nep-mon New Economics Papers
on Monetary Economics
Issue of 2022‒09‒19
25 papers chosen by
Bernd Hayo
Philipps-Universität Marburg

  1. DSGE Models and Machine Learning: An Application to Monetary Policy in the Euro Area By Daniel Stempel; Johannes Zahner
  2. New perspectives on monetary policy By Moritz Schularick
  3. Individual Trend Inflation By Toshitaka Sekine; Frank Packer; Shunichi Yoneyama
  4. Can National Treasury do contractionary monetary policy By Luchelle Soobyah; Nicola Viegi
  5. A Structural Measure of the Shadow Federal Funds Rate By Callum Jones; Mariano Kulish; James Morley
  6. The effects of Monetary Policy on Capital Flows A Meta-Analysis By Villamizar-Villegas, Mauricio; Arango-Lozano, Lucía; Castelblanco, Geraldine; Fajardo-Baquero, Nicolás; Ruiz-Sánchez, María Alejandra
  7. Cash, COVID-19 and the Prospects for a Canadian Digital Dollar By Walter Engert; Kim Huynh
  8. House Price Responses to Monetary Policy Surprises: Evidence from the U.S. Listings Data By Gorea, Denis; Kryvtsov, Oleksiy; Kudlyak, Marianna
  9. Pass-Through of Wages and Import Prices Has Increased in the Post-COVID Period By Mary Amiti; Sebastian Heise; Fatih Karahan; Aysegul Sahin
  10. What Do Long Data Tell Us About the Inflation Hike Post COVID-19 Pandemic? By Stephanie Schmitt-Grohé; Martín Uribe
  11. Counter-cyclical fiscal rules and the zero lower bound By Hauptmeier, Sebastian; Kamps, Christophe; Radke, Lucas
  12. Weather Shocks and Inflation Expectations in Semi-Structural Models By Jose Vicente Romero; Sara Naranjo Saldarriaga
  13. Does Public Debt Granger-Cause Inflation in Tanzania? A Multivariate Analysis By Talknice Saungweme; Nicholas M. Odhiambo
  14. How Credit Improves the Exchange Rate Forecast By Martin Casta
  15. A Mixed Duopoly in Interbank Payment Services By Carlos A. Arango-Arango; Yanneth Rocio Betancourt-Garcia
  16. Leaning against the wind with fiscal and monetary policy By Shaun de Jager; Chris Loewald; Konstantin Makrelov; Xolani Sibande
  17. How Inflation Impacts Deposit Insurance: Real Coverage and Coverage Ratio By Bert Van Roosebeke; Ryan Defina
  18. The Phillips Curve and Cost Pass-Through in Japan: Summary of the Second Workshop on "Issues Surrounding Price Developments during the COVID-19 Pandemic" By Research and Statistics Department
  19. Household characteristics, Irish inflation and the cost of living By Lydon, Reamonn
  20. A war in a pandemic-The recent spike in economic uncertainty and the hedging abilities of Bitcoin By Refk Selmi
  21. The shortterm costs of reducing trend inflation in South Africa By Chris Loewald; Konstantin Makrelov; Ekaterina Pirozhkova
  22. The Historical Role of Energy in UK Inflation and Productivity and Implications for Price Inflation in 2022 By Jennifer L. Castle; David F. Hendry; Andrew B. Martinez
  23. Non-bank mortgage lending in Ireland: recent developments and macroprudential considerations By Gaffney, Edward; Hennessy, Christina; McCann, Feargal
  24. Estimating the Euro Area output gap using multivariate information and addressing the COVID-19 pandemic By Morley, James; Palenzuela, Diego Rodriguez; Sun, Yiqiao; Wong, Benjamin
  25. The cost of complying with Basel III liquidity regulations for South African banks By Howard Diesel; Mukelani Nkuna; Tim Olds; Daan Steenkamp

  1. By: Daniel Stempel (University of Duesseldorf); Johannes Zahner (University of Marburg)
    Abstract: In the euro area, monetary policy is conducted by a single central bank for 19 member countries. However, countries are heterogeneous in their economic development, including their inflation rates. This paper combines a New Keynesian model and a neural network to assess whether the European Central Bank (ECB) conducted monetary policy between 2002 and 2022 according to the weighted average of the inflation rates within the European Monetary Union (EMU) or reacted more strongly to the inflation rate developments of certain EMU countries. The New Keynesian model first generates data which is used to train and evaluate several machine learning algorithms. We find that a neural network performs best out-of-sample. Thus, we use this algorithm to classify historical EMU data. Our findings suggest disproportional emphasis on the inflation rates experienced by southern EMU members for the vast majority of the time frame considered (80%). We argue that this result stems from a tendency of the ECB to react more strongly to countries whose inflation rates exhibit greater deviations from their long-term trend.
