nep-mac New Economics Papers
on Macroeconomics
Issue of 2016‒10‒30
72 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Effects of South African Monetary Policy Implementation on the CMA: A Panel Vector Autoregression Approach By Monaheng Seleteng (PhD)
  2. The effect of unconventional fiscal policy on consumption expenditure By D'Acunto, Francesco; Hoang, Daniel; Weber, Michael
  3. QE: The Story so far. By Haldane, Andrew; Roberts-Sklar, Matt; Wieladek, Tomasz; Young, Chris
  4. The effects of the crisis on production potential and household spending in Italy By Fabio Busetti; Pietro Cova; Antonio Maria Conti; Filippo Scoccianti; Libero Monteforte; Giordano Zevi; Valentina Aprigliano; Andrea Gerali; Alberto Locarno; Alessandro Notarpietro; Massimiliano Pisani; Concetta Rondinelli; Antonio Bassanetti; Lisa Rodano; Alfonso Rosolia; Francesco Franceschi; Silvia Fabiani; Mario Porqueddu; Marianna Riggi; Fabrizio Venditti
  5. Mending the broken link: heterogeneous bank lending and monetary policy pass-through By Altavilla, Carlo; Canova, Fabio; Ciccarelli, Matteo
  6. Monetary and Macroprudential Policy Games in a Monetary By Richard Dennis; Pelin Ilbas
  7. Financial shocks and inflation dynamics By Abbate, Angela; Eickmeier, Sandra; Prieto, Esteban
  8. A Macrofinance View of U.S. Sovereign CDS Premiums By Chernov, Mikhail; Schmid, Lukas; Schneider, Andres
  9. Central Bank sentiment and policy expectations By Paul Hubert; Fabien Labondance
  10. Optimal monetary policy with heterogeneous agents. By Galo Nuño; Carlos Thomas
  11. Anti-Cyclical Bank Capital Regulation and Monetary Policy By Aliaga-Díaz, Roger; Olivero , María Pía; Powell, Andrew
  12. Global value chains: new evidence and implications By Rita Cappariello; Alberto Felettigh; João Amador; Robert Stehre; Giacomo Oddo; Stefano Federico; Alessandro Borin; Michele Mancini; Sara Formai; Filippo Vergara Caffarelli; Luca Cherubini; Bart Los; Antonio Accetturo; Anna Giunta; Andrea Linarello; Andrea Petrella
  13. Long-run Unemployment and Macroeconomic Volatility By Stefano, Fasani;
  14. Monetary Policy in the Presence of Random Wage Indexation By Jonathan A. Attey; Casper G. de Vries
  15. The role of bank balance sheets in monetary policy transmission. Evidence from Poland By Mariusz Kapuściński
  16. Achieving Price Stability by Manipulating the Central Bank’s Payment on Reserves By Robert E. Hall; Ricardo Reis
  17. Achieving Price Stability by Manipulating the Central Bank's Payment on Reserves By Hall, Robert E.; Reis, Ricardo
  18. Thoughts on a fiscal union in EMU By Gadatsch, Niklas; Hollmayr, Josef; Stähler, Nikolai
  19. Assessing the role of interbank network structure in business and financial cycle analysis By Jean-Yves Gnabo; Nicolas K. Scholtes
  20. Did Fiscal Consolidation Cause the Double-Dip Recession in the Euro Area? By Philipp Heimberger
  21. The Optimal Use of Government Purchases for Stabilization By Michaillat, Pascal; Saez, Emmanuel
  22. The Interplay Between Financial Conditions and Monetary Policy Shocks By Bassetto, Marco; Benzoni, Luca; Serrao, Trevor
  23. Generalized stability of monetary unions under regime switching in monetary and fiscal policies By Dennis Bonam; Bart Hobijn
  24. The effect of ECB foreward guidance on policy expectations By Paul Hubert; Fabien Labondance
  25. Evolution of Exchange Rate Pass-through: Evidence from The Gambia By Jobarteh, Mustapha
  26. The effect of ECB forward guidance on policy expectations By Paul Hubert; Fabien Labondance
  27. How Sticky Wages In Existing Jobs Can Affect Hiring By Mark Bils; Yongsung Chang; Sun-Bin Kim
  28. Volatilité des cours des produits miniers et vulnérabilité de l’économie: est-ce que la croissance économique va s’essouffler en RDC? By Izu, Akhenaton
  29. Rethinking the current inflation target range in South Africa By Bonga-Bonga, Lumengo; Lebese, Ntsakeseni Letitia
  30. Forward Guidance, Quantitative Easing, or both? By Ferre De Graeve; Konstantinos Theodoridis
  31. Catallactics misapplication it crucial role in Africa's underdeveloped economy By Senzu, Emmanuel Tweneboah
  32. The Determinants of Economic Fluctuations in Greece: An Empirical Investigation (1995-2014) By Konstantakis, Konstantinos; Michaelides, Panayotis G.; Tsionas, Efthymios
  33. Explaining the Failure of the Expectations Hypothesis with Short-Term Rates By Ranaldo, Angelo; Rupprecht, Matthias
  34. Determinants of lending activity in the Euro area By Stefan Behrendt
  35. Filling the gap: open economy considerations for more reliable potential output estimates By Zsolt Darvas
  36. The transmission mechanism of credit support policies in the Euro Area By Jef Boeckx; Maite de Sola Perea; Gert Peersman
  37. The Financialization of GDP and its Implications for Macroeconomic Debates By Jacob Assa
  38. Wage and employment determination in a dynamic insider-outsider model By Guerrazzi, Marco
  39. Connecting the dots: market reactions to forecasts of policy rates and forward guidance provided by the Fed By Michelle Bongard; Gabriele Galati; Richhild Moessner; William Nelson
  40. Does slack influence public and private labour market interactions? By Ana Lamo; Enrique Moral-Benito; Javier J. Pérez
  41. The Interdependence of Monetary and Macroprudential Policy under the Zero Lower Bound By Vivien Lewis; Stefania Villa
  42. Payment Instruments and Collateral in the Interbank Payment System By Hajime Tomura
  43. Measuring Systemic Risk Contribution of International Mutual Funds By Aizenman, Joshua; Jinjarak, Yothin; Zheng, Huanhuan
  44. Macroprudential policies, the long-term interest rate and the exchange rate By Philip Turner
  45. Buffer-Stock Saving and Households' Response to Income Shocks By Koeniger, Winfried
  46. A Model of Fickle Capital Flows and Retrenchment: Global Liquidity Creation and Reach for Safety and Yield By Ricardo J. Caballero; Alp Simsek
  47. Core and Periphery in the European Monetary Union: Bayoumi and Eichengreen 25 Years Later By Nauro F. Campos; Corrado Macchiarelli
  48. Policy Uncertainty and Foreign Direct Investment: Evidence from the China-Japan Island Dispute By Cheng Chen; Tatsuro Senga; Chang Sun; Hongyong Zhang
  49. Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings By Brad Hershbein; Lisa B. Kahn
  50. Industrial Interdependence: China 1995-2010 By Jose-Miguel Albala-Bertrand
  51. Forward Guidance under Disagreement - Evidence from the Fed's Dot Projections By Gunda-Alexandra Detmers; ;
  52. Frictional Unemployment with Stochastic Bubbles By Vuillemey, Guillaume; Wasmer, Etienne
  53. 中国地方政府性债务风险与国债定价--基于城投债利差与国债收益率的分析 By 牛霖琳; 洪智武; 陈国进
  54. The Impact of Sex Ratios before Marriage on Household Saving in Two Asian Countries: The Competitive Saving Motive Revisited By Horioka, Charles Yuji; Terada-Hagiwara, Akiko
  55. A New Financial Order in Asia: Will a RMB bloc emerge? By Takatoshi Ito
  56. Trade credit: Elusive insurance of firm growth By Bams, Dennis; Bos, Jaap; Pisa, Magdalena
  57. A Quantitative Theory of Time-Consistent Unemployment Insurance By Xie, Zoe; Pei, Yun
  58. On the Stock Markets’ Reactions to Taxation and Public Expenditure By Pasquale Foresti; Oreste Napolitano
  59. Oil price and economic growth: a long story? By María Dolores Gadea; Ana Gómez-Loscos; Antonio Montañés
  60. Business cycles in an oil economy: Lessons from Norway By Drago Bergholt; Vegard Høghaug Larsen
  61. Is consumption-Laffer curve hump-shaped? The role of VAT evasion By Vasilev, Aleksandar
  62. Volatility Co-movement and the Great Moderation. An Empirical Analysis By Haroon Mumtaz; Konstantinos Theodoridis
  63. Optimal Fiscal Substitutes for the Exchange Rate in a Monetary Union By Christoph Kaufmann
  64. Government Spending Multipliers in Natural Resource-Rich Developing Countries By Jean-Pascal Nganou; Juste Some; Guy Tchuente
  65. Macroeconomic responses to an independent monetary policy shock: a (more) agnostic identification procedure By Marco Capasso; Alessio Moneta
  66. Are Macro-Forecasters Essentially The Same? An Analysis of Disagreement, Accuracy and Efficiency By Michael Clements
  67. Fiscal Risk and the Portfolio of Government Programs By Samuel G. Hanson; David S. Scharfstein; Adi Sunderam
  68. The signaling effect of raising inflation By Eric Mengus; Jean Barthelemy
  69. Which Sentiment Indicators Matter? An Analysis of the European Commercial Real Estate Market By Steffen Heinig; Anupam Nanda; Sotiris Tsolacos
  70. Unemployment Exits Before and During the Crisis By NAGORE GARCIA Maria desemparados; VAN SOEST Arthur
  71. The trade-off between monetary policy and bank stability By Martien Lamers; Frederik Mergaerts; Elien Meuleman; Rudi Vander Vennet
  72. Crisis Financieras en la Historia Las crisis financieras no son un fenómeno nuevo en la historia. Desde la crisis de los tulipanes en 1634 hasta la crisis financiera de Estados Unidos en 2008 y la europea de 2010 son eventos que se han sucedido sin que se encuentre la forma de evitarlos. A lo largo de la historia, las crisis financieras asociadas a burbujas especulativas y excesiva acumulación de deudas son eventos recurrentes que comparten un patrón similar, matizado con las características de cada país y momento histórico. Los avances tecnológicos juegan un rol en la aceleración de las mismas. A pesar de ello no tienen una definición única ni tampoco un esquema de resolución aceptado. Las crisis generan consecuencias el elevado costo social que generan en niveles de actividad y empleo. Una revisión de las principales crisis financieras de la historia muestra una serie de elementos comunes y deja lecciones que deben tomarse en cuenta para, al menos, minimizar su ocurrencia. By Carlos Parodi Trece

  1. By: Monaheng Seleteng (PhD)
    Abstract: The paper investigates the effects of South African monetary policy implementation on selected macroeconomic variables in the rest of the Common Monetary Area (CMA) looking specifically at the response of a shock to South African key interest rate (repo rate) on macroeconomic variables such as the regional lending rates, interest rate spread, private sector credit, money supply, inflation and economic growth in the rest of the CMA countries. The analysis is conducted using impulse-response functions derived from Panel Vector Autoregression (PVAR) methodology. The estimates are conducted using annual data for a panel of four CMA countries for the period 1980 – 2012. The results show that a positive shock to South African repo rate significantly affects lending rates, inflation and economic growth in the entire CMA countries. South African repo rate has more impact on lending rates in the entire CMA. This is then followed by the impact on inflation and then economic growth.
