nep-mon New Economics Papers
on Monetary Economics
Issue of 2009‒08‒30
twenty-two papers chosen by
Bernd Hayo
Philipps-University Marburg

  1. Monetary policy strategy in a global environment By Philippe Moutot; Giovanni Vitale
  2. Inflation and Inflation Uncertainty in the Euro Area By Guglielmo Maria Caporale; Luca Onorante; Paolo Paesani
  3. The reception of public signals in financial markets - what if central bank communication becomes stale? By Michael Ehrmann; David Sondermann
  4. Does central bank communication really lead to better forecasts of policy decisions? New evidence based on a Taylor rule model for the ECB By Jan-Egbert Sturm; Jakob de Haan
  5. Lenders of Last Resort in a Globalized World By Maurice Obstfeld
  6. Housing market heterogeneity in a monetary union By Margarita Rubio
  7. Why are banks holding so many excess reserves? By Todd Keister; James McAndrews
  8. The Swedish System of Payment 995-1534 By Edvinsson, Rodney; Franzén, Bo; Söderberg, Johan
  9. How Should Monetary Policy Respond to Exogenous Changes in the Relative Price of Oil? By MICHAEL PLANTE
  10. Does the ECB Rely on a Taylor Rule?: Comparing Ex-post with Real Time Data By Ansgar Belke; Jens Klose
  12. VARMA models for Malaysian Monetary Policy Analysis By Mala Raghavan; George Athanasopoulos; Param Silvapulle
  13. Optimal Exchange-Rate Targeting with Large Labor Unions By Vincenzo Cuciniello; Luisa Lambertini
  14. Credit Spreads and Monetary Policy By Vasco Cúrdia; Michael Woodford
  15. Fiscal and Monetary Policy Responses to Oil Price Shocks in Oil Importing Low Income Countries. By Micheal Plante
  16. The Role of "Determinacy" in Monetary Policy Analysis By Bennett T. McCallum
  17. Macro modelling with many models By Ida Wolden Bache; James Mitchell; Francesco Ravazzolo; Shaun P. Vahey
  18. Economic Shocks and Exchange Rate as a Shock Absorber in Indonesia and Thailand By Goo, Siwei; Siregar, Reza Y. Siregar
  19. Exchange Rates, Oil Price Shocks, and Monetary Policy in an Economy with Traded and Non-Traded Goods. By Micheal Plante
  20. Economic thought at the European Commission and the creation of EMU (1957-1991) By Ivo Maes
  21. Rose Effect and the Euro: The Magic is Gone By Tomáš Havránek
  22. Sovereign bond market integration: the euro, trading platforms and financial crises By Schulz, Alexander; Wolff, Guntram B.

  1. By: Philippe Moutot (European Central Bank, Directorate Monetary Policy, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Giovanni Vitale (European Central Bank, Directorate Monetary Policy, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: This paper discusses the structural implications of real and financial globalisation, with the aim of drawing lessons for the conduct of monetary policy and, in particular, for the assessment of risks to price stability. The first conclusion of the paper is that globalisation may have played only a limited role in reducing inflation and output volatility in developed economies. Central banks should remain focused on their mandate to preserve price stability. However, the globalisation of financial markets over the last 25 years has had major implications for the conduct of monetary policy. Four elements characterise the new financial landscape: the decline in the “home bias”; the increase in the size of international financial transactions relative to transactions in goods and services; the increase in the number of countries adopting inflation targeting and currency peg monetary regimes; and the transformation of financial market microstructure. The paper argues that in this new environment monetary policy should systematically incorporate financial analysis into its assessment of the risks to price stability. Monetary policy should “lean against the wind” of asset price bubbles that could burst at a high cost and hinder the maintenance of macroeconomic and financial stability. Further, in view of the interlinkages among financial markets worldwide, macro-financial surveillance at the international level needs to be strengthened and monetary policymakers need to cooperate and exchange information on a wider scale and at a deeper level with financial supervisors. Finally, the paper reviews the rationale for a central bank to act (in concert with other central banks) as the ultimate provider of liquidity to financial markets in situations of extreme instability and market malfunctioning. A sudden and sharp liquidity drought in the market should be tackled with appropriate measures that could even go beyond the extraordinary refinancing of monetary and financial institutions. In these circumstances, the central bank should clearly communicate that the aim of its liquidity provision measures is to support the proper functioning of financial markets, and that they do not indicate a change in the monetary policy stance (“separation principle”). JEL Classification: E44, E58, F33, F42.
