nep-cba New Economics Papers
on Central Banking
Issue of 2014‒08‒09
27 papers chosen by
Maria Semenova
Higher School of Economics

  1. Information, Amplification and Financial Crisis By Toni Ahnert; Ali Kakhbod
  2. Capital Flows and Macroprudential Policies - A Multilateral Assessment of Effectiveness and Externalities By John Beirne; Christian Friedrich
  3. Banks and capital requirements: channels of adjustment By Benjamin H Cohen; Michela Scatigna
  4. The exit from non-conventional monetary policy: what challenges? By Philip Turner
  5. Credit Growth, Monetary Policy, and Economic Activity in a Three-Regime TVAR Model By Stefan Avdjiev; Zheng Zeng
  6. Globalisation, pass-through and the optimal policy response to exchange rates By Michael B Devereux; James Yetman
  7. A shadow policy rate to calibrate US monetary policy at the zero lower bound By Marco Jacopo Lombardi; Feng Zhu
  8. The Impact of Monetary Policy on Financing of Czech Firms By Ruslan Aliyev; Dana Hajkova; Ivana Kubicova
  9. Eurobonds for EMU Stability, Convergence and Growth By Alberto Quadrio Curzio
  10. Banks, Sovereign Risk and Unconventional Monetary Policies By Stéphane Auray; Aurélien Eyquem; Xiaofei Ma
  11. Preferential regulatory treatment and banks' demand for government bonds By Clemens Bonner
  12. The Renminbi and Exchange Rate Regimes in East Asia By Masahiro Kawai; Victor Pontines
  13. Financial Stability and Financial Inclusion By Peter J. Morgan; Victor Pontines
  14. Policies to Enhance Trade Facilitation in South Asia and Southeast Asia By Anthony Bayley
  15. An Estimated DSGE Model with a Deflation Steady State By Yasuo Hirose
  16. How Monetary Policy is made: Two Canadian Tales By Pierre L. Siklos; Matthias Neuenkirch
  17. Reciprocal Brokered Deposits, Bank Risk, and Recent Deposit Insurance Policy By Guo Li; Sherrill Shaffer
  18. Swiss unconventional monetary policy: lessons for the transmission of quantitative easing By Christensen, Jens H.E.; Krogstrup, Signe
  19. Non-linear effects of the U.S. Monetary Policy in the Long Run By Olmos, Lorena; Sanso Frago, Marcos
  20. Fiscal consolidation, public debt and output dynamics in the euro area : lessons from a simple model with time-varying fiscal multipliers By Christophe Blot; Marion Cochard; Bruno Ducoudre; Danielle Schweisguth; Xavier Timbeau; Jérôme Creel
  21. Financial Activities Taxes, Bank Levies and Systemic Risk By Giuseppina Cannas; Jessica Cariboni; Massimo Marchesi; Gaëtan Nicodème; Marco Petracco Giudici; Stefano Zedda
  22. Identification of Monetary Policy Shocks in Turkey: A Structural VAR Approach By Mustafa Kilinc; Cengiz Tunc
  23. Reserve Requirements, Liquidity Risk and Credit Growth By Koray Alper; Mahir Binici; Selva Demiralp; Hakan Kara; Pinar Ozlu
  24. How to stabilize inflation without damaging employment: Strenghtening the power of unions. By Amélie Barbier-Gauchard; Francesco De Palma; Giuseppe Diana
  25. Financial crises and exchange rate policy By Luca Fornaro
  26. Fairness and the disinflation puzzle By Lunardelli, Andre
  27. Der makroprudenzielle Komplex: der Prozess, das Schloss, das Urteil By Remsperger, Hermann

  1. By: Toni Ahnert; Ali Kakhbod
    Abstract: We propose a parsimonious model of information choice in a global coordination game of regime change that is used to analyze debt crises, bank runs or currency attacks. A change in the publicly available information alters the uncertainty about the behavior of other investors. Greater strategic uncertainty makes private information more valuable, so more investors acquire information. This change in the proportion of informed investors amplifies the impact of the initial change in public information on the probability of a crisis. Our amplification result explains how a small deterioration in public information can cause a financial crisis.