    Keywords: Monetary policy, Transmission Mechanism, interest rates, Impulse-Response Functions, PVAR Model, Variance-Decomposition.
    JEL: C3 E43 E47 E52 E58 E61
    Date: 2016–10
  2. By: D'Acunto, Francesco; Hoang, Daniel; Weber, Michael
    Abstract: Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We exploit a unique natural experiment for an empirical test of the effectiveness of unconventional fiscal policy. To comply with European Union law, the German government announced in November 2005 an unexpected 3-percentage-point increase in value-added tax (VAT), effective in 2007. The shock increased households' inflation expectations during 2006 and actual inflation in 2007. Germans' willingness to purchase durables increased by 34% after the shock, compared to before and to matched households in other European countries not exposed to the VAT shock. Income, wealth effects, or intratemporal substitution cannot explain these results.
    Keywords: Zero-Lower Bound,Fiscal and Monetary Policy,Durable Consumption,Survey Data,Household Consumption
    JEL: D12 D84 D91 E21 E31 E32 E52 E65
    Date: 2016
  3. By: Haldane, Andrew (Bank of England); Roberts-Sklar, Matt (Bank of England); Wieladek, Tomasz (Bank of England); Young, Chris (Bank of England)
    Abstract: In the past decade or so, a number of central banks have purchased assets financed by the creation of central bank reserves as a tool for loosening monetary policy – a policy often known as ‘quantitative easing’ or ‘QE’. The first half of the paper reviews the international evidence on the impact on financial markets and economic activity of this policy. It finds that these central bank balance sheet expansions had a discernible and significant impact on financial markets and the economy. The second half of the paper provides new empirical analysis on the macroeconomic impact of central bank balance sheet expansions, across time and countries. It finds three key results. First, it is only when central bank balance sheet expansions are used as a monetary policy tool that they have a significant macro-economic impact. Second, there is evidence for the US that the effectiveness of QE may vary over time, depending on the state of the economy and liquidity of the financial system. And third, QE can have strong spill-over effects cross-border, acting mainly via financial channels. For example, the impact of US QE on UK economic activity may be as large as the impact on US economic activity.
    Keywords: Quantitative Easing; QE; unconventional monetary policy; central bank balance sheet
    JEL: E43 E44 E52 E58 E60
    Date: 2016–10–24
  4. By: Fabio Busetti (Bank of Italy); Pietro Cova; Antonio Maria Conti (Bank of Italy); Filippo Scoccianti (Bank of Italy); Libero Monteforte (Bank of Italy); Giordano Zevi (Bank of Italy); Valentina Aprigliano (Bank of Italy); Andrea Gerali (Bank of Italy); Alberto Locarno (Bank of Italy); Alessandro Notarpietro (Bank of Italy); Massimiliano Pisani (Bank of Italy); Concetta Rondinelli (Bank of Italy); Antonio Bassanetti (IMF); Lisa Rodano (Bank of Italy); Alfonso Rosolia (Bank of Italy); Francesco Franceschi (Bank of Italy); Silvia Fabiani (Bank of Italy); Mario Porqueddu (Bank of Italy); Marianna Riggi (Bank of Italy); Fabrizio Venditti (Bank of Italy)
    Abstract: The conference on the impact of the crisis on production potential and household spending in Italy was held in Rome on 5 December 2014. During the conference the results were presented of a research project led by a group of economists from the Bank’s Directorate General for Economics, Statistics and Research. The studies presented document the impact of the crisis on some important macroeconomic variables and verify to what extent these effects have also led to structural changes in the behaviour of households and firms.
    Keywords: industrial production, global financial crisis, sovereign debt crisis, heterogeneity, Italian economy, potential output, bayesian var, financial shocks, sovereign shocks, sovereign risk, fiscal policy
    JEL: C32 C51 E31 E32 E37 E41 E52 E65 F34
    Date: 2014–12
  5. By: Altavilla, Carlo; Canova, Fabio; Ciccarelli, Matteo
    Abstract: We analyse the pass-through of monetary policy measures to lending rates to firms and households in the euro area using a unique bank-level dataset. Banks' characteristics such as the capital ratio and the exposure to sovereign debt are responsible for the heterogeneity of pass-through of conventional monetary policy changes. The location of a bank is instead irrelevant. Non-standard measures normalized the capacity of banks to grant loans resulting in a significant compression in lending rates. Banks with a high level of non-performing loans and a low capital ratio were the most responsive to the measures. Finally, we quantify the effects of non-standard policies on the real economic activity using a standard macroeconomic model and find that in absence of these measures both inflation and output gap would have been significantly lower.
    Keywords: European Banks; Heterogeneity; Monetary pass-through; VARs
    JEL: C23 E44 E52 G21
    Date: 2016–10
  6. By: Richard Dennis (University of Glasgow); Pelin Ilbas (National Bank of Belgium)
    Abstract: We use the two-country model of the euro area developed by Quint and Rabanal (2014)to study policymaking in the European Monetary Union (EMU). In particular, we focus on strategic interactions: 1) between monetary policy and a common macroprudential authority, and; 2) between an EMU-level monetary authority and regional macroprudential authorities. In the .rst case, price stability and .nancial stability are pursued at the EMU level, while in the second case each macroprudential authority adopts region-speci.c objectives. We compare cooperative equilibria in the simultaneous-move and leadership solutions, each obtained assuming policy iscretion. Further, we assess the e¤ects on policy performance of assigning shared objectives across policymakers and of altering the level of importance attached to various policy objectives.
    Keywords: Monetary policy, macroprudential policy, policy coordination
    JEL: E42 E44 E52 E58
    Date: 2016–10
  7. By: Abbate, Angela; Eickmeier, Sandra; Prieto, Esteban
    Abstract: We assess the effects of financial shocks on inflation, and to what extent financial shocks can account for the "missing disinflation" during the Great Recession. We apply a vector autoregressive model to US data and identify financial shocks through sign restrictions. Our main finding is that expansionary financial shocks temporarily lower inflation. This result withstands a large battery of robustness checks. Moreover, negative financial shocks helped preventing a deflation during the latest financial crisis. We then explore the transmission channels of financial shocks relevant for inflation, and find that the cost channel can explain the inflation response. A policy implication is that financial shocks that move output and inflation in opposite directions may worsen the trade-off for a central bank with a dual mandate.
    Keywords: financial shocks,inflation dynamics,monetary policy,financial frictions,cost channel,sign restrictions
    JEL: E31 E44 E58
    Date: 2016
  8. By: Chernov, Mikhail; Schmid, Lukas; Schneider, Andres
    Abstract: Premiums on U.S. sovereign CDS have risen to persistently elevated levels since the financial crisis. In this paper, we ask whether these premiums reflect the probability of a U.S. fiscal default, namely a state in which budget balance can no longer be restored by further raising taxes or eroding the real value of debt by raising inflation. To that end, we develop an equilibrium macrofinance model of the U.S. economy, in which the fiscal and monetary policy stance jointly endogenously determine nominal debt, taxes, inflation and growth. While U.S. CDS cannot be valued using standard replication arguments, we show how in our equilibrium model, CDS premiums reflect endogenous risk adjusted fiscal default probabilities. A calibrated version of the model is quantitatively consistent with high premiums on U.S. sovereign CDS.
    Keywords: credit default swaps; recursive preferences; sovereign default
    JEL: E43 E44 E52 G12 G13
    Date: 2016–10
  9. By: Paul Hubert (OFCE-Sciences Po); Fabien Labondance (OFCE-Sciences Po - Université de Bourgogne Franche-Comté- CRESE)
    Abstract: We explore empirically the theoretical prediction that waves of optimism or pessimism may have aggregate effects, in the context of monetary policy. We investigate whether the sentiment conveyed by ECB and FOMC policymakers in their statements affect the term structure of private short-term interest rate expectations. First, we quantify central bank tone using a computational linguistics approach. Second, we identify sentiment as exogenous shocks to these quantitative measures using an augmented narrative approach following the information friction literature. Third, we estimate the impact of sentiment on private agents’ expectations about future short-term interest rates using a high-frequency methodology and an ARCH model. We find that sentiment shocks increase private interest rate expectations around maturities of one and two years. We also find that this effect is non-linear and depends on the state of the economy and on the characteristics (precision, sign and size) of the sentiment signal.
