|
on Central Banking |
| By: | Jakub Janus (Cracow University of Economics) |
| Abstract: | The implementation of unconventional (nonstandard) monetary policy instruments by the leading central banks at the wake of the financial and economic crisis was the most significant shift in the practice of central banking in the recent years. Evaluation of their effects is not feasible without a thorough recognition of the transmission mechanism of various balance-sheet policies, such as quantitative easing. The transmission channels of a standard interest-rate policy are based on a group of theories that are relatively coherent and well-documented. On the contrary, identification of similar framework for unconventional measures proved to be a complicated task. The aim of this paper is to extract and evaluate the theoretical efficiency of particular channels of unconventional monetary policy. This goal requires references to at least several, to some extent mutually exclusive, theories. It is also inevitable to draw one’s attention to the relative significance of identified channels, depending on the nature of used unconventional tools, as well as on reactions of financial institutions and other economic agents to undertaken actions. This paper discusses three broad channel of the unconventional policies transmission mechanism: the signaling channel, the liquidity channel, and the portfolio-balance channel. |
| Keywords: | unconventional monetary policy; monetary transmission mechanism; central banking; quantitative easing |
| JEL: | E42 E52 E58 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no57&r=cba |
| By: | Ali Alichi; Jaromir Benes; Joshua Felman; Irene Feng; Charles Freedman; Douglas Laxton; Evan Tanner; David Vavra; Hou Wang |
| Abstract: | The paper first describes how the Czech National Bank (CNB) moved gradually from a fixed exchange rate regime to the frontiers of Inflation-Forecast Targeting. It then focuses on the CNB’s recent experience in adding the exchange rate as a complementary monetary policy tool to stimulate the economy and combat the risks of deflation when the policy interest rate is at the zero lower bound. It assesses the theoretical basis of such a policy, the communications approach used by the CNB when announcing the new framework, and the effects thus far on inflation and output. |
| Keywords: | Monetary policy;Czech Republic;Inflation targeting;Deflation;Exchange rate policy;Exchange markets;Foreign exchange intervention;Inflation-Forecast Targeting, Inflation Targeting, exchange rate tool, zero lower bound, forward guidance, deflation, central bank communications |
| Date: | 2015–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/74&r=cba |
| By: | Michael Brei; Almira Buzaushina |
| Abstract: | The present paper investigates how an emerging market economy is affected when it suddenly faces a higher risk premium on international capital markets. We study this question empirically for five Latin American economies over the period 1994-2007 within a structural panel vector autoregression and analyze theoretically the transmission mechanism using a dynamic stochastic general equilibrium model (DSGE) of a small open economy. The financial shock is modeled by an unexpected increase in the risk premium of firms’ foreign-currency debt. In response, the adverse shock is amplified by a feedback mechanism between currency depreciation, adverse balance sheet and risk premium effects. The theoretical model is used to study different monetary policy responses. We find that an exchange rate targeting rule that strikes a balance between exchange rate and inflation targeting allows the monetary authority to stabilize inflation and output more effectively than under a pure inflation targeting rule. |
| Keywords: | CGEM, EPA, Gender inequalities, Trade opening, SenEmerging Markets, Financial Crises, International Capital Markets. |
| JEL: | F34 F36 G21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2015-11&r=cba |
| By: | Daisuke Ikeda (Bank of Japan); Takushi Kurozumi (Bank of Japan) |
| Abstract: | The history of financial crises, including the recent global crisis, shows that post-financial-crisis recoveries tend to be slower than usual recoveries. Against this background lie various factors, one of which is a slowdown in productivity induced by a post-crisis deterioration in firms' financing. To avoid a post-crisis slow recovery in which this factor comes into play, how should monetary policy be conducted? Ikeda and Kurozumi (2014) develop a model in which a tightening in firms' financing induces a productivity slowdown and hence a slow recovery, and conduct a monetary policy analysis. The analysis shows that (1) it is crucial for the post-crisis conduct of monetary policy to adopt a policy stance of responding strongly to output growth, while maintaining a response to inflation; and (2) such a policy stance toward output stabilization outperforms that toward inflation stabilization, because it facilitates recoveries in investment and productivity by improving firms' growth expectations. |
| Keywords: | Post-financial-crisis slow recovery; Slowdown in total factor productivity; Welfare-maximizing monetary policy |
| JEL: | E52 O33 |
| Date: | 2015–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojlab:lab15e02&r=cba |
| By: | Carlos A. Arango; Oscar M. Valencia |
