nep-mon New Economics Papers
on Monetary Economics
Issue of 2017‒09‒03
28 papers chosen by
Bernd Hayo
Philipps-Universität Marburg

  1. Central bank swap lines and CIP deviations By William Allen; Gabriele Galati; Richhild Moessner; William Nelson
  2. The impact of Monetary Policy Announcements and Political Events on the Exchange Rate: The Case of South Africa By Trust R. Mpofu; Amos C. Peters
  3. Spillovers from the ECB's non-standard monetary policy measures on south-eastern Europe By Moder, Isabella
  4. Changes in the Liquidity Effect Over Time: Evidence from Four Monetary Policy Regimes By Dawid Johannes van Lill
  5. Navigating monetary policy trade-offs: some conceptual and practical considerations for Asia-Pacific economies By Hamza Ali Malik and Vatcharin Sirimaneetham from the Macroeconomic Policy and Financing for Development Division.
  6. Negative interest rates in Switzerland: what have we learned? By Jean-Pierre Danthine
  7. Revisiting the Exchange Rate Response to Monetary Policy Innovations: The Role of Spillovers of U.S. News Shocks By Pierre De Leo; Vito Cormun
  8. The Effect of Firm Cash Holdings on Monetary Policy By Andre Silva; Bernardino Adao
  9. Monetary Policy: The Specific Features of Its Implementation in the Current Phase of Economic Development By Kiyutsevskaya Anna
  10. Financial Heterogeneity and the Investment Channel of Monetary Policy By Thomas Winberry; Pablo Ottonello
  11. Money, Banking and Financial Markets By Andolfatto, David; Berentsen, Aleksander; Martin, Fernando M.
  12. Should Unconventional Monetary Policies Become Conventional? By Pau Rabanal; Dominic Quint
  13. Leaning Against the Wind: The Role of Different Assumptions About the Costs By Svensson, Lars E O
  14. The Puzzle, the Power, and the Dark Side: Forward Guidance Redux By Bilbiie, Florin Ovidiu
  15. Measuring monetary policy and its impact on the bond market of an emerging economy By Sensarma, Rudra; Bhattacharyya, Indranil
  16. Ambiguity, Monetary Policy and Trend Inflation By Francesca Monti; Riccardo Maria Masolo
  17. Identifying Exchange Rate Common Factors By Ryan Greenaway-McGrevy; Donggyu Sul; Nelson Mark; Jyh-Lin Wu
  18. Non-Neutrality of Open Market Operations By Salvatore Nistico; Pierpaolo Benigno
  19. The Asymmetric Transmission of China's Monetary Policy By Tao Zha; Kaiji Chen
  20. Model-Based Measures of ELB Risk By Taisuke Nakata
  21. Macroeconomic Determinants of MIR Rate: Evidence from the Euro area By Anastasiou, Dimitrios
  22. Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime Switching Approach By Christopher Otrok; Andrew Foerster; Alessandro Rebucci; Gianluca Benigno
  23. Can We Identify the Fed's Preferences? By Jean-Bernard Chatelain; Kirsten Ralf
  24. The Optimal Inflation Rate with Discount Factor Heterogeneity By Antoine Lepetit
  25. A More Detailed IS-LM Story By Hiermeyer, Martin
  26. Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy By Jean-Bernard Chatelain; Kirsten Ralf
  27. A simplistic model of the emergence of money By Alex Lamarche-Perrin; André Orléan; Pablo Jensen
  28. Social representations of money: Contrast between citizens and local complementary currency members By Ariane Tichit

  1. By: William Allen; Gabriele Galati; Richhild Moessner; William Nelson
    Abstract: We study the use of US dollar central bank swap lines as a tool for addressing dislocations in the foreign currency swap market against the USD since the global financial crisis. We find that the use of the Federal Reserve's USD central bank swap lines was mainly related to tensions in US money markets during times of financial crisis, and less to tensions which were confined to foreign exchange swap markets. In particular, we find that the use of USD central bank swap lines did not react significantly to the recent period of persistent deviations of covered interest parity (CIP) since 2014. These results are consistent with the view that the Federal Reserve was guided by enlightened self-interest when providing swap lines to foreign central banks, in order to reduce dislocations in US financial markets and support financial stability. In recent years foreign exchange swap markets have not functioned properly, but it appears that now that the crisis is over, the Federal Reserve and other central banks have decided against trying permanently to fill the gap left by the dysfunction in the commercial foreign exchange swap market.
