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on Monetary Economics |
| By: | Gregora,Jiri; Melecky,Ales; Melecky,Martin |
| Abstract: | The interest rate pass-through describes how changes in a reference rate (the monetary policy, money market, or T-bill rate) transmit to bank lending rates. This paper reviews the empirical literature on the interest rate pass-through and systematizes it by means of meta-analysis and meta-regressions. The paper finds systematically lower estimated pass-through coefficients in studies that focus on transmission to long-term lending rates, consumer lending rates, and average lending rates. The interest rate pass-through is significantly influenced by country macro-financial and institutional factors. The estimated pass-through tends to be stronger for economies with deeper capital markets (measured by market capitalization). Interestingly, central bank independence rising from lower levels can reduce interest rate pass-through, while central bank independence rising from already high levels can boost the pass-through. |
| Keywords: | Macroeconomic Management,Inflation,Financial Structures,Financial Crisis Management&Restructuring,International Trade and Trade Rules |
| Date: | 2019–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:8713&r=all |
| By: | Lis, Eliza; Nickel, Christiane; Papetti, Andrea |
| Abstract: | Can the aging process affect inflation? The prolonged decline of fertility and mortality rates induces a persistent downward pressure on the natural interest rate. If this development is not internalized by the monetary policy rule, inflation can be on a downward trend. Using the structure of a two-sector overlapping generations model embedded in a New-Keynesian framework with price frictions, calibrated for the euro area, this paper shows that following a commonly specified monetary policy rule the economy features a ”disinflationary bias” since 1990, in a way that can match the downward trend of core inflation found in the data for the euro area. In this model, continuing to follow the same rule makes inflation to be on a declining pattern at least until 2030. At the same time, changing consumption patterns towards nontradable items such as health-care generate a small ”inflationary bias” a positive deviation of inflation from target of less than 0.1 percentage points between 1990 and 2030. In the model setting of this paper, this inflationary bias is not strong enough to counteract the disinflationary bias generated by the downward impact of aging on the natural interest rate. JEL Classification: E43, E52, E58, J11 |
| Keywords: | consumption composition, euro area, inflation, monetary policy, population aging |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202382&r=all |
| By: | Crowley, Patrick M.; Hudgins, David |
| Abstract: | When the central bank sets monetary policy according to a conventional or modified Taylor rule (which is known as the Taylor Principle), does this deliver the best outcome for the mac-roeconomy as a whole? This question is addressed by extending the wavelet-based control (WBC) model of Crowley and Hudgins (2015) to evaluate macroeconomic performance when the central bank sets interest rates based on a conventional or modified Taylor rule (TR). We compare the simulated performance of jointly optimal fiscal and monetary policy under an unrestricted baseline model with performance under the TR. We simulate the model un-der relatively small and large weighting of the output gap in the TR specification, and for both low and high inflation environments. The results show that the macroeconomic outcome de-pends on whether the conventional or modified Taylor rule is used, and whether the central bank is operating in a low or high inflation environment. |
| Keywords: | Discrete Wavelet Analysis,Monetary Policy,Optimal Control |
| JEL: | C61 C63 C88 E52 E61 F47 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bofecr:12020&r=all |
| By: | Lukas Menkhoff; Malte Rieth; Tobias Stöhr |
| Abstract: | Evidence on the effectiveness of FX interventions is either limited to short horizons or hampered by debatable identification. We address these limitations by identifying a structural vector autoregressive model for the daily frequency with an external instrument. Generally, we find, for freely floating currencies, that FX intervention shocks significantly affect exchange rates and that this impact persists for months. The signaling channel dominates the portfolio channel. Moreover, interest rates tend to fall in response to sales of the domestic currency, whereas stock prices of large (exporting) firms increase after devaluation of the domestic currency. |
| Keywords: | Foreign exchange intervention, structural VAR, exchange rates, interest rates, stock prices |
| JEL: | F31 F33 E58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1854&r=all |
| By: | Takahiro Hattori (Hitotsubashi University); Jiro Yoshida (The Pennsylvania State University and the University of Tokyo) |