    Keywords: animal spirits, Optimism, Confidence, Central Bank communication, Interest-rate expectations, ECB, FOMC
    JEL: E43 E52 E58
    Date: 2016–09
  10. By: Galo Nuño (Banco de España); Carlos Thomas (Banco de España)
    Abstract: Incomplete markets models with heterogeneous agents are increasingly used for policy analysis. We propose a novel methodology for solving fully dynamic optimal policy problems in models of this kind, both under discretion and commitment. We illustrate our methodology by studying optimal monetary policy in an incomplete-markets model with non-contingent nominal assets and costly inflation. Under discretion, an inflationary bias arises from the central bank’s attempt to redistribute wealth towards debtor households, which have a higher marginal utility of net wealth. Under commitment, this inflationary force is countered over time by the incentive to prevent expectations of future inflation from being priced into new bond issuances; under certain conditions, long run inflation is zero as both effects cancel out asymptotically. For a plausible calibration, we find that the optimal commitment features first-order initial inflation followed by a gradual decline towards its (near zero) long-run value. Welfare losses from discretionary policy are first-order in magnitude, affecting both debtors and creditors.
    Keywords: optimal monetary policy, commitment and discretion, incomplete markets, nominal debt, inflation, redistributive effects, continuous time
    JEL: E5 E62 F34
    Date: 2016–10
  11. By: Aliaga-Díaz, Roger (The Vanguard Group, Inc); Olivero , María Pía (Drexel University); Powell, Andrew (Research Department Inter-American Development Bank and Universidad Torcuato di Tella)
    Abstract: The financial crisis of 2008/09 revived attention given to credit booms and busts and bank credit pro-cyclicality. The regulation guidelines of Basel III attempt to improve the quality of bank capital and explicitly includes a capital buffer to address cyclicality. In this paper we study the interaction between cyclical capital rules and alternative types of monetary policy in the context of a dynamic stochastic general equilibrium model. We find that: First, capital requirements amplify the effects of various exogenous shocks. Second, anti-cyclical requirements (as in Basel III) indeed, and as intended by the regulation, have important stabilization properties relative to the case of constant requirements (as in Basel I). This is true for all types of fluctuations that we study, which include those caused by productivity, demand-side, preference and monetary shocks. The quantitative results are sensitive to the size of the capital buffer (over minimum requirements) optimally held by banks. In particular, with reasonably large buffers, the economy behaves just as when there is no regulation, in which case a very strongly cyclical capital rule would be required to have significant effects.
    Keywords: Credit crunch; cyclical capital requirements; monetary policy; business cycles
    JEL: E32 E44
    Date: 2016–09–01
  12. By: Rita Cappariello (Bank of Italy); Alberto Felettigh; João Amador (Banco do Portugal); Robert Stehre; Giacomo Oddo (Bank of Italy); Stefano Federico (Bank of Italy); Alessandro Borin (Bank of Italy); Michele Mancini (Bank of Italy); Sara Formai (Bank of Italy); Filippo Vergara Caffarelli (Bank of Italy); Luca Cherubini (Bank of Italy); Bart Los; Antonio Accetturo (Bank of Italy); Anna Giunta; Andrea Linarello (Bank of Italy); Andrea Petrella (Bank of Italy)
    Abstract: The workshop entitled 'Global Value Chains: new evidence and implications' was held in Rome on the 22nd of June 2015. The workshop presented the results of a research project carried out by a group of economists from the Bank's Directorate General for Economics, Statistics and Research. The first session focuses on the structure of global value chains and how they function in the euro area economies. The second and third sessions examine the implications of global value chains on competitiveness and economic performance, respectively. The last session concentrates on specific countries, regions and firms.
    Keywords: China, competitiveness, demand for skills, domestic value added activation, Euro Area, final demand, firm organization, foreign direct investment, Germany, global value chains, industrial firms, input-output tables, International trade, intra-regional differentiation, Italy, market shares, multinational companies, ownership-based competitiveness, trade elasticity, trade in value added, world trade
    JEL: C67 D23 E16 E21 E22 E27 F1 F10 F12 F14 F15 F21 F23 F23 F66 L14 L22 L60 R11 R15
    Date: 2016–03
  13. By: Stefano, Fasani;
    Abstract: This paper develops a DSGE model with downward nominal wage rigidity, in which aggregate price and productivity dynamics are exogenously determined by independent Brownian motions with drift. As a result, the long-run expected value of unemployment depends positively on the drift coe¢ cients and negatively on the volatility coe¢ cients of both price and productivity growth processes. Model prescriptions are empirically tested by using a dataset including a wide sample of OECD countries from a period spanning from 1961 to 2011. Panel regressions with fixed effects and time dummies confirm the expected relation of inflation and productivity with unemployment at low frequencies. Long-run unemployment is negatively correlated with the levels of inflation and productivity growth, and positively with their volatilities.
    Keywords: Long-run unemployment, Downward Nominal Wage Rigidity, Volatility, In‡ation targeting, DSGE model, Cross-country panel data
    JEL: E12 E24 E31 C23
    Date: 2016–10–18
  14. By: Jonathan A. Attey (Erasmus University Rotterdam, The Netherlands); Casper G. de Vries (Erasmus University Rotterdam, The Netherlands)
    Abstract: Empirical estimations suggest heavy-tailed unconditional distributions for inflation, the output gap and the interest rate. However, standard NK models used in policy analysis imply normal distributions for these variables. In this study, we propose a model which replicates the above mentioned empirical features of inflation,the output gap and the interest rate and subsequently investigate the conduct of monetary policy in this model. The novelty of this study is the introduction of random wage indexation as a source of multiplicative shocks. The findings of this study include the following: Firstly, the unconditional distributions of inflation, the output gap and the interest rates exhibit heavy-tailed characteristics. Secondly, under an indexation to lagged inflation scheme, there exists a positive relationship between expected inflation and conditional variance of inflation. Finally, it is better to target current inflation rather than lagged inflation when conducting monetary policy under a Taylor rule.
    Keywords: Wage Indexation; Monetary Policy
    JEL: E31 E40 E52
    Date: 2016–10–17
  15. By: Mariusz Kapuściński
    Abstract: This study investigates whether the effects of monetary policy are amplified through its impact on bank balance sheet strength. Or, in other words, it tests whether the bank lending channel of the monetary transmission mechanism (as reformulated by Disyatat, 2011) works. To this end, panel vector autoregressions with high frequency identification and univariate panel regressions are applied to data for Poland. Counterfactual exercises show that the analysed channel accounts for about 23% of a decrease in lending following a monetary policy impulse. This is another piece of evidence showing that the financial accelerator works in both non-financial and financial sector. In some cases it can make the interplay between monetary and macroprudential policy non-trivial.
    Keywords: monetary transmission mechanism, bank capital, panel vector autoregressions, high frequency identification
    JEL: E52 E51 C33 C23 E43
    Date: 2016
  16. By: Robert E. Hall; Ricardo Reis
    Abstract: Today, all major central banks pay or collect interest on reserves, and stand ready to use the interest rate as an instrument of monetary policy. We show that by paying an appropriate rate on reserves, the central bank can pin the price level uniquely to a target. The essential idea is to index reserves to the market interest rate, the price level, and the target price level in a way that creates a contractionary financial force if the price level is above the target and an expansionary force if below. Our payment-on-reserves policy process does not require terminal conditions like Taylor rules, exogenous fiscal surpluses like the fiscal theory of the price level, liquidity preference as in quantity theories, or local approximations as in new Keynesian models. The process accommodates liquidity services from reserves, segmented financial markets where only some institutions can hold reserves, and nominal rigidities. We believe it would be easy to implement.
    JEL: E31 E42 E58
    Date: 2016–10
  17. By: Hall, Robert E.; Reis, Ricardo
    Abstract: Today, all major central banks pay or collect interest on reserves, and stand ready to use the interest rate as an instrument of monetary policy. We show that by paying an appropriate rate on reserves, the central bank can pin the price level uniquely to a target. The essential idea is to index reserves to the market interest rate, the price level, and the target price level in a way that creates a contractionary financial force if the price level is above the target and an expansionary force if below. Our payment-on-reserves policy process does not require terminal conditions like Taylor rules, exogenous fiscal surpluses like the fiscal theory of the price level, liquidity preference as in quantity theories, or local approximations as in new Keynesian models. The process accommodates liquidity services from reserves, segmented financial markets where only some institutions can hold reserves, and nominal rigidities. We believe it would be easy to implement.
    JEL: E31 E42 E58
    Date: 2016–10
  18. By: Gadatsch, Niklas; Hollmayr, Josef; Stähler, Nikolai
    Abstract: Using an estimated large-scale New-Keynesian model, we assess welfare and business cycle consequences of a fiscal union within EMU. We differentiate between three different scenarios: public revenue equalisation, tax harmonisation and a centralised fiscal authority. Relative to the status quo, long term consequences generate winners and losers depending on the degree of integration and on how key macroeconomic variables adjust. Short term differences between the regimes are minor, both in terms of business cycle statistics as well as in terms of risk sharing of asymmetric shocks. This also explains why welfare differences are negligibly small across the fiscal union scenarios. Even when introducing risk premia on government bonds, this general finding is not changed - although risk premia per se decrease welfare notably. We further perform a counterfactual exercise analysing the effects of what would have happened had a fiscal union regime been installed at the start of EMU already. While key macroeconomic variables would have reacted very similarly, debt dynamics could have changed notably over the estimation period.