    Keywords: Central bank swap lines; foreign exchange swaps; covered interest parity; financial crisis
    JEL: E52 E58 F31
    Date: 2017–08
  2. By: Trust R. Mpofu; Amos C. Peters
    Abstract: Since 2000 the South African rand has been among the most volatile emerging market currencies, occasionally experiencing sharp depreciations. These sharp fluctuations in the value of the currency cannot be adequately explained by models of flow-supply and flow-demand of currency or by movements in fundamental factors, yet few studies have employed an asset pricing approach to explain exchange rate variability in emerging markets. To remedy this gap, we use an event study methodology to measure the impact of monetary policy announcements and political events on the exchange value of the South African rand. Using daily exchange rate data over the period March 1, 2000 to December 31, 2014, we find that the rand is highly responsive to both monetary policy announcements and political events. A total of 28 out of 43 monetary policy announcements displayed significant cumulative abnormal returns, while four political events, most notably the Marikana massacre, had significant impact on the rand.
    Keywords: Event study, Exchange Rate Volatility, asset pricing, Monetary policy, South Africa
    JEL: E52 E58 F31 G14
    Date: 2017–08
  3. By: Moder, Isabella
    Abstract: This paper is the first to comprehensively assess the impact of the euro area’s non-standard monetary policy measures on south-eastern Europe. By employing bilateral BVAR models, I am able to estimate the response of output and prices for each country, as well as to shed more light on potential shock transmission channels. The results suggest that the ECB’s non-standard monetary policy measures have had pronounced price effects on all south-eastern European countries, and output effects on approximately half of them. While I also find exports to be a relevant transmission channel in most cases, the interbank market rate responds significantly only in a few cases as the region was subject to significant cross-border bank deleveraging after the crisis. Furthermore, the results suggest that the exchange rate regime does not play a role in determining the sign and magnitude of price level and output responses. This is in line with the absence of distinct exchange rate responses in the model output, suggesting that exchange rates did not act as buffers for spillovers of euro area non-standard monetary policy measures on south-eastern Europe. JEL Classification: C11, C32, E52, F42
    Keywords: BVAR, EU integration, international shock transmission, unconventional monetary policy
    Date: 2017–08
  4. By: Dawid Johannes van Lill
    Abstract: This paper employs a time-varying parameter vector autoregressive (TVP-VAR) model to establish the nature of the relationship between central bank liabilities and the overnight policy rate. Four countries with different monetary policy regimes were considered. It was found that a clear negative relationship between these variables exists only in the case of one regime, namely the reserve regime. This result indicates that the introduction of new operational frameworks for central banks have challenged the traditional model of monetary policy implementation. A potential practical implication of the ‘decoupling’ of interest rates from reserves is that the central bank in the United States and Canada could potentially use their balance sheet alongside conventional interest rate policy. However, as there is practically no decoupling in South Africa, and very little evidence in Norway, such a policy recommendation would not apply.
    JEL: E42 E58 E52
    Date: 2017–08
  5. By: Hamza Ali Malik and Vatcharin Sirimaneetham from the Macroeconomic Policy and Financing for Development Division. (United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: Monetary policy considerations should go beyond concerns of near-term economic growth and inflation, and be mindful of other issues, such as financial stability, exchange rate movements and capital flows. In particular, a monetary policy stance that is kept too loose for too long could undermine domestic financial stability because firms and individuals tend to undertake riskier investment decisions when their balance sheets look stronger than they would otherwise. In many regional economies, financial stability is already being closely monitored.