    Keywords: Financial Institutions, Financial stability
    JEL: D83 G01
    Date: 2014
  2. By: John Beirne; Christian Friedrich
    Abstract: This paper assesses the effectiveness and associated externalities that arise when macroprudential policies (MPPs) are used to manage international capital flows. Using a sample of up to 139 countries, we examine the impact of eight different MPP measures on cross-border bank flows over the period 1999-2009. Our panel analysis takes into account the structure of the banking system as well as the presence of potential cross-country and cross-asset class spillover effects. Our results indicate that the structure of the domestic banking system matters for the effectiveness of MPPs. We specifically find that a high share of non-resident bank loans in the MPP-implementing country reduces the domestic effectiveness of most MPPs, while a high return on assets in the domestic banking system has the opposite effect. Our results on the spillover analysis indicate that both types of spillover can occur. First, we find that a high return on assets in the banking system of countries other than the MPP-implementing one leads to a reduction, and a greater degree of trade integration leads to an increase in spillovers across countries. However, the economic significance of the results suggests that only a limited number of countries will tend to experience substantial geographical spillover effects. Second, we also find some evidence of spillover effects across asset classes within countries.
    Keywords: Balance of payments and components, Financial markets, International topics
    JEL: F3 F5 G01 G11
    Date: 2014
  3. By: Benjamin H Cohen; Michela Scatigna
    Abstract: Bank capital ratios have increased steadily since the financial crisis. For a sample of 94 large banks from advanced and emerging economies, retained earnings account for the bulk of their higher risk-weighted capital ratios, with reductions in risk weights playing a lesser role. On average, banks continued to expand their lending, though lending growth was relatively slower among European banks. Lower dividend payouts and (for advanced economy banks) wider lending spreads have contributed to banks’ ability to use retained earnings to build capital. Banks that came out of the crisis with higher capital ratios and stronger profitability were able to expand lending more.
    Keywords: banks, bank capital, regulation, capital ratios, Basel III
    Date: 2014–03
  4. By: Philip Turner
    Abstract: Monetary policies pursued in response to the financial crisis have shown that changes in central bank balance sheets have major macroeconomic consequences. The New Classical Macroeconomics, which gained increasing sway from the late-1980s, had led to an exclusive focus on the policy rate and a neglect of balance sheet effects. Key financial market imperfections that had been demonstrated by earlier (or contemporaneous) advances in microeconomic theory were assumed away under the guise of Ricardian equivalence. Getting their balance sheets back to normal levels is important in order to preserve policy flexibility for the future, but will present central banks with formidable challenges. This task will require cooperation with Treasuries without surrendering monetary policy independence.As central banks pragmatically monitor market resilience, the financial dominance trap is to be avoided.
    Keywords: Central bank balance sheet, fiscal dominance, financial dominance, exit strategy
    Date: 2014–05
  5. By: Stefan Avdjiev; Zheng Zeng
    Abstract: We employ a threshold vector autoregression (TVAR) methodology in order to examine the nonlinear nature of the interactions among credit market conditions, monetary policy, and economic activity. We depart from the existing literature on the subject along two dimensions. First, we focus on a model in which the relevant threshold variable describes the state of economic activity rather than credit market conditions. Second, in contrast to the existing TVAR literature, which concentrates exclusively on single-threshold models, we allow for the presence of a second threshold, which is overwhelmingly supported by all relevant statistical tests. Our results indicate that the dynamics of the interactions among credit market conditions, monetary policy and economic activity change considerably as the economy moves from one phase of the business cycle to another and that single-threshold TVAR models are too restrictive to fully capture the nonlinear nature of those interactions. The impact of most shocks tends to be largest during periods of sub-par economic growth and smallest during times of moderate economic activity. By contrast, credit risk shocks have the largest impact when output growth is considerably above it long-term trend.