| Abstract: | This is the first study analyzing the Bank of Japan’s purchases of real estate investment trusts (REITs) that started in 2010 as part of enhanced unconventional monetary policy. The Bank purchases REIT shares after observing a significantly negative return over the previous night and during the morning market. The Bank continues purchases daily until the overnight and morning REIT returns become positive. This counter-cyclical behavior is consistent with the objective of decreasing risk premia and stimulating spending. Our study sheds light on the unique program of a central bank’s equity purchases. |
| Keywords: | large-scale asset purchases (LSAP), quantitative easing (QE), central banking, real estate investment trust, unconventional monetary policy |
| JEL: | E52 E58 G12 R33 |
| Date: | 2020–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2020_003&r=all |
| By: | Kim Huynh; Jozsef Molnar; Oleksandr Shcherbakov; Qinghui Yu |
| Abstract: | In recent years, there have been rapid technological innovations in retail payments. Such dramatic changes in the economics of payment systems have led to questions regarding whether there is consumer demand for cash. The entry of these new products and services has resulted in significant improvements in the characteristics of existing methods of payment, such as tap-and-go technology or contactless credit and debit cards. In addition, the introduction of decentralized digital currencies has raised questions about whether there is a need for a central bank digital currency (CBDC) and, if so, what its essential characteristics should be. To address these questions, we develop and estimate a structural model of demand for payment instruments. Our model allows for rich heterogeneity in consumer preferences. Identification of the distribution of consumer heterogeneity relies on observing individual-level consumer decisions at the point of sale. Using parameter estimates, we conduct a counterfactual experiment of an introduction of CBDC and simulate post-introduction consumer adoption and usage decisions. We also provide insights into the potential welfare implications of the introduction of new payment instruments. |
| Keywords: | Bank notes; Digital currencies and fintech; Financial services |
| JEL: | C51 E42 L52 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:20-7&r=all |
| By: | Klaus Adam; Michael Woodford |
| Abstract: | We analytically characterize optimal monetary policy for an augmented New Keynesian model with a housing sector. With rational private sector expectations about housing prices and inflation, optimal monetary policy can be characterized by a standard ‘target criterion’ that refers to inflation and the output gap, without making reference to housing prices. When the policymaker is concerned with potential departures of private sector expectations from rational ones and seeks a policy that is robust against such possible departures, then the optimal target criterion must also depend on housing prices. For empirically realistic cases, the central bank should then ‘lean against’ housing prices, i.e., following unexpected housing price increases (decreases), policy should adopt a stance that is projected to undershoot (overshoot) its normal targets for inflation and the output gap. Robustly optimal policy does not require that the central bank distinguishes between ‘fundamental’ and ‘non-fundamental’ movements in housing prices. |
| Keywords: | robust policy design, leaning against housing prices, distorted expectations |
| JEL: | D81 D84 E52 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8127&r=all |
| By: | Matthieu Lemoine; Harri Turunen; Mohammed Chahad; Antoine Lepetit; Anastasia Zhutova; Pierre Aldama; Pierrick Clerc; Jean-Pierre Laffargue |
| Abstract: | This paper presents the new model for France of the Banque de France (FR-BDF), as well as its key implications for the analysis of monetary policy transmission in France. Relative to our former model, this new semi-structural model has been improved along three dimensions: financial channels are richer, expectations now have an explicit role and simulations now converge toward a balanced growth path. We follow the approach of the FRB/US model, where agents can form their expectations in two different ways, VARbased or model-consistent, and where non-financial behavior react with polynomial adjustment costs. For standard monetary policy shocks, FR-BDF shows a stronger sensitivity than our former model, due to the widespread influence of expectations. Then, we show that, under model-consistent expectations, FR-BDF does not suffer from the forward guidance puzzle. Finally, Eurosystem asset purchase programmes have notable effects in FR-BDF, with a stronger transmission through exchange rates than term premia. |
| Keywords: | : Semi-structural Modeling, Expectations, Monetary Policy, Forward Guidance. |
| JEL: | C54 E37 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:736&r=all |
| By: | Jan J. J. Groen |
