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Record ID
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569
[ Page 13 of 68, No. 1 ]
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Date
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2014-10 |
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Author
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Aladangady, Aditya
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Affiliation
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Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board, Washington, D.C. |
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Title
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Homeowner Balance Sheets and Monetary Policy |
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Summary /
Abstract
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This paper empirically identifies an important channel through which monetary policy affects consumer spending: homeowner balance sheets. A monetary loosening increases home values, thereby strengthening homeowner balance sheets and stimulating household spending due to a combination of collateral and wealth effects. The magnitude of these effects on a given household depends on local housing market characteristics such as local geography and regulation. Cities with the largest geographic and regulatory barriers to new construction see 3-4 percent responses in real house prices compared with unconstrained, elastic-supply cities where construction holds prices in check. Using non-public geocoded microdata from the Consumer Expenditures Survey, house price and consumption responses are compared across areas differing in local land availability and zoning laws to identify a marginal propensity to consume out of housing of 0.07. Homeowners with debt service ratios in the highest quartile have MPCs as high as 0.14 compared with negligible responses for those with low debt service ratios. This indicates a strong role for collateral effects, as opposed to pure wealth effects, in driving the relationship between home values and spending. I discuss the implications of these results for the aggregate effects and regional heterogeneity in responses to monetary shocks. |
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Keywords
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Consumption; housing; wealth effects; collateral; home equity; monetary policy |
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URL
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http://www.federalreserve.gov/econresdata/feds/2014/files/201498pap.pdf
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Record ID
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565
[ Page 13 of 68, No. 5 ]
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Date
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2014-11 |
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Author
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Michael Bordo and Pierre Siklos
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Affiliation
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National Bureau of Economic Research |
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Title
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Central Bank Credibility, Reputation and Inflation Targeting in Historical Perspective |
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Summary /
Abstract
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This paper examines the historical evolution of central bank credibility using both historical narrative and empirics for a group of 16 countries, both advanced and emerging. It shows how the evolution of credibility has gone through a pendulum where credibility was high under the classical gold standard before 1914 before being lost and not fully regained until the 1980s. This characterization does not, however, seem to apply to the monetary history in the emerging markets examined in the paper. Nevertheless, credibility in all the economies examined has been enhanced in recent decades thanks to the adoption of inflation targeting. However, the recent financial crisis and the call for central banks to focus more on financial stability relying on macro prudential regulation may pose significant challenges for central bank credibility. |
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Keywords
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Credibility, Inflation Targeting, Monetary Policy |
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Remarks
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Record ID
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563
[ Page 13 of 68, No. 7 ]
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Date
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2014-11 |
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Author
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Del Negro, Marco and Sims, Christopher A.
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Affiliation
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Federal Reserve Bank of New York |
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Title
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When does a central bank’s balance sheet require fiscal support? |
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Summary /
Abstract
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Using a simple general equilibrium model, we argue that it would be appropriate for a central bank with a large balance sheet composed of long-duration nominal assets to have access to, and be willing to ask for, support for its balance sheet by the fiscal authority. Otherwise its ability to control inflation may be at risk. This need for balance sheet support—a within-government transaction—is distinct from the need for fiscal backing of inflation policy that arises even in models where the central bank’s balance sheet is merged with that of the rest of the government. |
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Keywords
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Central bank’s balance sheet; solvency; monetary policy |
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URL
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http://www.newyorkfed.org/research/staff_reports/sr701.pdf
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Record ID
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562
[ Page 13 of 68, No. 8 ]
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Date
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2014-11 |
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Author
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Vikram Rai and Lena Suchanek
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Affiliation
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Bank of Canada |
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Title
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The Effect of the Federal Reserve’s Tapering Announcements on Emerging Markets |
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Summary /
Abstract
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The Federal Reserve’s quantitative easing (QE) program has been accompanied by a flow of funds into emerging-market economies (EMEs) in search of higher returns. When Federal Reserve officials first mentioned an eventual slowdown and end of purchases under the central bank’s QE program in May and June 2013, foreign investors started to withdraw some of these funds, leading to capital outflows, a drop in EME currencies and stock markets, and a rise in bond yields. Using an event-study approach, this paper estimates the impact of “Fed tapering” on EME financial markets and capital flows for 19 EMEs. Results suggest that EMEs with strong fundamentals (e.g., stronger growth and current account position, lower debt, and higher growth in business confidence and productivity), saw more favourable responses to Fed communications on tapering. Capital account openness initially played a role as well, but diminished in importance in subsequent tapering announcements. |
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Keywords
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International financial markets; Transmission of monetary policy; International topics |
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URL
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http://www.bankofcanada.ca/wp-content/uploads/2014/11/wp2014-50.pdf
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Record ID
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561
[ Page 13 of 68, No. 9 ]
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Date
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2014-12 |
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Author
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Jiaqian Chen, Tommaso Mancini-Griffoli, and Ratna Sahay
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Affiliation
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Money and Capital Markets Department, IMF |
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Title
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Spillovers from United States Monetary Policy on Emerging Markets: Different This Time? |
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Summary /
Abstract
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The impact of monetary policy in large advanced countries on emerging market economies—dubbed spillovers—is hotly debated in global and national policy circles. When the U.S. resorted to unconventional monetary policy, spillovers on asset prices and capital flows were significant, though remained smaller in countries with better fundamentals. This was not because monetary policy shocks changed (in size, sign or impact on stance). In fact, the traditional signaling channel of monetary policy continued to play the leading role in transmitting shocks, relative to other channels, affecting longer-term bond yields. Instead, we find that larger spillovers stem more from structural factors, such as the use of new instruments (asset purchases). We obtain these results by developing a new methodology to extract, separate, and interpret U.S. monetary policy shocks. |
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Keywords
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Monetary policy announcements, unconventional monetary policies, spillovers, capital flows, equity markets, bond markets, exchange rates, emerging markets. |
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URL
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http://www.imf.org/external/pubs/ft/wp/2014/wp14240.pdf
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Record ID
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560
[ Page 13 of 68, No. 10 ]
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Date
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2014-10 |
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Author
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Nikolaos Antonakakis
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Affiliation
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Department of Economics, Vienna University of Economics and Business |
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Title
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Sovereign Debt and Economic Growth Revisited: The Role of (Non-)Sustainable Debt Thresholds |
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Summary /
Abstract
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Contributing to the contentious debate on the relationship between sovereign debt and economic growth, I examine the role of theory-driven (non-)sustainable debt-ratios in combination with debt-ratio thresholds on economic growth. Based on both dynamic and non-dynamic panel data analyses in the euro area (EA) 12 countries over the period 1970-2013, I find that non-sustainable debt-ratios above and below the 60% threshold, have a detrimental effect on short-run economic growth, while sustainable debt-ratios below the 90% threshold exert a positive influence on short-run economic growth. In the long-run, both non-sustainable and sustainable debt-ratios above the 90% threshold, as well as non-sustainable debt-ratios below the 60% compromise economic growth. Robustness analysis supports these findings, and provides additional evidence of a positive effect of sustainable debt-ratios below the 60% threshold, as predicated by the Maastricht Treaty criterion, on (short- and long-run) economic growth. Overall, these results suggest that debt sustainability in addition to debt non-linearities should be considered simultaneously in the debt-growth nexus. In addition, the results indicate the importance of a timely reaction of fiscal policy in countries with non-sustainable debts, as implied by fiscal rules, in an attempt to ensure fiscal sustainability and, ultimately, promote long-run economic growth. |
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Keywords
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Government debt, growth, sustainability, threshold, government budget constraint |
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URL
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https://epub.wu.ac.at/4321/1/wp187.pdf
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