    Keywords: Fiscal Policy,Fiscal Union,DSGE-Modelling,Macroeconomics
    JEL: H2 J6 E32 E62
    Date: 2016
  19. By: Jean-Yves Gnabo (Université de Namur); Nicolas K. Scholtes (European Central Bank & Université de Namur)
    Abstract: We develop a DSGE model incorporating a banking sector comprising 4 banks connected in a stylised network representing their interbank exposures. The micro-founded framework allows inter alia for endogenous bank defaults and bank capital requirements. In addition, we introduce a central bank who intervenes directly in the interbank market through liquidity injections. Model dynamics are driven by standard productivity as well as banking sector shocks. In our simulations, we incorporate four different interbank network structures: Complete, cyclical and two variations of the coreperiphery topology. Comparison of interbank market dynamics under the different topologies reveals a strong stabilising role played by the complete network while the remaining structures show a non-negligible shock propagation mechanism. Finally, we show that central bank interventions can counteract negative banking shocks with the effect depending again on the network structure.
    Keywords: Interbank network, DSGE model, banking, liquidity injections
    JEL: D85 E32 E44 E52 G21
    Date: 2016–10
  20. By: Philipp Heimberger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Abstract This paper analyses the short-run effects of fiscal consolidation measures on economic activity in the euro area during the euro crisis. It presents new econometric estimates on the link between cumulative GDP growth and fiscal austerity measures during 2011-2013. The main empirical finding is that the depth of the economic crisis in the euro area's economies is closely related to the harshness of fiscal austerity. Cumulative multiplier estimates are found to vary in a range from 1.4 to 2.1, depending on the data source used to identify the intensity of fiscal consolidation. Given these multiplier values, a reasonable approximation of the size of the output losses due to fiscal austerity in the euro area during 2011-2013 is in the range of 5.5% to 8.4% of GDP. Against the background of the prevailing macroeconomic and institutional circumstances, fiscal consolidation is argued to be the cause of the double-dip recession.
    Keywords: fiscal policy, fiscal multiplier, fiscal consolidation, austerity, growth, eurozone
    JEL: E61 E62 E63
    Date: 2016–10
  21. By: Michaillat, Pascal; Saez, Emmanuel
    Abstract: This paper explores how government purchases can improve stabilization. When unemployment is inefficiently high, optimal government purchases deviate from the Samuelson level to reduce the unemployment gap. Hence, stimulus spending is desirable in slumps whenever the unemployment multiplier is positive. Then, the optimal level of stimulus spending is increasing in the multiplier for small multipliers, largest for a moderate multiplier, and decreasing beyond that. Furthermore, the optimal level of stimulus spending is increasing in the elasticity of substitution between public and private consumption. In particular, optimal stimulus spending is zero when extra public services are useless, and it completely fills the unemployment gap when extra public services are as valuable as extra private services. The results hold whether taxes are nondistortionary or distortionary.
    JEL: E32 E62 H21 H41
    Date: 2016–10
  22. By: Bassetto, Marco (Federal Reserve Bank of Chicago); Benzoni, Luca (Federal Reserve Bank of Chicago); Serrao, Trevor (Federal Reserve Bank of Chicago)
    Abstract: We study the interplay between monetary policy and financial conditions shocks. Such shocks have a significant and similar impact on the real economy, though with different degrees of persistence. The systematic fed funds rate response to a financial shock contributes to bringing the economy back towards trend, but a zero lower bound on policy rates can prevent this from happening, with a significant cost in terms of output and investment. In a retrospective analysis of the U.S. economy over the past 20 years, we decompose the realization of economic variables into the contributions of financial, monetary policy, and other shocks.
    Keywords: Excess bond premium; financial conditions; monetary policy; zero lower bound
    JEL: E44 E52 G28
    Date: 2016–10–17
  23. By: Dennis Bonam; Bart Hobijn
    Abstract: Earlier studies on the equilibrium properties of standard dynamic macroeconomic models have shown that an inflation-targeting central bank imposes strict budgetary requirements on fiscal policy needed to obtain a unique and stable equilibrium. The failure of only one fiscal authority within a monetary union to meet these requirements already results in non-existence of equilibrium and an unstable monetary union. We show that such outcomes can be averted if fiscal authorities can make a credible commitment to switch to more sustainable fiscal regimes in the future. In addition, we illustrate how alternative policy measures, such as fiscal bailouts and debt monetization by the central bank, also broaden the range of policy stances under which monetary unions are stable.
    Keywords: Markov switching; monetary union; equilibrium stability and uniqueness; monetary-fiscal interactions
    JEL: E62 E63
    Date: 2016–10
  24. By: Paul Hubert (OFCE-Sciences Po); Fabien Labondance (OFCE-Sciences Po - Université de Bourgogne Franche-Comté- CRESE)
    Abstract: This paper investigates the instantaneous and dynamic effects of ECB forward guidance announcements on the term structure of private short-term interest rate expectations. We estimate the static and dynamic impact of forward guidance on private agents’ expectations about future short-term interest rates using a high-frequency methodology and an ARCH model, complemented with local projections. We find that ECB forward guidance announcements decrease most of the term structure of private short-term interest rate expectations, this being robust to several specifications. The effect is stronger on longer maturities and persistent.
    Keywords: Central Bank communication, Interest-rate expectations, OIS
    JEL: E43 E52 E58
    Date: 2016–10
  25. By: Jobarteh, Mustapha
    Abstract: The degree to which a change in exchange rate is reflected in changes in the domestic prices is termed exchange rate pass through (ERPT). In this work, we trace the evolutionary path of the ERPT to domestic prices in The Gambia using 60 windows of rolling VARs from 2002m1 to 2012m12. Our findings show pass through is higher in the long run than in the short run, and that irrespective of the horizon considered EPRT has been declining since 2002. Hence, exchange rate fluctuations those not seem to pose any significant threat to monetary policy in The Gambia.
    Keywords: Exchange Rate Pass Through, Inflation, Rolling VAR, The Gambia
    JEL: E52 E58
    Date: 2016–10–19
  26. By: Paul Hubert (Observatoire français des conjonctures économiques); Fabien Labondance (Observatoire français des conjonctures économiques)
    Abstract: This paper investigates the instantaneous and dynamic effects of ECB forward guidance announcements on the term structure of private short-term interest rate expectations. We estimate the static and dynamic impact of forward guidance on private agents’ expectations about future short-term interest rates using a high-frequency methodology and an ARCH model, complemented with local projections. We find that ECB forward guidance announcements decrease most of the term structure of private short-term interest rate expectations, this being robust to several specifications. The effect is stronger on longer maturities and persistent.
    Keywords: Central Bank communication; Short term interest rate expectations; OIS
    JEL: E43 E52 E58
    Date: 2016–10
  27. By: Mark Bils (University of Rochester NBER); Yongsung Chang (University of Rochester, Yonsei University); Sun-Bin Kim (Yonsei University)
    Abstract: We consider a matching model of employment with flexible wages for new hires, but sticky wages within matches. Unlike most models of sticky wages, we allow effort to re- spond if wages are too high or too low. In the Mortensen-Pissarides model, employment is not affected by wage stickiness in existing matches. But it is in our model. If wages of matched workers are stuck too high, firms require more effort, lowering the value of additional labor and reducing hiring. We find that effort's response can greatly increase wage inertia and the volatility of employment relative to that in measured productivity.
    Keywords: Effort, Employment, Sticky Wages, Wage Inertia
    JEL: E32 E24 J22
    Date: 2016–10
  28. By: Izu, Akhenaton
    Abstract: Inspired of the decrease of the prices of oil between January 2014 and January 2016, this article wonders about the capacity of resilience of the congolese economy in relation to the decrease of the mining product prices noticed since June 2015. The econometric analysis teaches that that a decrease of 10% of the export returns entails a reduction of the growth rate of 4% and a decrease of 20% of export returns entails a decrease of 9%. If the tendency observed since June 2015 continues, the economic growth will be blown in 2018 according to our simulations. Thus, we propose the creation of a mining fund to palliate the volatility of the mining product prices.
    Keywords: Growth, resilience, volatility of the prices, vulnerability.
    JEL: E30 E32 L71 O47
    Date: 2016–07–18
  29. By: Bonga-Bonga, Lumengo; Lebese, Ntsakeseni Letitia
    Abstract: With critics suggesting that inflation targeting is not an appropriate monetary policy framework for developing and emerging countries, this paper assesses whether or not the 3%-6% inflation target is the optimal inflation target band in South Africa. The optimal inflation target band is determined based on the time-varying non-accelerating inflation rate of unemployment (the NAIRU). The estimation results provide an estimated inflation range that is wider than the current range pursued by the South African Reserve Bank. This may suggest that the current range of inflation hinders real activities, especially employment in South Africa.
    Keywords: inflation target, NAIRU, unemployment, South Africa
    JEL: C13 E52
    Date: 2016–08–22
  30. By: Ferre De Graeve (Department of Economics, KU Leuven); Konstantinos Theodoridis (Bank of England)
    Abstract: During the Great Recession numerous central banks have implemented various unconventional monetary policy measures. This paper aims to empirically evaluate two particular types of unconventional policies (forward guidance and quantitative easing)in a structural manner. The primary aim is to evaluate the policies jointly, to mitigate concerns that empirical evaluation of either policy in isolation is prone to at leastpartially absorb the effects of the other - typically simultaneously implemented - policy. The approach is structural to overcome inherent empirical difficulties in evaluating policies, e.g. in the wake of anticipation. The model is estimated for the US (1975-2015) and sheds light on the historical real effects of the government debt maturity structure as well as the contribution of Fed policy through its maturity policy during the crisis.