| Abstract: | Controlling inflation is at the core of monetary policymaking, and central bankers would like to have access to reliable inflation forecasts to assess their progress in achieving this goal. Producing accurate inflation forecasts, however, turns out not to be a trivial exercise. This posts reviews the key challenges in inflation forecasting and discusses some recent developments that attempt to deal with these challenges. |
| Keywords: | Inflation; forecasting. |
| JEL: | E2 E5 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:86989&r=all |
| By: | Frederic Opitz (-) |
| Abstract: | In this paper, I evaluate the effects of public sector purchase program announcement shocks in the Euro area estimating a Bayesian VAR with sign-restrictions augmented by narrative information taken from event studies. Using monthly data, I find that the shocks persistently increase inflation and output. The exchange rate, market volatility, borrowing costs, and systemic risk fall while the quantity of household credit and economic and consumer sentiment rises. Most importantly, I find that the additional narrative information substantially reduces the uncertainty around these effects, shedding new light on the effectiveness and the pass-through of unconventional monetary policy |
| Keywords: | Unconventional monetary policy, APP, Narrative sign-restrictions |
| JEL: | E50 E51 E52 E58 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:20/994&r=all |
| By: | Marco Del Negro; Marc Giannoni; Christina Patterson |
| Abstract: | In this post, we quantify the macroeconomic effects of central bank announcements about future federal funds rates, or forward guidance. We estimate that a commitment to lowering future rates below market expectations can have fairly strong effects on real economic activity with only small effects on inflation. |
| Keywords: | Forward Guidance |
| JEL: | E5 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:86858&r=all |
| By: | Sean Myers; Michael J. Fleming |
| Abstract: | In this post, we quantify the macroeconomic effects of central bank announcements about future federal funds rates, or forward guidance. We estimate that a commitment to lowering future rates below market expectations can have fairly strong effects on real economic activity with only small effects on inflation. |
| Keywords: | Auctions; Treasury securities; primary dealers |
| JEL: | G1 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:86857&r=all |
| By: | Klaus Adam; Michael Woodford |
| Abstract: | We analytically characterize optimal monetary policy for an augmented New Keynesian model with a housing sector. With rational private sector expectations about housing prices and inflation, optimal monetary policy can be characterized by a standard “target criterion” in terms of inflation and the output gap, that makes no reference to housing prices. If instead the policymaker is concerned with potential departures of private sector expectations from rational ones, and seeks a policy that is robust against such possible departures, then the optimal target criterion will also depend on housing prices. For empirically realistic cases, robustness requires the central bank to “lean against” housing prices, i.e., to adopt a stance that is projected to undershoot (overshoot) its normal targets for inflation and the output gap following unexpected housing price increases (decreases). Notably, robustly optimal policy does not require that the central bank distinguish between “fundamental” and “non-fundamental” movements in housing prices. |
| JEL: | C61 E52 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26833&r=all |
| By: | Martijn Boermans; John Burger |
| Abstract: | We analyze how global and local factors affect portfolio allocation by euro area investors in emerging markets at the bond-level. First, cross-sectional analysis reveals a strong preference for home (Euro) currency bonds. Second, panel regressions, whether at the bond or aggregate flows level, consistently identify trade-weighted US dollar fluctuations as the most robust explanatory variable, in sharp contrast to other global factors, such as the VIX and Fed or ECB monetary policy, which have much less impact on reallocations to emerging market bonds. Our results are consistent with the notion that broad US dollar movements act as a barometer for global risk appetite, but with an important caveat: Throughout our analysis we find holdings in Euro-denominated bonds are less sensitive to global factors, which we interpret as further evidence of a home currency bias. |
| Keywords: | global risk; capital flows; global financial cycle; US dollar; foreign exchange rates; portfolio choice; emerging economies; spillovers; monetary policy; securities holdings statistics |
| JEL: | E52 F21 F3 F31 F32 G11 G15 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:676&r=all |
| By: | Kuk Mo Jung (Department of Economics, Sogang University, Seoul); Ju Hyun Pyun (Korea University Business School,) |
