nep-mon New Economics Papers
on Monetary Economics
Issue of 2021‒11‒15
27 papers chosen by
Bernd Hayo
Philipps-Universität Marburg

  1. Does money growth tell us anything about inflation? By Leonardo Cadamuro; Francesco Papadia
  2. Optimal monetary policy mix at the zero lower bound By Bonciani, Dario; Oh, Joonseok
  3. The Mundellian Trilemma and Optimal Monetary Policy in a World of High Capital Mobility By Richard T. Froyen; Alfred V. Guender
  4. A Model for Central Bank Digital Currencies: Implications for Bank Funding and Monetary Policy By Schiller, Jonathan; Gross, Jonas
  5. Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area By Christian Bittner; Alexander Rodnyansky; Farzad Saidi; Yannick Timmer
  6. A post Keynesian perspective on the eco zone project: Liquidity premia and external financial fragility in the West African Economic and Monetary Union, Ghana and Nigeria By Lampe, Florian; Löscher, Anne
  7. Liquidity, Capital Pledgeability and Inflation Redistribution By Paola Boel; Julian Diaz; Daria Finocchiaro
  8. TLTROs and collateral availability in Italy By Paola Antilici; Annino Agnes; Gianluca Mosconi
  9. Central Bank Tone and the Dispersion of Views within Monetary Policy Committees By Paul Hubert; Fabien Labondance
  10. Optimal monetary policy in a two-country new Keynesian model with deep consumption habits By Okano, Mitsuhiro
  11. Thoughts on a review of the ECB's monetary policy strategy By Christophe Blot; Jérôme Creel; Paul Hubert
  12. Forecasting Inflation and Output Growth with Credit-Card-Augmented Divisia Monetary Aggregates By Barnett, William; Park, Sohee
  13. The interactions of monetary and fiscal policies on inflation dynamics: A case of Ghana By Leshoro, Temitope Lydia A
  14. Monetary Policy and Racial Inequality By Bartscher, Alina Kristin; Kuhn, Moritz; Schularick, Moritz; Wachtel, Paul
  15. Optimal Monetary Policy According to HANK By Sushant Acharya; Edouard Challe; Keshav Dogra
  16. Evaluating the Effects of Forward Guidance and Large-scale Asset Purchases By Xu Zhang
  17. The asymmetric effects of monetary policy on stock price bubbles By Christophe Blot; Paul Hubert; Fabien Labondance
  18. The Internationalization of Domestic Banks and the Credit Channel of Monetary Policy By Morales, Paola; Osorio, Daniel; Lemus, Juan S.; Sarmiento Paipilla, Miguel
  19. Mark my words: the transmission of central bank communication to the general public via the print media By Munday, Tim; Brookes, James
  20. Precautionary saving and un-anchored expectations By Grimaud, Alex
  21. Diverse Policy Committees Can Reach Underrepresented Groups By D'Acunto, Francesco; Fuster, Andreas; Weber, Michael
  22. It's not always about the money, sometimes it's about sending a message: Evidence of Informational Content in Monetary Policy Announcements By Yong Cai; Santiago Camara; Nicholas Capel
  23. The simpler, the better: Measuring financial conditions for monetary policy and financial stability By Arrigoni, Simone; Bobasu, Alina; Venditti, Fabrizio
  24. Globalisation and the Slope of the Phillips Curve By Emanuel Kohlscheen; Richhild Moessner
  25. The Existential Trilemma of EMU in a Model of Fiscal Target Zone By Pompeo Della Posta; Roberto Tamborini
  26. The ECB's Policy, the Recovery Fund and the Importance of Trust: The Case of Greece By Vasiliki Dimakopoulou; George Economides; Apostolis Philippopoulos
  27. Gender Roles and the Gender Expectations Gap By D'Acunto, Francesco; Malmendier, Ulrike; Weber, Michael

  1. By: Leonardo Cadamuro; Francesco Papadia
    Abstract: Economists and central bankers no longer consider monetary aggregates relevant for inflation forecasts. We explain this neglect by advancing and testing the hypothesis that monetary aggregates are only relevant for inflation in unsettled monetary and inflationary conditions. When inflation is basically stable around the central bank target (1.9 percent), as it has been in most of the last two decades, there is no apparent relationship between monetary aggregates and inflation....
