdf

Remarks

Il Houng Lee used to head Article IV IMF Consultation missions to the Philippines. He is now IMF Senior Resident Representative in China.



Record ID

80     [ Page 60 of 68, No. 7 ]

Date

2010-09

Author

Jordi Galí

Affiliation

Center for Economic Policy Research

Title

Are Central Banks' Projections Meaningful?

Summary /
Abstract

Central banks' projections--i.e. forecasts conditional on a given interest rate path-- are often criticized on the grounds that their underlying policy assumptions are inconsistent with the existence of a unique equilibrium in many forward-looking models. Here I describe three alternative approaches to constructing projections that are not subject to the above criticism, using two different versions of New Keynesian model as reference frameworks. Most importantly, I show how the three approaches generate different projections for inflation and output, even though they imply an identical path for the interest rate. The latter result calls into question the meaning and usefulness of such projections.

Keywords

conditinal forecats; constant interest rate projections; inflation targeting; interest rate path; interest rate rules; multiple equilibria

URL

http://d.repec.org/n?u=RePEc:cpr:ceprdp:8027&r=mon



Record ID

79     [ Page 60 of 68, No. 8 ]

Date

2009-03

Author

Vasco Cúrdia and Michael Woodford

Affiliation

Federal Reserve Bank of New York, Columbia University

Title

Credit frictions and optimal monetary policy

Summary /
Abstract

We extend the basic (representative-household) New Keynesian [NK] model of the monetary transmission mechanism to allow for a spread between the interest rate available to savers and borrowers, that can vary for either exogenous or endogenous reasons. We find that the mere existence of a positive average spread makes little quantitative difference for the predicted effects of particular policies. Variation in spreads over time is of greater significance, with consequences both for the equilibrium relation between the policy rate and aggregate expenditure and for the relation between real activity and inflation.
Nonetheless, we find that the target criterion - a linear relation that should be maintained between the inflation rate and changes in the output gap - that characterises optimal policy in the basic NK model continues to provide a good approximation to optimal policy, even in the presence of variations in credit spreads. We also consider a "spread-adjusted Taylor rule", in which the intercept of the Taylor rule is adjusted in proportion to changes in credit spreads. We show that while such an adjustment can improve upon an unadjusted Taylor rule, the optimal degree of adjustment is less than 100 percent; and even with the correct size of adjustment, such a rule of thumb remains inferior to the targeting rule.
This is part of a series of BIS Working Papers (273 to 278) collecting papers presented at the BIS's Seventh Annual Conference on "Whither monetary policy? Monetary policy challenges in the decade ahead" in Luzern, Switzerland, on 26-27 June 2008. The event brought together senior representatives of central banks and academic institutions to exchange views on this topic. BIS Paper 45 contains the opening address of William R White (BIS), the contributions of the policy panel on "Beyond price stability - the challenges ahead" and speeches by Edmund Phelps (Columbia University) and Martin Wolf (Financial Times). The participants in the policy panel discussion chaired by Malcolm D Knight (BIS) were Martin Feldstein (Harvard University), Stanley Fischer (Bank of Israel), Mark Carney (Bank of Canada) and Jean-Pierre Landau (Banque de France). This Working Paper includes comments by Olivier Blanchard and Charles Goodhart.

Keywords

Financial Frictions, Interest Rate Spreads

URL

http://www.bis.org/publ/work278.pdf



Record ID

78     [ Page 60 of 68, No. 9 ]

