nep-cba New Economics Papers
on Central Banking
Issue of 2009‒01‒17
27 papers chosen by
Alexander Mihailov
University of Reading

  1. Financial Structure and the Impact of Monetary Policy on Asset Prices By Assenmacher-Wesche, Katrin; Gerlach, Stefan
  2. Stock Prices and Economic Fluctuations: A Markov Switching Structural Vector Autoregressive Analysis By Markku Lanne; Helmut Luetkepohl
  3. Deep Habits and the Dynamic Effects of Monetary Policy Shocks By Morten O. Ravn; Stephanie Schmitt-Grohe; Martín Uribe; Lenno Uuskula
  4. A Resolution of the Purchasing Power Parity Puzzle: Imperfect Knowledge and Long Swings By Roman Frydman; Michael D. Goldberg; Søren Johansen; Katarina Juselius
  5. Net Foreign Assets, Productivity and Real Exchange Rates in Constrained Economies By Dimitris K. Christopoulos; Karine Gente; Miguel A. Leon-Ledesma
  6. Is the financial crisis causing a recession? By Tatom, John
  7. Classifying Monetary Economics: Fields and Methods from Past to Future By Philip Arestis; Alexander Mihailov
  8. Intergenerational Transmission of Inflation Aversion: Theory and Evidence By Etienne Farvaque; Alexander Mihailov
  9. The Small Open-Economy New Keynesian Phillips Curve: Empirical Evidence and Implied Inflation Dynamics By Alexander Mihailov; Fabio Rumler; Johann Scharler
  10. Independence and Accountability of Monetary and Fiscal Policy Committees By Alexander Mihailov; Katrin Ullrich
  11. Quest for the best: How to measure central bank independence and show its relation with inflation? By Aleksandra Maslowska
  12. Fiscal sustainability and policy implications for the euro area By Fabrizio Balassone; Jorge Cunha; Geert Langenus; Bernhard Manzke; Jeanne Pavot; Doris Prammer; Pietro Tommasino
  13. Tradeoff between Inflation Stabilization and Growth Maximization By Hiroki Arato
  14. Optimal Operational Monetary Policy Rules in an Endogenous Growth Model: a calibrated analysis By Hiroki Arato
  15. Budgetary Policies in a DSGE Model with Finite Horizons By Annicchiarico, Barbara; Giammarioli, Nicola; Piergallini, Alessandro
  16. Inventories, Markups, and Real Rigidities in Menu Cost Models By Oleksiy Kryvtsov; Virgiliu Midrigan
  17. Term structure and the estimated monetary policy rule in the eurozone By Ramón María-Dolores; Jesús Vázquez
  18. Forecasting Exchange Rates with a Large Bayesian VAR By A. Carriero; G. Kapetanios; M. Marcellino
  19. Tax, Credit Constraints, and the Big Costs of Small Inflation By Andrew Coleman
  20. Trade Prices and the Euro By Julien Martin; Isabelle Mejean
  21. Sterling in crisis: 1964–1967 By Michael D. Bordo; Ronald MacDonald; Michael J. Oliver
  22. What Drives the Swiss Franc? By Reynard, Samuel
  23. Price-Setting Behaviour in Switzerland Evidence from CPI Micro Data By Kaufmann, Daniel
  24. Public and private sector wages:comovement and casuality By Ana Lamo; Javier J. Pérez; Ludger Schuknecht
  25. On What Terms Is the IMF Worth Funding? By Edwin M. Truman
  26. Some Reflections on the Recent Global Financial Turmoil – an Indian Perspective By Shyamala Gopinath
  27. Bank Lending Channel of Monetary Policy: Evidence for Colombia, Using a Firms´ Panel By José E. Gómez González; Paola Morales Acevedo

  1. By: Assenmacher-Wesche, Katrin (Swiss National Bank); Gerlach, Stefan (Goethe University, Frankfurt)
    Abstract: We study the responses of residential property and equity prices, inflation and economic activity to monetary policy shocks in 17 countries, using data spanning 1986-2006, using single-country VARs and panel VARs in which we distinguish between groups of countries depending on their financial systems. The effect of monetary policy on property prices is only about three times as large as its impact on GDP. Using monetary policy to guard against financial instability by offsetting asset-price movements thus has sizable effects on economic activity. While the financial structure influences the impact of policy on asset prices, its importance appears limited.
