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Record ID
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47
[ Page 23 of 23, No. 1 ]
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Date
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2010-02 |
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Author
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Jordi Galí
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Affiliation
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CREI, Universitat Pompeu Fabra, and Barcelona GSE |
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Title
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Monetary Policy and Unemployment |
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Summary /
Abstract
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Much recent research has focused on the development and analysis of extensions of the New Keynesian framework that model labor market frictions and unemployment explicitly. The present paper describes some of the essential ingredients and properties of those models, and their implications for monetary policy. |
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Keywords
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nominal rigidities, labor market frictions, wage rigidities |
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Remarks
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This is a paper by Jordi Gali, to be included as a chapter in the Handbook of Monetary Economics (ed. by B. Friedman and M Woodford). It explicitly incorporates labor market frictions and unemployment in a DSGE framework. |
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Record ID
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6
[ Page 23 of 23, No. 2 ]
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Date
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2010 |
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Author
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Various Authors
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Title
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Links to IMF Working Papers maintained at http://ideas.repec.org/ |
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Summary /
Abstract
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Contact information of International Monetary Fund:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email: publicaffairs@imf.org
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
Order information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm
For technical questions regarding this series, please contact JBeardow@imf.org (Jim Beardow) or baum@bc.edu (Christopher F. Baum)
Series handle: repec:imf:imfwpa
Citations RSS feed: at CitEc
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URL
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http://ideas.repec.org/s/imf/imfwpa.html
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Record ID
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9
[ Page 23 of 23, No. 3 ]
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Date
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2010 |
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Author
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Edsel Beja Jr.
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Affiliation
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Ateneo de Manila University |
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Title
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Is inflation targeting preferred by Filipinos? |
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Summary /
Abstract
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Analysis of World Values Survey 2000 data for the Philippines finds that lower income Filipinos are more likely than the upper income ones to support inflation targeting. The same can be said of older, healthier, and employed Filipinos but not of the educated and financially satisfied ones. Given the profile of people who preferred inflation targeting, the shift from monetary targeting to inflation targeting is deemed a pro-poor policy shift. Further analyses find that, in 2000, at least 53.1% of Filipino households preferred inflation targeting; in other words, the preference of Filipino society in 2000 was in line with the preference of the Bangko Sentral ng Pilipinas for inflation targeting.
URL:http://d.repec.org/n?u=RePEc:pra:mprapa:24382&r=mac |
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Keywords
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Inflation targeting; central bank policy; Philippines; Filipino preference |
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URL
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http://mpra.ub.uni-muenchen.de/24382/
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Remarks
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This piece by Edsel from Ateneo should provide comfort to BSP. |
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Record ID
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14
[ Page 23 of 23, No. 4 ]
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Date
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2010 |
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Author
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John B. Taylor
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Title
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Does the Crisis Experience Call for a New Paradigm in Monetary Policy? |
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Summary /
Abstract
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This paper shows that the monetary policy paradigm that was in place before the financial crisis worked very well and that the crisis occurred only after policy makers deviated from that paradigm. The paper also evaluates monetary policy during the financial crisis by dividing the crisis into three periods: pre-panic, panic and post-panic. It shows that the extraordinary measures did not work well in the pre-panic or the post-panic periods; instead they helped bring on the panic, even though they may have some positive impact during the panic. The implication of the paper is that the crisis does not call for a new paradigm for monetary policy.
URL: http://d.repec.org/n?u=RePEc:sec:cnstan:0402&r=mon
- http://www.case.com.pl/upload/publikacja_plik/30087204_CNSA_402.pdf |
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Keywords
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financial crisis, monetary policy rule, Taylor rule, quantitative easing |
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URL
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http://d.repec.org/n?u=RePEc:sec:cnstan:0402&r=mon
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Record ID
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16
[ Page 23 of 23, No. 5 ]
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Date
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2010 |
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Author
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Dale F. Gray, Carlos Garcia, Leonardo Luna and Jorge Restrepo
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Affiliation
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International Monetary Fund, Washington D.C.-USA, ILADES-Georgetown University, Universidad Alberto Hurtado, Transelec, Chile), Banco Central de Chile |
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Title
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Incorporating Financial Sector Risk Into Monetary Policy Models: Application to Chile |
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Summary /
Abstract
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This article analyzes whether market-based financial stability indicators (FSIs) should be included in monetary policy models and, if so, how.1 Since the economy and interest rates affect financial sector credit risk, and the financial sector affects the economy, this article builds a model of financial sector vulnerability and integrates it into a macroeconomic framework, typically used for monetary policy analysis. More specifically, should the central bank explicitly include the financial stability indicator in its monetary policy (interest rate) reaction function? This is the most important question to be answered in this article. The alternative would be to react only indirectly to financial risk by reacting to inflation and gross domestic product (GDP) gaps, since they already include the effect that financial factors have on the economy.