    Keywords: Globalisation, Monetary policy, Asset prices, Financial markets.
    Date: 2009–08
  2. By: Guglielmo Maria Caporale; Luca Onorante; Paolo Paesani
    Abstract: This paper estimates a time-varying AR-GARCH model of inflation producing measures of inflation uncertainty for the euro area, and investigates the linkages between them in a VAR framework, also allowing for the possible impact of the policy regime change associated with the start of EMU in 1999. The main findings are as follows. Steady-state inflation and inflation uncertainty have declined steadily since the inception of EMU, whilst short-run uncertainty has increased, mainly owing to exogenous shocks. A sequential dummy procedure provides further evidence of a structural break coinciding with the introduction of the euro and resulting in lower long-run uncertainty. It also appears that the direction of causality has been reversed, and that in the euro period the Friedman-Ball link is empirically supported, implying that the ECB can achieve lower inflation uncertainty by lowering the inflation rate.
    Keywords: Inflation, inflation uncertainty, time-varying parameters, GARCH models, ECB, EMU
    JEL: E31 E52 C22
    Date: 2009
  3. By: Michael Ehrmann (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); David Sondermann (University of Münster, Schlossplatz 2, D-48149 Münster, Germany.)
    Abstract: How do financial markets price new information? This paper analyzes price setting at the intersection of private and public information, by testing whether and how the reaction of financial markets to public signals depends on the relative importance of private information in agents’ information sets at a given point in time. It studies the reaction of UK short-term interest rates to the Bank of England’s inflation report and to macroeconomic announcements. Due to the quarterly frequency at which the Bank of England releases one of its main publications, it can become stale over time. In the course of this process, financial market participants need to rely more on private information. The paper develops a stylized model which predicts that, the more time has elapsed since the latest release of an inflation report, market volatility should increase, the price response to macroeconomic announcements should be more pronounced, and macroeconomic announcements should play a more important role in aligning agents’ information set, thus leading to a stronger volatility reduction. The empirical evidence is fully supportive of these hypotheses. JEL Classification: E58, E43, G12, G14.
    Keywords: public signals, inflation reports, monetary policy, interest rates, announcement effects, co-ordination of beliefs, Bank of England.
    Date: 2009–08
  4. By: Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Jakob de Haan (Faculty of Economics and Business, University of Groningen, The Netherlands)
    Abstract: Nowadays, it is widely believed that greater disclosure and clarity over policy may lead to greater predictability of central bank actions. We examine whether communication by the European Central Bank (ECB) adds information compared to the information provided by a Taylor rule model in which real time expected inflation and output are used. We use five indicators of ECB communication that are all based on the ECB President’s introductory statement at the press conference following an ECB policy meeting. Our results suggest that even though the indicators are sometimes quite different from one another, they add information that helps predict the next policy decision of the ECB. Furthermore, also when the interbank rate is included in our Taylor rule model, the ECB communication indicators remain significant.
    Keywords: ECB, central bank, communication, Taylor rule
    JEL: E52 E53 E3
    Date: 2009–08
  5. By: Maurice Obstfeld (Professor, University of California, Berkeley (E-mail:
    Abstract: The recent financial crisis teaches important lessons regarding the lender-of-last resort function. Large swap lines extended in 2007-08 from the Federal Reserve to other central banks show that the classic concept of a national last-resort lender fails to address key vulnerabilities in a globalized financial system with multiple currencies. What system of emergency international financial support will best help to minimize the likelihood of future economic instability? Acting alongside national central banks, the International Monetary Fund has a key role to play in the constellation of lenders of last resort. As the income-level and institutional divergence between emerging and mature economies shrinks over time, the IMF may even evolve into a global last- resort lender that channels central bank liquidity where it is needed. The IMF's effectiveness would be greatly enhanced by several complementary reforms in international financial governance, though some of these appear politically problematic at the present time.