    Keywords: New Keynesian Models, Monetary Policy, European Monetary Union, Neural Networks, Transfer Learning
    JEL: C45 C53 E58
    Date: 2022
  2. By: Moritz Schularick (University of Bonn and Sciences Po, Paris)
    Abstract: This paper presents and discusses new perspectives on the framework of monetary policy that challenge the current paradigm: (i) The development of heterogeneous agent models in which “divine coincidence†no longer holds and trade-offs between inflation and output stabilization arise; (ii) New theoretical and empirical evidence on the distributional effects of conventional and unconventional monetary policy; (iii) Evidence that stabilization policy by central banks invites more leverage, risktaking and a rising exposure of intermediaries to the systematic risks that central banks insure, which in turn increases financial and economic fragility.
    Keywords: monetary policy, heterogeneous agent model, inequality, asset prices, Central Banks´ mandate, stabilization policy
    JEL: E42 E52 E58 E64 H63
    Date: 2022–02
  3. By: Toshitaka Sekine (Hitotsubashi University and CAMA (E-mail:; Frank Packer (Bank for International Settlements (E-mail:; Shunichi Yoneyama (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: This paper extends the recent approaches to estimate trend inflation from the survey responses of individual forecasters. It relies on a noisy information model to estimate the trend inflation of individual forecasters. Applying the model to the recent Japanese data, it reveals that the added noise term plays a crucial role and there exists considerable heterogeneity among individual trend inflation forecasts that drives the dynamics of the mean trend inflation forecasts. Divergences in forecasts as well as moves in estimates of trend inflation are largely driven by a identifiable group of forecasters who see less noise in the inflationary process, expect the impact of transitory inflationary shocks to wane more quickly, and are more flexible in adjusting their forecasts of trend inflation in response to new information.
    Keywords: Inflation forecast, Disagreement, Unobserved components model, Noisy information, Inflation target, Quantitative and qualitative monetary easing, Bank of Japan
    JEL: E31 E52 E58
    Date: 2022–08
  4. By: Luchelle Soobyah; Nicola Viegi
    Abstract: Can National Treasury do contractionary monetary policy
    Date: 2022–08–10
  5. By: Callum Jones (Federal Reserve Board); Mariano Kulish (School of Economics, University of Sydney); James Morley (School of Economics, University of Sydney)
    Abstract: We propose a shadow policy interest rate based on an estimated structural model that accounts for the zero lower bound. The lower bound constraint, if expected to bind, is contractionary and increases the shadow rate compared to an unconstrained systematic policy response. By contrast, forward guidance and other unconventional policies that extend the expected duration of zero-interest-rate policy are expansionary and decrease the shadow rate. By quantifying these distinct effects, our structural shadow federal funds rate better captures the stance of monetary policy given economic conditions than a shadow rate based only on the term structure of interest rates.