    Keywords: Unconventional monetary policy, quantitative easing, forward guidance
    JEL: E40 E43 E52 E58 E63
    Date: 2016–10
  31. By: Senzu, Emmanuel Tweneboah
    Abstract: The Paper seek to solve the macroeconomic error which emerges from the dispensing of the monetary policy by African Central Banks as a result refuses to address the desired economic growth expected by the individual developing and underdeveloped countries
    Keywords: Monetary Policy, Catallactics, macroeconomics, microeconomics, fiscal policy, development economics
    JEL: D2 E5 E6
    Date: 2016–10
  32. By: Konstantakis, Konstantinos; Michaelides, Panayotis G.; Tsionas, Efthymios
    Abstract: In this work, we investigate the determinants of the Greek Business Cycle in the time period 1995-2014. To this end, we make use of a wide dataset in a quarterly format, which contains all the major macroeconomic and financial variables that have had a certain impact on the Greek economy. We apply a number of relevant econometric techniques such as filtering, Fourier analysis, white noise tests, unit root tests, structural breaks tests, backward regression and rolling windows analysis. Our findings show that the Greek business cycle exhibits two structural breaks, one in 2004 (Q3) and one in 2011(Q4). In the sub- period 1995-2004, the 10-year bond-yields and the elections were found to have a pro-cyclical character on the Greek Business Cycle, while the formation of EMU was found to have a counter-cyclical effect. In the time period 2005-2012, Greek credit and imports were found have a strong pro-cyclical impact, while the overall EU-17 Business Cycle and the Troika had a countercyclical impact on the Greek economy. Further research on the implications of the Greek crisis for other countries would be important.
    Keywords: Business Cycles, Greece
    JEL: C2 C51 E3
    Date: 2015
  33. By: Ranaldo, Angelo; Rupprecht, Matthias
    Abstract: This paper provides the first systematic study of the temporal and cross-sectional variation in the risk premium of the expectations hypothesis. Using a unique and comprehensive data set of short-term European repo rates, we explain the sources and the time variation affecting the risk premium. Our results from unconditional and conditional analyses show that the expectations hypothesis cannot be rejected when repos constitute riskless loans. By contrast, the expectations hypothesis is violated when interest rates are affected by funding risk and collateral risk. Securing loans with safe collateral and unconventional monetary policy can substantially reduce risk premiums, thus supporting the validity of the expectations hypothesis.
    Keywords: Expectations hypothesis, interest rates, risk premium, monetary policy, repo
    JEL: D01 E43 E52 G10 G21
    Date: 2016–10
  34. By: Stefan Behrendt (School of Economics and Business Administration, Friedrich Schiller University Jena)
    Abstract: Empirical estimations of the drivers for loan extension mainly apply the outstanding stock of bank credit as the dependent variable. This paper picks up the critique of Behrendt (2016), namely that such estimations may lead to misleading results, as the change of the stock is not only driven by extended loans, but also by repayments, write-downs, revaluations and securitisation activity. This paper specifically applies a variable of new credit extensions for eight Euro area countries in a simultaneous equation panel model to evaluate potential determinants for credit extension, and compares the findings with a conventional specification using the outstanding stock. It is found that the new lending variable performs exceedingly better in respect to the underlying theory than the stock variable. This result has vast implications for the conduct of monetary policy while looking at credit trends. As most determinants have different coefficients, not only by magnitude, but also by significance and sign, central banks might react in a different way to changing trends in lending when looking at the stock variable rather than the underlying credit extension.
    Keywords: credit channel, monetary transmission, bank lending
    JEL: C18 C82 E51 E52
    Date: 2016–10–18
  35. By: Zsolt Darvas
    Abstract: This paper argues that the Phillips curve relationship is not sufficient to trace back the output gap, because the effect of excess demand is not symmetric across tradeable and non-tradeable sectors. In the non-tradeable sector, excess demand creates excess employment and inflation via the Phillips curve, while in the tradeable sector much of the excess demand is absorbed by the trade balance. We set up an unobserved-components model including both a Phillips curve and a current account equation to estimate ‘sustainable output’ for 45 countries. Our estimates for many countries differ substantially from the potential output estimates of the European Commission, IMF and OECD. We assemble a comprehensive real-time dataset to estimate our model on data which was available in each year from 2004-15. Our model was able to identify correctly the sign of pre-crisis output gaps using real time data for countries such as the United States, Spain and Ireland, in contrast to the estimates of the three institutions, which estimated negative output gaps real-time, while their current estimates for the pre-crisis period suggest positive gaps. In the past five years the annual output gap estimate revisions of our model, the European Commission, IMF, OECD and the Hodrick-Prescott filter were broadly similar in the range of 0.5-1.0 percent of GDP for advanced countries. Such large revisions are worrisome, because the European fiscal framework can translate the imprecision in output gap estimates into poorly grounded fiscal policymaking in the EU.
    Keywords: equilibrium current account, international trade, Kalman-filter, open economy, Phillips-curve, potential output, real-time data, sustainable output, state-space models
    JEL: C32 E32 F41
    Date: 2015–11
  36. By: Jef Boeckx (National Bank of Belgium, Research Department); Maite de Sola Perea (National Bank of Belgium, Research Department); Gert Peersman (Ghent University)
    Abstract: We use an original monthly dataset of 131 individual euro area banks to examine the effectiveness and transmission mechanism of the Eurosystem?s credit support policies since the start of the crisis. First, we show that these policies have indeed been succesful in stimulating the credit ?ow of banks to the private sector. Second, we ?nd support for the "bank lending view" of monetary transmission. Speci?cally, the policies have had a greater impact on loan supply of banks that are more constrained to obtain unsecured external funding, i.e. small banks (size effect), banks with less liquid balance sheets (liquidity effect), banks that depend more on wholesale funding (retail effect) and low-capitalized banks (capital effect). The role of bank capital is, however, ambiguous. Besides the above favorable direct e¤ect on loan supply, lower levels of bank capitalization at the same time mitigate the size, retail and liquidity effects of the policies. The drag on the other channels has even been dominant during tthe sample period, i.e. better capitalized banks have on average responded more to the credit support policies of the Eurosystem as a result of more favourable size, retail and liquidity effects.
    Keywords: unconventional monetary policy, bank lending, monetary transmission mechanism
    JEL: E51 E52 E58 G01 G21
    Date: 2016–10
  37. By: Jacob Assa (United Nations - OHRLLS)
    Abstract: The large and growing literature on financialization has focused on identifying the expansion of the financial sector into various realms of economies and societies, as well as analysing its effects on economic growth, employment, inequality and democracy, among other variables. Most works in this literature, however, still use standard indicators such as Gross Domestic Product (GDP) for empirically defining and examining the scope of financialization or the extent of its impacts. This paper builds on recent research focusing on the financialization of GDP itself. While the original measure in the 1930s and 1940s was designed to capture the production of measurable output, subsequent updates to the national accounting framework shifted the production boundary (which determines what gets counted in GDP) to cover more services, including those for which there is no direct measure of output. In particular, the ‘value-added’ of financial services is imputed based on banks’ revenues and costs, and the inclusion of such income in GDP has caused a deterioration in its correlation with measures of employment and median income, as well as in its performance as a leading indicator. Using new data and treating financial revenues as a cost to the overall economy, a new measure – Final GDP – performs better than GDP on all three fronts. It also sheds light on several unresolved empirical debates in macroeconomics. First, the phenomenon of the Great Moderation of fluctuations in output appears to be a statistical artefact, as the inclusion of finance in GDP smooths over volatility as well as trends of secular stagnation. Second, the spurious breakdown of Okun’s Law also turns out to be a figment of the data, since GDP by construction has been diverging from employment and aggregate demand. Jobless growth recoveries thus turn out to be merely periods of stagnation when employment growth is naturally subdued. Finally, using in-sample forecasting, FGDP outperforms GDP as a leading indicator, foretelling the Great Recession earlier and more clearly than the standard measure. The paper concludes by assessing some broader implications of the finalization of GDP for economics and politics.
    Keywords: National accounts, finance, GDP, financialization, macroeconomics
    Date: 2016–10
  38. By: Guerrazzi, Marco
    Abstract: In this paper, I develop a dynamic insider-outsider model in which a union of incumbent workers is called in to choose the wage of its members by taking into account the optimal employment policy of firms that, in turn, are assumed to decide the firing rate of insiders and the number of outsiders to hire. Under the assumption that incumbents are able to observe their own productivity, the one of outsiders and the amount of labour turnover costs paid by firms, I analytically show that the initial stock of insiders may pin down an equilibrium in which the trajectories of incumbents, their own wage and the firing rate are jointly determined and the proposition according to which insiders have an incentive to keep their numbers small holds on a static and a dynamic perspective. Moreover, I numerically show that in this setting insiders adjust their wage in order to retain their positions and such a behaviour leads to asymmetric employment fluctuations and a certain degree of wage stickiness.
    Keywords: Insider-outsider theory; Union modeling; Wage and employment dynamics; Optimal control.
    JEL: E24 E32 J31 J64
    Date: 2016–10–26
  39. By: Michelle Bongard; Gabriele Galati; Richhild Moessner; William Nelson
    Abstract: This paper compares market reactions to forecasts of the policy rate path provided by FOMC participants ("dots") in the Summary of Economic Projections (SEP) with those to forward guidance provided by the FOMC in its statements. We find that market expectations of the time to lift-off from the zero lower bound are significantly affected in the expected direction by surprises in SEP dots and in forward guidance. We also find a significant impact of macroeconomic news on market participants' expectations of time to lift-off. These results are consistent with forward guidance about policy rates and SEP forecasts each contributing to the public's understanding of future Federal Reserve monetary policy, and with the conditionality of both forms of communication about future policy rates being understood. We also present evidence that market expectations concerning the time to lift-off are influenced by the maximum time to lift-off implied by forward guidance, the SEP and the economic outlook. An appendix provides the FOMC's forward guidance after each meeting from January 2012 to September 2015 and our interpretation of the implied days to liftoff.
    Keywords: forward guidance; policy rate forecasts; zero lower bound
    JEL: E52 E58
    Date: 2016–10
  40. By: Ana Lamo (EUROPEAN CENTRAL BANK); Enrique Moral-Benito (Banco de España); Javier J. Pérez (Banco de España)
    Abstract: We empirically analyse the impact of public employment and public wages shocks on private labour market outcomes by examining whether policies operate differently in periods of economic slack than in normal times. We use local projection methods and focus on the Spanish and euro area aggregate cases. We find that the degree of unemployment slack is key for determining: (i) whether public employment crowds out private employment, and (ii) the degree and extent of the influence of public wages on the private sector. In addition, we find that at times of economic distress, public wage adjustment has lower output costs than public employment cuts for the Spanish case, while the opposite occurs at the euro area level. We conjecture that differences in the degree of wage rigidities and the size of the unemployment pool may rationalise our findings
    Keywords: public employment, wages, unemployment, fiscal policies.