    Keywords: Lender of Last Resort, Financial Crisis, Central Banking, International Monetary System, International Monetary Fund
    JEL: E58 F33 F36
    Date: 2009–08
  6. By: Margarita Rubio (Banco de España)
    Abstract: This paper studies the implications of cross-country housing market heterogeneity for a monetary union, also comparing the results with a flexible exchange rate and independent monetary policy setting. I develop a two-country new Keynesian general equilibrium model with housing and collateral constraints to explore this issue. Results show that in a monetary union, consumption reacts more strongly to monetary policy shocks in countries with high loan-to-value ratios (LTVs), a high proportion of borrowers or variable-rate mortgages. As for asymmetric technology shocks, output and house prices increase by more in the country receiving the shock if it can conduct monetary policy independently. I also fi nd that after country-specific housing price shocks consumption does not only increase in the country where the shock takes place, there is an international transmission. From a normative perspective, I conclude that housing-market homogenization in a monetary union is not beneficial per se, only when it is towards low LTVs or predominantly fixed-rate mortgages. Furthermore, I show that when there are asymmetric shocks but identical housing markets, it is beneficial to form a monetary union with respect to having a flexible exchange rate regime. However, for the examples I consider, net benefits decrease substantially if there is LTV heterogeneity and are negative under different mortgage contracts.
    Keywords: Housing market, collateral constraint, monetary policy, monetary union
    JEL: E32 E44 F36
    Date: 2009–08
  7. By: Todd Keister; James McAndrews
    Abstract: The quantity of reserves in the U.S. banking system has risen dramatically since September 2008. Some commentators have expressed concern that this pattern indicates that the Federal Reserve’s liquidity facilities have been ineffective in promoting the flow of credit to firms and households. Others have argued that the high level of reserves will be inflationary. We explain, through a series of examples, why banks are currently holding so many reserves. The examples show how the quantity of bank reserves is determined by the size of the Federal Reserve’s policy initiatives and in no way reflects the initiatives’ effects on bank lending. We also argue that a large increase in bank reserves need not be inflationary, because the payment of interest on reserves allows the Federal Reserve to adjust short-term interest rates independently of the level of reserves.
    Date: 2009
  8. By: Edvinsson, Rodney (Dept. of Economic History, Stockholm University); Franzén, Bo (Dept. of Economic History, Stockholm University); Söderberg, Johan (Dept. of Economic History, Stockholm University)
    Abstract: The medieval system of payment in Sweden was complex. This paper aims at clarifying some essential features of it in a way that may facilitate further study of medieval Swedish economic history by international researchers. For instance, the presentation of the exchange rate between the silver mark and the mark penningar provides information that is indispensable to anyone who wishes to convert nominal Swedish prices into silver prices, which in turn is necessary for international comparisons. Part of the complexity of the monetary system is due to the lack of a country-wide monetary standard for most of the medieval era. Several currencies existed alongside the mark penning. In addition, various foreign gold coins circulated at a floating rate. The exchange rates between these various currencies are sometimes not known with any precision. We have, however, tried to summarize the available information in several tables.
    Keywords: monetary history; mark; silver; gold; Middle Ages; exchange
    JEL: E42 N13 N23
    Date: 2009–08–17
  9. By: MICHAEL PLANTE (Indiana University, Ball State University)
    Abstract: This paper examines welfare maximizing optimal monetary policy and simple mon- etary policy rules in a New Keynesian model that incorporates oil as an intermediate input and as a consumption good. I show under several dierent assumptions that the optimal policy focuses on stabilizing some combination of nominal wage and core ination while allowing for signicant movements in value added and CPI (headline) in- ation. Wage indexation to headline ination does not change this result. The optimal response of the nominal rate is sensitive to the assumptions of the model. For all cases examined the optimal policy is well approximated, in welfare terms, by a simple policy rule that suciently stabilizes core ination. Empirical evidence using data from after 1986 supports the hypothesis that the Federal Reserve has been responding to real oil price changes in a manner similar to what the model says is optimal.
    Date: 2009–08
  10. By: Ansgar Belke; Jens Klose
    Abstract: We assess the differences that emerge in Taylor rule estimations for the ECB when using ex-post data instead of real time forecasts and vice versa. We argue that previous comparative studies in this field mixed up two separate effects. First, the differences resulting from the use of ex-post and real time data per se and, second, the differences emerging from the use of non-modified real time data instead of real-time data based forecasted values and vice versa. Since both effects can influence the reaction to inflation and the output gap either way, we use a more clear-cut approach to disentangle the partial effects. Our estimation results indicate that using real time instead of ex post data leads to higher estimated inflation coefficients while the opposite is true for the output gap coefficients. If real time data forecasts for the current period are used (since actual data become available with a lag), this empirical pattern is even strengthened in the sense of even increasing the inflation response but lowering the reaction to the output gap while the reverse is true if "true" forecasts of real time data for several periods are employed.
