nep-cba New Economics Papers
on Central Banking
Issue of 2019‒11‒04
sixteen papers chosen by
Sergey E. Pekarski
Higher School of Economics

  1. Should Monetary Policy Take Inequality and Climate Change into Account? By Patrick Honohan
  2. Stock Market's Assessment of Monetary Policy Transmission: The Cash Flow Effect By Refet S. Gürkaynak; Hatice Gökce Karasoy-Can; Sang Seok Lee
  3. Spillovers of asset purchases within the real sector: Win-win or joy and sorrow? By Sondershaus, Talina
  4. Quantitative Easing and Equity Prices: Evidence from the ETF Program of the Bank of Japan By Andrea Barbon; Virginia Gianinazzi
  5. US banking deregulation and local economic growth: Direct effects and externalities By Pieter IJtsma; Sherrill Shaffer; Laura Spierdijk
  6. Narrative monetary policy surprises and the media By Saskia ter Ellen; Vegard H. Larsen; Leif Anders Thorsrud
  7. The dynamic impact of FX interventions on financial markets By Rieth, Malte; Menkhoff, Lukas; Stöhr, Tobias
  8. US Monetary Policy and the Stability of Currency Pegs By Rövekamp, Ingmar
  9. Inflation and Deflationary Biases in Inflation Expectations By Lamla, Michael; Pfajfar, Damjan; Rendell, Lea
  10. Information Effects of Euro Area Monetary Policy By Kerssenfischer, Mark
  11. Bank Capital Regulation and Endogenous Shadow Banking Crises By Poeschl, Johannes; Zhang, Xue
  12. Active, or passive? Revisiting the role of fiscal policy in the Great Inflation By Ettmeier, Stephanie; Kriwoluzky, Alexander
  13. ECB Announcements and Stock Market Volatility By Neugebauer, Frederik
  14. Predicting Monetary Policy Using Artificial Neural Networks By Hinterlang, Natascha
  15. The Contemporary Role of Gold in Central Banks' Balance Sheets By Iveta Polaskova; Lubos Komarek; Michal Skoda
  16. Endogenous forward guidance By Vogel, Lukas

