nep-mon New Economics Papers
on Monetary Economics
Issue of 2013‒09‒28
25 papers chosen by
Bernd Hayo
Philipps-University Marburg

  1. Implicit Asymmetric Exchange Rate Peg under Inflation Targeting Regimes: The Case of Turkey By Ahmet Benlialper; Hasan Cömert
  2. Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero By Jinill Kim; Seth Pruitt
  3. Rounding the Corners of the Policy Trilemma: Sources of Monetary Policy Autonomy By Michael W. Klein; Jay C. Shambaugh
  4. Monetary Transaction Costs and the Term Premium By Raphael A. Espinoza; Dimitrios P. Tsomocos
  5. Asset Allocation and Monetary Policy: Evidence from the Eurozone By Hau, Harald; Lai, Sandy
  6. Central Bank Design By Reis, Ricardo
  7. Heterogeneous Bank Lending Responses to Monetary Policy: New Evidence from a Real-time Identification By John C Bluedorn; Christopher Bowdler; Christoffer Koch
  8. Monetary Policy and Balance Sheets By Deniz Igan; Alain N. Kabundi; Francisco Nadal-De Simone; Natalia T. Tamirisa
  9. Technology Persistence and Monetary Policy By Pancrazi, Roberto; Vukotic, Marija
  10. Assessing Asian Exchange Rates Coordination under Regional Currency Basket System By Benjamin Keddad
  11. Leaning Against the Wind and the Timing of Monetary Policy By Itai Agur; Maria Demertzis
  12. A Schumpeterian Analysis of Monetary Policy, Innovation and North-South Technology Transfer By Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi
  13. Identifying Taylor rules in macro-finance models By Backus, David; Chernov, Mikhail; Zin, Stanley E.
  14. Does quantitative easing affect market liquidity? By Jens H. E. Christensen; James M. Gillan
  15. Does the Greenspan era provide evidence on leadership in the FOMC? By El-Shagi, Makram; Jung, Alexander
  16. The Federal Reserve and Financial Regulation: The First Hundred Years By Gary B. Gorton; Andrew Metrick
  17. Survey of Reserve Managers: Lessons from the Crisis By Aideen Morahan; Christian B. Mulder
  18. Assessing asset purchases within the ECB’s securities markets programme By Eser, Fabian; Schwaab, Bernd
  19. Distributional and Welfare Consequences of Disinflation in Emerging Economies By Enes Sunel
  20. Assessing Reserve Adequacy: The Colombian Case By Javier Gómez Restrepo; Juan Sebastián Rojas Bohórquez
  21. The Impact of the Federal Reserve's Large-Scale Asset Purchase Programs on Corporate Credit Risk By Simon Gilchrist; Egon Zakrajsek
  22. Crunch Time: Fiscal Crises and the Role of Monetary Policy By David Greenlaw; James D. Hamilton; Peter Hooper; Frederic S. Mishkin
  23. The art of currency manipulation : how to profiteer by deliberately distorting exchange rates By Basu, Kaushik
  24. Economic Policy Coordination in the EMU: From Maastricht via SGP to the Fiscal Pact By Jorgen Mortensen
  25. Quantity theory, say's law and effective demand in money theories By Giovanni Scarano

  1. By: Ahmet Benlialper; Hasan Cömert
    Abstract: Especially, after the 2000s, many developing countries let exchange rates float and began implementing inflation targeting regimes based on mainly manipulation of expectations and aggregate demand. However, most developing countries implementing inflation targeting regimes experienced considerable appreciation trends in their currencies. Might have exchange rates been utilized as implicit tools even under inflation targeting regimes in developing countries? To answer this question and investigate the determinants of inflation under an inflation targeting regime, as a case study, this paper analyzes the Turkish experience with the inflation targeting regime between 2002 and 2008. There are two main findings of this paper. First, the evidence from a Vector Autoregressive (VAR) model suggests that the main determinants of inflation in Turkey during this period are supply side factors such as international commodity prices and the variation in exchange rate rather than demand side factors. �Since the Turkish lira (TL) was considerably over-appreciated during this period, it is apparent that the Turkish Central Bank benefited from the appreciation of the TL in its fight against inflation during this period. Second, our findings suggest that the appreciation of the TL is related to the deliberate asymmetric policy stance of the Bank with respect to the exchange rate. �Both the econometric analysis from a VAR model and descriptive statistics indicate that appreciation of the Turkish lira was tolerated during the period under investigation whereas depreciation was responded aggressively by the Bank. We call this policy stance under the inflation targeting regimes as “implicit asymmetric exchange rate peg”. �The Turkish experience indicates that, as opposed to rhetoric of central banks in developing countries, inflation targeting developing countries may have an asymeyric stance toward exchange rates and favour appreciation of their currencies to hit their inflation targets. In this sense, IT seems to contribute to the ignorance of dangers regarding to over-appreciation of currencies in developing countries. � �
    Keywords: Inflation Targeting, Central Banking, Developing Countries, Exchange Rates
    JEL: E52 E58 E31 F31
    Date: 2013
  2. By: Jinill Kim; Seth Pruitt
    Abstract: Did the Federal Reserve's response to economic fundamentals change with the onset of the Global Financial Crisis? Estimation of a monetary policy rule to answer this question faces a censoring problem since the interest rate target has been set at the zero lower bound since late 2008. Surveys by forecasters allow us to sidestep the problem and to use a conventional regression. We find that the Fed's inflation response has decreased and that the unemployment response has remained as strong; this suggests that the Federal Reserve's commitment to stable inflation has become weaker in the eyes of the professional forecasters.