URL:http://d.repec.org/n?u=RePEc:ila:ilades:inv229&r=mac |
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Keywords
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financial sector risk, monetary policy models |
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URL
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http://www.economia.uahurtado.cl/pdf/publicaciones/inv229.pdf
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Record ID
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18
[ Page 23 of 23, No. 6 ]
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Date
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2010 |
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Author
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Carlos Garcia and Wildo Gonzalez
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Affiliation
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ILADES-Georgetown University, Universidad Alberto Hurtado and Banco Central de Chile |
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Title
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Is more exchange rate intervention necessary in small open economies? The role of risk premium and commodity shocks |
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Summary /
Abstract
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We estimate how the monetary policy works in small open economies with inflation target. To do so, we build a dynamic stochastic general equilibrium model that incorporates the basic features of these economies. We conclude that the monetary policy in a group of representative small open economies (including Australia, Chile, Colombia, Peru and New Zealand) presents strong differences due to shocks from the international financial markets (risk premium shocks, mainly) that explain mostly the variability of the real exchange rate, which has important reallocation effects in the short run. By using the allocations of the Ramsey problem as benchmark, this article shows that if the central banks in small open economies want to reduce the observed volatility of the inflation rate and the output gap, more exchange rate intervention is necessary in order to reduce the volatility produced by risk premium shocks.
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Keywords
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Small open economies economy models; monetary policy rules; exchange rates; Bayesian econometrics, Risk premium shocks, Ramsey problem. |
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URL
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http://d.repec.org/n?u=RePEc:ila:ilades:inv248&r=mon
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Remarks
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I thought this study may be relevant to the BSP (W. Gonzalez is with the central bank of Chile)... |
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Record ID
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19
[ Page 23 of 23, No. 7 ]
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Date
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2010 |
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Author
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Carlos Garcia, Jorge Restrepo and Scott Roger
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Affiliation
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ILADES-Georgetown University, Universidad Alberto Hurtado, Banco Central de Chile and IMF Institute, International Monetary Fund, Washington D.C.-USA |
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Title
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Hybrid Inflation Targeting Regimes |
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Summary /
Abstract
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This paper uses a DSGE model to examine whether including the exchange rate explicitly in the central bank’s policy reaction function can improve macroeconomic performance. It is found that including an element of exchange rate smoothing in the policy reaction function is helpful both for financially robust advanced economies and for financially vulnerable emerging economies in handling risk premium shocks. As long as the weight placed on exchange rate smoothing is relatively small, the effects on inflation and output volatility in the event of demand and cost-push shocks are minimal. Financially vulnerable emerging economies are especially likely to benefit from some exchange rate smoothing because of the perverse impact of exchange rate movements on activity. |
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Keywords
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Inflation targeting, monetary policy, exchange rate |
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URL
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http://d.repec.org/n?u=RePEc:ila:ilades:inv226&r=mon
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Remarks
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My ex-IMF colleague Scott Roger, has done considerable work on Inflation Targeting |
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Record ID
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20
[ Page 23 of 23, No. 8 ]
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Date
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2010 |
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Author
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Meixing Dai
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Affiliation
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University of Strasbourg, France |
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Title
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Financial Market Imperfections and Monetary Policy Strategy |
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Summary /
Abstract
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In a model with imperfect money, credit and reserve markets, we examine if an inflation-targeting central bank using the funds rate operating procedure to indirectly control market interest rates also needs a monetary aggregate as policy instrument. We show that if private agents use information extracted from money and financial markets to form inflation expectations and if the access to liquidity is subject to non-price rationing, the central bank can use a narrow monetary aggregate and the discount interest rate as independent policy instruments to reinforce the credibility of its announcements and the role of inflation target as nominal anchor for inflation expectations. This study shows how a monetary policy strategy combining inflation targeting and monetary targeting can be conceived to guarantee macroeconomic stability and the credibility of monetary policy. Friedman’s k-percent money growth rule, generating dynamic instability, and two alternative stabilizing feedback monetary targeting rules are examined. |
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Keywords
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Imperfect financial markets, non-price rationing, inflation targeting, monetary targeting, macroeconomic stability, Friedman’s k-percent rule, feedback money growth rules, two-pillar strategy. |
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URL
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http://d.repec.org/n?u=RePEc:ulp:sbbeta:2010-19&r=mon
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Remarks
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The model in this paper is simple enough, yet very informative. It is an attempt to provide a theoretical explanation of the ECB's two-pillar monetary policy strategy |
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Record ID
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21
[ Page 23 of 23, No. 9 ]
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Date
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2010 |
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Author
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Kumar, Manmohan S. ; Woo, Jaejoon
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Title
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Public Debt and Growth |
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Summary /
Abstract
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This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost four decades, takes into account a broad range of determinants of growth as well as various estimation issues including reverse causality and endogeneity. In addition, threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined. The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of growth: on average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year, with the impact being somewhat smaller in advanced economies. There is some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth. Analysis of the components of growth suggests that the adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.