Date

2009-03

Author

Christopher A Sims

Affiliation

Princeton University, NBER

Title

Inflation expectations, uncertainty and monetary policy

Summary /
Abstract

Monetary economics as practiced by central bank modelers has made a great deal of progress in recent years. In a 2002 paper I interviewed research economists at four central banks and surveyed the models in use at those banks. I criticized the models for having lost all touch with statistical inference and with its connection to decision theory. I also criticized them for not following the rational expectations literature by jointly specifying and estimating the equations in their systems. And I pointed out that none of the models had a consistent treatment of asset markets. Since then many central banks, taking advantage of the new computational methods for Bayesian inference that economists are learning to use, have made substantial progress toward meeting the first two of these criticisms. They have still for the most part done little about the third. And academic economists are beginning to question some of the standard assumptions in the rational expectations framework that underlies these models.
Recent events in financial markets, and the difficulties that they raise for central banks, make it painfully clear that even the frontier Bayesian DSGE models like that in use at the Swedish Riksbank do not model asset markets in any depth. But the problem goes beyond that: these models, and most academic macro models as well, assume a standard rational expectations framework: there is only one probability measure in play, the "true" probability measure from which nature draws realizations. Agents in the model form expectations using this true distribution, conditioning on information sets that consist of all information in the model dated t and earlier. It is well documented that people do not actually behave this way, and in the literature on behavioral finance there is some suggestion that deviations from this standardized assumption of rational behavior given a common probability distribution may be important.
The recent events in financial markets - the dotcom boom, the US house price boom, perhaps the continuing commodity price boom - look to some observers like bubbles that must have fed off some sort of irrational behavior. Many observers think that monetary policy might have somehow fueled these bubble-like episodes in asset markets. These are important questions for monetary policy, and it is disturbing that the monetary policy models in use cannot even be used to pose these questions.
In this paper I focus on two particular, and related, deviations from the assumption that all agents have the same probability distribution and that they optimally process all information available up to some date t. I consider the implications of agents' being able to process information only at a limited rate, and the implications of agents' assuming differing probability distriubions.
This is part of a series of BIS Working Papers (273 to 278) collecting papers presented at the BIS's Seventh Annual Conference on "Whither monetary policy? Monetary policy challenges in the decade ahead" in Luzern, Switzerland, on 26-27 June 2008. The event brought together senior representatives of central banks and academic institutions to exchange views on this topic. BIS Paper 45 contains the opening address of William R White (BIS), the contributions of the policy panel on "Beyond price stability - the challenges ahead" and speeches by Edmund Phelps (Columbia University) and Martin Wolf (Financial Times). The participants in the policy panel discussion chaired by Malcolm D Knight (BIS) were Martin Feldstein (Harvard University), Stanley Fischer (Bank of Israel), Mark Carney (Bank of Canada) and Jean-Pierre Landau (Banque de France). This Working Paper includes comments by Athanasios Orphanides and Lars E O Svensson.

Keywords

Inflation Expectations, Expectations formation, Rational Inattention, Asset Prices, Monetary Policy

URL

http://www.bis.org/publ/work275.pdf



Record ID

77     [ Page 60 of 68, No. 10 ]

Date

2010-09

Author

Laura Valderrama

Affiliation

International Monetary Fund

Title

Macroprudential Regulation under Repo Funding

Summary /
Abstract

The use of collateral has become one of the most widespread risk mitigation techniques. While it brings stabilizing effects to the individual lender we argue that it may exacerbate systemic risk through margin call activation. We show how a liquidity shock to the cash lender may propagate as a solvency shock via liquidity hoarding even if the cash lender remains solvent in all states of nature. Albeit a cost-effective response of the cash lender to a liquidity shock, liquidity hoarding may lead to the bankruptcy of its repo counterparties triggering contagion across asset classes. To buttress the resilience of the financial system, we lay out a menu of macroprudential policies that deactivate this channel of financial contagion

Keywords

Repurchase Agreement; Haircut; Margin Call; Liquidity Hoarding; Systemic Risk; Financial Contagion; Macroprudential Regulation

URL

http://www.imf.org/external/pubs/ft/wp/2010/wp10220.pdf

Remarks

The author proposes strengthened liquidity ratios and stronger capital buffer in exchange for deactivating the use of collateral as a risk mitigating technique (when in fact it can exacerbate systemic risk through margin call activation).



Total records: 676 | Select no. of records per page: 10 | 20 | 30 | 50 | 100 | Show all | Search
Select a Page:   << Previous  1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 Next >>



Copyright ©2010-2013 Web development and maintenance by Ferdinand S. Co | Updated by: Dan Villanueva