    Keywords: European Central Bank, monetary policy, real time data, Taylor rule
    JEL: E43 E58
    Date: 2009
  11. By: Troy Davig, Eric Leeper (Federal Reserve Bank of Kansas City, Indiana University Bloomington)
    Abstract: Increases in government spending trigger substitution effects—both inter- and intra-temporal—and a wealth effect. The ultimate impacts on the econ- omy hinge on current and expected monetary and fiscal policy behavior. Studies that impose active monetary policy and passive fiscal policy typically find that government consumption crowds out private consumption: higher future taxes cre- ate a strong negative wealth effect, while the active monetary response increases the real interest rate. This paper estimates Markov-switching policy rules for the United States and finds that monetary and fiscal policies fluctuate between ac- tive and passive behavior. When the estimated joint policy process is imposed on a conventional new Keynesian model, government spending generates positive consumption multipliers in some policy regimes and in simulated data in which all policy regimes are realized. The paper reports the model’s predictions of the macroeconomic impacts of the American Recovery and Reinvestment Act’s implied path for government spending under alternative monetary-fiscal policy combina- tions.
    Date: 2009–06
  12. By: Mala Raghavan; George Athanasopoulos; Param Silvapulle
    Abstract: This paper establishes vector autoregressive moving average (VARMA) models for Malaysian monetary policy analysis by efficiently identifying and simultaneously estimating the model parameters using full information maximum likelihood. The monetary literature is largely dominated by vector autoregressive (VAR) and structural vector autoregressive (SVAR).models, and to the best of our knowledge, this is the first paper to use VARMA modelling to investigate monetary policy. Malaysia is an interesting small open economy to study because of the capital control measures imposed by the government following the 1997 Asian financial crisis. A comparison of the impulse responses generated by these three models for the pre- and post-crisis periods indicates that the VARMA model impulse responses are consistent with prior expectations based on economic theories and policies pursued by the Malaysian government, particularly in the post-crisis period. Furthermore, uncovering the way in which various intermediate channels work would help Bank Negara Malaysia to steer the economy in the right direction so that monetary policy can still remain an effective policy measure in achieving sustainable economic growth and price stability.
    Keywords: VARMA models, Identification, Impulse responses, Open Economy, Transmission mechanism
    JEL: C32 E52 F41
    Date: 2009–08
  13. By: Vincenzo Cuciniello (Chair of International Finance, Ecole Polytechnique Federale de Lausanne (EPFL), Switzerland); Luisa Lambertini (Chair of International Finance, Ecole Polytechnique Federale de Lausanne (EPFL), Switzerland)
    Abstract: We study whether monetary policy should target the exchange rate in a two-country model with non-atomistic wage setters, non-traded goods and different degrees of exchange-rate pass through. Commitment to an exchange rate target reduces the labor market distortion. Large labor unions anticipate that higher wages depreciate the exchange rate, which triggers an increase in the interest rate and restrain wage demands. However, reduced exchange rate flexibility worsens the distortion stemming from preset pricing. Targeting the nominal exchange rate will be optimal when the labor market distortion is larger than the preset-pricing one. This result arises with cooperation both under producer and local currency pricing, even though the optimal degree of exchange-rate targeting is higher under local currency pricing. In the Nash equilibrium, the terms-of-trade effect raises optimal wage mark-ups thereby reducing the optimal weight on the exchange rate target. The terms-of-trade effect is stronger as openness and substitutability among Home and Foreign goods increase.
    Keywords: Monetary policy, International Finance, Open-Economy Macroeconomics
    JEL: F3 F41 E52
    Date: 2009–05
  14. By: Vasco Cúrdia; Michael Woodford
    Abstract: We consider the desirability of modifying a standard Taylor rule for a central bank's interest-rate policy to incorporate either an adjustment for changes in interest-rate spreads (as proposed by Taylor [2008] and by McCulley and Toloui [2008]) or a response to variations in the aggregate volume of credit (as proposed by Christiano et al. [2007]). We consider the consequences of such adjustments for the way in which policy would respond to a variety of types of possible economic disturbances, including (but not limited to) disturbances originating in the financial sector that increase equilibrium spreads and contract the supply of credit. We conduct our analysis using the simple DSGE model with credit frictions developed in Curdia and Woodford (2009), and compare the equilibrium responses to a variety of disturbances under the modified Taylor rules to those under a policy that would maximize average expected utility. According to our model, a spread adjustment can improve upon the standard Taylor rule, but the optimal size is unlikely to be as large as the one proposed, and the same type of adjustment is not desirable regardless of the source of the variation in credit spreads. A response to credit is less likely to be helpful, and the desirable size (and even the right sign) of the response to credit is less robust to alternative assumptions about the nature and persistence of disturbances.
