Record ID

649     [ Page 5 of 68, No. 1 ]

Date

2016-07

Author

Michelle Lewis and John McDermott

Affiliation

Reserve Bank of New Zealand

Title

New Zealand's experience with changing its inflation target and the impact on inflation expectations

Summary /
Abstract

We document the experience of the Reserve Bank of New Zealand in changing its inflation target, particularly the effects on inflation expectations. Firstly, the Reserve Bank of New Zealand's DSGE model is used to highlight expectation-formation in the transmission following a change in the inflation target. Secondly, a Nelson-Siegel model is used to combine a number of inflation expectation surveys into a continuous curve where expectations can be plotted as a function of the forecast horizon. Using estimates of long-run inflation expectations derived from the Nelson-Siegel model, we find that numerical changes in the inflation target result in an immediate change in inflation expectations.

Keywords

Inflation target, inflation expectations

URL

http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Discussion%20papers/2016/dp16-07.pdf

Record ID

648     [ Page 5 of 68, No. 2 ]

Date

2016-05

Author

Nicoletta Batini, Giovanni Melina, and Stefania Villa

Affiliation

European Department, IMF, Research Department, IMF, and University of Foggia & KU Leuven

Title

Fiscal Buffers, Private Debt, and Stagnation: The Good, the Bad and the Ugly

Summary /
Abstract

We revisit the empirical relationship between private/public debt and output, and build a model that reproduces it. In the model, the government provides financial assistance to credit-constrained agents to mitigate deleveraging. As we observe in the data, surges in private debt are potentially more damaging for the economy than surges in public debt. The model suggests two policy implications. First, capping leverage leads to milder recessions, but also implies more muted expansions. Second, with fiscal buffers, financial assistance to credit-constrained agents helps avoid stagnation. The growth returns from intervention decline as the government approaches the fiscal limit.

Keywords

Private debt, public debt, borrowing constraints, fiscal limits, DSGE

URL

http://www.imf.org/external/pubs/ft/wp/2016/wp16104.pdf

Record ID

647     [ Page 5 of 68, No. 3 ]

Date

2016-03

Author

Iversen, Jens; Laséen, Stefan; Lundvall, Henrik; and Söderström, Ulf

Affiliation

Monetary Policy Department, Central Bank of Sweden; International Monetary Fund; National Institute of Economic Research; Monetary Policy Department, Central Bank of Sweden

Title

Real-Time Forecasting for Monetary Policy Analysis: The Case of Sveriges Riksbank

Summary /
Abstract

We evaluate forecasts made in real time to support monetary policy decisions at Sveriges Riksbank (the central bank of Sweden) from 2007 to 2013. We compare forecasts made with a DSGE model and a BVAR model with judgmental forecasts published by the Riksbank, and we evaluate the usefulness of conditioning information for the model-based forecasts. We also study the perceived usefulness of model forecasts for central bank policymakers when producing the judgmental forecasts.

Keywords

Real-time forecasting; Forecast evaluation; Monetary policy; Inflation targeting

URL

http://www.riksbank.se/Documents/Rapporter/Working_papers/2016/rap_wp318_160323.pdf

Record ID

646     [ Page 5 of 68, No. 4 ]

Date

2016-04

Author

Boyarchenko, Nina; Haddad, Valentin; and Plosser, Matthew

Affiliation

Federal Reserve Bank of New York; Princeton University; and Federal Reserve Bank of New York

Title

The Federal Reserve and market confidence

Summary /
Abstract

We discover a novel monetary policy shock that has a widespread impact on aggregate financial conditions. Our shock can be summarized by the response of long-horizon yields to Federal Open Market Committee (FOMC) announcements; not only is it orthogonal to changes in the near-term path of policy rates, but it also explains more than half of the abnormal variation in the yield curve on announcement days. We find that our long-rate shock is positively related to changes in real interest rates and market volatility, and negatively related to market returns and mortgage demand, consistent with policy announcements affecting market confidence. Our results demonstrate that Federal Reserve pronouncements influence markets independent of changes in the stance of conventional monetary policy.

Keywords

Policy announcement; risk premium; uncertainty; financial conditions

URL

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr773.pdf?la=en

Record ID

645     [ Page 5 of 68, No. 5 ]

Date

2016-03

Author

Kashiwabara, Chie

Affiliation

Institute of Developing Economies, Japan

Title

Asset composition of the Philippines' universal and commercial banks : monetary policy or self-discipline?

Summary /
Abstract

The central bank of the Philippines (Bangko Sentral ng Pilipinas, BSP) has improved its monetary policy measures since the 2000s. After rationalizing the country's banking sector since late-1990s, its monetary policy and the uniiversal/commercial banks' (UCBs) behavior in allocating their assets has changed since mid-2000s. Though further and more detailed studies are nesessary, based on the results of simple correlation analyses conducted in this paper suggest a possible mixture of the country's monetary policy and their own decision-making in asset allocations, instead of a "follow-through" attitude.