    Keywords: asset prices; monetary policy; panel VAR
    JEL: C23 E52
    Date: 2008–09–10
  2. By: Markku Lanne; Helmut Luetkepohl
    Abstract: The role of expectations for economic fluctuations has received considerable attention in recent business cycle analysis. We exploit Markov regime switching models to identify shocks in cointegrated structural vector autoregressions and investigate different identification schemes for bivariate systems comprising U.S. stock prices and total factor productivity. The former variable is viewed as re°ecting expectations of economic agents about future productivity. It is found that some previously used identification schemes can be rejected in our model setup. The results crucially depend on the measure used for total factor productivity.
    Keywords: Cointegration, Markov regime switching model, vector error correction model, structural vector autoregression, mixed normal distribution
    JEL: C32
    Date: 2008
  3. By: Morten O. Ravn; Stephanie Schmitt-Grohe; Martín Uribe; Lenno Uuskula
    Abstract: This paper introduces deep habits into a sticky-price sticky-wage economy and asks whether the countercyclical markup movements induced by deep habits is helpful for accounting for the dynamic effects of monetary policy shocks. We find that this is the case: When allowing for deep habits, the model can account very precisely for the persistent impact of monetary policy shocks on aggregate consumption and for the impact on inflation that other models have hard a time explaining. In particular, the model can account both for the price puzzle and for inflation persistence. We also show that the deep habits mechanism and nominal rigidities are complementary: The deep habits model can account for the dynamic effects of monetary policy shock at low to moderate levels of nominal rigidities. We show that the results are stable over time and are not caused by monetary policy changes.
    Keywords: deep habits, monetary policy, price puzzle, inflation persistence, countercyclical markups
    JEL: E21 E31 E32 E52
    Date: 2008
  4. By: Roman Frydman; Michael D. Goldberg; Søren Johansen; Katarina Juselius (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: Asset prices undergo long swings that revolve around benchmark levels. In currency markets, fluctuations involve real exchange rates that are highly persistent and that move in near-parallel fashion with nominal rates. The inability to explain these two regularities with one model has been called the "purchasing power parity puzzle." In this paper, we trace the puzzle to exchange rate modelers' use of the "Rational Expectations Hypothesis." We show that once imperfect knowledge is recognized, a monetary model is able to account for the puzzle, as well as other salient features of the data, including the long-swings behavior of exchange rates.
    Keywords: PPP puzzle, long swings, imperfect knowledge, rational expectations hypothesis
    JEL: F31 F41 G15
    Date: 2009–01–12
  5. By: Dimitris K. Christopoulos (Panteion University); Karine Gente (University of Aix-Marseilles); Miguel A. Leon-Ledesma (University of Kent)
    Abstract: Empirical evidence suggests that real exchange rates (RER) behave differently in developed and developing countries. We develop an exogenous 2-sector growth model in which RER determination depends on the country's capacity to borrow from international capital markets. The country faces a constraint on capital inflows. With high domestic savings, the country converges to the world per capita income and RER only depends on productivity spread between sectors (Balassa-Samuelson effect). If the constraint is too tight and/or domestic savings too low, RER depends on both net foreign assets (transfer effect) and productivity. We then analyze the empirical implications of the model and find that, in accordance with the theory, RER is mainly driven by productivity and net foreign assets in constrained countries and exclusively by productivity in unconstrained countries.