    Keywords: monetary policy, policy rule, survey data, market perceptions, censoring, zero lower bound, Blue Chip survey
    JEL: E53 E58
    Date: 2013–09
  3. By: Michael W. Klein; Jay C. Shambaugh
    Abstract: A central result in international macroeconomics is that a government cannot simultaneously opt for open financial markets, fixed exchange rates, and monetary autonomy; rather, it is constrained to choosing no more than two of these three. In the wake of the Great Recession, however, there has been an effort to address macroeconomic challenges through intermediate measures, such as narrowly targeted capital controls or limited exchange rate flexibility. This paper addresses the question of whether these intermediate policies, which round the corners of the triangle representing the policy trilemma, afford a full measure of monetary policy autonomy. Our results confirm that extensive capital controls or floating exchange rates enable a country to have monetary autonomy, as suggested by the trilemma. Partial capital controls, however, do not generally enable a country to have greater monetary control than is the case with open capital accounts unless they are quite extensive. In contrast, a moderate amount of exchange rate flexibility does allow for some degree of monetary autonomy, especially in emerging and developing economies.
    JEL: E52 F3 F33 F41
    Date: 2013–09
  4. By: Raphael A. Espinoza; Dimitrios P. Tsomocos
    Abstract: We show that, in a monetary equilibrium, trade and asset prices depend on both the supply of the liquidity by the Central Bank and the liquidity of assets and commodities. As a result, monetary aggregates are informative for the conduct of monetary policy. We also show asset prices are higher in liquidity-constrained states of nature. This generates a term premium even in absence of aggregate uncertainty. These results hold in any monetary economy with heterogeneous agents and short-term liquidity effects, where monetary costs act as transaction costs and the quantity theory of money is verified.
    Keywords: Monetary policy;Central banks;Liquidity;Asset prices;Interest rate structures;Economic models;Liquidity ; Cash-in-advance constraints ; Term structure of interest rates
    Date: 2013–04–03
  5. By: Hau, Harald; Lai, Sandy
    Abstract: The eurozone has a single short-term nominal interest rate, but monetary policy conditions measured by either real short-term interest rates or Taylor rule residuals varied substantially across countries in the period from 2003-2010. We use this cross-country variation in the (local) tightness of monetary policy to examine its influence on equity and money market flows. In line with a powerful risk-shifting channel, we find that fund investors in countries with decreased real interest rates shift their portfolio investment out of the money market and into the riskier equity market. A ten-basis-point lower real short-term interest rate is associated with a 0.8% incremental money market outflow and a 1% incremental equity market inflow by local investors relative to asset under management. The latter produces the strongest equity price increase in countries where domestic institutional investors represent a large share of the countries' stock market capitalization.
    Keywords: asset price inflation; monetary policy; risk seeking; Taylor rule residuals
    JEL: G11 G14 G23
    Date: 2013–08
  6. By: Reis, Ricardo
    Abstract: What set of institutions can support the activity of a central bank? Designing a central bank requires specifying its objective function, including the bank's mandate at different horizons and the choice of banker(s), specifying the resource constraint that limits the resources that the central bank generates, the assets it holds, or the payments on its liabilities, and finally specifying how the central bank will communicate with private agents to affect the way they respond to policy choices. This paper summarizes the relevant economic literature that bears on these choices, leading to twelve principles on central bank design.