    Date: 2021–11
  2. By: Bonciani, Dario (Bank of England); Oh, Joonseok (Freie Universität Berlin)
    Abstract: Long-term asset purchases carried out by central banks increase the consumption volatility of households holding long-term debt. For this reason, monetary authorities should not just aim at stabilising inflation and the output gap but also mitigate the volatility of their balance sheet. In response to negative demand shocks at the zero lower bound (ZLB), the optimal monetary policy consists of a mix of forward guidance and mild adjustments in the balance sheet. The presence of balance-sheet policies reduces the optimal ZLB duration and significantly improves social welfare. Mitigating the effectiveness of forward guidance calls for a more substantial balance-sheet expansion and a shorter ZLB duration. If a central bank only aims to stabilise inflation and the output gap, welfare losses are significantly larger than under the optimal policy and balance-sheet policies only improve welfare if the weight on output-gap stabilisation is relatively large. Last, simple implementable policy rules can achieve welfare outcomes close to those under the optimal policy.
    Keywords: Optimal monetary policy; unconventional monetary policy; quantitative easing; forward guidance
    JEL: E52 E58 E61
    Date: 2021–10–22
  3. By: Richard T. Froyen; Alfred V. Guender (University of Canterbury)
    Abstract: This paper proposes that the Mundellian Trilemma remains valid despite the emergence of a world financial cycle. A clear distinction must be made between monetary policy independence and insulation of an open economy’s financial system. A flexible exchange rate allows an optimizing central bank to chart an independent course but does not insulate the domestic economy from foreign monetary or financial shocks. The gains from a flexible exchange rate may be considerable and vary in accordance with the mandate of the central bank. The Mundellian Trilemma highlights the acute shortage of policy instruments and resulting tradeoffs among policy goals. We show that macroprudential policy in the form of an interest equalization tax, enhances the ability of an optimizing central bank to effectively stabilize domestic output and inflation in the presence of policy changes abroad and potentially destabilizing capital flows.
    Keywords: Mundellian Trilemma, policy independence, capital mobility, instrument shortage, capital controls
    JEL: E3 E5 F3
    Date: 2021–09–01
  4. By: Schiller, Jonathan; Gross, Jonas
    JEL: E42
    Date: 2021
  5. By: Christian Bittner; Alexander Rodnyansky; Farzad Saidi; Yannick Timmer
    Abstract: In the presence of negative monetary-policy rates and a zero lower bound on deposit rates, banks that are more exposed to central banks’ asset-purchase programs reduce their lending to the real economy by more than their counterparts. When banks face a lower bound on customer deposit rates, an asset swap between securities and reserves reduces banks’ net worth as the cost of holding reserves cannot be matched with a reduction in their cost of funding. Exploiting euro-area syndicated lending data and the German credit registry, we provide evidence that deposit-reliant banks with relatively higher funding costs and greater exposure to large-scale asset purchases reduce corporate lending relatively more, have lower stock returns, and rebalance their interbank lending from safe to risky countries.