| Abstract: | This paper presents a DSGE model with banks that face moral hazard in management. Banks receive demand deposits and fund investment projects. Banks are subject to potential withdrawals by depositors which may force them into early liquidation of their investments. The likelihood of this happening depends on the bank management efforts to keep the bank financially sound and the degree of bank leverage. We study the properties of this model under different monetary and macro-prudential policy arrangements. Our model is able to replicate the pro-cyclicality of leverage, and provides insights on the interplay between bank leverage and bank management incentives as a result of monetary, productivity and financial shocks. We find that a combination of pro-cyclical capital requirements and a standard monetary policy are well suited to contain the effects on output and prices of a downturn, keeping the financial system in check. Yet, in an expansionary phase (i.e. a productivity shock) this policy combination may produce desirable results for some macro-variables but at the expense of a deterioration in other macro-financial indicators. |
| Keywords: | DSGE modeling, Financial frictions, Moral hazard, Macro-prudential policies. |
| JEL: | G11 D86 |
| Date: | 2015–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012695&r=cba |
| By: | Joseph Crowley |
| Abstract: | This paper presents an overview of exposures in the balance sheets of central banks, banks, and other depository institutions during the past decade, with emphasis on asset growth and currency composition. It exploits the IMF’s SRF-based monetary data to show: (i) there was a widely observed buildup of assets prior to the global financial crisis, but there has been no significant reduction in its wake; (ii) the foreign currency composition of the balance sheets of banks and other depository institutions remained remarkably constant in spite of the crisis, significant changes in the composition of balance sheets, and globalization, and does not seem to have been significantly influenced by the behavior of exchange rates; and (iii) exposure to households increased prior to the crisis, but this increased risk was offset by increased capitalization. |
| Keywords: | Central banks;Commercial banks;Financial assets;Financial risk;Balance sheets;Global Financial Crisis 2008-2009;Asset growth, currency composition, balance sheet composition, dollarization |
| Date: | 2015–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/47&r=cba |
| By: | Onour, Ibrahim |
| Abstract: | Research Problem: The primary purpose of the paper is to set up a macroeconomic model that depict domestic inflation dynamics in a conflict economy impeded by parallel market for foreign exchange and internal political conflict. Research methodology: To investigate domestic inflation sensitivity to macro variables time-varying coefficient estimation approach employed on monthly data from Sudan during the period from January 2008 to December2013. Results: While domestic money growth (government spending) is the main driver of domestic inflation,the increasing role of parallel market for foreign exchange and imported inflation on domestic inflation reveal increasing sensitivity of the economy to external shocks. Also indicated that our model based estimates of domestic inflation rate is about 22% above the officially announced inflation rate. Recommendations: To control domestic inflation it is essential to control growth in domestic money creation and adopt more flexible official foreign exchange rate that enables inflation trageting policy. |
| Keywords: | Inflation, parallel market, money growth |
| JEL: | E3 E30 E31 E4 E44 |
| Date: | 2015–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63527&r=cba |
| By: | mhamdi, ghrissi |
| Abstract: | The aim of this paper is to provide a credible measure of inflation. This credibility is of great importance for successful inflation targeting regime. This paper proposes a technique to solve a conceptual disparity between inflation phenomenon and its measurement. For this, we proposed an alternative measure called core inflation, defined as the inflation component that has no real impact on long-term production. Evaluation of core inflation was obtained using a VAR system under the assumption that variations in the extent of inflation are affected by two types of shock. The first type has no impact on real output in the long term, while the second can have this effect. This approach is a reconstruction of the approach of Quah and Vahey (1995) in the case of the Tunisian economy. The study concluded that the administered prices constitute a major obstacle to measure, interpret and forecast inflation. Central Bank of Tunisia has no control over a third of the CPI basket. This feature of the Tunisian economy is simply a sign of weakness of the economic system and the need for monetary authorities to continue its efforts to liberalize prices. |
| Keywords: | monetary policy in Tunisia, Inflation, core inflation, VAR |
| JEL: | E5 E6 |
| Date: | 2014–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63477&r=cba |
| By: | Carlos A. Arango (Banco de la República de Colombia); Oscar M. Valencia (Banco de la República de Colombia) |