    Keywords: zero lower bound; forward guidance; shadow rate; monetary policy
    JEL: E52 E58
    Date: 2022–08
  6. By: Villamizar-Villegas, Mauricio; Arango-Lozano, Lucía; Castelblanco, Geraldine; Fajardo-Baquero, Nicolás; Ruiz-Sánchez, María Alejandra
    Abstract: We investigate whether central banks are able to attract or redirect capital flows, by bringing together the entire empirical literature into the first quantitative meta-analysis on the subject. We dissect policy effects by the type of flow and by the origin of the monetary shock. Further, we assess whether policy effects depend on factors that drive investors to either search for yields or fly to safety. Our findings indicate a mean effect size of inflows in the amount of 0.09% of quarterly GDP in response to either a 100 basis point (bp) increase in the domestic policy rate or a 100bp reduction in the external rate. However, the effect size under a random effect specification is much lower (0.01%). Factors that significantly attract inflows include foreign exchange reserves, output growth, and financial openness, while factors that deter flows include foreign debt, capital controls, and departures from the uncovered interest rate parity. Also, both local and global risks matter (global risks exerting a larger pressure). Finally, we shed light on differences across the different types of flows: banking flows being the most responsive to monetary policy, while foreign direct investment being the least responsive.
    Keywords: Meta-Analysis; Capital Flows; Monetary Policy
    JEL: C83 E58 F21 F31 F32
    Date: 2022–08
  7. By: Walter Engert; Kim Huynh
    Abstract: We provide an analysis of cash trends in Canada before and during the COVID-19 pandemic. Focusing on the pandemic period, we explore the implications on demand for, use of and access to cash. We find that cash demand has been strong pre-pandemic and increased sharply during the pandemic. While cash use fell initially due to the decreased number of in-person shopping opportunities, it recovered as containment measures eased. We explore the potential two scenarios for issuance of central bank digital currency or Canadian digital dollar. We discuss the Canadian experience in maintaining cash as an efficient and accessible method of payment and store of value.
    Keywords: Bank notes; Central bank research; Coronavirus disease (COVID-19); Digital currencies and fintech; Econometric and statistical methods
    JEL: C C12 C9 E E4 O O54
    Date: 2022–08
  8. By: Gorea, Denis (European Investment Bank); Kryvtsov, Oleksiy (Bank of Canada); Kudlyak, Marianna (Federal Reserve Bank of San Francisco)
    Abstract: Existing literature documents that house prices respond to monetary policy surprises with a significant delay, taking years to reach their peak response. We present new evidence of a much faster response. We exploit information contained in listings for the residential properties for sale in the United States between 2001 and 2019 from the CoreLogic Multiple Listing Service Dataset. Using high-frequency measures of monetary policy shocks, we document that a one-standard-deviation contractionary monetary policy surprise lowers housing list prices by 0.2–0.3 percent within two weeks—a magnitude on par with the effect on stock prices. House prices respond stronger to the surprises to future rates as compared to the surprise changes in the federal funds rate. Sale prices are mostly pre-determined by list prices and do not independently respond to monetary policy surprises.
    Keywords: house prices, monetary policy, transmission of monetary policy, list and sales prices
    JEL: E52 R21 R31
    Date: 2022–08
  9. By: Mary Amiti; Sebastian Heise; Fatih Karahan; Aysegul Sahin
    Abstract: Annual CPI inflation reached 9.1 percent in June 2022, the highest reading since November 1981. The broad-based nature of the recent inflation readings has increased concerns that inflation may run above the Federal Reserve’s target for a longer period than anticipated. In this post we use detailed industry-level data to examine two prominent cost-push-based explanations for high inflation: rising import prices and higher labor costs. We find that the pass-through of wages and input prices to the U.S. Producer Price Index has grown during the pandemic. Both the large changes in these costs and a higher pass-through into domestic prices have contributed toward higher inflation.