    Keywords: negative interest rates, quantitative easing, unconventional monetary policy, bank lending channel
    JEL: E52 E58 G21
    Date: 2021
  6. By: Lampe, Florian; Löscher, Anne
    Abstract: The paper treats the eco currency union project in West Africa and its implications for monetary policies against the backdrop of the international monetary order from a post-Keynesian perspective. The eco zone project envisions a common monetary union of the West African Economic and Monetary Union (WAEMU), i.e. the independent Western subzone of the CFA franc union, and the remaining non-CFA countries of the Economic Community of West African States (ECOWAS) with Nigeria and Ghana as the economically most important member states. The literature on the international currency hierarchy developed by Latin-American structuralists and the post-Keynesian Berlin School of thought focuses on the notion of a currency-specific liquidity premium that structurally determines the interest rate level in the corresponding currency areas. Based on this set of literature, we conduct a comparison between the liquidity premia of the Western CFA-franc, the Nigerian naira and the Ghanaian cedi to make conjectures about what implications a common ECOWAS currency union would have regarding monetary policy space. Being a non-pecuniary variable, the liquidity premium cannot be observed directly. We therefore approximate the liquidity premium by calculating differences in interest rates such as the central bank's base rate, the coupon rate on T-bills and bonds and the interest rate spread between Eurobonds and bonds denominated in local currency. Besides, we use balance of payment data to identify external financial fragilities that might become a crucial factor for monetary policy due to an increasing financialisation in West African economies. We find that investors demand structurally higher yields on bonds originating in Ghana and Nigeria than in the CFA-franc zone. One could interpret this as the CFA-franc conveying over a higher liquidity premium because it has to have lower yields rates to compensate for liquidity-differences to financial assets denominated in the US dollar or euro. However, another explanation is that expectations about the future developments of the cedi's and naira's exchange value by investors are more pessimistic in comparison to that of the CFA-franc. This is rooted in two major factors: Firstly, under the current arrangement, France still has leeway in monetary policy making and acts as exchange rate stabiliser by pushing for restrictive monetary policies and guaranteeing foreign exchange reserve provision. Secondly, the estimation of external financial fragility in the CFA-franc zone and Nigeria shows that the naira implies a greater risk of sudden devaluation due to a higher exposure to mobile liabilities vis-à-vis its asset endowments.
    Keywords: West African Economic and Monetary Union,CFA franc,eco zone,international currency hierarchy,external financial fragility
    JEL: E12 F33 F41 G11 O57
    Date: 2021
  7. By: Paola Boel; Julian Diaz; Daria Finocchiaro
    Abstract: We study the redistributive effects of expected inflation in a microfounded monetary model with heterogeneous discount factors and collateral constraints. In equilibrium, this heterogeneity leads to borrowing and lending. Model assumptions also guarantee a tractable distribution of money and capital holdings. Several results emerge from our analysis. First, in this framework expected inflation is detrimental to capital accumulation. Second, expected inflation affects borrowing and lending when collateral constraints are present, thus also inducing redistributive effects through credit. Third, we find this channel to be regressive when we calibrate our model using US data. This is because the drop in borrowers’ capital caused by inflation is larger when capital is used as collateral.
    Keywords: money; heterogeneity; collateral constraint; welfare cost of inflation
    JEL: E40 E50
    Date: 2021–11–10
  8. By: Paola Antilici (Bank of Italy); Annino Agnes (Bank of Italy); Gianluca Mosconi (Bank of Italy)
    Abstract: In response to the Covid-19 pandemic, the ECB has adopted a broad set of measures aimed at ensuring that banks maintain wide access to central bank liquidity. In an environment where refinancing operations are conducted under a full allotment regime, it is important to analyse whether collateral scarcity might have influenced participation in the TLTRO-III operations and the contribution made by collateral easing measures. The analysis shows that the collateral availability of the Italian banking system proved to be adequate and it allowed Italian banks to benefit from the favorable conditions introduced under the TLTRO-III programme. For almost all the banks, the absence of collateral easing measures would not have been a restricting factor on a full TLTRO-III take-up. Such interventions have allowed banks to increase the usage of non-marketable assets as collateral and have reduced their reliance on more liquid assets. Empirical evidence suggests that the monetary policy package, together with the fiscal measures adopted by the government, have helped to support bank lending to the real economy.
    Keywords: TLTRO, central bank collateral, collateral easing, central bank credit operations.