    Keywords: Mechanism Design; Monetary Policy
    JEL: E50 E58
    Date: 2013–07
  7. By: John C Bluedorn; Christopher Bowdler; Christoffer Koch
    Abstract: We present new evidence on how heterogeneity in banks interacts with monetary policy changes to impact bank lending. Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, we find much greater heterogeneity in U.S. bank lending responses than that found in previous research based on realized federal funds rate changes. Our findings suggest that studies using realized monetary policy changes confound the monetary policy’s effects with those of changes in expected macrofundamentals. We also extend Romer and Romer (2004)’s identification scheme, and expand the time and balance sheet coverage of the U.S. banking sample.
    Keywords: Monetary policy;Banking sector;Loans;Economic models;Monetary Transmission; Lending Channel; Monetary Policy Identification; Banking
    Date: 2013–05–22
  8. By: Deniz Igan; Alain N. Kabundi; Francisco Nadal-De Simone; Natalia T. Tamirisa
    Abstract: This paper evaluates the strength of the balance sheet channel in the U.S. monetary policy transmission mechanism over the past three decades. Using a Factor-Augmented Vector Autoregression model on an expanded data set, including sectoral balance sheet variables, we show that the balance sheets of various economic agents act as important links in the monetary policy transmission mechanism. Balance sheets of financial intermediaries, such as commercial banks, asset-backed-security issuers and, to a lesser extent, security brokers and dealers, shrink in response to monetary tightening, while money market fund assets grow. The balance sheet effects are comparable in magnitude to the traditional interest rate channel. However, their economic significance in the run-up to the recent financial crisis was small. Large increases in interest rates would have been needed to avert a rapid rise of house prices and an unsustainable expansion of mortgage credit, suggesting an important role for macroprudential policies.
    Keywords: Monetary transmission mechanism;United States;Monetary policy;Interest rates;Economic models;monetary policy transmission; balance sheets; FAVAR; generalized dynamic factor models
    Date: 2013–07–03
  9. By: Pancrazi, Roberto (Department of Economics, University of Warwick); Vukotic, Marija (Department of Economics, University of Warwick)
    Abstract: In this paper, by using several statistical tools, we provide evidence of increased persistence of the U.S. total factor productivity. In a forward-looking model, agents’ optimal behavior depends on the autocorrelation structure of the exogenous shocks. Since many monetary models are driven by exogenous technology shocks, we study the implications of a change in technology persistence on monetary policy using a New Keynesian framework. First, we analytically derive the interaction between the TFP persistence, monetary policy parameters, and output gap and inflation. Second, we show that change in the TFP persistence a¤ects the optimal behavior of monetary policy. JEL classification: JEL codes:
    Date: 2013
  10. By: Benjamin Keddad (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: In this paper, I examine the extent to which the Asian exchange rates are coordinated around a synthetic Asian Currency Unit (ACU) defined as a basket of the Asian currencies. Using a VAR model, the results provide some evidence of stabilization among the Asian exchange rates around the ACU. Although the US dollar remains the dominant anchor within the region, these countries have allowed for more exchange rate flexibility against the US dollar since 2006, with the aim to adopt a basket peg where the Asian currencies have gained an increasing role. The empirical results also suggest that the official adoption of an undisclosed currency basket by Chinese authorities in July 2005 has been an important factor in the decision of Asian countries to shift toward a de facto currency basket system.
    Keywords: Asian Currency Unit, Monetary integration, Currency basket peg, Nominal exchange rate coordination.
    JEL: F33 F41
  11. By: Itai Agur; Maria Demertzis
    Abstract: If monetary policy is to aim also at financial stability, how would it change? To analyze this question, this paper develops a general-form framework. Financial stability objectives are shown to make monetary policy more aggressive: in reaction to negative shocks, cuts are deeper but shorter-lived than otherwise. By keeping cuts brief, monetary policy tightens as soon as bank risk appetite heats up. Within this shorter time span, cuts must then be deeper than otherwise to also achieve standard objectives. Finally, we analyze how robust this result is to the presence of a bank regulatory tool, and provide a parameterized example.