  6. By: Jean-Pierre Danthine (CEPR - Center for Economic Policy Research - CEPR, UNIL - Université de Lausanne, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: The Swiss National Bank has introduced negative interest rates of minus 75bp in mid-January 2015. Large exemptions on commercial bank holdings at the SNB result in the average rate being significantly less negative than the marginal rate. With this constellation the policy transmission to the real economy is asymmetric. It fully satisfies the needs of a SOE in search of a negative interest differential, not those of an economy aiming at a 'classical' monetary stimulus at the zero bound. While the Swiss design would make it possible to impose rates that are significantly more negative with modest complementary features, the unpopularity of negative rates makes it likely that the ambition to totally free monetary policy of the ZLB will be thwarted by democratic realities in the near future.
    Keywords: safe haven currency,negative interest rates,paper currency hoarding
    Date: 2017–07
  7. By: Pierre De Leo (Boston College); Vito Cormun (Boston College)
    Abstract: Recursive vector autoregression (VAR) analysis suggests that the nominal exchange rate tends to depreciate after a contractionary monetary policy shock in most developing countries, a puzzle for virtually all open-economy macroeconomic models. Using a structural VAR approach, we document that when the U.S. economic outlook worsens developing countries' exchange rates signicantly depreciate and their policy-controlled interest rates increase. We show that commonly used recursive VAR schemes inevitably confound these correlations for the monetary policy innovation. In our econometric framework, we identify the spillover effects of future U.S. business cycles as the innovations that best explain future movements in the Federal Funds rate over an horizon of two years. When the monetary policy shock is then cleansed of these variations, the exchange rate response puzzle disappears. We conclude by showing that a standard small open economy model with news about future fundamentals in a large economy is consistent with all the empirical findings of this paper.
    Date: 2017
  8. By: Andre Silva (Universidade Nova de Lisboa); Bernardino Adao (Banco de Portugal)
    Abstract: Firm cash holdings increased substantially from 1980 to 2013. The overall distribution of firm cash holdings changed in the same period. We study the implications of these changes for monetary policy. We use Compustat data and a model with financial frictions that allows the calculation of the monetary policy effects according to the distribution of cash holdings. We find that the interest rate channel of the transmission of monetary policy has become more powerful, as the impact of monetary policy over real interest rates increased. With the observed changes in firm cash holdings, the real interest rate takes 3.4 months more to return to its initial value after a shock to the nominal interest rate.
    Date: 2017
  9. By: Kiyutsevskaya Anna (Gaidar Institute for Economic Policy)
    Abstract: The article examines the specific features that characterize central banks' monetary policies under current conditions in the context of evolution of their goals and objectives during different phases of economic development. The author substantiates the statement that the choice of goals and objectives is determined by objective factors, and on this basis comes to the conclusion that the global financial and economic crisis, which revealed the challenges to and constraints on the choice of monetary policy directions, became the next starting point in its evolution.
    Keywords: Russian economy, monetary policy regime, monetary authorities, features of macroeconomic development, targeting, developed and developing countries
    JEL: E52 F33
    Date: 2017
  10. By: Thomas Winberry (University of Chicago); Pablo Ottonello (University of Michigan)
    Abstract: We study the heterogeneous effects of monetary policy on firm-level investment and their implications for the aggregate transmission mechanism. Empirically, we find that firms with low levels of liquid assets and/or high levels of debt are substantially less responsive to identified monetary shocks in terms of their capital investment, inventory investment, and stock returns. We build a heterogeneous firm new Keynesian model featuring financial frictions consistent with this fact. In the model, firms with low net worth find it costlier to finance investment and are therefore less willing to respond to monetary shocks. The aggregate effect of monetary policy therefore depends on the distribution of net worth; it is weak when balance sheets are week, but becomes stronger as they recover.