  1. By: Patrick Honohan (Peterson Institute for International Economics)
    Abstract: Should central banks take more account of ethical distributional and environmental concerns in the design and implementation of the wider monetary policy toolkit they have been using in the past decade? Although the scope to influence a range of objectives is more limited than is often supposed, and while it is vital to not derail monetary policy from its core purposes, central bank mandates justify paying more attention to such broad issues, especially if policy choices have a significant potential impact. Carefully managed steps in this direction could actually strengthen central bank independence while making some contribution to improving the effectiveness of public policy on these matters.
    Keywords: Monetary Policy, Central Banking
    JEL: E42 E52 E58
    Date: 2019–10
  2. By: Refet S. Gürkaynak; Hatice Gökce Karasoy-Can; Sang Seok Lee
    Abstract: We show that firm liability structure and associated cash flow matter for firm behavior, and that financial market participants price stocks accordingly. Looking at firm level stock price changes around monetary policy announcements, we find that firms that have more cash flow exposure see their stock prices affected more. The stock price reaction depends on the maturity and type of debt issued by the firm, and the forward guidance provided by the Fed. This effect has remained intact during the ZLB period. Importantly, we show that the effect is not a rule of thumb behavior outcome and that the marginal stock market participant actually studies and reacts to the liability structure of firm balance sheets. The cash flow exposure at the time of monetary policy actions predicts future net worth, investment, and assets, verifying the stock pricing decision and also providing evidence of cash flow effects on firms’ real behavior. The results hold for S&P500 firms that are usually thought of not being subject to tight financial constraints.
    Keywords: cash flow effect of monetary policy, investor sophistication, financial frictions, stock pricing
    JEL: E43 E44 E52 E58 G14
    Date: 2019
  3. By: Sondershaus, Talina
    Abstract: Events which have an adverse or positive effect on some firms can disseminate through the economy to firms which are not directly affected. By exploiting the first large sovereign bond purchase programme of the ECB, this paper investigates whether more lending to some firms spill over to firms in the surroundings of direct beneficiaries. Firms operating in the same industry and region invest less and reduce employment. The paper shows the importance to consider spillover effects when assessing unconventional monetary policies: Differences between treatment and control groups can be entirely attributed to negative effects on the control group.
    Keywords: asset purchase programmes,small and medium enterprises,investments
    JEL: D22 E58 G21 G28
    Date: 2019
  4. By: Andrea Barbon (Università della Svizzera italiana (USI), Lugano; Swiss Finance Institute, Students); Virginia Gianinazzi (Università della Svizzera italiana (USI), Lugano; Swiss Finance Institute)
    Abstract: Since the introduction of its Quantitative and Qualitative Easing program in 2013, the Bank of Japan has been increasing its holdings of Japanese equity through large scale purchases of index-linked ETFs with the intention of lowering assets' risk premia. We exploit the cross-sectional heterogeneity of the shock to supply induced by the policy to identify a positive, sizeable and persistent impact on stock prices consistent with a portfolio balance channel. The evidence suggests that demand curves for stocks are downward sloping in the long-run. We estimate an increase of 22 basis points in aggregate market valuation per trillion Yen invested into the program, corresponding to a price elasticity of 1. We show that the purchases of ETFs tracking the price-weighted Nikkei 225 index generate significant pricing distortions relative to a value-weighted benchmark. Finally, we provide a rigorous framework to discuss the consequences of a potential exit strategy from QE.
    Keywords: ETFs, quantitative easing, portfolio balance channel, unconventional monetary policy, Bank of Japan
    JEL: E52 E58 B26
    Date: 2019–04
  5. By: Pieter IJtsma; Sherrill Shaffer; Laura Spierdijk
    Abstract: This study investigates the effects of banking deregulation on county-level economic growth in the U.S. during the 1970–2000 period. Our main contribution to the literature is that we analyze both the direct and external effects of banking deregulation on local economic growth. For the regions South, West and Northeast, we find significantly positive long-run direct effects of intrastate branching deregulation on the expected growth rates of counties in the deregulated state itself, up to several percentage points. We also establish significantly positive long-run external effects on the expected growth rates of counties adjacent to the deregulated state, up to several tenths of percentage points. We do not find such robust effects for interstate banking deregulation.
    Keywords: U.S. banking deregulation, economic growth, externalities
    JEL: G21 G28
    Date: 2019–10
  6. By: Saskia ter Ellen; Vegard H. Larsen; Leif Anders Thorsrud
    Abstract: We propose a method to quantify narratives from textual data in a structured manner, and identify what we label "narrative monetary policy surprises" as the change in economic media coverage explained by central bank communication accompanying interest rate meetings. Our proposed method is fast and simple, and relies on a Singular Value Decomposition of the different texts and articles coupled with a unit rotation identifi cation scheme. Identifying narrative surprises in central bank communication using this type of data and identifi cation provides surprise measures that are uncorrelated with conventional monetary policy surprises, and, in contrast to such surprises, have a signifi cant effect on subsequent media coverage. In turn, narrative monetary policy surprises lead to macroeconomic responses similar to what recent monetary policy literature associates with the information component of monetary policy communication. Our study highlights the importance of written central bank communication and the role of the media as information intermediaries.
    Keywords: communication, monetary policy, factor identification, textual data
  7. By: Rieth, Malte; Menkhoff, Lukas; Stöhr, Tobias
    JEL: F31 F33 E58
    Date: 2019
  8. By: Rövekamp, Ingmar
    JEL: E52
    Date: 2019
  9. By: Lamla, Michael; Pfajfar, Damjan; Rendell, Lea
    JEL: E31 E37 E58 D84
    Date: 2019
  10. By: Kerssenfischer, Mark
    JEL: E52 E44 E32 C32
    Date: 2019
  11. By: Poeschl, Johannes; Zhang, Xue
    JEL: E44 G24 G28
    Date: 2019
  12. By: Ettmeier, Stephanie; Kriwoluzky, Alexander
    JEL: C11 C15 E63 E65
    Date: 2019
  13. By: Neugebauer, Frederik
    JEL: E52 E58 G12 G14
    Date: 2019
  14. By: Hinterlang, Natascha
    JEL: C45 C53 E47
    Date: 2019
  15. By: Iveta Polaskova; Lubos Komarek; Michal Skoda
    Abstract: This paper is devoted to the monetary policy context of gold in central banks' reserves. It examines the correlation between the nominal and real price of gold and selected macroeconomic variables and financial assets over the financial and business cycles. In this context, it analyses the investment diversification opportunity that gold offers central banks and other investors. The paper also highlights differences in gold holdings between the central banks of advanced economies (including those with reserve currencies) and those of emerging market and developing economies. It goes on to outline the history of gold holdings from the establishment of the independent Czechoslovakia at the end of 1918 to the present day. It concludes by presenting the rationale for the position of the CNB, which ranks among the modern central banks holding minimal amounts of reserve gold.
    Keywords: Central bank, gold, international monetary system, international reserves
    JEL: E42 E58 F33 Q31
    Date: 2019–10
  16. By: Vogel, Lukas
    JEL: E31 E52 E58 E62 C11
    Date: 2019

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