    JEL: E62 E65 H6 C3 C82
    Date: 2016–03
  41. By: Vivien Lewis (Department of Economics, KU Leuven); Stefania Villa (Department of Economics, KU Leuven, Department of Economics, University of Foggia)
    Abstract: This paper considers the interdependence of monetary and macroprudential policy in a New Keynesian business cycle model under the zero lower bound constraint. Entrepreneurs borrow in nominal terms from banks and are subject to idiosyncratic default risk. The realized loan return to the bank varies with aggregate risk, such that bank balance sheets are affected by higher-than-expected rm defaults. Monetary and macroprudential policies are given by an interest rate rule and a capital requirement rule, respectively. We first characterize the model's stability properties under different steady state policies. We then analyze the transmission of a risk shock under the zero lower bound and different macroprudential policies. We finally investigate whether these policies are indeed optimal.
    Keywords: Triffin, European Payments Union (EPU), international monetary system (IMS)
    JEL: A11 B31 F02 F33 F36 N24
    Date: 2016–09
  42. By: Hajime Tomura (Faculty of Political Science and Economics, Waseda University)
    Abstract: This paper presents a three-period model to analyze the need for bank reserves in the presence of other liquid assets like Treasury securities. If a pair of banks settle bank transfers without bank reserves, they must prepare extra liquidity for interbank payments, because depositors' demand for timely payments causes a hold-up problem in the bilateral settlement of bank transfers. In light of this result, the interbank payment system provided by the central bank can be regarded as an implicit interbank settlement contract to save liquidity. The central bank is necessary for this contract as the custodian of collateral. Bank reserves can be characterized as the balances of liquid collateral submitted by banks to participate into this contract. This result explains the rate-of-return dominance puzzle and the need for substitution between bank reserves and other liquid assets simultaneously. The optimal contract is the floor system, not only because it pays interest on bank reserves, but also because it eliminates the over- the-counter interbank money market. The model indicates it is efficient if all banks share the same custodian of collateral, which justifies the current practice that a public institution provides the interbank payment system.
    Keywords: bank reserves; large value payment system; interbank money market; clear- ing house; collateral; legal tender.
    JEL: E41 E42
    Date: 2015–08
  43. By: Aizenman, Joshua (Asian Development Bank Institute); Jinjarak, Yothin (Asian Development Bank Institute); Zheng, Huanhuan (Asian Development Bank Institute)
    Abstract: This study provides new evidence of systemic risk contribution in the international mutual fund sector from 2000–2011. The empirical analysis tracks the systemic risk of 10,570 mutual funds investing internationally. The main findings suggest that the systemic risk contributions of international mutual funds are more than proportional given the fund’s size. Policy implications are discussed in terms of practicality of regulation, macroprudential approach, and risk-taking behavior of fund managers.
    Keywords: systemic risk contribution; systemic risk; mutual funds; international mutual funds; global financial system
    JEL: E44 F30 G15
    Date: 2016–10–20
  44. By: Philip Turner
    Abstract: The Bernanke-Blinder closed economy model suggests that macroprudential policies aimed at bank lending will affect the domestic long-term interest rate. In an open economy, domestic shocks to long-term rates are likely to influence capital flows and the exchange rate. Currency movements feed back into domestic credit through several channels, which will be influenced by balance sheet positions and not only by income flows. Macroprudential policies aimed at domestic credit and at foreign currency borrowing may be the best option open to small countries facing very low global interest rates and risky domestic credit expansion.
    Keywords: Bernanke-Blinder model, capital flows, interest rate policy, macroprudential policy
    Date: 2016–10
  45. By: Koeniger, Winfried
    Abstract: We use the Italian Survey of Household Income and Wealth, a rather unique dataset with a long time dimension of panel information on consumption, income and wealth, to structurally estimate a buffer-stock saving model. We exploit the information contained in the joint dynamics of income, consumption and wealth to quantify the degree of insurance against income risk. The estimated model implies that Italian households can insure between 89 and 95 percent of a transitory and between 7 and 9 percent of a permanent income shock. Compared to existing empirical estimates for the same dataset, our findings suggest that Italian households do not have access to significant insurance beyond self-insurance.
    Keywords: Consumption, Wealth, Incomplete markets, Insurance
    JEL: D91 E21
    Date: 2016–10
  46. By: Ricardo J. Caballero; Alp Simsek
    Abstract: Gross capital flows are very large and highly cyclical. They are a central aspect of global liquidity creation and destruction. They also exhibit rich internal dynamics that shape fluctuations in domestic liquidity, such as the fickleness of foreign capital inflows and the retrenchment of domestic capital outflows during crises. In this paper we provide a model that builds on these observations to address some of the main questions and concerns in the capital flows literature. Within this model, we find that for symmetric economies, the liquidity provision aspect of capital flows vastly outweighs their fickleness cost, so that taxing capital flows, while could prove useful for a country in isolation, backfires as a global equilibrium outcome. However, if the system is heterogeneous and includes economies with abundant (DM) and with limited (EM) natural domestic liquidity, there can be scenarios when global liquidity uncertainty is high and EM's reach for safety can destabilize DMs, as well as risk-on scenarios in which DM's reach for yield can destabilize EMs.
    JEL: E3 E4 F3 F4 F6 G1
    Date: 2016–10
  47. By: Nauro F. Campos; Corrado Macchiarelli
    Abstract: Bayoumi-Eichengreen (1993) establish a EMU core-periphery pattern using 1963-1988 data. We use same methodology, sample, window length (1989-2015), and a novel over-identifying restriction test to ask whether the EMU strengthened or weakened the core-periphery pattern. Our results suggest the latter.
    Keywords: Business cycle synchronization, Structural VAR, European Monetary Union, Core-periphery
    JEL: E32 E63 F02
    Date: 2016–09
  48. By: Cheng Chen (University of Hong Kong); Tatsuro Senga (Queen Mary University of London); Chang Sun (Princeton University); Hongyong Zhang (RIETI)
    Abstract: Can a temporary negative shock generate long-lasting effects on economic activities? To show causal evidence, we utilize data from Japanese multinational corporations (MNCs) and explore the economic impact of the unexpected escalation of an island dispute between China and Japan in 2012. Our difference-in-differences (DID) estimation substantiates that a sharp, but temporary fall in local sales of Japanese MNCs in China led to persistent downward deviation of foreign direct investment (FDI) from its trend. Moreover, despite the quick recovery of local sales, Japanese MNCs in China have continued to underestimate their local sales, which generates pessimistic and more dispersed forecast errors after the island crisis. We view this as evidence for a belief-driven channel through which a large and unexpected negative shock leads agents to revise their beliefs and start tail risk hedging.
    Keywords: Uncertainty, Forecasts, FDI, Geopolitical conflicts, Business cycles
    JEL: D84 E22 E32 F23
    Date: 2016–10
  49. By: Brad Hershbein; Lisa B. Kahn
    Abstract: We show that skill requirements in job vacancy postings differentially increased in MSAs that were hit hard by the Great Recession, relative to less hard-hit areas, and that these differences across MSAs persist through the end of 2015. The increases are prevalent within occupations, more pronounced in the non-traded sector, driven by both within-firm upskilling and substitution from older to newer firms, accompanied by increases in capital stock, and are evident in realized employment. We argue that this evidence reflects the restructuring of production toward more-skilled workers and routine-labor saving technologies, and that the Great Recession accelerated this process.
    JEL: D22 E32 J23 J24 M51 O33
    Date: 2016–10
  50. By: Jose-Miguel Albala-Bertrand (Queen Mary University of London)
    Abstract: This paper is a continuation of our study of structural change in China and deals with the changes of domestic industrial/sectoral backward and forward linkages (i.e. the pull and push of the economy) as well as the changes in their domestic and imported components (i.e. via import substitution/penetration) over the 1995-2010 period. We present the results in terms of rates of change for the period as a whole as well as for their yearly evolution over such a period. The main conclusions are that the secondary sector has become the main pull engine of the economy by far, with the tertiary sector also increasing its pull, and that there are three distinctive periods for the evolution of import substitution/penetration, which seem to correspond to both international crises and domestic reform.
    Keywords: China, Industrial structural change, Input-output decomposition, Trajectories over 1995-2010
    JEL: L16 O4 B4 E2
    Date: 2015–10
  51. By: Gunda-Alexandra Detmers; ;
    Abstract: This paper compares the effectiveness of date- and state-based forward guidance issued by the Federal Reserve since mid-2011 accounting for the influence of disagreement within the FOMC. Effectiveness is investigated through the lens of interest rates’ sensitivity to macroeconomic news and I find that the Fed’s forward guidance reduces the sensitivity and therefore crowds out other public information. The sensitivity shrinkage is stronger in the case of date-based forward guidance due to its unconditional nature. Yet, high levels of disagreement among monetary policy makers as published through the FOMC’s dot projections since 2012 partially restore sensitivity to macroeconomic news. Thus, disagreement appears to lower the information content of forward guidance and to weaken the Fed’s commitment as perceived by financial markets. The dot projections are therefore able to reduce the focal point character of forward guidance.