    Keywords: Real exchange rate; capital inflows constraint; overlapping generations
    JEL: E39 F32 F41
    Date: 2008–10
  6. By: Tatom, John
    Abstract: The U.S. entered a recession in December 2007. Coming in train with a foreclosure crisis that began in late 2006 and its associated financial crisis that began in August 2007, there is a tendency for analysts to attribute the recession to the financial crisis. The worst aspects of the financial crisis that attract attention today did not begin until September 2008 well after the recession began. Other factors account for the recession and could portend the imminent end to the current recession. A leading candidate for the cause of the current recession is the Federal Reserve (Fed). The Fed has caused every post-world war II recession, according to most experts, especially Milton Friedman. In late 2006 there already were signs of a sharp slowing in money growth in place portending recession; see Tatom (2006). This slowing lasted until September 2008. The recent recession has also been influenced by sharp increase in oil prices in 2007-08 that raised the relative price of energy. Subsequently, oil prices fell sharply. Thus, like the monetary policy influence, the energy price shock influence on the recession is in the process of rapidly disappearing and reversing. This is similar to the oil price shock related to the first Kuwait-Iraq war in 1990-91 when a larger and faster run-up in oil prices created a recession followed by a quick reversal of oil prices and economic recovery. Oil prices are falling faster in the current recession from their peak in July 2008. If the Fed caused the current recession and energy prices made it worse and longer, and if there were no other factors influencing it, then a quick end could be in sight, in the first or second quarter of 2009.
    Keywords: Financial crisis; recession; monetary policy; oil price shocks
    JEL: E30 E52 E44
    Date: 2008–12–19
  7. By: Philip Arestis (Department of Land Economy, University of Cambridge); Alexander Mihailov (Department of Economics, University of Reading)
    Abstract: We propose a simple, yet sufficiently encompassing classification scheme of monetary economics. It comprises three fundamental fields and six recent areas that expand within and across these fields. The elements of our scheme are not found together and in their mutual relationships in earlier studies of the relevant literature, neither is this an attempt to produce a relatively complete systematization. Our intention in taking stock is not finality or exhaustiveness. We rather suggest a viewpoint and a possible ordering of the accumulating knowledge. Our hope is to stimulate an improved understanding of the evolving nature and internal consistency of monetary economics at large.
    Keywords: monetary economics, monetary theory, monetary policy, public finance, classification, methodology
    JEL: E40 E50 E60
    Date: 2008
  8. By: Etienne Farvaque (Equippe - Universités de Lille, and DULBEA - Université Libre de Bruxelles.); Alexander Mihailov (School of Economics, University of Reading)
    Abstract: We study the evolution of inflation aversion preferences across generations. In the theoretical part of the paper, we analyze the dynamics of such preferences in an overlapping-generations model with heterogenous mature agents characterized by different degrees of inflation aversion. We show how the stability of a society’s degree of inflation aversion depends on the strength and speed of changes in the structure of the population. The empirical part then proposes two applications in support of the theoretical results. We first link demographic structures to inflation aversion, and then proceed by looking at the relations between income (in)equality and measures of inflation aversion.
    Keywords: Intergenerational transmission, evolving preferences, inflation aversion, central bank independence, demographic change, income inequality
    JEL: E24 E31 E58 J10
    Date: 2008
  9. By: Alexander Mihailov (School of Economics, University of Reading); Fabio Rumler (Economic Analysis Division, Oesterreichische Nationalbank); Johann Scharler (Department of Economics, University of Linz)
    Abstract: This paper applies GMM estimation to assess empirically the small open-economy New Keynesian Phillips Curve derived in Galí and Monacelli (2005). We obtain a testable specification where fluctuations in the terms of trade enter explicitly, thus allowing a comparison of the relevance of domestic versus external determinants of CPI inflation dynamics. For most countries in our sample the expected relative change in the terms of trade emerges as a more relevant inflation driver than the contemporaneous domestic output gap. Overall, our results indicate some, albeit moderate, support for the tested relationship based on data from ten OECD countries typically classified as open economies.
    Keywords: New Keynesian Phillips Curve, small open economies, terms of trade fluctuations, inflation dynamics, GMM estimation
    JEL: C32 C52 E31 F41
    Date: 2008
  10. By: Alexander Mihailov (School of Economics, University of Reading); Katrin Ullrich (Centre for European Economic Research, Mannheim)
    Abstract: The democratic accountability of policymaking institutions which are autonomous within delegated mandates has not received as much attention as their independence. We analyze in a theoretical model the effects of accountability inthe form of possible overriding of economic policy decisions by the government under different degrees of independence of expert committees conducting monetary and fiscal policy. The equilibrium outcomes of such alternative institution-design frameworks are compared according to key macroeconomic performance criteria. Our results stress the trade-off between anchoring inflation expectations on target and output stabilization that is not solved with accountability.