    Keywords: Threshold vector autoregression, regime switching, nonlinearity, business-cycle asymmetry, credit shock
    Date: 2014–06
  6. By: Michael B Devereux; James Yetman
    Abstract: In this paper we examine how monetary policy should respond to nominal exchange rates in a New Keynesian open economy model that allows for a non-trivial role for sterilised intervention. The paper develops the argument against the backdrop of the evolving policy-making environment of Asian economies. Sterilised intervention can be a potent tool that offers policymakers an additional degree of freedom in maximising global welfare. We show that the gains to sterilised intervention are greater when goods market integration is low and exchange rate pass-through is high. However, increased financial internationalisation reduces the effectiveness of sterilised intervention, as the international policy trilemma becomes more relevant. Unsterilised intervention may also have a role to play, although the potential welfare gains from this are generally smaller. Most central banks in Asia have actively used sterilised foreign exchange intervention as a policy tool to smooth exchange rates. But, over time, declining exchange rate pass-through and the increasing international integration of financial and goods markets will tend to reduce the efficacy of sterilised intervention. Given the limited effectiveness of unsterilised intervention, our model implies that the role of exchange rate movements in the optimal setting of monetary policy in Asia is decreasing.
    Keywords: globalisation; foreign exchange intervention; exchange rate pass-through
    Date: 2014–06
  7. By: Marco Jacopo Lombardi; Feng Zhu
    Abstract: The recent global financial crisis, the Great Recession and the subsequent implementation of a variety of unconventional policy measures have raised the issue of how to correctly measure the stance of monetary policy when policy interest rates reach the zero lower bound (ZLB). In this paper, we propose a new "shadow policy rate" for the US economy, using a large set of data representing the various facets of the US Federal Reserve's policy stance. Changes in term premia at various maturities and asset purchases by the Fed are key drivers of this shadow rate. We document that our shadow policy rate tracks the effective federal funds rate very closely before the recent crisis. More importantly, it provides a reasonable gauge of US monetary policy stance when the ZLB becomes binding. This facilitates the assessment of the policy stance against familiar Taylor rule benchmarks. Finally, we show that in structural vector autoregressive (VAR) models, the shadow policy rate helps identify monetary policy shocks that better reflect the Federal Reserve's unconventional policy measures.
    Keywords: unconventional monetary policy, zero lower bound, shadow policy rate, federal funds rate, dynamic factor model, monetary VAR
    Date: 2014–06
  8. By: Ruslan Aliyev; Dana Hajkova; Ivana Kubicova
    Abstract: This paper uses firm-level financial data for Czech firms and tests for the role of companies’ financial structure in the transmission of monetary policy. Our results indicate that higher short-term interest rates coincide with lower shares of total debt, short-term bank loans, and long-term debt. We find that firm-specific characteristics, such as size, age, collateral, and profit, affect the way in which monetary policy changes are reflected in the external financing decisions of firms. These findings indicate the presence of informational frictions in credit markets and hence provide some empirical evidence of the existence of broad credit and relationship lending channels in the Czech Republic.
    Keywords: Credit channel, Czech Republic, external finance, monetary policy transmission
    JEL: E44 E51 E52 G21 G32
    Date: 2014–06
  9. By: Alberto Quadrio Curzio
    Abstract: The severe crises within the Eurozone, which began in 2009, had (and still have) at least two main aspects. One is the problem of sovereign bonds issued by peripheral Euro-States. The other is the fall in the rate of growth of the Eurozone. Among the many proposals and political choices made to overcome these crises, one concerned the so called «Eurobonds» (EB) which in actual fact covers a wide range of bonds. In this present essay I will consider five types of Eurobonds: the Unionbond (proposed by Jacques Delors in 1993), the Goldeurobond (proposed by myself between 2004-2008), the Stabilitybond (proposed mainly by the European Parliament in 2011-12), the Rescuebond (issued by EFSF and ESM since 2011), the EuroUnionBond (proposed by Romano Prodi and myself in 2011-2012). The conclusion of my analysis is that the opposition to EB or EUB is mainly of political nature, being the economic and historical criticism to them rather weak.