    JEL: E52 E58
    Date: 2021–11
  9. By: Paul Hubert (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Fabien Labondance (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: Does policymakers' choice of words matter? We explore empirically whether central bank tone conveyed in FOMC statements contains useful information for financial market participants. We quantify central bank tone using computational linguistics and identify exogenous shocks to central bank tone orthogonal to the state of the economy. Using an ARCH model and a high-frequency approach, we find that positive central bank tone increases interest rates at the 1-year maturity. We therefore investigate which potential pieces of information could be revealed by central bank tone. Our tests suggest that it relates to the dispersion of views among FOMC members. This information may be useful to financial markets to understand current and future policy decisions. Finally, we show that central bank tone helps predicting future policy decisions.
    Keywords: Optimism,FOMC,Dissent,Interest rate expectations,ECB
    Date: 2020–01–01
  10. By: Okano, Mitsuhiro
    Abstract: This study develops a two-country new Keynesian (NK) model that incorporates deep habits in consumption and investigates the macroeconomic dynamics under the optimal coordinated monetary policy. We show that in response to the structural shocks, the central bank changes the interest rate significantly in the two-country open economy model compared with the closed economy where the central bank is reluctant to move interest rates. When a deep consumption habit exists, the international central bank can exploit the terms of trade externalities. Habit formation might boost the expenditure switching effect, which differentiates the aggressiveness of the central bank between closed and open economies with deep habit. Moreover, we showed that the deviations from the law of one price, or the goods-specific real exchange rate, generated endogenously by the deep habit are significantly related to the degree of home bias. In particular, the deviations fully disappeared when there is no home bias.
    Keywords: Optimal monetary policy; Deep habit; Policy coordination; Commitment;
    JEL: E52 E58 F41
    Date: 2021–10–17
  11. By: Christophe Blot (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Jérôme Creel (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Paul Hubert (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: Time is ripe for a review of the ECB strategy: the economic context and the audience for communication have changed, and the tools for policy decisions and for analysing the environment have expanded. The definition of the inflation target, the twopillar strategy and the use of "non-standard" policy measures need discussion. A change in the ECB mandate is also worth discussing for it would permit to evaluate the current strategy and mandate against an alternative. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs.
    Keywords: Monetary policy strategy,ECB mandate
    Date: 2019–12–01
  12. By: Barnett, William; Park, Sohee
    Abstract: This paper investigates the performance of the Credit-Card-Augmented Divisia monetary aggregates in forecasting U.S. inflation and output growth at the 12-month horizon. We compute recursive and rolling out-of-sample forecasts using an Autoregressive Distributed Lag (ADL) model based on Divisia monetary aggregates. We use the three available versions of those monetary aggregate indices, including the original Divisia aggregates, the credit card-augmented Divisia, and the credit-card-augmented Divisia inside money aggregates. The source of each is the Center for Financial Stability (CFS). We find that the smallest Root Mean Square Forecast Errors (RMSFE) are attained with the credit-card-augmented Divisia indices used as the forecast indicators. We also consider Bayesian vector autoregression (BVAR) for forecasting annual inflation and output growth.
    Keywords: Divisia, credit-card-augmented Divisia, monetary aggregates, forecasting, Bayesian vector autoregression, inflation, output growth.
    JEL: C32 C53 E31 E47 E51
    Date: 2021–10–19
  13. By: Leshoro, Temitope Lydia A
    Abstract: Ghana is the second African country to adopt the inflation targeting framework, after South Africa. The country experienced persistently high levels of inflation, exceeding 100 percent in the early 1980s. The inflation rate has, however, fallen and remained below 20 percent since the adoption of the inflation targeting regime in 2007, and it was as low as one digit in some years. Given the importance of the interaction of monetary policy and fiscal policy in achieving price stability and economic growth of any economy, this study therefore examines whether the monetary or fiscal policy is effective in determining the inflation dynamics in Ghana, using annual data over the period 1980 to 2020. The study adopted the vector error correction mechanism (VECM) and the innovation accounting technique of the impulse response function (IRF) and the variance decomposition (VD), which analyses the dynamic relationship among variables. The results obtained shows that fiscal policy is ineffective and insignificant in determining inflation dynamics in Ghana, while monetary policy appears to be effective, more dominant and highly statistically significant. The importance of the adoption of the inflation targeting was also highlighted. Policy recommendations were provided based on the findings of this study.