Keywords

Monetary policy, Banks, Monetary policy measure, Universal and commercial banks, The Philippines

URL

http://ir.ide.go.jp/dspace/bitstream/2344/1540/1/ARRIDE_Discussion_No.586_kashiwabara.pdf

Record ID

644     [ Page 5 of 68, No. 6 ]

Date

2016-01

Author

Lars E. O. Svensson

Affiliation

Research Department, International Monetary Fund

Title

Cost-Benefit Analysis of Leaning Against the Wind : Are Costs Larger Also with Less Effective Macroprudential Policy?

Summary /
Abstract

“Leaning against the wind” (LAW) with a higher monetary policy interest rate may have benefits in terms of lower real debt growth and associated lower probability of a financial crisis but has costs in terms of higher unemployment and lower inflation, importantly including a higher cost of a crisis when the economy is weaker. For existing empirical estimates, costs exceed benefits by a substantial margin, even if monetary policy is non-neutral and permanently affects real debt. Somewhat surprisingly, less effective macro-prudential policy and generally a credit boom, with resulting higher probability, severity, or duration of a crisis, increases costs of LAW more than benefits, thus further strengthening the strong case against LAW.

Keywords

Monetary policy, financial stability, macroprudential policy

URL

http://www.imf.org/external/pubs/ft/wp/2016/wp1603.pdf

Record ID

643     [ Page 5 of 68, No. 7 ]

Date

2015-12

Author

Zeyyad Mandalinci

Affiliation

Queen Mary University of London

Title

Forecasting Inflation in Emerging Markets: An Evaluation of Alternative Models

Summary /
Abstract

This paper carries out a comprehensive forecasting exercise to assess out-of-sample forecasting performance of various econometric models for inflation across three dimensions; time, emerging market countries and models. The competing forecasting models include univariate and multivariate, fixed and time varying parameter, constant and stochastic volatility, small and large dataset, with and without bayesian variable selection models. Results indicate that the forecasting performance of different models change notably both across time and countries. Similar to some of the recent findings of the literature that focus on developed countries, models that account for stochastic volatility and time-varying parameters provide more accurate forecasts for inflation than alternatives in emerging markets.

Keywords

Forecasting, Bayesian Analysis, Emerging Markets, Forecast Comparison

URL

http://d.repec.org/n?u=RePEc:qmm:wpaper:3&r=mon

Record ID

642     [ Page 5 of 68, No. 8 ]

Date

2012-12

Author

Bullard, James B.

Affiliation

President and CEO, Federal Reserve Bank of St. Louis

Title

A Hat Trick for the FOMC

Summary /
Abstract

At Ball State University in Muncie, Ind., St. Louis Fed President James Bullard assessed the Federal Open Market Committee's forecasts running up to 2015 and discussed implications for monetary policy. He said that the forecasts look to have missed on all three key variables—real GDP growth, unemployment and inflation—and that the misses are such that they continue to pull the committee in different directions on monetary policy.

Keywords

Forecasting growth, unemployment, and inflation; monetary policy

URL

https://www.stlouisfed.org/~/media/Files/PDFs/Bullard/remarks/Bullard-Muncie-IN-7Dec2015.pdf

Record ID

641     [ Page 5 of 68, No. 9 ]

Date

2015-12

Author

Michael Woodford and Vasco Curdia

Affiliation

CEPR and 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 characterizes 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. Such a flexible inflation target" can be implemented by a central-bank reaction function that is similar to a forward-looking Taylor rule, but adjusted for changes in current and expected future credit spreads.

Keywords

Credit spreads; flexibllation targeting; policy rules; quadratic loss function; target criterion

URL

http://d.repec.org/n?u=RePEc:cpr:ceprdp:11016&r=cba

Record ID

640     [ Page 5 of 68, No. 10 ]

Date

2015-10

Author

Claude Lopez, Donald Markwardt, and Keith Savard

Affiliation

Milken Institute

Title

Macroprudential Policy: What Does It Really Mean

Summary /
Abstract

As many central banks contemplate the normalization of monetary policy, their focus is turning to the promise of macroprudential policy as a tool to manage possible future systemic risk in financial markets. Janet Yellen and Mario Draghi, among others, are pinning much of their hopes for managing financial stability in the context of Basel III on macroprudentialism. Despite central banks’ clear intention that this policy will play a significant role in developed economies, few policymakers or financial players know what macroprudential policy is, much less how to assess its efficacy or necessity. The paper is a shorter version of a report on the same subject. It aims to clarify the concept of macroprudential policy for a broader audience, cultivating a better understanding of these tools and their implications for broader monetary policy going forward.

Keywords

Macroprudential, Systemic Risk

URL

https://mpra.ub.uni-muenchen.de/68157/1/MPRA_paper_68157.pdf