    Keywords: Eurobond; EuroUnionBond; Economic and Monetary Union; Stability; Convergence; Growth;
    JEL: F G
    Date: 2014
  10. By: Stéphane Auray (CREST-ENSAI, ULCO and CIRPEE); Aurélien Eyquem (Université Lumière Lyon 2); Xiaofei Ma (CREST-ENSAI et Université Lumière Lyon 2)
    Abstract: We develop a two-country model with an explicitly microfounded interbank market and sovereign default risk. Calibrated to the Euro Area, the model performs satisfactorily in matching key business cycle facts on real, financial and fiscal time series. We then use the model to assess the effects of a large crisis and quantify the potential effects of alternative unconventional policies on the dynamics of GDP, sovereign default risk and public indebtedness. We show that quantitative monetary easing is more efficient in stimulating GDP, while qualitative monetary easing relieves financial tensions and sovereign risk more efficiently. In terms of welfare, in the short run, unconventional monetary policies bring sizable welfare gains for households, while the long term effects are much smaller
    Keywords: Recession, Interbank Market, Sovereign Default, Monetary Policy
    JEL: E44 F34 G15
    Date: 2014–03
  11. By: Clemens Bonner
    Abstract: Government bonds receive preferential treatment in financial regulation. The purpose of this paper is to analyze the impact of this preferential treatment on banks' demand for government bonds. Using unique transaction-level data, our analysis suggests that preferential treatment in liquidity and capital regulation increases banks' demand for government bonds beyond their own risk appetite. Liquidity and capital regulation also seem to incentivize banks to substitute other bonds with government bonds. On top of that, we find evidence that regulation leads to a longer-term increase in government bond holdings. Finally, our results suggest that higher government bond holdings are associated with more lending and lower profits during normal times but not during stress.
    Keywords: Government bonds; financial markets; regulation; liquidity; capital
    JEL: G18 G21 E42
    Date: 2014–07
  12. By: Masahiro Kawai (Asian Development Bank Institute (ADBI)); Victor Pontines
    Abstract: With the rise of the People’s Republic of China (PRC) as the world’s largest trading nation (measured by trade value) and second largest economic power (measured by GDP), its economic influence over the neighboring emerging economies in East Asia has also risen. The PRC introduced some exchange rate flexibility in July 2005, and in the wake of the global financial crisis has been pursuing a policy to internationalize its currency, the renminbi (RMB). Clearly the exchange rate policy of the PRC has significant implications for exchange rate regimes in emerging East Asia. This paper examines the behavior of the RMB exchange rate and the impact of RMB movements on those of other currencies in emerging East Asia during the period 2000–2014. We apply the Frankel–Wei regression model to identify changes in the RMB exchange rate regime over time and a modified version of the model, developed by the authors in their earlier paper, to estimate the RMB weight in an emerging East Asian economy’s currency basket. We find that the US dollar continues to be the dominant anchor currency in the region, while the RMB has taken on increasing importance in the currency baskets of many East Asian economies in recent years. The paper also explores how monetary and currency cooperation—led by the PRC and Japan—can promote intra-East Asian exchange rate stability under the pressure of rising financial market openness in the PRC.
    Keywords: Remminbi, China, PRC, exchange rate regime, East Asia, exchange rate policy, the Frankel–Wei model, Japan, financial market openness
    JEL: F15 F31 F36 F41 O24
    Date: 2014–05
  13. By: Peter J. Morgan (Asian Development Bank Institute (ADBI)); Victor Pontines
    Abstract: Developing economies are seeking to promote financial inclusion, i.e., greater access to financial services for low-income households and firms, as part of their overall strategies for economic and financial development. This raises the question of whether financial stability and financial inclusion are, broadly speaking, substitutes or complements. In other words, does the move toward greater financial inclusion tend to increase or decrease financial stability? A number of studies have suggested both positive and negative ways in which financial inclusion could affect financial stability, but very few empirical studies have been made of their relationship. This partly reflects the scarcity and relative newness of data on financial inclusion. This study contributes to the literature on this subject by estimating the effects of various measures of financial inclusion (together with some control variables) on some measures of financial stability, including bank non-performing loans and bank Z-scores. We find some evidence that an increased share of lending to small and medium-sized enterprises (SMEs) aids financial stability, mainly by reducing non-performing loans (NPLs) and the probability of default by financial institutions. This suggests that policy measures to increase financial inclusion, at least by SMEs, would have the side-benefit of contributing to financial stability as well.