| Abstract: | This paper presents a DSGE model with banks that face moral hazard in management. Banks receive demand deposits and fund investment projects. Banks are subject to potential withdrawals by depositors which may force them into early liquidation of their investments. The likelihood of this happening depends on the bank management efforts to keep the bank financially sound and the degree of bank leverage. We study the properties of this model under different monetary and macro-prudential policy arrangements. Our model is able to replicate the pro-cyclicality of leverage, and provides insights on the interplay between bank leverage and bank management incentives as a result of monetary, productivity and financial shocks. We find that a combination of pro-cyclical capital requirements and a standard monetary policy are well suited to contain the effects on output and prices of a downturn, keeping the financial system in check. Yet, in an expansionary phase (i.e. a productivity shock) this policy combination may produce desirable results for some macro-variables but at the expense of a deterioration in other macro-financial indicators. Classification JEL: G11, 033, D86. |
| Keywords: | DSGE modeling, Financial frictions, Moral hazard, Macro-prudential policies. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:878&r=cba |
| By: | Liu, Taoxiong; Huang, Mengdan |
| Abstract: | China has experienced several episodes of inflation in recent years. Popular arguments attribute these episodes to relatively high growth rates of money, which were then primarily explained by China’s accumulation of foreign exchange reserves and the undervaluation of RMB. We attempt to explain China’s high monetary growth rates through the supply of land. Under China’s land system, the supply of land is controlled by the government and can be viewed as exogenous to the monetary system. An increase in the money supply stimulates bank loans and thereby monetary growth. Both an error correction model and a simultaneous equations model are developed to explore the effect of the land supply on monetary growth. The empirical results show that the effect of the land supply on the money supply is significantly positive and even exceeds that of foreign exchange reserves. The significance for monetary policy is that, under China’s existing political economy, both the central bank and local governments should be responsible for monetary policy and price levels. |
| Keywords: | land supply, money supply, foreign exchange reserves |
| JEL: | E50 R10 R14 |
| Date: | 2015–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62781&r=cba |
| By: | César Carrera (Central Reserve Bank of Peru); Fernando Pérez Forero (Central Reserve Bank of Peru); Nelson Ramírez-Rondán (Central Reserve Bank of Peru) |
| Abstract: | Emerging economies have been largely affected for Fed's Quantitative Easing (QE) policies. This paper assesses the impact of these measures in terms of key macroeconomic variables for four small open economies (SOE) in Latin America such as Chile, Colombia, Mexico and Peru. We identify a QE policy shock in a Structural VAR with Block Exogeneity (à la Zha, 1999) and we impose a mixture of zero and sign restrictions (à la Arias et al., 2014). Overall, we find that this QE policy shock has significant effects on financial variables such as aggregate credit and the exchange rate. These effects are larger than the ones produced on output and prices. |
| Keywords: | Quantitative Easing, Structural Vector Autoregressions, Sign and Zero Restrictions |
| JEL: | E43 E51 E52 E58 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:2015-035&r=cba |
| By: | Daniel Kaufmann (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | This paper documents nominal stability in Switzerland from 1805 to 2013 using a data set on annual price, wage and nominal GDP changes. The trends of these indicators are estimated by an unobserved-components stochastic-volatility model in order to control for short-term fluctuations and measurement error. Based on a narrative analysis of these trends five main findings emerge. (i) Fiat currency regimes in Switzerland provided a relatively stable monetary background even compared to the metal-currency regimes before WW1. (ii) The flexible inflation targeting regime adopted in December 1999 has performed best over the last two centuries measured by today’s definition of nominal stability. (iii) Fiat currency regimes without clearly communicated nominal price anchor (Bretton Woods System and monetary targeting) were characterised by an inflation bias. (iv) The metal-currency regimes (competing currencies and bimetallism before World War 1, and to some extent flexible inflation targeting, were associated with a deflation bias. (v) Persistent deflations in terms of the CPI only occurred under metallic regimes before WW2. These episodes were accompanied by falling nominal GDP, falling employment but relatively stable hourly wages. |
| Keywords: | monetary history, monetary regimes, Nominal stability, unobserved-components stochastic-volatility model, price stability |
| JEL: | E31 C22 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:15-379&r=cba |
| By: | Vashelyuk, Natalya (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Trunin, Pavel (Russian Presidential Academy of National Economy and Public Administration (RANEPA)) |