    Keywords: Monetary policy;Banking sector;Bank regulations;Financial stability;Economic models;Monetary policy, financial stability, bank risk, regulation
    Date: 2013–04–03
  12. By: Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi
    Abstract: This study analyzes the cross-country effects of monetary policy on innovation and international technology transfer. We consider a scale-invariant North-South quality-ladder model that features innovative R&D in the North and adaptive R&D in the South. To model money demand, we impose cash-in-advance constraints on these two types of R&D investment. We find that an increase in the Southern nominal interest rate causes a permanent decrease in the rate of international technology transfer, a permanent increase in the North-South wage gap, and a temporary decrease in the rate of Northern innovation. An increase in the Northern nominal interest rate causes a temporary decrease in the rate of Northern innovation, a permanent decrease in the North-South wage gap, and an ambiguous effect on the rate of international technology transfer depending on the relative size of the two economies. We also calibrate the model to China-US data and find that the cross-country welfare effects of monetary policy are quantitatively significant. Specifically, permanently decreasing the nominal interest rate to zero in China leads to a welfare gain of 3.37% in China and a welfare gain of 1.25% in the US. Permanently decreasing the nominal interest rate to zero in the US leads to welfare gains of 0.33% in the US and 1.24% in China.
    Keywords: monetary policy, economic growth, R&D, North-South product cycles, FDI
    JEL: E4 F43 O3
    Date: 2013–09
  13. By: Backus, David; Chernov, Mikhail; Zin, Stanley E.
    Abstract: Identification problems arise naturally in forward-looking models when agents observe more than economists. We illustrate the problem in several macro-finance models with Taylor rules. When the shock to the rule is observed by agents but not economists, identification of the rule's parameters requires restrictions on the form of the shock. We show how such restrictions work when we observe the state directly, indirectly, or infer it from observables.
    Keywords: exponential-affine models; forward-looking models; information sets; monetary policy
    JEL: E43 E52 G12
    Date: 2013–08
  14. By: Jens H. E. Christensen; James M. Gillan
    Abstract: The second round of large-scale asset purchases by the Federal Reserve—frequently referred to as QE2—included repeated purchases of Treasury inflation-protected securities (TIPS). To quantify the effect QE2 had on the functioning of the TIPS market and the related market for inflation swaps, we exploit the measure of combined liquidity premiums in TIPS yields and inflation swap rates derived by Christensen and Gillan (2012). We find that, on TIPS purchase dates, the liquidity premium dropped by 8 to 11 basis points depending on maturity, or about 50 percent. Furthermore, the effect was sustained on nonpurchase dates during most of the program, but dissipated towards its end.
    Date: 2013
  15. By: El-Shagi, Makram; Jung, Alexander
    Abstract: The aim of this paper is to examine whether Chairman Greenspan influenced the Reserve Bank Presidents. This question is interesting, because it has been argued that their preferences would be more persistent compared to those of the Governors. We estimate individual Taylor-type reaction functions for the Federal Reserve Districts using their voiced interest rate preferences during the policy go-around as well as real-time economic information on the inflation and unemployment gap. A bootstrap analysis exploits information contained in these reaction functions and constructs counterfactual distributions of disagreement among the Federal Reserve Districts, assuming the absence of factors that could have enforced consensus. We compare these simulated distributions with the observed disagreement during the committee deliberations and find empirical evidence in favour of coordination. This detected coordination helped to bring the preferences of the Federal Reserve Districts more in line with Chairman Greenspan’s views. JEL Classification: C15, C53, D72, E58
    Keywords: bootstrap, federal Reserve Districts, greenspan era, individual reaction functions, real-time data
    Date: 2013–08
  16. By: Gary B. Gorton; Andrew Metrick
    Abstract: This paper surveys the role of the Federal Reserve within the financial regulatory system, with particular attention to the interaction of the Fed’s role as both a supervisor and a lender-of-last-resort (LOLR). The institutional design of the Federal Reserve System was aimed at preventing banking panics, primarily due to the permanent presence of the discount window. This new system was successful at preventing a panic in the early 1920s, after which the Fed began to discourage the use of the discount window and intentionally create “stigma” for window borrowing – policies that contributed to the panics of the Great Depression. The legislation of the New Deal era centralized Fed power in the Board of Governors, and over the next 75 years the Fed expanded its role as a supervisor of the largest banks. Nevertheless, prior to the recent crisis the Fed had large gaps in its authority as a supervisor and as LOLR, with the latter role weakened further by stigma. The Fed was unable to prevent the recent crisis, during which its LOLR function expanded significantly. As the Fed begins its second century, there are still great challenges to fulfilling its original intention of panic prevention.