    Keywords: Financial Stability, financial inclusion, SMEs, low-income households, non-performing loans
    JEL: G21 G28 O16
    Date: 2014–07
  14. By: Anthony Bayley (Asian Development Bank Institute (ADBI))
    Abstract: This paper discusses trade facilitation in the context of enhancing trading links between South and Southeast Asia, in a manner understandable to the non-specialist. Presently, these two Asian regions tend to trade preferentially with distant markets. One of the reasons cited for the limited trade between themselves is that trade facilitation with trade partners in developed countries is more user-friendly and stable. This suggests that enhancing trade facilitation within the two regions could promote intra- and inter-regional trade. The paper identifies the scope of trade facilitation and profiles the current overall situation in the two regions. It highlights the key issues and constraints, often referred to as non-trade barriers, in terms of both “soft†and “hard†infrastructure, and highlights ongoing initiatives designed to promote change, especially through the application of new approaches and procedures. Lastly, the paper concludes by discussing the key regional trade facilitation issues and proposing recommendations to eliminate the non-trade barriers that are adversely impacting on trade within and between the regions.
    Keywords: trade facilitation, trading links, South Asia, Southeast Asia, intra-regional and inter-regional trade, Infrastructure
    JEL: F15 F13
    Date: 2014–07
  15. By: Yasuo Hirose
    Abstract: Benhabib, Schmitt-Grohé, and Uribe (2001) argue for the existence of a deflation steady state when the zero lower bound on the nominal interest rate is considered in a Taylor-type monetary policy rule. This paper estimates a medium-scale DSGE model with a deflation steady state for the Japanese economy during the period from 1999 to 2013, when the Bank of Japan conducted a zero interest rate policy and the inflation rate was almost always negative. Although the model exhibits equilibrium indeterminacy around the deflation steady state, a set of specific equilibria is selected by Bayesian methods. According to the estimated model, shocks to households’ preferences, investment adjustment costs, and external demand do not necessarily have an inflationary effect, in contrast to a standard model with a targeted-inflation steady state. An economy in the deflation equilibrium could experience unexpected volatility because of sunspot fluctuations, but it turns out that the effect of sunspot shocks on Japan’s business cycles is marginal and that macroeconomic stability during the period was a result of good luck.
    Keywords: Deflation, Zero interest rate, Japanese economy, Indeterminacy, Bayesian Estimation
    JEL: E31 E32 E52
    Date: 2014–07
  16. By: Pierre L. Siklos; Matthias Neuenkirch
    Abstract: We examine policy rate recommendations of the Bank of Canada’s Governing Council (GC) and its shadow, the C.D. Howe Institute’s Monetary Policy Council (MPC). Individual recommendations of the MPC are observed but not those of the GC. Differences in the two committee’s recommendations are small but persistent. The MPC is more responsive to the output gap than its GC counterpart. Both committees respond similarly to inflation. Disagreement within the MPC and with the GC is more likely when rates are rising. Finally, the Bank’s forward guidance had a significant influence on the MPC’s views about the future inflation path.
    JEL: E43 E52 E58 E61 E69
    Date: 2014–07
  17. By: Guo Li; Sherrill Shaffer
    Abstract: This study provides new evidence regarding reciprocal brokered deposits (RBDs), regulatory responses, and bank risk, contributing to prior studies in four ways. First, using updated financial Call Report data and bank failure data through 2012, we reexamine the moral hazard hypothesis that banks using RBDs exhibit higher risk. Second, we uncover a previously overlooked positive association between RBDs and banks’ cost of failure. Third, we apply Granger causality tests; and finally, we test whether the FDIC’s recent revision of its pricing discourages the use of RBDs and weakens its association with bank risk.
    Keywords: Reciprocal Brokered Deposits, Moral Hazard, cost of failure
    JEL: G21 G22 G28
    Date: 2014–07
  18. By: Christensen, Jens H.E. (Federal Reserve Bank of San Francisco); Krogstrup, Signe (Swiss National Bank)
    Abstract: In August 2011, the Swiss National Bank engaged in unconventional monetary policy through an unprecedented expansion of bank reserves. As these actions did not involve any outright long-term asset purchases, this unique episode allows for novel insights on the transmission mechanism of central bank balance sheet expansions to interest rates. Analysis of the response of Swiss bond yields to announcements regarding this program suggests that expansion of reserves by itself can lower long-term yields through a portfolio balance effect.