    JEL: E52 E58
    Date: 2016–10
  52. By: Vuillemey, Guillaume (HEC Paris); Wasmer, Etienne (Sciences Po, Paris)
    Abstract: Bubbles are recurrent events, which contribute to both macroeconomic and employment volatility. We introduce stochastic bubbles in the standard search-and matching model of the labor market. The economy alternates between latent and bubbly states, each being associated with a distinct solution for the market value of firms (respectively, stable or explosive). Bubbles in firm value induce distortions in hiring decisions and wages, which we explicitly characterize. Faced with bubbles, the social planner optimally deviates from the standard Hosios efficiency condition. The optimal share of workers in total surplus must be above the elasticity of hiring rates, by a small but increasing amount as the bubble expands. Finally, our specification for bubbles significantly improves the quantitative ability of the model to match U.S. data, along both real and financial dimensions.
    Keywords: unemployment volatility, labor frictions, bubbles
    JEL: E32 J60
    Date: 2016–10
  53. By: 牛霖琳 (WISE); 洪智武 (WISE); 陈国进 (WISE)
    Abstract: 2008年全球金融危机后,中国政府的大规模财政刺激计划推助了地方政府债务融资的激 增,地方债务风险不断暴露,对中国财政和金融系统性风险的影响受到关注。本文使用5年 期城投债与国债的利差作为地方政府性债务风险的较为市场化的代表因子,采用无套利Ne lson-Siegel利率期限结构扩展模型,对国债收益率曲线和城投债利差联合建模 ,在保证各期限国债收益率之间一致性定价的基础上,研究两者的联合动态与风险传导机制 。实证结果表明,城投债风险通过两个渠道影响国债收益率:一是“避风港效应”,即国债 作为国内债市最安全资产对城投债的替代作用,城投债风险上升时,国债价格被推升、中短 期国债预期收益率下降;二是“补偿效应”,城投债风险可能引致系统性风险,国债收益率 风险溢价随城投债风险增加而上升。样本期内城投债风险作用于国债市场的“避风港效应” 强于“补偿效应”。本文的结构性建模与研究思路为即时有效的地方政府性债务风险预警和 防范机制的建立提供了参考。
    Keywords: 地方债务风险 城投债利差 国债收益率 无套利Nelson-Siegel扩展模型
    JEL: C15 E43 G12
    Date: 2016–10–19
  54. By: Horioka, Charles Yuji (Osaka University); Terada-Hagiwara, Akiko (Asian Development Bank)
    Abstract: This paper estimates a household saving rate equation for India and the Republic of Korea using long-term time series data for the 1975–2010 period, focusing in particular on the impact of the premarital sex ratio on the household saving rate. To summarize the main findings of the paper, it finds that the premarital sex (or gender) ratio (the ratio of males to females) has a significant impact on the household saving rate in both India and the Republic of Korea, even after controlling for the usual suspects such as the aged and youth dependency ratios and income. It has a negative impact in India, where the bride’s side has to pay substantial dowries to the groom’s side at marriage, but a positive impact in the Republic of Korea, where, as in the People’s Republic of China, the groom’s side has to bear a disproportionate share of marriage-related expenses including purchasing a house or condominium for the newlywed couple.
    Keywords: age structure of the population; competitive saving motive; dowries; gender ratio; household saving rate; India; life cycle hypothesis; marriage expenses; population control; premarital sex ratio; Republic of Korea; saving for education; saving for marriage; saving rate; sex ratio; son preference; wedding expenses
    JEL: D12 D14 D91 E21 J11 J12 O16
    Date: 2016–08–05
  55. By: Takatoshi Ito
    Abstract: The objective of this paper is three-fold. First, the monetary and exchange rate regimes of the Asian countries are described and analyzed. The degrees of flexibility in exchange rates and capital controls vary across countries. Some countries have adopted a flexible inflation targeting framework, while others have pursued exchange rate targeting. The paper presents a new result of a tradeoff between price stability and exchange rate stability in the hyperbolic relationship of Asian countries. Second, a framework that analyzes and quantifies the degree of currency internationalization is proposed and applied to the RMB. In every indicator, the RMB’s weight in private-sector international finance has grown in the last several years, both in the private and public sectors. In the settlement role of currency, the RMB is ranked 8th in the BIS survey and 7th in SWIFT usage. This paper exploits data of a recent period when the RMB became de-pegged from the USD and show some of the emerging Asian currencies co-moving with the RMB, more so than the USD. In the official sector, RMB is also increasing its weight. The Chinese central bank has extended the currency-swap agreements with 30-some countries, so that the RMB can be used for trade finance and liquidity assistance. The RMB is adopted as a composition currency of the Special Drawing Rights (SDR), effective in October 2016, with 10.92 percent, ranking number 3, surpassing the JPY and GBP. Finally, potential impending changes in the Asian monetary and exchange rate regimes in Asia are discussed. Projecting the growth of the Chinese economy into the future, the weight of the RMB in the financial markets will increase globally as well as in Asia.
    JEL: E52 F31 F33 F38
    Date: 2016–10
  56. By: Bams, Dennis (Finance); Bos, Jaap (Finance); Pisa, Magdalena (whu otto beisheim school of management)
    Abstract: Firms depend heavily on trade credit. This paper introduces a trade credit network into a structural model of the economy. In an empirical analysis of the model, we find that trade credit is an elusive insurance: as long as a firm is financially unconstrained and times are good, more trade credit enhances sales stability and insures against shocks to the firm’s suppliers. However, if a firm becomes financially constrained or times are bad, trade credit fails to insure against supplier shocks. Moreover, if the firm is low on cash, trade credit propagates shocks from a supplier to its customer.
    Keywords: trade credit, insurance, credit chains, spillover effects
    JEL: E32 G32 L14
    Date: 2016
  57. By: Xie, Zoe; Pei, Yun
    Abstract: During recessions, the U.S. government substantially increases the duration of unemployment insurance (UI) benefits through multiple extensions. This paper seeks to understand the incentives driving these increases. Because of the trade-off between insurance and job search incentives, the classic time-inconsistency problem arises. This paper endogenizes a time-consistent UI policy in a stochastic equilibrium search model, where a government without commitment to future policies chooses the UI benefit level and expected duration each period. A longer benefit duration increases unemployed workers' consumption but reduces job search, leading to higher future unemployment. Quantitatively, the model rationalizes most of the variations in benefit duration during the Great Recession. We use the framework to evaluate the effects of the 2009-2013 benefit extensions on unemployment and welfare.
    Keywords: Time-consistent policy, Unemployment insurance, Labor market, Business cycle
    JEL: E61 H21 J64 J65
    Date: 2016–05–01
  58. By: Pasquale Foresti; Oreste Napolitano
    Abstract: In this paper a panel analysis is employed to investigate the effects of governments’ expenditure and taxation on stock market indexes in 11 members of the Eurozone. A significant number of studies have focused on the effects of monetary policy on the Eurozone stock markets, while only a limited number of papers have investigated the effects of fiscal policy on the stock markets. Therefore, we know little, if anything, on the sign and the stability of the stock markets’ reaction to taxation and public expenditure. Our results show that fiscal maneuvers influence stock markets and that, following an increase (decrease) in public deficit, stock markets indexes go down (up). Nevertheless, further analysis shows that the signs of the estimated stock markets’ reactions are not constant over time and that they can change according to the surrounding macroeconomic scenario.
    Keywords: Stock Market, Fiscal Policy, Eurozone
    Date: 2016–09
  59. By: María Dolores Gadea (UNIVERSITY OF ZARAGOZA); Ana Gómez-Loscos (Banco de España); Antonio Montañés (UNIVERSITY OF ZARAGOZA)
    Abstract: This study investigates changes in the relationship between oil prices and the US economy from a long-term perspective. Although neither of the two series (oil price and GDP growth rates) presents structural breaks in mean, we identify different volatility periods in both of them, separately. From a multivariate perspective, we do not observe a significant effect between changes in oil prices and GDP growth when considering the full period. However, we find a significant relationship in some subperiods by carrying out a rolling analysis and by investigating the presence of structural breaks in the multivariate framework. Finally, we obtain evidence, by means of a time-varying VAR, that the impact of the oil price shock on GDP growth has declined over time. We also observe that the negative effect is greater at the time of large oil price increases, supporting previous evidence of nonlinearity in the relationship.
    Keywords: oil price, business cycle, structural breaks
    JEL: C22 C32 E32 Q43
    Date: 2016–10
  60. By: Drago Bergholt (Norges Bank (Central Bank of Norway)); Vegard Høghaug Larsen (Norges Bank (Central Bank of Norway))
    Abstract: The recent oil price fall has created concern among policy makers regarding the consequences of terms of trade shocks for resource-rich countries. This concern is not a minor one – the world's commodity exporters combined are responsible for 15–20% of global value added. We estimate a two-country New Keynesian model in order to quantify the importance of oil price shocks for Norway – a large, prototype petroleum exporter. Domestic supply chains link mainland (non-oil) Norway to the off-shore oil industry, while fiscal authorities accumulate income in a sovereign wealth fund. Oil prices and the international business cycle are jointly determined abroad. These features allow us to disentangle the structural sources of oil price fluctuations, and how they affect mainland Norway. The estimated model provides three important results: First, pass-through from oil prices to the oil exporter implies up to 20% higher business cycle volatility. Second, the majority of spillover effects stem from non-oil disturbances such as innovations in international investment efficiency. Conventional oil market shocks, in contrast, explain at most 10% of the Norwegian business cycle. Third, the prevailing fiscal regime provides substantial protection against external shocks while domestic supply linkages make the oil exporter more exposed.
    Date: 2016–10–20
  61. By: Vasilev, Aleksandar
    Abstract: This paper shows a standard RBC model, when augmented with a VAT evasion channel, where evasion depends on the consumption tax rate, can produce a hump-shaped consumption Laffer curve. Furthermore, when the evasion channel is turned off, the hump in the Laffer curve disappears, resulting in a monotone relationship between the VAT rate and both the consumption and total tax revenue. This result comes in stark contrast to Hiragara and Nituhara (2015), who generate a peaking curve for consumption tax revenue in a model with a separable utility in consumption and leisure and no evasion. Their results are contingent on implausible values for elasticity parameters, and in addition predict a revenue-maximizing consumption tax rate which is implausibly high. The paper contributes to the public finance literature by providing evidence for the importance of the evasion mechanism, while at the same time adding to the debate about the existence of a peak tax rate for consumption tax revenue.