    Keywords: monetary policy, fiscal policy, inflation, vector error correction mechanism, impulse response function, variance decomposition, Ghana.
    Date: 2021–10
  14. By: Bartscher, Alina Kristin; Kuhn, Moritz; Schularick, Moritz; Wachtel, Paul
    Abstract: This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own less financial assets that appreciate in value. Over multi-year time horizons, the employment effects are substantially smaller than the countervailing portfolio effects. We conclude that there is little reason to think that accommodative monetary policy plays a significant role in reducing racial inequities in the way often discussed. On the contrary, it may well accentuate inequalities for extended periods.
    Keywords: monetary policy,racial inequality,income distribution,wealth distribution,wealth effects
    JEL: E40 E52 J15
    Date: 2021
  15. By: Sushant Acharya; Edouard Challe; Keshav Dogra
    Abstract: We study optimal monetary policy in an analytically tractable Heterogeneous Agent New Keynesian model with rich cross-sectional heterogeneity. Optimal policy differs from that in a representative agent model because monetary policy can affect consumption inequality by reducing both idiosyncratic consumption risk and the inequality that arises from households’ unequal exposures to aggregate shocks. Simple target criteria summarize the planner’s trade-off between consumption inequality, productive efficiency and price stability. Mitigating consumption inequality requires putting some weight on stabilizing the level of output and correspondingly reducing the weights on the output gap and the price level relative to an economy without inequality.
    Keywords: Economic models; Monetary policy
    JEL: E21 E30 E52 E63
    Date: 2021–11
  16. By: Xu Zhang
    Abstract: This paper evaluates the effects of forward guidance and large-scale asset purchases (LSAP) when the nominal interest rate reaches the zero lower bound. I investigate the effects of the two policies in a dynamic new Keynesian model with financial frictions adapted from Gertler and Karadi (2011, 2013), with changes implemented so that the framework delivers realistic predictions for the effects of each policy on the entire yield curve. I then match the change that the model predicts would arise from a linear combination of the two shocks with the observed change in the yield curve in a 30-minute window around Federal Reserve announcements, allowing me to identify the separate contributions of each shock to the effects of the announcement. My estimates imply that LSAP was more important in influencing output and inflation than forward guidance.
    Keywords: Business fluctuations and cycles; Central bank research; Econometric and statistical methods; Interest rates
    JEL: E5 G0
    Date: 2021–11
  17. By: Christophe Blot (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Paul Hubert (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Fabien Labondance (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: Is the effect of US monetary policy on stock price bubbles asymmetric? We use a range of measures of excessive stock price variations that are unrelated to business cycle fluctuations. We find that the effects of monetary policy are asymmetric so responses to restrictive and expansionary shocks must be differentiated. The effects of restrictive monetary policy are more powerful than the effects of expansionary policies. We also find evidence that the asymmetric effect of monetary policy is state-contingent and depends on monetary, credit and business cycles as well as stock price boom-bust dynamics.