    JEL: E43 E52 E58 G12
    Date: 2014–08–06
  19. By: Olmos, Lorena; Sanso Frago, Marcos
    Abstract: We find non-linearities in the U.S. long-run relationships among trend inflation, growth rate and financial frictions. Moreover, our results show that mismeasurements of the natural rate of interest deviate the trend inflation from its target, which is especially clear when monetary policy reacts preventively against inflation deviations. The long-run growth rate, the trend inflation and the natural rate of interest, specified as time-varying, are jointly estimated over the period 1960:Q1-2013:Q2 by applying the Kalman filter, following mainly Laubach and Williams (2003).
    Keywords: Kalman Filter; Trend Inflation; Financial frictions; Growth
    JEL: C32 E31 E52
    Date: 2014
  20. By: Christophe Blot (OFCE); Marion Cochard (OFCE); Bruno Ducoudre (OFCE); Danielle Schweisguth (OFCE); Xavier Timbeau (OFCE); Jérôme Creel (OFCE)
    Abstract: EMU countries have engaged in a consolidation of fiscal policies since 2011. This paper deals with the public debt and output dynamic consequences of this strategy. To this end, we develop a simple macroeconomic model of the Euro area, where fiscal multiplier is time-varying. Recent empirical evidence has indeed shown that fiscal multipliers were higher in time of crisis. We then analyze the ability of EMU countries to comply with the new fiscal rules on public debt. The path of public debt and output gap is simulated according to different hypothesis related to fiscal multiplier, monetary policy and hysteresis effects. Not all EMU countries would be able to reach a 60% debt-to-GDP ratio in 2032. An alternative strategy may be to spread austerity in order to report part of consolidation to periods where the fiscal multiplier will be weaker. The gain of spreading austerity may yet be partly offset by higher risk premium. There is then a need to find institutional arrangements to avoid panics in the sovereign debt markets. Finally, it is shown that it would not be very efficient to implement an expansionary fiscal policy in Germany in order to balance austerity in the Euro area. Since output gap is nearly closed in Germany, the multiplier effect of a positive fiscal stance would be low and spillover effects would not be significant.
    Keywords: Fiscal consolidation; Fiscal multiplier; Public Debt; Macroeconomic performance
    JEL: E61 E62 E47
    Date: 2014–07
  21. By: Giuseppina Cannas (Joint Research Centre of the European Commission); Jessica Cariboni (Joint Research Centre of the European Commission); Massimo Marchesi (European Commission); Gaëtan Nicodème (European Commission); Marco Petracco Giudici (Joint Research Centre of the European Commission); Stefano Zedda (Joint Research Centre of the European Commission)
    Abstract: The question of additional taxes on banking institutions has recently been debated.At the same time, financial regulation in the banking sector is undergoing many changes aimed at strengthening financial stability. This paper uses SYMBOL, a micro-simulation model of the banking system, to estimate contributions to systemic risk of individual banks under various future regulatory scenarios and compares them to their potential tax liabilities under alternative designs of Financial Activity Taxes and Bank Levies. The results show that when contagion is not avoided, all taxes perform about the same way. However, when contagion is avoided, bank levies outperform FATs.
    Keywords: Taxation; Banks; Financial Activity Tax; Bank levy; Systemic Risk; Regulation
    JEL: F23 G32 H25 R38
    Date: 2014–04
  22. By: Mustafa Kilinc; Cengiz Tunc
    Abstract: This paper tries to identify the monetary policy shocks in Turkey during the explicit inflation targeting period starting from 2006 using a structural VAR approach. We model Turkey as a small open economy where domestic variables are affected by external factors like commodity prices and global demand but domestic variables do not affect external variables. We analyze the effects of four shocks on Turkish economy: two domestic shocks of interest rates and risk premium, and two external shocks of commodity prices and global demand. All shocks are found to have significant effects on main economic variables. Positive interest rate shocks appreciate the domestic currency and decrease the inflation whereas positive risk premium shocks cause a depreciation and an increase in inflation. Both of these shocks also cause a decrease in the domestic activity. Being an open and internationally integrated economy, Turkey is significantly affected by global shocks. A positive global demand innovation leads to an increase in global commodity prices, which together increase both the level of prices and economic activity in Turkey. Positive commodity price shocks also increase the inflation in Turkey.