    Date: 2017
  11. By: Andolfatto, David (Federal Reserve Bank of St. Louis); Berentsen, Aleksander (University of Basel); Martin, Fernando M. (Federal Reserve Bank of St. Louis)
    Abstract: The fact that money, banking, and financial markets interact in important ways seems self-evident. The theoretical nature of this interaction, however, has not been fully explored. To this end, we integrate the Diamond (1997) model of banking and financial markets with the Lagos and Wright (2005) dynamic model of monetary exchange--a union that bears a framework in which fractional reserve banks emerge in equilibrium, where bank assets are funded with liabilities made demandable for government money, where the terms of bank deposit contracts are constrained by the liquidity insurance available in financial markets, where banks are subject to runs, and where a central bank has a meaningful role to play, both in terms of inflation policy and as a lender of last resort. The model provides a rationale for nominal deposit contracts combined with a central bank lender-of-last-resort facility to promote efficient liquidity insurance and a panic-free banking system.
    Date: 2017–08–03
  12. By: Pau Rabanal (IMF); Dominic Quint (Deutsche Bundesbank)
    Abstract: The large recession that followed the Global Financial Crisis of 2008–09 triggered unprecedented monetary policy easing around the world. Most central banks in advanced economies deployed new instruments to affect credit conditions and to provide liquidity at a large scale after short-term policy rates reached their effective lower bound. In this paper, we study if this new set of tools, commonly labeled as unconventional monetary policies (UMP), should still be used when economic conditions and interest rates normalize. We study the optimality of UMP by using an estimated non-linear DSGE model with a banking sector and long-term private and public debt for the United States. We find that the benefits of using UMP in normal times are substantial, equivalent to 1.45 percent of consumption. However, the benefits from using UMP are shock-dependent and mostly arise when the economy is hit by financial shocks. When more traditional business cycle shocks (such as supply and demand shocks) hit the economy, the benefits of using UMP are negligible or zero.
    Date: 2017
  13. By: Svensson, Lars E O
    Abstract: "Leaning against the wind" (LAW), that is, tighter monetary policy for financial-stability purposes, has costs in terms of a weaker economy with higher unemployment and lower inflation and possible benefits from a lower probability or magnitude of a (financial) crisis. A first obvious cost is a weaker economy if no crisis occurs. A second cost - less obvious, but higher - is a weaker economy if a crisis occurs. Taking the second cost into account, Svensson (2017) shows that for representative empirical benchmark estimates and reasonable assumptions the costs of LAW exceed the benefits by a substantial margin. Previous literature has disregarded the second cost, by assuming that the crisis loss level is independent of LAW. Some recent literature has effectively disregarded the second cost, making it to be of second order by assuming that the cost of a crisis (the crisis loss level less the non-crisis loss level) is independent of LAW. In these cases where the second cost is disregarded, for representative estimates a small but economically insignificant amount of LAW is optimal.
    Keywords: financial crises.; Financial Stability; macroprudential policy; monetary policy
    JEL: E52 E58 G01
    Date: 2017–08
  14. By: Bilbiie, Florin Ovidiu
    Abstract: Forward guidance (FG) is phenomenally powerful in New Keynesian models---a feature that earned the label "FG puzzle". This paper shows formally how two channels are jointly necessary to reduce the power enough to resolve the puzzle: hand-to-mouth constrained households' income respond to aggregate less than one-to-one; and unconstrained households self-insure idiosyncratic risk. These channels are complementary: if the former condition fails, FG power is instead amplified and the puzzle aggravated. Yet optimal policy does not imply larger FG duration even with such puzzling amplification, because FG power has a dark side: when it increases, so does its welfare cost.
    Keywords: forward guidance; hand-to-mouth; heterogenous households; aggregate demand; self-insurance; optimal monetary policy; liquidity trap; Keynesian cross.