    Keywords: independence, accountability, monetary policy, fiscal policy, expert committees, institution design
    JEL: E52 E58 E61 E63
    Date: 2008
  11. By: Aleksandra Maslowska (Department of Economics, University of Turku)
    Abstract: We use several numerical tests in order to receive answers to our three questions. First, this paper aims to indicate, which measure of central bank independence explains economic changes the most accurately, and hence gives the most exact guidance onto institutional design of monetary authorities. Second, our aim is to prove that differences in legal proxies matter as much as institutional development of countries. Finally, we show that results are vulnerable to data modification. This experiment is performed by an empirical verification of the quality of CBI indices, comparing several widely used measures for around 100 countries, using a panel data approach. After a brief description of imprecision in CBI measures methodology and their definitions, a comparison using OLS method is made. Additional tests of TSLS, PCA and stepwise selection are used, as well. In the final conclusion we are able to point the ``winner'' of this experiment but also we indicate that a minor modification of data can change the result.
    Keywords: institution, central bank independence, panel data
    JEL: E42 E50
    Date: 2008–09
  12. By: Fabrizio Balassone (Banca d’Italia, Via Nazionale 91, I-00184 Rome, Italy.); Jorge Cunha (Banco de Portugal, 148, Rua do Comercio, P-1101 Lisbon Codex, Portugal.); Geert Langenus (Corresponding author: National Bank of Belgium, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.); Bernhard Manzke (Deutsche Bundesbank, Wilhelm-Epstein-Strasse 14, D-60431 Frankfurt am Main, Germany.); Jeanne Pavot (Banque de France, 39, rue Croix-des-Petits-Champs, F-75049 Paris Cedex 01, France.); Doris Prammer (Oesterreichische Nationalbank, Otto Wagner Platz 3 / Postfach 61, A-1011 Vienna, Austria and European Commission.); Pietro Tommasino (Banca d’Italia, Via Nazionale 91, I-00184 Rome, Italy.)
    Abstract: In this paper we examine the sustainability of euro area public finances against the backdrop of population ageing. We critically assess the widely used projections of the Working Group on Ageing Populations (AWG) of the EU's Economic Policy Committee and argue that ageing costs may be higher than projected in the AWG reference scenario. Taking into account adjusted headline estimates for ageing costs, largely based upon the sensitivity analysis carried out by the AWG, we consider alternative indicators to quantify sustainability gaps for euro area countries. With respect to the policy implications, we assess the appropriateness of different budgetary strategies to restore fiscal sustainability taking into account intergenerational equity. Our stylised analysis based upon the lifetime contribution to the government's primary balance of different generations suggests that an important degree of pre-funding of the ageing costs is necessary to avoid shifting the burden of adjustment in a disproportionate way to future generations. For many euro area countries this implies that the medium-term targets defined in the context of the revised stability and growth pact would ideally need to be revised upwards to significant surpluses. JEL Classification: H55, H60.
    Keywords: Population ageing, fiscal sustainability, generational accounting, mediumterm objectives for fiscal policy.
    Date: 2009–01
  13. By: Hiroki Arato (Japan Society for the Promotion of Science and Graduate School of Economics, Kyoto University)
    Abstract: This paper analyzes monetary policy implication in an endogenous growth model in which the average growth rate is inefficiently low and in which the capital accumulation technology is concave. This paper does two exercises. First, we derive the utility-based welfare criterion of the model. The welfare measure suggests that even if the natural rate of growth moves parallel to its efficient rate, the increase of inflation volatility may improve welfare through the increase of average growth. Second, we test this hypothesis numerically and show that in our calibrated model the tradeoff between inflation stabilization and average growth maximization exists. In addition, the tradeoff is resolved by highly growth-stimulating (investment stabilization) policy. The reason is the existence of concavity in the capital accumulation technology, through which investment stabilization rises average growth.