    Keywords: Monetary Policy, Interest Rates, Risk Premium, Small Open Economy
    JEL: E43 E52 E58 F41
    Date: 2014
  23. By: Koray Alper; Mahir Binici; Selva Demiralp; Hakan Kara; Pinar Ozlu
    Abstract: Many central banks in emerging economies have used reserve requirements (RR) to alleviate the trade-off between financial stability and price stability in recent years. Notwithstanding their widespread use, transmission channels of RR have remained largely as a black-box. In this paper, we use bank-level data to explore the interaction between RR and bank lending behavior. Our empirical findings suggest that short-term borrowing from the central bank is not a close substitute for deposits for banks. Bank lending behavior responds significantly to reserve requirements and liquidity positions. Our analysis allows us to identify a new channel that we name as the “liquidity channel”. The channel works through a decline in bank liquidity and loan supply due to an increase in reserve requirements.
    Keywords: Monetary Transmission Mechanism; Liquidity Risk; Bank Lending Channel; Turkey
    JEL: E44 E51 E52
    Date: 2014
  24. By: Amélie Barbier-Gauchard; Francesco De Palma; Giuseppe Diana
    Abstract: The aim of this paper is to assess the impact of union bargaining power on inflation and employment in a case of efficiency bargaining, in a context of a strategic game between Central Bank and social partners.
    Keywords: monetary policy, employment, inflation, union bargaining power, efficiency bargaining.
    JEL: E24 E52 E58 J52
    Date: 2014
  25. By: Luca Fornaro
    Abstract: This paper studies exchange rate policy in a small open economy model featuring an occasionally binding collateral constraint and Fisherian deflation. The goal is to evaluate the performance of alternative exchange rate policies in sudden stopprone economies. The key element of the analysis is a pecuniary externality arising from frictions in the international credit markets, which creates a trade-off between price and financial stability. The main result is that the appropriate exchange rate policy sustains the value of collateral and access to international credit markets during financial crises.
    Keywords: Financial crises, Monetary Policy, Sudden Stops, Exchange Rate Regime, Nominal Wage Rigidities, Pecuniary Externalities.
    JEL: G01 E44 E52 F32 F34 F41
    Date: 2014–07
  26. By: Lunardelli, Andre
    Abstract: Following Driscoll and Holden (2004), I model forward-looking workers who consider it unfair if a wage adjustment fails to match past inflation. However, the present paper proposes a much larger effect by using the job finding rate as the measure of workers' opportunities outside the firm rather than the unemployment rate, develops a dynamic model with imperfect monitoring, and simulates a credible gradual disinflation with a large sacrifice ratio. It also uses the model to discuss real adverse shocks, the manner in which indexation is used in New Keynesian models, and the use of sticky information to explain disinflation costs. --
    Keywords: inflation persistence,reciprocity,indexation,Phillips curve,coordination failure,asymmetric effects of monetary policy
    JEL: D03 E31 E32 E42 E50 J64
    Date: 2014
  27. By: Remsperger, Hermann
    Abstract: Die Auseinandersetzung mit einem neu entstehenden Bereich der Wirtschaftspolitik kann faszinierend und herausfordernd zugleich sein. Ein aktuelles Beispiel dafür stellt die makroprudenzielle Politik dar. Sie soll zu einem stabilen Finanzsystem beitragen. Fesselnd sind hier nicht nur die Pläne der Architekten zur Erreichung dieses Ziels. Vielmehr ist es auch faszinierend, wie schnell die Rahmenbedingungen für die privaten und staatlichen Finanzakteure von den Bauherren verändert oder wichtige Teile des Ordnungsrahmens überhaupt erst geschaffen werden. Gerade wenn jedoch hier und da nach Plänen gebaut wird, die man selbst für weniger überzeugend hält, wie zum Beispiel die Ansiedlung makroprudenzieller Aufgaben beim neuen Aufsichtsgremium in der Europäischen Zentralbank (EZB), kann diese Faszination auch zu eigenen Stellungnahmen herausfordern... --
    Date: 2014

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