| Abstract: | A long-run relationship between money (inflation or interest rates), unemployment, and equity prices are studied. We first document robust empirical evidence that a statistically significant joint relationship between the long term trends of three variables exists in the post-WWII U.S. data: (i) a positive relationship between inflation (or interest rates) and unemployment; (ii) a negative relationship between unemployment and equity prices; and (iii) a negative relationship between inflation (or interest rates) and equity prices. Then, we provide a unified framework that incorporates money, unemployment, and equity prices with microfoundation and empirical relevance. The model predicts the empirically found joint relationship in the long run. The calibration exercises also show that the model results driven solely by US monetary policy can account for 62.9% and 29.8% of variations of the long-term trends of US unemployment rate and real equity prices, respectively |
| Keywords: | Inflation, Unemployment, Equity Prices, SearchModels |
| JEL: | E4 E5 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:sgo:wpaper:2001&r=all |
| By: | Carlos Esteban Posada Posada; Alejandro Torres García; Alfredo Villca Condori |
| Date: | 2020–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:col:000122:018006&r=all |
| By: | Raphael Galvao; Felipe Shalders |
| Abstract: | We study Central Bank communication in a coordination environment. We show that anything goes when the Central Bank cannot commit to a communication policy: both its most and least preferred allocations can be supported in equilibrium, and so can anything in between. We find that the ability to commit to a policy does not eliminate multiplicity and, in particular, does not necessarily implement the Central Bank's most preferred allocation. Under commitment, however, the Central Bank can avoid the least desirable outcomes and assure an intermediate payoff. We show that the Central Bank chooses an information structure with only two messages that leads to perfect coordination among private agents. |
| Keywords: | Central Bank communication; commitment; coordination |
| JEL: | D83 D84 E58 |
| Date: | 2020–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2020wpecon2&r=all |
| By: | Leiva-Leon, Danilo; Martínez-Martin, Jaime; Ortega, Eva |
| Abstract: | This paper decomposes the time-varying effect of exogenous exchange rate shocks on euro area countries inflation into country-specific (idiosyncratic) and region-wide (common) components. To do so, we propose a flexible empirical framework based on dynamic factor models subject to drifting parameters and exogenous information. We show that exogenous shocks to the EUR/USD exchange rate account for over 50% of nominal EUR/USD exchange rate fluctuations in more than a third of the quarters of the past six years, especially in turning point periods. Our main results indicate that headline inflation in euro area countries, and in particular its energy component, has become significantly more affected by these exogenous exchange rate shocks since the early 2010s, in particular for the region's largest economies. While in the case of headline inflation this increasing sensitivity is solely reliant on a sustained surge in the degree of comovement, for energy inflation it is also based on a higher region-wide effect of the shocks. By contrast, purely exogenous exchange rate shocks do not seem to have a significant impact on the core component of headline inflation, which also displays a lower degree of comovement across euro area countries. JEL Classification: C32, E31, F31, F41 |
| Keywords: | exchange rate, factor model, inflation, structural VAR model |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202383&r=all |
| By: | Philip Gunby (University of Canterbury); Stephen Hickson (University of Canterbury) |
| Abstract: | Simple concepts such as the velocity of money can be powerful tools to stimulate classroom discussions about complex issues in macroeconomics classes. For example, are cashless societies likely or is monetary policy likely to be effective? Such concepts are also ideal for in-class data analysis and for research-based teaching. The velocity of money for example only requires values from three commonly available variables, a simple calculation, and can be analysed by plotting it on a graph. In this paper we provide a summary of the velocity of money, what affects it, and illustrate these with two fascinating cases. We also provide two assignments, including how to create data sets, along with grading rubrics. Finally, we discuss experiences from an assignment we set our class. |
| Keywords: | Teaching Macroeconomics, Velocity of Money, Cashless Society, Data Analysis, FRED, Undergraduate Research |
| JEL: | A22 B22 E41 E42 E51 |
| Date: | 2020–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:20/07&r=all |
| By: | Maruyama, Yuuki |
| Abstract: | The point of this model is that total investment in the economy is not determined by the equilibrium of the interest rate alone, but by the equilibrium of both the interest rate and the market price of risk (risk premium). In this model, the lower the discount rate or risk aversion of people, the higher the total investment. This model shows that when the interest rate is not at the zero lower bound, the total investment is only slightly affected by people's risk aversion, but at the zero lower bound, the total investment is inversely proportional to people's risk aversion. In addition, this model is used to analyze monetary policy. It is shown that the interest rate channel and the credit channel can be analyzed with the same formula and the effect of the interest rate channel is small. This explains why a central bank can greatly increase the total investment with small changes in the interest rate. Additionally, this paper analyzes fiscal policy, helicopter money, and government bonds. |