    JEL: E21 E31 E40 E44 E50 E52 E58 E60 E62
    Date: 2017–08
  15. By: Sensarma, Rudra; Bhattacharyya, Indranil
    Abstract: In view of multiple instruments used by many central banks in emerging market economies, we derive a composite measure of monetary policy for India and assess its impact on the yield curve. Our results show that while monetary policy has the dominant impact among macroeconomic variables on the entire term structure, it is particularly strong at the shorter end and on credit spreads. Shifts in the level of the government yield curve and credit spreads also lead to changes in monetary policy. In terms of robustness, our measure performs better than a narrative based measure of monetary policy available in the literature.
    Keywords: Term structure, yield curve, monetary policy, SVAR
    JEL: C51 E44 E52
    Date: 2015–10
  16. By: Francesca Monti (Bank of England); Riccardo Maria Masolo (Bank of England)
    Abstract: Allowing for ambiguity, or Knightian uncertainty, about the behavior of the policymaker helps explain the evolution of trend inflation in the US in a simple new-Keynesian model, without resorting to exogenous changes in the inflation target. Using Blue Chip survey data to gauge the degree of private sector confidence, our model helps reconcile the difference between target inflation and the inflation trend measured in the data. We also show how, in the presence of ambiguity, it is optimal for policymakers to lean against the private sectors pessimistic expectations.
    Date: 2017
  17. By: Ryan Greenaway-McGrevy; Donggyu Sul; Nelson Mark; Jyh-Lin Wu
    Abstract: Using recently developed model selection procedures, we determine that exchange rate returns are driven by a two-factor model. We identify them as a dollar factor and a euro factor. Exchange rates are thus driven by global, US, and Euro-zone stochastic discount factors. The identified factors can also be given a risk-based interpretation. Identification motivates multilateral models for bilateral exchange rates. Out-of-sample forecast accuracy of empirically identified multilateral models dominate the random walk and a bilateral purchasing power parity fundamentals prediction model. 24-month ahead forecast accuracy of the multilateral model dominates those of a principal components forecasting model.
    JEL: F31 F37
    Date: 2017–08
  18. By: Salvatore Nistico (Sapienza Università di Roma); Pierpaolo Benigno (LUISS Guido Carli)
    Abstract: We analyze the effects on inflation and output of unconventional open-market operations due to the possible income losses on the central bank's balance sheet. We first state a general Neutrality Property, and characterize the theoretical conditions supporting it. We then discuss three non-neutrality results. First, when treasury's support is absent, sizeable balance-sheet losses can undermine central bank's solvency and should be resolved through a substantial increase in inflation. Second, a financially independent central bank - i.e. averse to income losses - commits to a more inflationary stance and delayed exit strategy from a liquidity trap. Third, if the treasury is unable or unwilling to tax households to cover central bank's losses, the wealth transfer to the private sector also leads to higher inflation. Finally, we argue that non-neutral open-market operations can be used to escape suboptimal policies during a liquidity trap.
    Date: 2017
  19. By: Tao Zha (Federal Reserve Bank of Atlanta); Kaiji Chen (Emory University)
    Abstract: China monetary policy, as well as its transmission into the economy, is yet to be understood by researchers and policymakers. We propose a new estimation method and use it to quantify the monetary transmission of China's monetary policy within the endogenous-switching nonlinear SVAR framework. We find strong evidence that contributions of monetary policy shocks to the GDP fluctuation are asymmetric across different states of the economy. The effect of monetary policy on output is supported more by medium and long term bank loans than by short term bank loans. This is especially true for the shortfall state, in which an increase of M2 is channeled disproportionally into MLT loans. These findings highlight the role of M2 growth as a primary instrument and the bank lending channel to investment as a key transmission mechanism for monetary policy. Our analysis shows that China monetary policy has unbalanced effects on consumption and investment.