    Keywords: Non-linearity,Equity,Booms and busts,Federal reserve
    Date: 2020–04–01
  18. By: Morales, Paola; Osorio, Daniel; Lemus, Juan S.; Sarmiento Paipilla, Miguel (Tilburg University, School of Economics and Management)
    Date: 2021
  19. By: Munday, Tim (University of Oxford); Brookes, James (Bank of England)
    Abstract: We ask how central banks can change their communication in order to receive greater newspaper coverage. We write down a model of news production and consumption in which news generation is endogenous because the central bank must draft its communication in such a way that newspapers choose to report it, while still retaining the message the central bank wishes to convey to the public. We use our model to show that standard econometric techniques that correlate central bank text with measures of news coverage in order to determine what causes central bank communication to be reported on will likely prove to be biased. We use techniques from computational linguistics combined with an event-study methodology to measure the extent of news coverage a central bank communication receives, and the textual features that might cause a communication to be more (or less) likely to be considered newsworthy. We consider the case of the Bank of England, and estimate the relationship between news coverage and central bank communication implied by our model. We find that the interaction between the state of the economy and the way in which the Bank of England writes its communication is important for determining news coverage. We provide concrete suggestions for ways in which central bank communication can increase its news coverage by improving readability in line with our results.
    Keywords: Central bank communication; print media; high-dimensional estimation; natural language processing
    JEL: C01 C55 C82 E43 E52 E58
    Date: 2021–10–27
  20. By: Grimaud, Alex
    Abstract: This paper investigates monetary policy in a heterogeneous agent new Keynesian (HANK) model where agents face idiosyncratic income risk and use adaptive learning in order to form their expectations. Households experience different histories and observe different idiosyncratic variables. This gives rise to idiosyncratic learning processes, which naturally implies the existence of heterogeneous expectations. In HANK models, supply shocks generate precautionary saving. The learning setup amplifies this effect and can result in long-lasting disinflationary traps. Dovish Taylor rules focused on closing the output gap dampen the learning effects. Price level targeting improves the inflation and output stabilization trade-off by better anchoring expectations.
    Keywords: adaptive learning,precautionary saving,restricted perception equilibrium,heterogeneous expectations,heterogeneous agent
    JEL: E25 E31 E52 E70
    Date: 2021
  21. By: D'Acunto, Francesco; Fuster, Andreas; Weber, Michael
    Abstract: Increasing the diversity of policy committees has taken center stage worldwide, but whether and why diverse committees are more effective is still unclear. In a randomized control trial that varies the salience of female and minority representation on the Federal Reserve's monetary policy committee, the FOMC, we test whether diversity affects how Fed information influences consumers' subjective beliefs. Women and Black respondents form unemployment expectations more in line with FOMC forecasts and trust the Fed more after this intervention. Women are also more likely to acquire Fed-related information when associated with a female official. White men, who are overrepresented on the FOMC, do not react negatively. Heterogeneous taste for diversity can explain these patterns better than homophily. Our results suggest more diverse policy committees are better able to reach underrepresented groups without inducing negative reactions by others, thereby enhancing the effectiveness of policy communication and public trust in the institution.
    Date: 2021
  22. By: Yong Cai; Santiago Camara; Nicholas Capel
    Abstract: This paper introduces a transparent framework to identify the informational content of FOMC announcements. We do so by modelling the expectations of the FOMC and private sector agents using state of the art computational linguistic tools on both FOMC statements and New York Times articles. We identify the informational content of FOMC announcements as the projection of high frequency movements in financial assets onto differences in expectations. Our recovered series is intuitively reasonable and shows that information disclosure has a significant impact on the yields of short-term government bonds.
    Date: 2021–11
  23. By: Arrigoni, Simone; Bobasu, Alina; Venditti, Fabrizio
    Abstract: In this paper we assess the merits of financial condition indices constructed using simple averages versus a more sophisticated alternative that uses factor models with time varying parameters. Our analysis is based on data for 18 advanced and emerging economies at a monthly frequency covering about 70% of the world's GDP.We assess the performance of these indicators based on their ability to capture tail risk for economic activity and to predict banking and currency crises. We find that averaging across the indicators of interest, using judgmental but intuitive weights, produces financial condition indices that are not inferior to, and actually perform better than, those constructed with more sophisticated statistical methods. An indicator that gives more weight to measures of financial stress, which we term WA-FSI, emerges as the best indicator for anticipating banking crisis, and is therefore better suited for financial stability.