    Keywords: wages; import prices; inflation; Pass-through
    JEL: E31 F00
    Date: 2022–08–23
  10. By: Stephanie Schmitt-Grohé; Martín Uribe
    Abstract: To what extent is the recent spike in inflation driven by a change in its permanent component? We estimate a semi-structural model of output, inflation, and the nominal interest rate in the United States over the period 1900-2021. The model predicts that between 2019 and 2021 the permanent component of inflation rose by 51 basis points. If instead we estimate the model using postwar data (1955--2021), the permanent component of inflation is predicted to have increased by 238 basis points. A possible interpretation of this finding is that the model estimated on the shorter sample assigns a larger increase in the permanent component of inflation because the period 1955-2021 does not contain sudden sparks in inflation like the one observed in the aftermath of the COVID-19 pandemic but only gradual ones---the great inflation of the 70s took more than 10 years to build up. By contrast, the period 1900-1954 is plagued with sudden inflation hikes---including one around the 1918 Spanish flu pandemic---which the estimated model endogenously recalls and uses to interpret inflation around the COVID-19 episode. This result suggests that prewar data might be of use to understand recent inflation dynamics.
    JEL: E31 E37 E52
    Date: 2022–08
  11. By: Hauptmeier, Sebastian; Kamps, Christophe; Radke, Lucas
    Abstract: We analyse the effectiveness of optimal simple and implementable monetary and fiscal policy rules in stabilising economic activity, inflation and government debt in face of an occasionally binding lower bound on the nominal interest rate in a New Keynesian model. We show that, within the traditional assignment of active monetary policy and passive fiscal policy, the optimal fiscal policy rule features a strong counter-cyclical response to the deviation of inflation from the central bank’s target - providing significant macroeconomic stabilisation especially at the lower bound - while also featuring a strong response to government debt. Our quantitative results show that the optimal counter-cyclical fiscal feedback to inflation significantly improves welfare and reduces the lower-bound frequency. In addition, the optimal simple monetary and fiscal rules almost completely resolve the deflationary bias associated with the lower bound. JEL Classification: E31, E52, E61, E62
    Keywords: deflationary bias, fiscal rules, inflation targeting, zero lower bound
    Date: 2022–08
  12. By: Jose Vicente Romero (Banco de la Republica); Sara Naranjo Saldarriaga (Banco de la Republica)
    Abstract: Colombia is particularly affected by the El Nino Southern Oscillation (ENSO) weather fluctuations. In this context, this study explores how the adverse weather events linked to ENSO affect the inflation expectations in Colombia and how to incorporate these second-round effects into a small open economy New Keynesian model. Using BVARx models we provide evidence that the inflation expectations obtained from surveys and break-even inflation measures are affected by weather supply shocks. Later, using this stylised fact, we modify one of the core forecasting models of the Banco de la Republica by incorporating the mechanisms in which weather-related shocks affect marginal costs and inflation expectations. We find that ENSO shocks had an important role in both inflation and the dynamics of inflation expectations, and that policymakers should consider this fact.
    Keywords: Inflation; inflation expectations; inflation expectations anchoring; weather shocks
    JEL: D84 E31 E52 Q54
    Date: 2022–08–15
  13. By: Talknice Saungweme; Nicholas M. Odhiambo
    Abstract: The optimal balance between fiscal and monetary policy in achieving price stability has been contested in literature. In the main, however, it is widely recognised that whether public debts are financed in a monetary way or otherwise, the choice of policy action affects the effectiveness of monetary policy in ensuring price stability. This study contributes to the debate by testing the dynamic causal relationship between public debt and inflation in Tanzania covering the period 1970-2020. The study applies the autoregressive distributed lag (ARDL) bounds testing technique to cointegration and the ECM-based Granger-causality test to explore this relationship. In order to address the omission-of-variable bias, which has been the major methodological deficiency detected in some previous studies, two monetary variables, namely money supply and interest rate, were added as intermittent variables alongside public debt and inflation. The findings from this study show that there is a consistent long-run cointegrating relationship between public debt, inflation, money supply and interest rate in Tanzania. However, the results fail to find evidence of causality between public debt and inflation in Tanzania, irrespective of whether the causality is estimated in the short run or in the long run. The findings of this study, therefore, show that Tanzania’s current debt is not inflationary; hence, policymakers may continue to pursue the desirable fiscal policies necessary for the country’s long-term optimal growth path.