    JEL: E44 E52
    Date: 2009–08
  15. By: Micheal Plante (Indiana University, Ball State University)
    Abstract: This paper considers monetary and scal policy responses to oil price shocks in low income oil importing countries. I examine the dynamic properties and the welfare implications of a set of ination targeting policies and a group of policies where the government provides a subsidy on household purchases of oil products and nances this subsidy through some combination of printing money and raising non-distortionary lump sum taxes. Even in the case where lump sum taxes nance the subsidy, it distorts household behavior in important ways leading to over consumption of oil products, increased trade decits, and distortions to the labor supply. Resorting to the ination tax to nance the subsidy leads to signicant macroeconomic issues when exchange rates are exible. The welfare gains from a policy that nances the subsidy through lump sum taxation are small compared to the policy with full pass through. For most calibrations the losses from nancing the policy through the ination tax are substantial. The welfare generated by the ination targeting policies is close to the baseline policy with full pass through so long as the response to ination is strong enough.
    Date: 2009–08
  16. By: Bennett T. McCallum (Professor, Carnegie Mellon University and National Bureau of Economic Research (E-mail:
    Abstract: It is well known that the concept of "determinacy"-a single stable solution-plays a major role in contemporary monetary policy analysis. But while determinacy is desirable, other things equal, it is not necessary for a solution to be plausible and is not sufficient for a solution to be desirable. There is a related but distinct criterion of "learnability" that seems more crucial. This paper argues that recognition of information feasibility requires that a candidate solution must, to be plausible, be quantitatively learnable on the basis of information generated by the economy itself. Since a prominent least- squares(LS) learning process is highly "biased" toward learnability, it is reasonable to regard it as a necessary condition for any specific solution to be relevant. This implies that determinacy is not necessary for policy analysis; there may be more than one stable solution but only one that is LS learnable. Also, determinacy is not sufficient for satisfactory policy analysis; explosive solutions pertaining to nominal variables will not be eliminated by transversality conditions. For these and other reasons, the role of determinacy in monetary policy analysis should be reconsidered and substantially de-emphasized.
    Keywords: Determinacy, Learnability, Rational Expectations, Multiple Solutions, Monetary Policy
    JEL: C62 E4 E5 E52
    Date: 2009–08
  17. By: Ida Wolden Bache (Norges Bank (Central Bank of Norway)); James Mitchell (National Institute of Economic and Social Research); Francesco Ravazzolo (Norges Bank (Central Bank of Norway)); Shaun P. Vahey (Melbourne Business School)
    Abstract: We argue that the next generation of macro modellers at Inflation Targeting central banks should adapt a methodology from the weather forecasting literature known as `ensemble modelling'. In this approach, uncertainty about model specifications (e.g., initial conditions, parameters, and boundary conditions) is explicitly accounted for by constructing ensemble predictive densities from a large number of component models. The components allow the modeller to explore a wide range of uncertainties; and the resulting ensemble `integrates out' these uncertainties using time-varying weights on the components. We provide two examples of this modelling strategy: (i) forecasting inflation with a disaggregate ensemble; and (ii) forecasting inflation with an ensemble DSGE.
    Keywords: Ensemble modelling, Forecasting, DSGE models, Density combination
    JEL: C11 C32 C53 E37 E52
    Date: 2009–08–17
  18. By: Goo, Siwei; Siregar, Reza Y. Siregar
    Abstract: This study investigates the requirement for the exchange rate to be a shock absorber in Indonesia and Thailand from 1986 to 2007. In general, we find that the economic shocks have predominantly been asymmetric relative to the US and the Japanese economies. Yet, the weights attached to the US dollar remain respectably high in the exchange rate management of the rupiah and the baht, in particular for the latter currency, during the post-1997 crisis. Hence, relinquishing the role of exchange rate as a shock absorber has been costly during both the pre-and the post-1997 crisis periods for these Southeast Asian countries. Furthermore, it is arguably more costly for Thailand during the post-1997, and for Indonesia during the pre-1997 crisis.