    JEL: E5 E6 G21 N0
    Date: 2013–08
  17. By: Aideen Morahan; Christian B. Mulder
    Abstract: This paper reports in detail on a survey that was circulated to reserve managing central banks of IMF member countries in April 2012. The survey aims to gain further insight into how reserve managers have reacted to the crisis to date. The survey also aims to understand how reserve managers arrive at their strategic asset allocation and how they operate their risk management frameworks in practice. Some of the key themes that emerge from the survey include potential procyclical and counter cyclical behavior by reserve managers, increased focus placed on returns and wide variability across countries in how the currency composition of reserves is derived.
    Keywords: Central banks;Reserves;Risk management;Asset management;International Reserves, Foreign Currency Reserves, Official Reserves
    Date: 2013–05–08
  18. By: Eser, Fabian; Schwaab, Bernd
    Abstract: We assess the yield impact of asset purchases within the ECB’s Securities Markets Programme in five euro area sovereign bond markets during 2010-11. Identification is non-trivial and based on time series panel data regression on predetermined purchases and control covariates. In addition to large and economically significant announcement effects, we find an average impact at the five year maturity per e1 bn of bond purchases of approximately -1 to -2 bps (Italy), -3 bps (Ireland), -4 to -6 bps (Spain), -6 to -9 bps (Portugal), and up to -17 to -21 bps (Greece). The impact depends on market size and a default risk signal, and is approximately -3 basis points at a five-year maturity for purchases of 1/1000 of the respective debt market. Bond yield volatility is lower on intervention days for most SMP countries, due to less extreme movements occurring when the Eurosystem is active as a buyer. A dynamic specification points to both transitory and longer-lived effects from purchases. JEL Classification: C32, G12
    Keywords: Central bank asset purchases, effectiveness of non-standard monetary policy measures, European Central Bank, Securities Markets Programme
    Date: 2013–09
  19. By: Enes Sunel
    Abstract: This study investigates the distributional and welfare consequences of disinflation in emerging economies using a monetary model of a small open economy with uninsured idiosyncratic earnings risk. The model is calibrated to Turkish data and is used to compare stationary equilibria with quarterly inflation rates of 14.25% (for 1987 : Q1-2002 : Q4) and 2.25% (for 2003 : Q1- 2010 : Q2). Reduction in inflationary finance is assumed to affect lump-sum transfers, since government spending-to-GDP ratios have been roughly stable during disinflation in a number of emerging economies. Disinflation is found to lower aggregate welfare by 1.23% in terms of compensating consumption variation. This is because the reduction in the distortionary impediments of inflation on the poor falls short of the decline in their redistributive transfers income that is mainly financed by the rich. The shrinkage of cash transfers also tightens natural debt limits and increases the precautionary savings motive.
    Keywords: Small open economy, incomplete markets, disinflation
    JEL: D31 F41 E52
    Date: 2013
  20. By: Javier Gómez Restrepo; Juan Sebastián Rojas Bohórquez
    Abstract: International reserves are very important for emerging economies, as they allow to buffer possible liquidity vulnerabilities within a countries' balance of payments. Consequently, the issue of how many reserves should each country hold is a relevant issue for economic policy. The literature has identified two different methodological approaches to deal with this issue, namely reserve optimality and reserve adequacy indicators, which are carefully reviewed in this paper to determine which is the most appropriate to guide policy decisions in the Colombian case. The indicator proposed by the IMF (2011) was adopted to find the adequate level that this country should hold by calibrating it with historical data for Colombia. This new conservative index suggests that the accumulated levels of reserves have been adequate in recent years and that only in very extreme scenarios there is room to acquire additional reserves. Finally, it is worth highlighting that the methodology developed in this article provides a complementary indicator to the existing ones in order to evaluate the international reserves levels that Colombia should accumulate to reduce its vulnerability to external shocks.
    Keywords: International reserves, Reserve optimality, Reserve adequacy. Classification JEL: E58, F32
    Date: 2013–09
  21. By: Simon Gilchrist; Egon Zakrajsek
    Abstract: Estimating the effect of Federal Reserve’s announcements of Large-Scale Asset Purchase (LSAP) programs on corporate credit risk is complicated by the simultaneity of policy decisions and movements in prices of risky financial assets, as well as by the fact that both interest rates of assets targeted by the programs and indicators of credit risk reacted to other common shocks during the recent financial crisis. This paper employs a heteroskedasticity-based approach to estimate the structural coefficient measuring the sensitivity of market-based indicators of corporate credit risk to declines in the benchmark market interest rates prompted by the LSAP announcements. The results indicate that the LSAP announcements led to a significant reduction in the cost of insuring against default risk—as measured by the CDX indexes—for both investment- and speculative-grade corporate credits. While the unconventional policy measures employed by the Federal Reserve to stimulate the economy have substantially lowered the overall level of credit risk in the economy, the LSAP announcements appear to have had no measurable effect on credit risk in the financial intermediary sector.