    Keywords: Endogenous Growth; Monetary Stabilization Policy
    JEL: E3
    Date: 2009–01
  14. By: Hiroki Arato (Japan Society for the Promotion of Science and Graduate School of Economics, Kyoto University)
    Abstract: This paper constructs an endogenous growth New Keynesian model and considers growth and welfare effect of Taylor-type (operational) monetary policy rules. The Ramsey equilibrium and optimal operational monetary policy rule is also computed. In the calibrated model, the Ramseyoptimal volatility of inflation rate is smaller than that in standard exogenous growth New Keynesian model with physical capital accumulation. Optimal operational monetary policy rule makes nominal interest rate respond strongly to inflation and mutely to real activity, as in standard New Keynesian model. Growth-maximizing operational monetary policy is not identical to optimal operational monetary policy. Welfare cost of responding to real activity is two or three times larger than that of exogenous growth New Keynesian model.
    Keywords: Monetary policy, Sticky price, Endogenous growth
    JEL: E31 E52 O41
    Date: 2009–01
  15. By: Annicchiarico, Barbara; Giammarioli, Nicola; Piergallini, Alessandro
    Abstract: This paper presents a dynamic stochastic general equilibrium model with nominal rigidities, capital accumulation and finite horizons. Our New Keynesian framework exhibits intergenerational wealth effects and is intended to investigate the macroeconomic implications of fiscal policy, which is specified by either a debt-based tax rule or a balanced-budget rule allowing for temporary deficits. When calibrated to euro area quarterly data, the model predicts that fiscal expansions generate a trade-off in output dynamics between short-term gains and medium-term losses. It is shown that the effects of fiscal shocks crucially depend upon the conduct of monetary policy. Simulation analysis suggests that balanced-budget requirements enhance the determinacy properties of feedback interest rate rules by guaranteeing inflation stabilization.
    Keywords: Fiscal Policy; Monetary Policy; Nominal Rigidities; Capital Accumulation; Finite Lifetime; Simulations.
    JEL: E52 D58 E63
    Date: 2009–01
  16. By: Oleksiy Kryvtsov; Virgiliu Midrigan
    Abstract: Real rigidities that limit the responsiveness of real marginal cost to output are a key ingredient of sticky price models necessary to account for the dynamics of output and inflation. We argue here, in the spirit of Bils and Kahn (2000), that the behavior of marginal cost over the cycle is directly related to that of inventories, data on which is readily available. We study a menu cost economy in which firms hold inventories in order to avoid stockouts and to economize on fixed ordering costs. We find that, for low rates of depreciation similar to those in the data, inventories are highly sensitive to changes in the cost of holding and acquiring them over the cycle. This implies that the model requires an elasticity of real marginal cost to output approximately equal to the inverse of the elasticity of intertemporal substitution in order to account for the countercyclical inventory-to-sales ratio in the data. Stronger real rigidities lower the cost of acquiring and holding inventories during booms and counterfactually predict a procyclical inventory-to-sales ratio.
    JEL: E31 E32
    Date: 2009–01
  17. By: Ramón María-Dolores (Universidad de Murcia); Jesús Vázquez (Euskal Herriko Unibertsitatea)
    Abstract: In this paper we estimate a standard version of the New Keynesian Monetary (NKM) model augmented with term structure in order to analyze two issues. First, we analyze the effect of introducing an explicit term structure channel in the NKM model on the estimated parameter values of the model, with special emphasis on the interest rate smoothing parameter using data for the Eurozone. Second, we study the ability of the model to reproduce some stylized facts such as highly persistent dynamics, the weak comovement between economic activity and inflation, and the positive, strong comovement between interest rates observed in actual Eurozone data. The estimation procedure implemented is a classical structural method based on the indirect inference principle.