| Date: | 2020–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:hm9jn&r=all |
| By: | Robert Patalano (OECD); Caroline Roulet (OECD) |
| Abstract: | This paper examines global credit intermediation through the lens of financial markets and financial intermediaries in the post-crisis period during which highly accommodative monetary policies contributed to investors’ search for yield. It reviews the extent to which non-bank intermediation contributed to the rise of sovereign and corporate debt levels and exuberance in global credit markets. It also assesses forms of market-based finance that are contributing to financial vulnerabilities, including leverage loans and collateralised loan obligations (CLOs), fixed-income investment funds, and bank contingent convertible debt. Post-crisis policy frameworks should adapt to the shift toward market-based finance in many countries to allow better consideration of the interactions between monetary, prudential, and regulatory tools with respect to credit intermediation and risks. Policies should also consider the optimal combination of macroprudential and activities-based tools in non-bank credit intermediation to address vulnerabilities without undermining the benefits of market-based finance. |
| Keywords: | debt sustainability, International lending, international policy mix, non-bank financial intermediation |
| JEL: | F34 F42 G21 G23 |
| Date: | 2020–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaad:44-en&r=all |
| By: | Gerke, Rafael; Giesen, Sebastian; Scheer, F. Alexander |
| Abstract: | We quantify the macroeconomic effects of interest rate forward guidance in an estimated medium-scale two-agent New Keynesian (TANK) model. In general, such models can dampen or amplify the power of forward guidance compared to a representative agent model. Our empirical estimates indicate a dampening, as there is sufficient countercyclical redistribution.An interaction with asset purchases gives rise to non-linear effects that depend on the horizon of forward guidance. |
| Keywords: | Forward Guidance,Hand-to-mouth households,Redistribution,Bayesian Estimation,Asset purchase program |
| JEL: | E44 E52 E62 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:032020&r=all |
| By: | Olivier Armantier (Board of Governors of the Federal Reserve System (U.S.); Federal Reserve Bank of Philadelphia; Federal Reserve Bank of New York) |
| Abstract: | Even when banks face acute liquidity shortages, they often appear reluctant to borrow at the New York Fed?s discount window (DW) out of concern that such borrowing may be interpreted as a sign of financial weakness. This phenomenon is often called ?DW stigma.? In this post, we explore possible reasons why banks may feel such stigma. |
| JEL: | G2 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:86919&r=all |
| By: | Nauro F Campos; Corrado Macchiarelli |
| Abstract: | The year 2019 marked the 20th anniversary of the establishment of the Euro. It was also the last full year before the UK formally left the European Union. This paper examines the relationship between the UK and the euro area. We look at the economic distance between core and periphery groups of countries which is driven by the level of synchronisation in economic activity. We provide new evidence that since 1990 the UK economy has become significantly more integrated with that of the EMU countries. The UK has moved from being in the periphery before 1990 to being part of the core over the following 30 years, despite not being part of the EMU. We also provide evidence that the level of business cycles synchronisation of the UK economy with the EU has had the greatest, among the EU countries, variability over time. We conclude with some policy implications arising from Brexit for the stability of the euro area. Specifically, while synchronisation might have increased the costs of Brexit, the UK exit from the EU represents much less of a threat to the stability of the euro area than the risk of a failure to further European economic integration via fiscal federalism and the banking union. |
| Keywords: | European Monetary Union, Eurozone, Core-periphery |
| JEL: | E32 E63 F02 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:512&r=all |
| By: | Kristoffer Hansen (GRANEM - Groupe de Recherche Angevin en Economie et Management - Institut National de l'Horticulture et du Paysage - AGROCAMPUS OUEST - UA - Université d'Angers) |