| Abstract: | This paper examines the impact of nonstandard monetary policy measures on money market and their economy-wide effects. Four groups of nonconventional measures (quantitative easing, direct and indirect credit easing, forward guidance) and the way in which these operations were conducted in developed and emerging economies are explored. The study of nonstandard liquidity providing measures taken by the Bank of Russia revealed that the main challenges for monetary policy implementation are enhancing the transparency of monetary policy, minimizing distortional effects and appropriate risk management. We also found the evidence of the effectiveness of the credit auctions for 3-month loans secured by assets or guarantees. The regression analysis of the nonstandard liquidity easing measures showed that the increase in pace of providing the loans secured by non-marketable assets or guaranties puts a downward pressure on MosPrime rates. |
| Keywords: | monetary policy, money market, nonconventional measures, nonstandard liquidity, credit auctions |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:ppaper:mak14&r=cba |
| By: | Serhan Cevik; Richard Harris; Fatih Yilmaz |
| Abstract: | Standard models—based exclusively on macro-financial variables—have made little progress in explaining the behavior of exchange rates. In this paper, we introduce a neglected set of “soft power†factors capturing a country’s demographic, institutional, political and social underpinnings to uncover the “missing†determinants of exchange rate volatility over time and across countries. Based on a balanced panel dataset comprising 115 countries during the period 1996–2011, the empirical results are generally robust across different estimation methodologies and show a high degree of persistence in exchange rate volatility, especially in emerging market economies. After controlling for standard macroeconomic factors, we find that the “soft power†variables—such as an index of voice and accountability, life expectancy, educational attainment, the z-score of banks, and the share of agriculture relative to services—have a statistically significant influence on the level of exchange rate volatility across countries. |
| Keywords: | Exchange rates;Foreign exchange market volatility;Econometric models;Exchange rate volatility |
| Date: | 2015–03–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/63&r=cba |
| By: | Andrés Fernández Martín; Michael W. Klein; Alessandro Rebucci; Martin Schindler; Martin Uribe |
| Abstract: | This paper presents and describes a new dataset of capital control restrictions on both inflows and outflows of 10 categories of assets for 100 countries over the period 1995 to 2013. Building on the data first presented in Schindler (2009) and other datasets based on the analysis of the IMF's Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), this dataset includes additional asset categories, more countries, and a longer time period. The paper discusses the manner in which information in the AREAER is translated into a usable dataset. The paper additionally characterizes the data with respect to the prevalence of controls across asset categories, the correlation of controls across asset categories and between controls on inflows and controls on outflows, the aggregation of the separate categories into broader indicators, and the comparison of this dataset with other indicators of capital controls. |
| Keywords: | Financial management, Capital flows, Financial integration, Capital flows, Financial integration, Capital control measures |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:88195&r=cba |
| By: | Kei Imakubo (Bank of Japan); Jouchi Nakajima (Bank of Japan) |
| Abstract: | This paper proposes and estimates an extended shadow-rate term structure model, and uses it to extract inflation risk premia from nominal and real term structures. Our model incorporates the shadow rate and thereby explicitly takes account of the zero lower bound constraint of nominal interest rates. The estimation results for Japan and the United States confirm that our model successfully avoids the estimation bias inherent in the standard affine-type term structure model that ignores the zero lower bound. As we theoretically and empirically demonstrate, the inflation risk premium is time-varying and takes both positive and negative values reflecting market concerns with regard to asymmetric uncertainty in future inflation. |
| Keywords: | Arbitrage-free term structure; Inflation risk premium; Shadow rate; Term premium; Zero lower bound |
| JEL: | E31 E43 E52 G12 |
| Date: | 2015–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp15e01&r=cba |
| By: | Koepke, Robin |
| Abstract: | The empirical literature has long established that U.S. interest rates are an important driver of international portfolio flows, with lower rates “pushing” capital to emerging markets. On the basis of this literature, it is often argued that the Federal Reserve’s imminent policy tightening cycle is likely to weigh on portfolio flows to emerging markets in coming years. The analysis presented in this paper offers a different interpretation of the literature, suggesting that it is the surprise element of monetary policy that affects EM portfolio inflows. A shift in market expectations towards easier future U.S. monetary policy leads to greater foreign portfolio inflows and vice versa. Given current market expectations of sustained increases in the federal funds rate in coming years, EM portfolio flows could be boosted by a slower pace of Fed tightening than currently expected or could be reduced by a faster pace of Fed tightening. |