    Keywords: NKM model, term structure, policy rule, indirect inference
    JEL: C32 E30 E52
    Date: 2008–12
  18. By: A. Carriero; G. Kapetanios; M. Marcellino
    Abstract: Models based on economic theory have serious problems at forecasting exchange rates better than simple univariate driftless random walk models, especially at short horizons. Multivariate time series models suffer from the same problem. In this paper, we propose to forecast exchange rates with a large Bayesian VAR (BVAR), using a panel of 33 exchange rates vis-a-vis the US Dollar. Since exchange rates tend to co-move, the use of a large set of them can contain useful information for forecasting. In addition, we adopt a driftless random walk prior, so that cross-dynamics matter for forecasting only if there is strong evidence of them in the data. We produce forecasts for all the 33 exchange rates in the panel, and show that our model produces systematically better forecasts than a random walk for most of the countries, and at any forecast horizon, including at 1-step ahead.
    Keywords: Exchange Rates, Forecasting, Bayesian VAR
    JEL: C53 C11 F31
    Date: 2008
  19. By: Andrew Coleman (Motu Economic and Public Policy Research)
    Abstract: This paper develops an overlapping generations model incorporating credit constraints, owner-occupier and rental sectors, and detailed tax regulations to examine how the interaction of inflation and the tax system affect the housing market. It shows that even modest rates of inflation can have very large effects on the home-ownership rates of young households, particularly at low real interest rates. This occurs even if there is a large supply response in the quantity of housing. The model suggests that the welfare costs of inflation could be ameliorated by exempting the inflation component of interest payments from income tax.
    Keywords: Inflation, credit constraints, capital income taxes, housing markets, home-ownership rates, monetary policy
    JEL: E40 E58
    Date: 2008–12
  20. By: Julien Martin; Isabelle Mejean
    Abstract: This paper describes the impact of the Euro on i) the level, ii) the evolution and iii) the dispersion of trade prices. This empirical analysis relies on firm level data about French exports over the period 1995-2005. We find that the elimination of exchange rate fluctuations reduces the pricing to market behavior of French exporters. At the beginning of the EMU, we also observe an increase in aggregate prices for sales in the Euro zone. This price increase does not compensate for the aggregate price gap between cheaper EMU markets and more expensive non-EMU countries. Last we find that the Euro has affected firms’ pricing strategies leading to a reduction of the price dispersion inside the Euro zone.
    Keywords: International trade prices; european monetary integration
    JEL: F12 F15
    Date: 2008–12
  21. By: Michael D. Bordo; Ronald MacDonald; Michael J. Oliver
    Abstract: We provide the first econometric study of foreign exchange market intervention for the UK during the sterling crises from 1964–1967. We use daily data on spot and forward dollar/sterling exchange rates and reserve movements which allows a more precise description of the loss of credibility during four currency crises. Reserve losses are consistent with exchange rate crises. External assistance given to sterling throughout this period shored up the reserves and allowed the sterling peg to be maintained.
    JEL: N1 N14 N2
    Date: 2009–01
  22. By: Reynard, Samuel (Swiss National Bank)
    Abstract: This paper analyzes the behavior of the Swiss franc (CHF) over the past 35 years. It relates the evolution of the CHF exchange rates to economic fundamentals like the relative competitiveness of the Swiss export sector, accumulated current accounts, interest rate differentials and oil prices. Some factors like the introduction of the euro, a relative increase in Swiss domestic productivity and higher oil prices seem to have modified the CHF behavior in the last decade, but more data will be needed to draw definitive conclusions. The paper relies on different data sources and assesses potential exchange rate determinants under different angles. Overall, measurement and econometric issues would make it difficult to determine a unique econometric specification or specific values for equilibrium exchange rates.
    Keywords: Swiss franc; exchange rates; fundamentals
    JEL: F31 F32
    Date: 2008–06–01
  23. By: Kaufmann, Daniel (Swiss National Bank)
    Abstract: This paper investigates price-setting behaviour of firms based on the individual price quotes underlying the Swiss consumer price index. The data set covers the years from 1993 to 2005. Six main findings emerge from the analysis. (i) Prices are sticky; the median duration amounts to 4.6 quarters. (ii) Price-setting behaviour is heterogeneous across sectors and outlet characteristics. (iii) Price changes are sizeable; the median absolute size amounts to 9.4%. (iv) There is no indication of general downward price stickiness; even in the case of positive inflation, 41.3% of all price adjustments are decreases and the distributions of price changes do not show substantial asymmetries. (v) Firms respond to expected cost shocks at the date of their occurrence; VAT rate changes do not lead to more price adjustments before they take effect. (vi) There is some evidence that firms adjust their behaviour according to the state of the economy; in particular, firms facing higher rates of inflation adjust prices more frequently.