  14. By: Martin Casta
    Abstract: This paper presents a simple reduced-form error correction model for forecasting nominal exchange rates. The model is inspired by the classical monetary model of exchange rates. However, the commonly used monetary aggregates were replaced by loans to corporations. The reason for this change is that our goal is to focus on corporate deposits, for which corporate loans act as a proxy. For presentational purposes, we focus on eight major trading currency pairs: AUD/USD, CAD/USD, CHF/USD, EUR/USD, GBP/USD, NZD/USD, SEK/USD and JPY/USD, for which we use data from approximately the last two decades. We empirically show statistically and economically significant exchange rates forecastability in the medium and long run, and we also present some findings on predictability even in the short run. In short, our results suggest that corporate loans are a significant driver behind exchange rate movements.
    Keywords: Exchange rates, forecasting, forecast evaluation
    JEL: C5 F31 F32 F37
    Date: 2022–08
  15. By: Carlos A. Arango-Arango (Banco de la Republica de Colombia); Yanneth Rocio Betancourt-Garcia (Banco de la Republica de Colombia)
    Abstract: In this paper, we analyze theoretically the coexistence of two means of payment, such as cash and digital or electronic payments, introducing some distortions in the payments markets to understand the widespread use of cash, specially in emerging countries. Lagos and Wright (2005) theoretical approach allows us to model explicitly the frictions in the exchange process considering money as essential. We introduce in this framework theft and informality (measured by tax evasion) as factors aecting cash usage and competition with a private digital payment platform. Considering heterogeneity in the seller's side by assuming dierent levels of productivity we nd the factors that explain the use of cash or digital payments. If a public provider enters the market with a less expensive platform the fees charged by the private provider have to be adjusted to the cost level of the public platform, decreasing the use of cash in the economy.
    Keywords: Cash; means of payments; payments services; digital payments; instant payments
    JEL: E40 E41 E42 E44
    Date: 2022–08–15
  16. By: Shaun de Jager; Chris Loewald; Konstantin Makrelov; Xolani Sibande
    Abstract: Leaning-against-the-wind-with-fiscal-and -monetary-policy
    Date: 2022–09–06
  17. By: Bert Van Roosebeke (International Association of Deposit Insurers); Ryan Defina (International Association of Deposit Insurers)
    Abstract: The recent emergence of inflationary pressures across the globe has presented an additional consideration for deposit insurers. This Policy Brief considers how inflation may impact on two key concepts of deposit insurance: coverage levels and coverage ratios. We introduce the concept of 'real coverage' and using IADI data, we illustrate that the cumulative impact of inflation over the years on coverage levels may be significant as increases in general price levels erode coverage and lead to a decrease in the real terms of unchanged nominal coverage levels. Using this metric in reviewing historic increases in nominal coverage levels by a limited number of deposit insurers only, we find some indications for consideration of real coverage levels in setting policy. Inflation affects coverage ratios, which are a prominent element of deposit insurers' policy. The impact of inflation is highly complex and may depend on a number of variables, including the duration and sudden nature of inflation and its distributional impact on wealth and savings. Using IADI Annual Survey data from the past seven years, we investigate the correlation between inflation and both eligible and covered deposits in nominal terms. We find evidence for both nominal covered and eligible deposits to grow at rates below inflation rates. Ignoring distributive effects of inflation on saving rates across income groups, this implies that all else equal, to hold an existing coverage ratio, deposit insurers can increase coverage levels at a ratio below inflation. An upcoming policy brief will cover the inflation considerations in international deposit insurance standards and governance arrangements.