    Date: 2017
  20. By: Taisuke Nakata
    Abstract: The target range for the federal funds rate has increased a few times since its liftoff from the effective lower bound (ELB) in December 2015 and currently stands at 1 to 1-1/4 percent. According to standard macroeconomic models, ELB risk--how likely it is for the policy rate to be constrained by the ELB in the near- and medium-term future--has important implications for interest rate policy. In this note, I construct measures of ELB risk by combining survey-based projections of the U.S. economy with stochastic simulations of the FRB/US model, a large-scale model of the US economy maintained and made public by Federal Reserve staff, and I examine how the ELB risk measures have evolved in the past and how they are likely to evolve in the future.
    Date: 2017–08–23
  21. By: Anastasiou, Dimitrios
    Abstract: The objective of this study is to examine the determinants of MIR rate in the Euro area for the period 2003Q1-2015Q3. By employing Fixed Effects, Random Effects and Dynamic OLS (DOLS) as econometric methodologies, I examine if the MIR rate is affected by the following macroeconomic factors: unemployment rate, inflation rate, GDP growth, political stability index and wages as % to GDP. All of these factors found to exert great significance to MIR rate and thus they have to be taken into consideration when macro-prudential policies are designing.
    Keywords: MIR rate; Interest margin; DOLS estimation; Euro area; European Central Bank.
    JEL: C33 C51 E4 E43 E58 G2
    Date: 2017–04
  22. By: Christopher Otrok (University of Missouri); Andrew Foerster (Federal Reserve Bank of Kansas City); Alessandro Rebucci (The Johns Hopkins Carey Business School); Gianluca Benigno
    Abstract: This paper develops an endogenous regime switching approach to modeling financial crises. In the model there are two regimes, one a crisis regime, the second a regime for normal economic times. The switch between regimes is based on a probability determined by economic variables in the economy. Agents in the economy know how economic fundamentals affect the probability of moving in or out of the crisis state. That is, it is a rational expectations solution of the model. The solution then ensures that decisions made in the normal state fully incorporate how those decision affect the probability of moving into the crisis state as well as how the economy will operate in a crisis. The model developed captures all of the salient features one would want in an empirical model of financial crises. First, it captures the non-linear nature of a crisis. Second, the regime switching model is solved using perturbation methods and a second order solution. This allows the solution to capture the impact of risk on decision rules due both in an out of the crisis. Third, since the solution method is perturbation based it can handle a number of state variables and many shocks. That is, we are less constrained than current non-linear methods in terms of the size of the model. Fourth, the speed of the solution method means that non-linear filters can be used to calculate the likelihood function of the model for a full Bayesian estimation of the relevant shocks and frictions that are fundamental to models of financial crises. Fifth, the fully rational expectations nature of the solution allows one to ask key counterfactual policy questions. We adopt this approach to study sudden stop episodes in Mexico.
    Date: 2017
  23. By: Jean-Bernard Chatelain (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Kirsten Ralf (Ecole Supérieure du Commerce Extérieur - ESCE - International business school)
    Abstract: Shifting from Ramsey optimal policy to time-consistent policy or optimal simple rule corresponds to a saddle-node bifurcation of the dynamic system of the economy. A pre-test of Ramsey optimal policy versus time-consistent policy rejects time-consistent policy and optimal simple rule for the U.S. Fed during 1960 to 2006, assuming the reference new-Keynesian Phillips curve transmission mechanism with auto-correlated cost-push shock. The number of reduced form parameters is larger with Ramsey optimal policy than with time-consistent policy although the number of structural parameters, including central bank preferences, is the same. The new-Keynesian Phillips curve model is under-identified with Ramsey optimal policy (one identifying equation missing) and hence under-identified for time-consistent policy (three identifying equations missing). Estimating a structural VAR for Ramsey optimal policy during Volcker-Greenspan period, the new-Keynesian Phillips curve slope parameter and the Fed's preferences (weight of the volatility of the output gap) are not statistically different from zero at the 5% level.