| Abstract: | In recent years some economists have begun to doubt the scientific standing of the standard Austrian theory of the origin of money. They seem to think that it is only one possible solution to the problem of accounting for money's value. Of these economists, Gary North (North 2012b) has presented the most cogent count-er-interpretation to how we should understand the theory of the origin of money as elaborated by Carl Menger and Ludwig von Mises. Unlike the rest of economic theory, the origin of money and Mises's regression theorem do not partake of the character of a scientific law deduced from the basic principles of the science, but is rather, and is presented as such in the writings of Menger and Mises, what North terms "conjectural history." In this essay we will respond to North's challenge and to the economists who agree with him. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02458484&r=all |
| By: | Yakhin, Yossi |
| Abstract: | Breaking the uncovered interest rate parity (UIP) condition is essential to accounting for the empirical behavior of exchange rates, and is a prerequisite for theoretical analysis of sterilized foreign exchange interventions. Gabaix and Maggiori (2015) account for some of the long-standing empirical exchange rate puzzles by introducing financial intermediaries that are willing to absorb international saving imbalances for a premium, thereby deviating from the UIP. In another important contribution, Fanelli and Straub (2019) lay down the principles for foreign exchange interventions. In their model, regulatory exposure limits and participation cost in the international financial markets drive a wedge in the UIP. This paper demonstrates that, to a first order approximation, these models are equivalent to a reduced-form portfolio adjustment cost model, as in Schmitt-Grohé and Uribe (2003). Therefore, to the extent that one is only concerned with first-order dynamics and second moments, there is no gain from adopting the rich microstructure of either models -- a simple portfolio adjustment cost is just as good. |
| Keywords: | UIP; Financial Frictions; Open Economy Macroeconomics |
| JEL: | E58 F31 F41 |
| Date: | 2019–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99267&r=all |
| By: | Walter Engert; Ben Fung |
| Abstract: | A number of questions can arise when considering the implications of a cashless society. This note considers whether cash is necessary for a uniform currency. |
| Keywords: | Bank notes; Digital Currencies and Fintech; Financial services; Payment clearing and settlement systems |
| JEL: | E42 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocsan:20-7&r=all |
| By: | Hoang Sang Nguyen (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Fabien Rondeau (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper evaluates macroeconomic interdependencies of seven Central and Eastern European Countries (CEECs) with the Euro Area (EA) through trade relationship. We estimate a near-VAR model and we simulate responses of activity in those CEECs to output shocks for twelve former members of the EA before and after the 2004 enlargement of the European Union (EU). During both periods, empirical results show that spillover effects come through the main economies of the EA: Germany, France and Italy. Furthermore, CEECs are more responsive to output shocks in the EA after 2004 than before (3.3 times larger on average). Increases in spillover effects are larger for the three CEECs that adopted the Euro early (Slovenia, Slovakia, and Estonia) than the other CEECs (4.9 versus 2.1) but without higher trade intensity with the EA (1.07 versus 1.12). Our results show that trade effects are positive inside the same currency area but negative for the CEECs without the euro. JEL Classifications: F13, F15, F45 |
| Keywords: | OCA,Enlargement,European Union,Trade Spillovers,Euro,Near-VAR |
| Date: | 2019–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02440515&r=all |
| By: | Sangyup Choi (Yonsei Univ); Junhyeok Shin (Yonsei Univ) |
| Abstract: | While the many commonalities shared by Bitcoin and gold raise a question of whether Bitcoin is a safe-haven like gold, relevant empirical evidence to date is mixed. Unlike existing empirical studies, we derive a simple estimable model of Bitcoin price dynamics from the quantity equation, which allows for structural interpretation of our findings; we then estimate the dynamic effects of macro factors, including income, inflation, and interest rates on Bitcoin prices at a weekly frequency. Unlike gold, Bitcoin prices are vulnerable to financial risk or uncertainty shocks, which is inconsistent with safe-haven quality. When the empirical model is augmented with Bitcoin-specific variables, such as its supply, transactions, and velocity, a major share of Bitcoin price dynamics is explained by these variables. We also find an interesting nonlinearity in the drivers of Bitcoin price dynamics between bullish and bearish market: the role of Bitcoin-idiosyncratic shocks increases when it appreciates, while the effects of macro factors dominate when it depreciates. |
| Keywords: | Cryptocurrencies; Bitcoin; safe-haven; gold; quantity equation; Vector Autoregressions |
| JEL: | E41 E44 F31 G10 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2020rwp-167&r=all |