Source: IMF Working Paper No. 10/174 |
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URL
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http://www.imf.org/external/pubs/cat/longres.cfm?sk=24080.0
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Remarks
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The last sentence in the summary below identifies precisely the transmission mechanisms described and analyzed in my book, Macroeconomic Policies for Stable Growth, chapters 3, 5, and 7. |
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Record ID
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23
[ Page 23 of 23, No. 10 ]
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Date
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2010 |
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Author
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Zhang, Yanan; Ji, Lu; Liu, Fei
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Title
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Local Housing Market Cycle and Loss Given Default: Evidence from Sub-Prime Residential Mortgages |
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Summary /
Abstract
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This paper studies the impact of housing market cycles on loss given default (LGD). Previous studies have shown that the current loan-to-value ratio (CLTV) is the most important determinant of LGD. This paper establishes another linkage which is between the house price cycles before the time of mortgage origination and LGD. The empirical analysis is based on a large loan-level sub-prime residential mortgage loss dataset from 1998 to 2009. Results show that house price history has a long memory in explaining LGD. Its explanatory power far exceeds the original LTV and other loan characteristics. This paper offers a countercyclical view of LGD risk. The model can be combined with a default probability model to serve as a regulatory prudential tool. Such a tool provides a solution to the inherent procyclical bias in BASEL II capital requirements, and can contribute to the safety and soundness of banking institutions.
Source: IMF Working Paper No. 10/167 |
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URL
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http://www.imf.org/external/pubs/cat/longres.cfm?sk=24057.0
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Record ID
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25
[ Page 23 of 23, No. 11 ]
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Date
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2010 |
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Author
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Kevin Clinton, Michael Kumhof, Douglas Laxton and Susanna Mursula
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Affiliation
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IMF |
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Title
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Budget Consolidation: Short-Term Pain and Long-Term Gain |
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Summary /
Abstract
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The paper evaluates the costs and benefits of fiscal consolidation using simulations based on the IMFs global DSGE model GIMF. Over the longer run, well-targeted permanent reductions in budget deficits lead to a considerable increase in both the growth rate and the level of output. The gains may be enhanced by shifting some of the tax burden from incomes to consumption. In the short run, credibility plays a crucial role in determining the size of initial output loses. Global current account imbalances would be significantly reduced if budget consolidation was larger in countries with current account deficits.
Source: IMF Working Paper No. 10/163
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URL
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http://www.imf.org/external/pubs/cat/longres.cfm?sk=24044.0
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Record ID
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26
[ Page 23 of 23, No. 12 ]
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Date
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2010 |
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Author
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Gulcin Ozkan, F.; Unsal, D. Filiz
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Title
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External Finance, Sudden Stops, and Financial Crisis: What is Different This Time? |
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Summary /
Abstract
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This paper develops a two-country DSGE model to investigate the transmission of a global financial crisis to a small open economy. We find that economies hit by a sudden stop arising from financial distress in the global economy are likely to face a more prolonged crisis than sudden stop episodes of domestic origin. Moreover, in contrast to the existing literature, our results suggest that the greater a country's trade integration with the rest of the world, the greater the response of its macroeconomic aggregates to a sudden stop of capital flows.
