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on Monetary Economics |
| By: | Carlos J. Rodriguez-Fuentes; Antonio Olivera-Herrera; David Padron-Marrero |
| Abstract: | The primary goal of the European Central Bank’s (ECB) monetary policy is to achieve price stability. Whereas during the 1980s and 1990s there was a rapid and strong convergence in terms of price differential among the Euro countries, particularly in those countries with higher inflation rates in the past, single monetary policy has proved to be quite inefficient in continuing this trend and has not achieved further reductions in inflation rate differentials within the euro zone. Since the ECB sets the official interest rate according to the average inflation of the euro area, the persistence of such price differentials within the area would mean that the “one size interest rate policy” would not fit all. This paper studies empirically the inflation rate differentials and their persistence in some currency unions with the aim to draw some conclusions for the working of the ECB monetary policy. KEYWORDS: monetary policy; inflation persistence; currency unions |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p218&r=mon |
| By: | sunanda roy (drake university) |
| Abstract: | The paper studies asset prices and capital accumulation in a monetary economy with non-diversifiable idiosyncratic risks (incomplete markets). A government issued unbacked currency is introduced into agent's preferences in a dynamic GEI (General Equilibrium with Incomplete market) model with CARA preferences and normal disturbances. Closed form expressions for equlibrium allocations and prices are derived under finite and infinite horizons. The paper addresses several monetary issues. In particular, money is shown to be neutral but not superneutral at the steady state. The rate of inflation is shown to adversely affect the steady state capital stock under some situations. Finally the Friedman rule is shown to be non-optimal for some economies. |
| JEL: | C6 D5 D9 |
| Date: | 2005–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpge:0508002&r=mon |
| By: | Karlo Kauko (Bank of Finland) |
| Abstract: | This paper presents econometric analyses on the determination of bank deposit and lending rates using longitudinal Finnish data. Interest rate pass-through is very strong, possibly complete, in the case of lending rates; in the case of deposit rates the pass-through is far from complete, even in the long term. The monetary union has benefited customers by decreasing the average rate on new loans. Credit and interest rate risk premiums are clearly observable in banks' lending rates. The impact of money market rates on loan stock rates seems to have been non-linear; no obvious explanation for this phenomenon has been found. |
| Keywords: | G21, E43, E44 |
| JEL: | G21 E43 E44 |
| Date: | 2005–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0508020&r=mon |
| By: | Deokho Cho; Seungryu Ma |
| Abstract: | The goal of this study is to identify the long-term relationship between housing value and interest rate in the Korean housing market, using the Cointegration Test and Spectral Analysis. The result shows the long-term negative (-) equilibrium relationship between housing values and interest rate. Moreover, the Granger Causality Test for confirming the short-term dynamic relationship between these variables notes the one-way causality from interest rate to the change rate of housing and the transfer function model certifies concretely the causal structure of this relationship. The result of this study suggests that the interest rate adjustment policy in the Korean housing market can work very effectively and it will contribute to forecast the change of future housing values hereafter. Keywords: Dynamic relationship; Housing value; Interest rate; Cointegration and spectral analysis; Long term equilibrium |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p323&r=mon |
| By: | John Conlon (University of Mississippi) |
| Abstract: | Policy towards speculative bubbles is examined in a model of a finite horizon 'greater fool' bubble, with rational agents, asymmetric information and short-sales constraints. This model permits the use of standard tools of comparative dynamics and welfare economics to analyze bubble policies. Government policy is modeled as deflating overpriced assets by revealing information about whether or not the asset is overpriced. It is shown that such a policy tends to improve welfare if it protects less-informed buyers from 'bad' sellers, who know the asset is overpriced. However, if policy deflates prices only in 'strong bubbles,', where all private agents know the asset is overpriced, this tends to reduce welfare. This is because, in those states where the central bank turns out not to deflate prices, bad sellers become more confident of selling the asset. That is, bubble bursting protects bad sellers from each other, which, in turn, can exacerbate the lemons problem in states where the asset is valuable. |
| Keywords: | Bubbles, Asymmetric Information, Policy |
| JEL: | D82 E52 G14 |
| Date: | 2005–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpga:0508007&r=mon |