| Keywords: | Capital Flows, Portfolio Flows, Emerging Markets, Monetary Policy, Market Expectations, Fed Funds Futures, Push and Pull |
| JEL: | E43 F32 F4 G11 |
| Date: | 2014–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63519&r=cba |
| By: | Jakub Mateju (CERGE-EI, Prague, Czech Republic; Czech National Bank, Prague, Czech Republic) |
| Abstract: | This paper suggests that non-fundamental component in asset prices is one of the drivers of financial and credit cycle. Presented model builds on the financial accelerator literature by including a stock market where limitedly-liable investors trade stocks of productive firms with stochastic productivities. Investors borrow funds from the banking sector and can go bankrupt. Their limited liability induces a moral hazard problem which shifts demand for risk and drives prices of risky assets above fundamental value. Embedding the contracting problem in a New Keynesian general equilibrium framework, the model shows that loose monetary policy induces loose credit conditions and leads to a rise in both fundamental and non-fundamental components of stock prices. Positive shock to non-fundamental component triggers a financial cycle: collateral values rise, lending rate and default rate decreases. These effects reverse after several quarters, inducing a credit crunch. The credit boom lasts only while stock market growth maintains sufficient momentum. However, monetary policy does not reduce volatility of inflation and output gap by reacting to asset prices. |
| Keywords: | credit cycle, limited liability, non-fundamental asset pricing, collateral value, monetary policy |
| JEL: | E32 E44 E52 G10 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2015_05&r=cba |
| By: | Bursian, Dirk; Faia, Ester |
| Abstract: | Trust in policy makers fluctuates significantly over the cycle and affects the transmission mechanism. Despite this it is absent from the literature. We build a monetary model embedding trust cycles; the latter emerge as an equilibrium phenomenon of a game-theoretic interaction between atomistic agents and the monetary authority. Trust affects agents' ’stochastic discount factors, namely the price of future risk, and through this it interacts with the monetary transmission mechanism. Using data from the Eurobarometer surveys, we analyze the link between trust and the transmission mechanism of macro and monetary shocks. Empirical results are in line with theoretical ones. |
| Keywords: | betrayal aversion; monetary transmission system; trust games |
| JEL: | C7 C8 E0 E5 G12 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10541&r=cba |
| By: | Aldasoro, Iñaki; Delli Gatti, Domenico; Faia, Ester |
| Abstract: | We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a matching algorithm. Contagion occurs through liquidity hoarding, interbank interlinkages and fire sale externalities. The resulting network configuration exhibits a core-periphery structure, dis-assortative behavior and low density. Within this framework we analyze the effects of prudential policies on the stability/efficiency trade-off. Liquidity requirements unequivocally decrease systemic risk but at the cost of lower efficiency (measured by aggregate investment in non-liquid assets); equity requirements tend to reduce risk (hence increasestability) without reducing significantly overall investment. |
| Keywords: | banking networks; contagion; fire sales; prudential regulation; systemic risk |
| JEL: | C63 D85 G21 G28 L14 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10540&r=cba |
| By: | GAMMADIGBE, Vigninou |
| Abstract: | From the policy mix theory to the related empirical works, the quantification of the coordination of monetary and fiscal policies seems to be missing. In this paper, we propose an index (PMCI) which measures the coherent nature of the policy mix rather than it restrictive or expansive character. It is defined as the average number of periods that monetary and fiscal policies have been in phase in a Keynesian perspective. After calculating the index for thirty (30) countries over the period 1990 to 2013, we explore the relationship between the policy mix coherence and the stabilization of the activity. The econometric analysis provides empirical evidence that good coordination of monetary and fiscal policies reduces the output volatility. |
| Keywords: | Coordination, Monetary policy, Fiscal policy. |
| JEL: | C21 C43 E61 |
| Date: | 2015–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63583&r=cba |
| By: | Pelizzon, Loriana; Subrahmanyam, Marti G.; Tomio, Davide; Uno, Jun |
| Abstract: | This paper examines the dynamic relationship between credit risk and liquidity in the sovereign bond market in the context of the European Central Bank (ECB) interventions. Using a comprehensive set of liquidity measures obtained from a detailed, quote-level dataset of the largest interdealer market for Italian government bonds, we show that changes in credit risk, as measured by the Italian sovereign credit default swap (CDS) spread, generally drive the liquidity of the market: a 10% change in the CDS spread leads a 11% change in the bid-ask spread. This relationship is stronger, and the transmission is faster, when the CDS spread is above the 500 basis point threshold, estimated endogenously, and can be ascribed to changes in margins and collateral, as well as clientele effects. Moreover, we show that the Long-Term Refinancing Operations (LTRO) intervention by the ECB weakened the sensitivity of the liquidity provision by the market makers to changes in the Italian government's credit risk. We also document the importance of market-wide and dealer-specific funding liquidity measures in determining the market liquidity for Italian government bonds. |