Source: IMF Working Paper No. 10/158: |
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URL
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http://www.imf.org/external/pubs/cat/longres.cfm?sk=24034.0
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Record ID
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28
[ Page 23 of 23, No. 13 ]
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Date
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2010 |
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Author
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Benjamin Friedman and Kenneth Kuttner
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Affiliation
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Harvard University and Williams College |
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Title
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Implementation of Monetary Policy: How Do Central Banks Set Interest Rates? |
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Summary /
Abstract
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Central banks no longer set the short-term interest rates that they use for monetary policy purposes by manipulating the supply of banking system reserves, as in conventional economics textbooks; today this process involves little or no variation in the supply of central bank liabilities. In effect, the announcement effect has displaced the liquidity effect as the fulcrum of monetary policy implementation. The chapter begins with an exposition of the traditional view of the implementation of monetary policy, and an assessment of the relationship between the quantity of reserves, appropriately defined, and the level of short-term interest rates. Event studies show no relationship between the two for the United States, the Euro-system, or Japan. Structural estimates of banks’ reserve demand, at a frequency corresponding to the required reserve maintenance period, show no interest elasticity for the U.S. or the Euro-system (but some elasticity for Japan). The chapter next develops a model of the overnight interest rate setting process incorporating several key features of current monetary policy practice, including in particular reserve averaging procedures and a commitment, either explicit or implicit, by the central bank to lend or absorb reserves in response to differences between the policy interest rate and the corresponding target. A key implication is that if reserve demand depends on the difference between current and expected future interest rates, but not on the current level per se, then the central bank can alter the market-clearing interest rate with no change in reserve supply. This implication is borne out in structural estimates of daily reserve demand and supply in the U.S.: expected future interest rates shift banks’ reserve demand, while changes in the interest rate target are associated with no discernable change in reserve supply. The chapter concludes with a discussion of the implementation of monetary policy during the recent financial crisis, and the conditions under which the interest rate and the size of the central bank’s balance sheet could function as two independent policy instruments. |
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Keywords
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Reserve supply, reserve demand, liquidity effect, announcement effect |
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URL
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http://d.repec.org/n?u=RePEc:wil:wileco:2010-03&r=mac
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Record ID
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48
[ Page 23 of 23, No. 15 ]
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Date
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2009-12 |
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Author
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Morten L. Bech and Elizabeth Klee
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Affiliation
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Federal Reserve Bank of New York |
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Title
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The Mechanics of a Graceful Exit: Interest on Reserves and Segmentation in the Federal Funds Market |
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Summary /
Abstract
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To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds rate began to deviate from the target rate set by the Federal Open Market Committee. In response, the Federal Reserve revised its operational framework for implementing monetary policy and began to pay interest on reserve balances in an attempt to provide a floor for the federal funds rate. Nevertheless, following the policy change, the effective federal funds rate remained below not only the target but also the rate paid on reserve balances. We develop a model to explain this phenomenon and use data from the federal funds market to evaluate it empirically. In turn, we show how successful the Federal Reserve may be in raising the federal funds rate even in an environment with substantial reserve balances.
Source: NY Fed Staff Report no. 416 December 2009 |
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Keywords
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federal funds, segmentation, interest on reserves, corridor system, exit strategy |
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Record ID
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40
[ Page 23 of 23, No. 16 ]
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Date
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2009 |
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Author
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David Parsley and Helen Popper
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Affiliation
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Vanderbilt University and Santa Clara University |
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Title
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Evaluating Exchange Rate Management An Application to Korea |
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Summary /
Abstract
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This paper uses data-rich estimation techniques to study monetary policy in an open economy. We apply the techniques to a small, forward-looking model and explore the importance of the exchange rate in the monetary policy rule. This approach allows us to discern whether a monetary authority targets the exchange rate per se, or instead simply responds to the exchange rate in order to achieve its other objectives. The approach also removes a downward bias on the estimate of the extent of inflation targeting. We find that this bias is important in the case of Korea, a de jure inflation targeter. In contrast to previous studies, our findings suggest that the Bank of Korea actively targets inflation, not the exchange rate. Apparently, the exchange rate has been only indirectly important in Korea's monetary policy.
Source: HKIMR Working Paper No.28/2009 |
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URL
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http://www.hkimr.org/view_attachment.asp?type=23&id=223
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Remarks
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This is a useful empirical study on the role of the exchange rate in the monetary policy rule of an IT country. I venture to guess that the authors' conclusion that BoK targets inflation and not the exchange rate is equally applicable to the BSP; of course, this can be tested with Philippine data using the same forward-looking model and estimation techniques of this paper. |
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Record ID
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34
[ Page 23 of 23, No. 17 ]
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Date
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2006-08 |
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Author
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V. V. Chari and Patrick J. Kehoe
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Affiliation
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University of Minnesota and Federal Reserve Bank of Minneapolis |
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Title
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Modern Macroeconomics in Practice: How Theory Is Shaping Policy |
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Summary /
Abstract
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Theoretical advances in macroeconomics made in the last three decades have had a major influence on macroeconomic policy analysis. Moreover, over the last several decades, the United States and other countries have undertaken a variety of policy changes that are precisely what macroeconomic theory of the last 30 years suggests. The three key developments that have shaped macroeconomic policy analysis are the Lucas critique of policy evaluation due to Robert Lucas, the time inconsistency critique of discretionary policy due to Finn Kydland and Edward Prescott, and the development of quantitative dynamic stochastic general equilibrium models following Finn Kydland and Edward Prescott.
Source: Federal Reserve Bank of Minneapolis, Research Department Staff Report 376 |
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URL
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http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=1093
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Remarks
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This is another useful survey of theoretical developments in the last 30 years that have shaped macroeconomic and central banking policies, written by Chari and Kehoe of the University of Minnesota and the Fed Res Bank of Minneapolis. |
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