    Keywords: Economic Shocks; Shock Absorber; Exchange Rate; Structural Vector Autoregression; Indonesia; Thailand
    JEL: E52 C22 F31
    Date: 2009–08–19
  19. By: Micheal Plante (Indiana University, Ball State University)
    Abstract: This paper examines monetary policy responses to oil price shocks in a small open economy that produces traded and non-traded goods. When only labor and oil are used in production and prices are sticky in the non-traded sector the behavior of ination, the nominal exchange rate, and the relative price of the non-traded good depends crucially upon whether the ratio of the cost share of oil to the cost share of labor is higher for the traded or non-traded sector. If the ratio is smaller (higher) for the traded sector then a policy that fully stabilizes non-traded ination causes the nominal exchange rate to appreciate (depreciate) and the relative price of the non-traded good to rise (fall) when there is a surprise rise in the price of oil. Similar results can hold for a policy that stabilizes CPI ination. Under a policy that xes the nominal exchange rate, non-traded ination rises (falls) if the ratio is smaller (larger) for the traded sector. Analytical results show that a policy of xing the exchange rate always produces a unique solution and that a policy of stabilizing non-traded ination produces a unique solution so long as the nominal interest rate is raised more than one-for-one with rises in non-traded ination. A policy that stabilizes CPI ination, however, produces multiple equilibria for a wide range of calibrations of the policy rule.
    Date: 2009–08
  20. By: Ivo Maes (National Bank of Belgium, Robert Triffin Chair, Universit‚ catholique de Louvain and ICHEC Brussels Management School.)
    Abstract: To understand macroeconomic and monetary thought at the European Commission, two elements are crucial: firstly, the Rome Treaty, as it determined the mandate of the Commission and, secondly, the economic ideas in the different countries of the Community, as economic thought at the Commission was to a large extent a synthesis and compromise of the main schools of thought in the Community. The Rome Treaty transformed economic and legal rules in the countries of the Community. It comprised the creation of a common market, as well as several accompanying policies. Initially, economic thought at the Commission was to a large extent a synthesis of French and German ideas, with a certain predominance of French ideas. Later, Anglo-Saxon ideas would gain ground. At the beginning of the 1980s, the Commission?s analytical framework became basically medium-term oriented, with an important role for supply-side and structural elements and a more cautious approach towards discretionary stabilization policies. This facilitated the process of European integration, also in the monetary area, as the consensus on stability oriented policies was a crucial condition for EMU. Trough time, the Commission has taken seriously its role as guardian of the Treaties and initiator of Community policies, also in the monetary area. The Commission always advocated a strengthening of economic policy coordination and monetary cooperation. In this paper, we first focus on the different schools which have been shaping economic thought at the Commission. This is followed by an analysis of the Rome Treaty, especially the monetary dimension. Thereafter we go into the EMU process and the initiatives of the Commission to further European monetary integration. We will consider three broad periods: the early decades, the 1970s, and the Maastricht process.
    Date: 2009–02
  21. By: Tomáš Havránek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper presents an updated meta-analysis of the effect of currency unions on trade, focusing on the Euro area. Using meta-regression methods such as funnel asymmetry test, evidence for strong publication bias is found. The estimated underlying effect for non-Euro studies reaches about 50%. However, the Euro's trade promoting effect corrected for publication bias is insignificant. The Rose effect literature shows signs of the economics research cycle: reported t-statistic is a quadratic function of publication year. Explanatory meta-regression (robust fixed effects and random effects) suggests that some authors produce predictable results. Interestingly, proxies for authors' IT skills were also found significant.
    Keywords: Rose effect; Trade; Currency union; Euro; Meta-analysis; Publication bias
    JEL: C42 F15 F33
    Date: 2009–08
  22. By: Schulz, Alexander; Wolff, Guntram B.
    Abstract: We disentangle different driving factors of sovereign bond market integration by studying yield co-movements of EMU countries, the UK, the US and 16 German states (Länder) since 1992. At a low frequency bond market integration has increased gradually in the course of the last 15 years in EMU countries, as well as the UK, the US and the German Länder. The current financial turmoil has abated low frequency euroarea sovereign bond bond market integration, while it has had little effect on the integration with the US and UK. Bond market integration at a high frequency band remains relatively low until October 2000, when a sharp increase in integration can be observed in all samples. The increase in high frequency integration can be attributed to electronic trading platforms becoming functional. The financial crisis does not effect high frequency integration, as no technology shock occurs.
    Keywords: sovereign bond market; bond market integration; EMU; electronic trading
    JEL: E42 G15 E44 F33
    Date: 2009

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