nep-cba New Economics Papers
on Central Banking
Issue of 2005‒01‒16
five papers chosen by
Roberto Santillan

  1. European Monetary Union: Nominal Convergence, Real Divergence and Slow Growth? An investigation into the effects of changing macroeconomic policy institutions associated with monetary union By Eckhard Hein; Achim Truger
  2. Monetary Policy and Wage Bargaining in the EMU: Restrictive ECB Policies, High Unemployment, Nominal Wage Restraint and Rising Inflation By Eckhard Hein
  3. Forecasting Austrian Inflation By Gabriel Moser; Fabio Rumler; Johann Scharler
  4. Monetary Policy Shocks and the Role of House Prices Across European Countries By Massimo Giuliodori
  5. Exchange Rate Regimes Past, Present and Future By Michael D. Bordo; Josef Christl; Christian Just; Harold James

  1. By: Eckhard Hein (WSI in der Hans Böckler Stiftung); Achim Truger (WSI in der Hans Böckler Stiftung)
    Abstract: It is by now widely accepted that the structural characteristics of the countries to become the euro area did not adhere to the conditions of an optimum currency area (OCA) when the euro was introduced in 1999. However, the satisfaction of OCA criteria may not be required for a workable currency union, because the criteria have to rely on a very restrictive concept of money and their satisfaction may be largely endogenous to shifts in the economic policy regime. Growth and convergence of prosperity across a currency union rather depend on the appropriate macroeconomic policy institutions. Therefore, in this paper the effects of the new EMU institutional framework for monetary, fiscal and wage policies on overall growth and on convergence across the euro area are analysed. It is concluded that not only the period of nominal convergence towards EMU but also the initial period of the euro area has suffered from a rather restrictive macroeconomic policy mix which has neither been conducive to aggregate growth nor to real convergence across the euro area. In order to improve growth and convergence some major institutional reforms seem to be required.
    Keywords: European Monetary Union, nominal convergence, real convergence, macroeconomic policy mix
    JEL: E
    Date: 2005–01–07
  2. By: Eckhard Hein (WSI in der Hans Böckler Stiftung)
    Abstract: Assessing the effects of monetary policy and wage bargaining on employment and inflation in the European Monetary Union (EMU), in the first step a Post-Keynesian competitive claims model of inflation with endogenous money is developed. In this model the NAIRU is considered to be a short-run limit to employment enforced by independent and conservative central banks. In the long run, however, the NAIRU will follow actual unemployment and is therefore also dependent on the forces determining aggregate demand, including monetary policies. But the NAIRU may also be reduced by effectively co-ordinated wage bargaining as has been shown by institutional political economists. Applying these considerations to the economic performance of the EMU, different scenarios determined by wage bargaining co-ordination and the European Central Bank’s (ECB) monetary policies are developed. It is shown that the first phase of EMU was dominated by uncoordinated wage bargaining across EMU and an “anti-growth-bias” of the ECB. Therefore, the Euro area was plagued with nominal wage restraint, high unemployment and rising inflation. Economic performance will improve if the ECB abandons its asymmetric monetary strategy. This may be facilitated by a higher degree of effective wage bargaining co-ordination across EMU.
    Keywords: European Monetary Union, monetary policy, wage bargaining, inflation and employment
    JEL: E
    Date: 2005–01–07
  3. By: Gabriel Moser (Oesterreichische Nationalbank, Foreign Research Department, Otto-Wagner Platz 3, POB 61, A-1011 Vienna); Fabio Rumler (Oesterreichische Nationalbank, Economic Analysis Division); Johann Scharler (Oesterreichische Nationalbank, Economic Analysis Division)
    Abstract: In this paper we apply factor models proposed by Stock and Watson [18] and VAR and ARIMA models to generate 12-month out of sample forecasts of Austrian HICP inflation and its subindices processed food, unprocessed food, energy, industrial goods and services price inflation. A sequential forecast model selection procedure tailored to this specific task is applied. It turns out that factor models possess the highest predictive accuracy for several subindices and that predictive accuracy can be further improved by combining the information contained in factor and VAR models for some indices. With respect to forecasting HICP inflation, our analysis suggests to favor the aggregation of subindices forecasts. Furthermore, the subindices forecasts are used as a tool to give a more detailed picture of the determinants of HICP inflation from both an ex-ante and ex-post perspective.
    Keywords: Inflation Forecasting, Forecast Model selection, Aggregation
    JEL: C52 C53 E31
    Date: 2004–10–04
  4. By: Massimo Giuliodori
    Abstract: This paper provides a discussion of the `housing market' channels of the monetarytransmission mechanism (MTM) and offers some evidence on institutional differences in the European housing and mortgage markets. Using a number of VAR models, estimated individually for nine European countries over the pre-EMU period, we find that house prices are significantly affected by monetary policy shocks. The relative role of these policy-induced fluctuations in house prices for private consumption is then investigated. We show that house prices may enhance the effects of monetary shocks on consumer spending in those economies where housing and mortgage markets are relatively more developed and competitive.
    Keywords: Monetary transmission; house prices; impulse responses.
    JEL: C32 E21 E52 R21
    Date: 2004–11
  5. By: Michael D. Bordo (Department of Economics, Rutgers University); Josef Christl (Oesterreichische Nationalbank, Managing Director); Christian Just (Oesterreichische Nationalbank, European Affaires and International Financial Organizations Division); Harold James (Department of Economics, Princeton University)
    Date: 2004–11–03

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