    Keywords: Ramsey optimal policy,Time-consistent policy,Identication,Central bank preferences,New-Keynesian Phillips curve
    Date: 2017–06
  24. By: Antoine Lepetit (Banque de France - Banque de France - Banque de France)
    Abstract: This paper considers a standard New Keynesian model in which the relevant frictions faced by the monetary authority are price stickiness and the market power of firms, and shows that the optimal inflation rate is no longer zero in the presence of discount factor heterogeneity. I derive analytical solutions for the long-run optimal inflation rate under different assumptions about price setting, and find that it is positive when the social discount factor is greater than the discount factor used by firms when evaluating profit flows, zero when the two are equal, and negative when the planner is more impatient than firms.
    Keywords: Optimal inflation rate, sticky prices, discount factor heterogeneity
    Date: 2017–05–25
  25. By: Hiermeyer, Martin
    Abstract: Textbooks give a fairly short IS-LM story. This paper offers a more detailed one. This story has several advantages vis-à-vis the usual textbook story, including: (a) it is clear about what it means by "money"; (b) it describes the central bank as targeting an interest rate; and (c) it covers the money multiplier and quantitative easing. To unfold, the more detailed story requires only minor adjustments to the IS-LM model, mostly the addition of the quantity equation of money – a mere identity.
    Keywords: Fiscal policy; monetary policy; teaching of economics
    JEL: A2 E52 E62
    Date: 2017–08–25
  26. By: Jean-Bernard Chatelain (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Kirsten Ralf (Ecole Supérieure du Commerce Extérieur - ESCE - International business school)
    Abstract: This paper shows that a shift from Ramsey optimal policy under short term commitment (based on a negative-feedback mechanism) to a Taylor rule (based on positive-feedback mechanism) in the new-Keynesian model is in fact a Hopf bifurcation, with opposite policy advice. The number of stable eigenvalues corresponds to the number of predetermined variables including the interest rate and its lag as policy instruments for Ramsey optimal policy. With a new-Keynesian Taylor rule, however, these policy instruments are arbitrarily assumed to be forward-looking variables when policy targets (inflation and output gap) are forward-looking variables. For new-Keynesian Taylor rule, this Hopf bifurcation implies a lack of robustness and multiple equilibria if public debt is not set to zero for all observation.
    Keywords: Bifurcations,Taylor rule,Taylor principle,new-Keynesian model,Ramsey optimal policy,Finite horizon commitment
    Date: 2017–06
  27. By: Alex Lamarche-Perrin (Phys-ENS - Laboratoire de Physique de l'ENS Lyon - ENS Lyon - École normale supérieure - Lyon - CNRS - Centre National de la Recherche Scientifique); André Orléan (PSE - Paris School of Economics); Pablo Jensen (Phys-ENS - Laboratoire de Physique de l'ENS Lyon - ENS Lyon - École normale supérieure - Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We present a simplistic model of the competition between dierent currencies. Each individual is free to choose the currency that minimizes his transaction costs, which arise whenever his exchanging relations have chosen a dierent currency. We show that competition between currencies does not necessarily converge to the emergence of a single currency. For large systems, we prove that two distinct communities using dier-ent currencies in the initial state will remain forever in this fractionalized state.
    Date: 2017–06–01
  28. By: Ariane Tichit (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article analyses the social representations of money from survey data. More specifically, it tests how organizers of a complementary currency system have a distinct perception of money compared to other citizens. The main results confirm the existence of significant differences between the two groups. The structure of their representations shows that for the local currency members money is less tied to official institutions, to the symbol of the sovereign State, to labour and to wages than for the representative population segment. This confirms a number of theoretical studies that see these social innovations as forms of protest against the standard system, questioning the sovereign State currency and close to the concept of unconditional income. Local currencies, through the different social representations of money they contain, could well be drivers of societal change.
    Keywords: Social representations of money,Survey data,Abric method,Complementary currencies.
    Date: 2017–08–22

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