    Keywords: financial conditions,quantile regressions,banking crises,SVARs,spillovers
    JEL: E32 E44 C11 C55
    Date: 2021
  24. By: Emanuel Kohlscheen; Richhild Moessner
    Abstract: We study the effects of globalisation on the slope of the New Keynesian Phillips curve for CPI inflation, based on a broad panel of 35 countries and controlling for possibly non-linear exchange rate effects. We find that the output gap generally has a significant positive effect on inflation, but that this effect decreases as integration in the global economy increases. We conclude that the advance of globalisation has been a key force behind the flattening of price Phillips curves across the world.
    Keywords: inflation, globalisation, openness, output gap, Phillips curve
    JEL: E52 E58
    Date: 2021
  25. By: Pompeo Della Posta; Roberto Tamborini
    Abstract: The lesson of the sovereign debt crises of the 2010s, and of the outbreak of the COVID- 19 pandemic is that EMU irreversibility, if not to remain a wishful statement in the founding treaties, necessitates to be completed by carefully designed ramparts for extraordinary times beside regulations for ordinary times. In this paper we wish to contribute to this line of thought in two points. First, we highlight that when exposed to large, systemic shocks the EMU faces a trilemma: its integrity can only be saved by relaxing either monetary orthodoxy, or fiscal orthodoxy, or both. We elaborate this concept by means of a fiscal target-zone model, where EMU member governments are willing to abide with the commitment to debt stability under the no-bailout clause only up to an upper bound of their feasible fiscal effort. Second, we show that EMU completion means providing a monetary and/or fiscal emergency backstop to the irreversibility principle. Drawing on the target-zone literature, we show how these devices can be designed in a consistent manner that minimises their extension and mitigates the moral hazard concerns. The alternative to these devices is not retaining both the EMU irreversibility and the twin orthodoxies, but reformulating the treaties with explicit and regulated exit procedures
    Date: 2021
  26. By: Vasiliki Dimakopoulou; George Economides; Apostolis Philippopoulos
    Abstract: This paper, using a microfounded macroeconomic model that embeds the key features of the Greek economy, studies the efficacy of the various policy measures taken, at national and EU level, to cushion the economic effects of the pandemic shock. The paper attempts to give quantitative answers to questions like: What are the effects of these policies and, especially, what are the implications of the fiscal transfers and grants from the Recovery Fund and the quantitative policies of the ECB, like the PEPP, for the Greek economy? Do they help the real economy and, if yes, by how much? What would have happened had these measures not taken? How costly will be the re-emergence of the fear of debt default and risk premia?
    Keywords: central banking, fiscal policy, international lending, pandemic
    JEL: E50 E60 F30
    Date: 2021
  27. By: D'Acunto, Francesco; Malmendier, Ulrike; Weber, Michael
    Abstract: Expectations about economic variables vary systematically across genders. In the domain of inflation, women have persistently higher expectations than men. We argue that traditional gender roles are a significant factor in generating this gender expectations gap as they expose women and men to different economic signals in their daily lives. Using unique data on the participation of men and women in household grocery chores, their resulting exposure to price signals, and their inflation expectations, we document a tight link between the gender expectations gap and the distribution of grocery shopping duties. Because grocery prices are highly volatile, and consumers focus disproportionally on positive price changes, frequent exposure to grocery prices increases perceptions of current inflation and expectations of future inflation. The gender expectations gap is largest in households whose female heads are solely responsible for grocery shopping, whereas no gap arises in households that split grocery chores equally between men and women. Our results indicate that gender differences in inflation expectations arise due to social conditioning rather than through differences in innate abilities, skills, or preferences.
    Keywords: Gender Gap,Expectations,Perceptions,Experiences,Social Conditioning
    JEL: C90 D14 D84 E31 E52 G11
    Date: 2021

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