    Keywords: Price-setting; frequency of price changes; nominal price rigidity; time-dependent pricing; statedependent pricing
    JEL: D40 E31
    Date: 2008–08–04
  24. By: Ana Lamo (European Central Bank); Javier J. Pérez (Bank of Spain); Ludger Schuknecht (European Central Bank)
    Abstract: This paper looks at public and private sector wages interactions since the 1960s in the euro area, euro area countries and a number of other OECD countries. It focuses on co-movements and causal relationships. To obtain the most robust results possible, we apply a number of alternative empirical methodologies, and perform the analysis for two data samples and different price deflators. The paper reports, first, a strong positive annual contemporaneous correlation of public and private sector wages over the business cycle; this finding is robust across methods and measures of wages and quite general across countries. Second, we show evidence of long-run relationships between public and private sector wages in all countries. Finally, causality analysis suggests that feedback effects between private and public wages occur in a direct manner and, importantly also via prices. While influences from the private sector appear on the whole to be stronger, there are direct and indirect feedback effects from public wage setting in a number of countries as well. We show how country-specific institutional features of labour and product markets contain helpful information to explain the heterogeneity across countries of our results on public/private wage leadership.
    Keywords: government wages; private sector wages; causality; co-movement.
    JEL: J30 C32 J51 J52 E62 E63 H50
    Date: 2008
  25. By: Edwin M. Truman (Peterson Institute for International Economics)
    Abstract: In the first decade of the 21st century the International Monetary Fund (IMF) faced crises of legitimacy, relevance, and budgetary finance. It now confronts what likely will be the worst global recession since World War II, potentially huge demands for its financial assistance with limited resources, and calls for it to play a more central role in the international financial and regulatory systems. At the same time, the incoming Barack Obama administration must decide what to do about the modest package of IMF reforms that was completed in the spring of 2008. The package requires US congressional approval to go into effect. This paper reviews the recent, slow progress on IMF reform and makes recommendations to the Obama administration against the background of that record, the emerging global recession, and continuing financial turmoil. I recommend that the IMF package be reopened to include a doubling of IMF quotas and an amendment that will permit the Fund to swap special drawing rights (SDR) with major central banks to finance its short-term lending facility. I also recommend a special allocation of 50 billion SDR. If these proposals are turned down by the G- 20 at its meeting in April 2009, I reluctantly recommend that the Obama administration seek congressional approval of the IMF package as it now stands because a failure to do so would seriously undermine the Fund as a central multilateral institution.
    Keywords: International Monetary Fund, current account adjustment, exchange rates, financial turbulence, global recession, financial supervision and regulation
    JEL: F02 F32 F33 F42
    Date: 2008–12
  26. By: Shyamala Gopinath
    Abstract: The speech tries to underline some lessones that be drawn from the crisis relevant to regulation, financial markets and the market infrastructure and reflect on these. [Annual Conference of Foreign Exchange Dealers’ Association of India (FEDAI) at Kolkata].
    Keywords: financial cisis, Indian, nationalisation, institutions, mortgage lenders, foreign exchange, monetary policy
    Date: 2009
  27. By: José E. Gómez González; Paola Morales Acevedo
    Abstract: In this paper we find empirical evidence of bank lending channel for Colombia, using a balanced panel data of about four thousand non-financial firms. We find that increases in the interest rate, proxiing for the monetary policy instrument, lead to a reduction in the proportion of bank loans, out of total debt, of the .rms. This bank lending channel amplifies the effect of the traditional interest rate channel, which leads to a reduction in total debt and spending when monetary policy tightens. Our result agrees with, and complements, those obtained by Gómez González and Grosz (2007), who provide evidence of the existence of a bank lending channel in Colombia using bank-specific financial variables.
    Date: 2009–01–07

This nep-cba issue is ©2009 by Alexander Mihailov. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.