| Keywords: | Liquidity,Credit Risk,Euro-zone Government Bonds,Financial Crisis,MTS Bond Market |
| JEL: | G01 G12 G14 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:95&r=cba |
| By: | Laurence M. Ball; Sandeep Mazumder |
| Abstract: | This paper examines the recent behavior of core inflation in the United States. We specify a simple Phillips curve based on the assumptions that inflation expectations are fully anchored at the Federal Reserve’s target, and that labor-market slack is captured by the level of shortterm unemployment. This equation explains inflation behavior since 2000, including the failure of high total unemployment since 2008 to reduce inflation greatly. The fit of our equation is especially good when we measure core inflation with the Cleveland Fed’s series on weighted median inflation. We also propose a more general Phillips curve in which core inflation depends on short-term unemployment and on expected inflation as measured by the Survey of Professional Forecasters. This specification fits U.S. inflation since 1985, including both the anchored-expectations period of the 2000s and the preceding period when expectations were determined by past levels of inflation. |
| Keywords: | Inflation;United States;Unemployment;Deflation;Keynesian economics;Inflation, Phillips curve. |
| Date: | 2015–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/39&r=cba |
| By: | Alan Finkelstein Shapiro; Andres Gonzalez |
| Abstract: | Emerging economies have high shares of self-employed individuals running owner-only firms who, in contrast to many salaried firms, have little access to formal financing and therefore rely on informal financing (input credit) from other firms. We build a small open economy real business cycle model with labor and financial market frictions where formal credit markets, informal credit, and the structure of the labor market interact. The model successfully replicates the cyclical behavior of sectoral employment, formal credit, and the main macroeconomic aggregates in emerging economies. We show that a countercyclical macroprudential policy that reduces formal credit fluctuations has positive though quantitatively limited effects on consumption and output volatility, but generates larger unemployment fluctuations in response to productivity shocks; the same policy increases labor market and aggregate volatility in response to net worth shocks. The link between input credit and the labor market structure---key for capturing the cyclical dynamics of labor and credit markets in the data---plays a crucial role for these results. |
| Keywords: | Macroprudential policies and financial stability;Latin America;Emerging markets;Labor markets;Business cycles;Small open economies;Labor market friction;Econometric models;Business cycles, self-employment, labor search frictions, financial frictions, macroprudential policy. |
| Date: | 2015–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/78&r=cba |
| By: | International Monetary Fund |
| Abstract: | The U.S. federal banking agencies (FBAs1) have improved considerably in effectiveness since the previous FSAP. In response to global and domestic reforms, particularly the Dodd-Frank Act (DFA), the FBAs have stepped up their supervisory intensity, especially of large banking organizations, putting emphasis on banks’ capital planning, stress testing and corporate governance. To match, the FBAs have also enhanced their supervisory capacity, adding significantly to their staffing numbers and skills base. |
| Keywords: | Financial Sector Assessment Program;Banking sector;Basel Core Principles;Bank supervision;Reports on the Observance of Standards and Codes;United States; |
| Date: | 2015–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/89&r=cba |
| By: | International Monetary Fund |
| Abstract: | This paper discusses key findings of the Detailed Assessment of Compliance on the Basel Core Principles for Effective Banking Supervision in South Africa. The South African banking system is highly concentrated with more than 90 percent of banking assets being controlled by the five largest banks. A suitable legal framework for banking supervision is in place to provide each responsible authority with the necessary legal powers to authorize banks, conduct ongoing supervision, address compliance with laws, and undertake timely corrective actions to address safety and soundness concerns. The responsibilities and objectives of each of the authorities involved in banking supervision are clearly defined in legislation and publicly disclosed. |
| Keywords: | Financial Sector Assessment Program;Banking sector;Basel Core Principles;Bank supervision;Reports on the Observance of Standards and Codes;South Africa; |
| Date: | 2015–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/55&r=cba |