    Keywords: consumption Laffer curve,VAT evasion,general equilibrium,fiscal policy
    JEL: D58 E26 H26
    Date: 2016
  62. By: Haroon Mumtaz (Queen Mary University of London); Konstantinos Theodoridis (Bank of England)
    Abstract: We propose an extended time-varying parameter Vector Autoregression that allows for an evolving relationship between the variances of the shocks. Using this model, we show that the relationship between the conditional variance of GDP growth and the long-term interest rate has become weaker over time in the US. Similarly, the co-movement between the variance of the long=term interest rate across the US and the UK declined over the 'Great Moderation' period. In contrast, the volatility of US and UK GDP growth appears to have become increasingly correlated in the recent past.
    Keywords: Vector-Autoregressions, Time-varying parameters, Stochastic volatility.
    JEL: C15 C32 E32
    Date: 2016–10
  63. By: Christoph Kaufmann
    Abstract: This paper studies Ramsey-optimal monetary and fiscal policy in a New Keynesian 2-country open economy framework, which is used to assess how far fiscal policy can substitute for the role of nominal exchange rates within a monetary union. Giving up exchange rate exibility leads to welfare costs that depend significantly on whether the law of one price holds internationally or whether firms can engage in pricing-to-market. Calibrated to the euro area, the welfare costs can be reduced by 86% in the former and by 69% in the latter case by using only one tax instrument per country. Fiscal devaluations can be observed as an optimal policy in a monetary union: if a nominal devaluation of the domestic currency were optimal under exible exchange rates, optimal fiscal policy in a monetary union is an increase of the domestic relative to the foreign value added tax.
    Keywords: Monetary union, Optimal monetary and fiscal policy, Exchange rate
    JEL: F41 F45 E63
    Date: 2016–09–21
  64. By: Jean-Pascal Nganou; Juste Some; Guy Tchuente
    Abstract: This paper estimates the government spending multiplier for natural resource-rich low-income countries (LICs). Kraay (2014) identification strategy exploits the long lags between approval and eventual disbursement of loans to isolate a predetermined component of public spending associated with past loan approval decisions taken before the realization of contemporaneous shocks. However, he did not take into account the fact that natural resource extraction in a developing country can be linked to loan approvals and subsequent disbursements. Moreover, natural resources are an important source of public revenue for many LICs. For these reasons, we correct loans disbursement and control for natural resource rent to identify the government spending multiplier. Our estimates suggest that in the short run, the government spending multiplier is around 0.7 for natural resource-rich LICs. Government spending has a permanent impact on the real economic activity in resource-rich countries while having a transitory long-run impact in other countries.
    Keywords: Government spending multipliers; fiscal policy; natural resources
    JEL: E62 O23
    Date: 2016–09
  65. By: Marco Capasso; Alessio Moneta
    Abstract: This study investigates the effects of a monetary policy shock on real output and prices, by means of a novel distribution-free nonrecursive identification scheme for structural vector autoregressions. Structural shocks are assumed to be mutually independent. The identification procedure is agnostic in Uhlig[2005]'s sense, since the response of output to a monetary shock is not restricted. Moreover, assuming mutual independence of the shocks allows us to impose no additional constraints derived from economic theory.
    Keywords: Structural Models, Vector Autoregressions, Independent Component Analysis, Identification, Monetary Policy
    Date: 2016–10–24
  66. By: Michael Clements (ICMA Centre, Henley Business School, University of Reading,)
    Abstract: We investigate whether there are systematic differences between forecasters in terms of their levels of disagreement and the accuracy of their forecasts, and whether these differences are related to whether or not a forecaster efficiently uses their available information. We ?find that forecasters are not interchangeable. At any point in time, the level of disagreement between forecasters is more likely to be due to a given set of forecasters, as opposed to any randomly-selected set of forecasters. In terms of forecast accuracy, we also fi?nd persistence, in that forecasters who are more (less) accurate in one period tend to be more (less) accurate in a subsequent period. Finally, we reject efficiency for around half of all forecasters at short horizons (depending on the variable in question), and ?find that efficient forecasters tend to be more accurate and less contrarian. Our results do not support the notion that contrarian forecasts stand apart by virtue of having superior information - knowing something that others do not.
    Keywords: Expectations formation, Disagreement, Accuracy, Forecast Efficiency
    JEL: C53 E37
    Date: 2016–10
  67. By: Samuel G. Hanson; David S. Scharfstein; Adi Sunderam
    Abstract: In this paper, we develop a new model for government cost-benefit analysis in the presence of risk. In our model, a benevolent government chooses the scale of a risky project in the presence of two key frictions. First, there are market failures, which cause the government to perceive project payoffs differently than private households do. This gives the government a "social risk management" motive: projects that ameliorate market failures when household marginal utility is high are appealing. The second friction is that government financing is costly because of tax distortions. This creates a "fiscal risk management" motive: incremental spending that occurs when total government spending is already high is particularly unattractive. A first key insight is that the government's need to manage fiscal risk frequently limits its capacity for managing social risk. A second key insight is that fiscal risk and social risk interact in complex ways. When considering many potential projects, government cost-benefit analysis thus acquires the flavor of a portfolio choice problem. We use the model to explore how the relative attractiveness of two technologies for promoting financial stability—bailouts and regulation—varies with the government's fiscal burden and characteristics of the economy.
    JEL: E61 G11 G28 H1 H43
    Date: 2016–10
  68. By: Eric Mengus (HEC Paris); Jean Barthelemy (Sciences Po.)
    Abstract: This paper argues that central bankers can raise inflation to signal their ability to commit to forward guidance policies. As inflation can be stabilized in normal times either because of central banker’s commitment ability or because of his aversion to inflation, the private sector is unable to infer the central banker’s type from observing stable inflation before a liquidity trap, jeopardizing the efficiency of forward guidance policy. We derive optimal policy in a new-Keynesian model subject to liquidity traps where agents are uncertain about the central banker’s type and we show that the central banker with commitment ability can signal its type by raising inflation before a trap. The corresponding level of signaling inflation increases with the frequency, the severity as well as with the length of liquidity traps. Finally, we show that this signaling motive can explain level of inflation well above 2%.
    Date: 2016
  69. By: Steffen Heinig (Henley Business School, University of Reading); Anupam Nanda (Henley Business School, University of Reading); Sotiris Tsolacos (Henley Business School, University of Reading)
    Abstract: Property markets exhibit several classic market inefficiencies, which can lead to irrational behaviour and a better understanding of connections between yield modeling and the role of sentiment is of immense interest to property funds, pension funds, banks, insurance companies and other participants. While past studies have examined the role of sentiment in market performance, the conclusions have remained mixed. This paper compares established models against two new innovative methods, paying more attention towards the expectations of market participants to explain yield adjustments and swings in property values. Forecast evaluations reveal that models incorporating property-specific and google trend sentiment outperform the base model. The European market offers an interesting testing ground for our research questions as the interest of investors and banks in abrupt movements in yields and pricing and the role of market sentiment has grown in Europe post global financial crisis due to high level of nonperforming loans.
    Keywords: yield modelling, property lending, sentiment
    JEL: C53 C82 E37 R31
    Date: 2016–06
  70. By: NAGORE GARCIA Maria desemparados; VAN SOEST Arthur
    Abstract: Using administrative data from Spanish Social Security, we compare the pattern and the determinants of individual unemployment durations and the stability of jobs found after unemployment before and during the recent crisis. We find particularly strong effects of the crisis on the hazards in the beginning of the unemployment spell. The groups hit hardest by the crisis are men, immigrants, older workers, and individuals with lower levels of education. The disadvantage of men is mainly due to the more pro-cyclical nature of men´s jobs. Decompositions show that the increase in average unemployment duration and the decrease in average duration of the new job during the crisis are not explained by changing characteristics of the individuals who become unemployed.
    Keywords: Unemployment durations; Job durations; Business cycle; Re-employment probability
    JEL: C41 E32 J64
    Date: 2016–10
  71. By: Martien Lamers (University of Groningen, Netherlands); Frederik Mergaerts (Ghent University, Belgium); Elien Meuleman (Ghent University, Belgium); Rudi Vander Vennet (Ghent University, Belgium)
    Abstract: This paper investigates how monetary policy interventions by the European Central Bank and the Federal Reserve affect the stock market perception of bank systemic risk. In a first step, we identify monetary policy shocks using a structural VAR approach by exploiting the changes of the volatility of these shocks on days on which there are monetary policy announcements. The second step consists of a panel regression analysis, in which we relate monetary policy shocks to market-based measures of bank systemic risk. Our sample includes information on both Euro Area and U.S. listed banks, covering a sample period from October 2008 to December 2015. We condition the impact of the monetary policy shocks on a set of bank-specific variables, thereby allowing for a heterogeneous transmission of monetary policy. We furthermore use the differences between Euro Area core and periphery countries and the additional granularity of U.S. accounting data to assess which channels determine the transmission of monetary policy. Our results indicate that by supporting weaker banks and allowing banks to delay recognizing bad loans, accommodative monetary policy may contribute to the buildup of vulnerabilities in the banking sector and may make an eventual policy tightening more difficult. On the other hand, a continuation of expansionary monetary policy may increase risk-taking incentives by further compressing banks’ net interest margins.
    Keywords: Triffin, European Payments Union (EPU), international monetary system (IMS)
    JEL: G21 G32 E52
    Date: 2016–09
  72. By: Carlos Parodi Trece (Departamento de Economía, Universidad del Pacífico)
    Keywords: Crisis financieras, historia económica, globalización crisis de deuda, economía.
    JEL: G0 E5 N2 N4
    Date: 2016–07

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