    JEL: E44 E58 G2
    Date: 2013–08
  22. By: David Greenlaw; James D. Hamilton; Peter Hooper; Frederic S. Mishkin
    Abstract: Countries with high debt loads are vulnerable to an adverse feedback loop in which doubts by lenders lead to higher sovereign interest rates which in turn make the debt problems more severe. We analyze the recent experience of advanced economies using both econometric methods and case studies and conclude that countries with debt above 80% of GDP and persistent current-account deficits are vulnerable to a rapid fiscal deterioration as a result of these tipping-point dynamics. Such feedback is left out of current long-term U.S. budget projections and could make it much more difficult for the U.S. to maintain a sustainable budget course. A potential fiscal crunch also puts fundamental limits on what monetary policy is able to achieve. In simulations of the Federal Reserve’s balance sheet, we find that under our baseline assumptions, in 2017-18 the Fed will be running sizable income losses on its portfolio net of operating and other expenses and therefore for a time will be unable to make remittances to the U.S. Treasury. Under alternative scenarios that allow for an emergence of fiscal concerns, the Fed’s net losses would be more substantial.
    JEL: E63 H63
    Date: 2013–08
  23. By: Basu, Kaushik
    Abstract: A frequent charge in foreign exchange markets in developing countries is that of manipulators being at work. Since to buy is to raise prices and to sell is to lower prices, the question that naturally arises is whether the widespread charge of market manipulation is valid. The paper shows that (whether or not"widespreadness"has any merit) it is possible for a player to manipulate and profiteer. By using some simple principles of game theory, the paper outlines a strategy that a manipulator may use. The aim of this paper is not to provide a manual for the manipulator but to enable the regulator to understand the art and develop policies to curb manipulation.
    Keywords: Markets and Market Access,Emerging Markets,Debt Markets,Currencies and Exchange Rates,Economic Theory&Research
    Date: 2013–09–01
  24. By: Jorgen Mortensen
    Abstract: The present paper first takes a step backwards with an attempt to situate the adoption of this Treaty in discussion of the SGP and the “Maastricht criteria” (the criteria for EMU membership fixed in the Maastricht Treaty) in a longer perspective of the sharing of competences for macroeconomic policy making within the EU from the initial Treaty to the Maastricht Treaty and the Stability and Growth Pact (SGP). It then presents the main features of the Fiscal Treaty and its relation to the SGP and draws some conclusions as regards the importance and relevance of this new step in the process of economic policy coordination. It concludes that the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union does not seem to offer a definitive solution to the problem of finding the appropriate budgetarymonetary policy mix in the EMU already well identified in the Delors report in 1989 and regularly emphasised ever since and now seriously aggravated due to the Crisis. Furthermore, the implementation of this Treaty may under certain circumstances contribute to an increase in the uncertainties as regards the distribution of the competences between the European Parliament and national parliaments and between the former and the Commission and the Council.
    Keywords: Economic Policy Coordination, Stability and Growth Pact, Maastricht Treaty, Fiscal Treaty, Sustainability of Fiscal Policy
    JEL: E61 E62 E52
    Date: 2013–08
  25. By: Giovanni Scarano
    Abstract: The idea that effective demand is closely connected with money supply has emerged a number of times in the history of economic thought, within approaches differing in origin and formulation. In particular, we analyse Lange and Patinkin’s theses and those of Luxemburg and the money circuit theorists. The principal thesis proposed is that the idea is closely bound up with the more or less explicit assumption of two fundamental hypotheses. The first is that Say’s law or, more generally, Walras’ law no longer applies, or in any case that there is no form of complementarity in the exchanges of goods and services within the social product. The second hypothesis is that money is a particular “good”. We stress that this theoretical paradigm is incompatible not only with money as a store of value, but also with commodity money or endogenous money supplied strictly in connection with the credit cycle.
    Keywords: Effective Demand, Money Supply, Say’s Law, Walras’ Law, Store of Value, Endogenous Money
    JEL: D50 E41 E51 E11 E13
    Date: 2013–09

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