    Keywords: deposit insurance, bank resolution
    JEL: G21 G33
    Date: 2022–08
  18. By: Research and Statistics Department (Bank of Japan)
    Abstract: On May 30, 2022, the second workshop on "Issues Surrounding Price Developments during the COVID-19 Pandemic," entitled "The Phillips Curve and Cost Pass-Through in Japan," was held at the Bank of Japan's Head Office. The workshop featured lively discussions involving experts and scholars in economics and empirical analysis on the impact on prices of the recent increase in cost-push pressures triggered by high raw material costs and the weak yen, on the various factors affecting price formation from a somewhat longer-term perspective, and on what to make of these developments in light of changes in economic structure as a result of the pandemic. Session 1 focused on the characteristics of the recent pass-through of cost-push pressures to consumer prices, comparing current developments in Japan with those abroad and in the past. The session featured an analysis showing that in Japan, too, where the pass-through until recently was limited, the pass-through rate may be increasing, especially at the intermediate demand stage, and, based on this analysis, discussion of the recent price-setting behavior of firms, etc. Session 2 started with the presentation of an analysis of the impact of various factors, such as cost-push pressures and inflation expectations, on inflation based on the Phillips curve framework. The presentation further focused on the mechanism of inflation expectations formation, wage developments, and other issues, which are thought to have a significant impact on price formation in the long run, and featured discussion on the implications of the findings presented. Session 3 consisted of a panel discussion on what to expect with regard to future inflation developments taking structural changes due to the pandemic into account. First, it was pointed out that while the recent increase in cost-push pressures was expected to push up prices in the immediate future, from a somewhat longer-run perspective it was necessary to keep an eye on the downward pressure on the economy and prices from the downward push on real incomes. In this context, it was suggested that recent price hikes, especially for daily necessities, would have a greater impact on lower-income households. Second, in terms of whether the current cost-push inflation would help to achieve future price stability, the view was that the key issues were (1) whether firms' price-setting stance was gradually changing and this stance was becoming ingrained in society, and (2) whether, for this to happen, wages were going to rise firmly and household incomes were maintained.
  19. By: Lydon, Reamonn (Central Bank of Ireland)
    Abstract: Lower income, older and rural households experienced relatively larger cost of living increases from higher inflation in recent months. This is because energy-related spending – both home heating/energy and transport – is a higher share of overall expenditure for these households, and higher energy prices are currently the main driver of inflation. Taking a longer-term perspective on inflation developments from 1998 to the present, I find little historic evidence of systematic differences in inflation experienced by lower and higher income households.
    Date: 2022–02
  20. By: Refk Selmi (ESC PAU - Ecole Supérieure de Commerce, Pau Business School)
    Abstract: The ongoing Russian/Ukrainian war, along with sanctions imposed on Russia, poses a major shock to the world economy, merely two years after the COVID-19 pandemic. Accordingly, the global economic policy uncertainty has surged due to the resulting spiraling energy prices and economic disruptions. This paper uses a quantile-on-quantile approach to compare the ability of Bitcoin to hedge the economic policy uncertainty (EPU) of major global Bitcoin exchange markets (China, Japan, Korea and the United States) for the periods prior to and post-the COVID-19 and Russia's invasion of Ukraine. The results reveal that, prior to the pandemic, significant rises in EPU lead to high Bitcoin returns. After the COVID-19 and the recent war in Ukraine, the hedge effectiveness of Bitcoin is weakening due to the tight correlation with stocks in times of rising inflation expectations and the global central banks' hawkish response to it. Moreover, the Bitcoin hedging property is country-specific, and depends to different Bitcoin market conditions and various uncertainty levels. We explain this heterogeneity by differences across countries in terms of the recognition of Bitcoin as a legal tender, the Bitcoin trading volume, the exchange market maturity, and the investors' attitude towards risk.
    Keywords: Bitcoin,the COVID-19,the war in Ukraine,the economic policy uncertainty,hedge,country-specific analysis
    Date: 2022
  21. By: Chris Loewald; Konstantin Makrelov; Ekaterina Pirozhkova
    Abstract: The short-term costs of reducing trend inflation in South Africa
    Date: 2022–08–02
  22. By: Jennifer L. Castle (Climate Econometrics and Nuffield College, University of Oxford, UK); David F. Hendry (Climate Econometrics and Nuffield College, University of Oxford, UK); Andrew B. Martinez (Office of Macroeconomic Analysis, U.S. Department of the Treasury)
    Abstract: We model UK price and wage inflation, productivity and unemployment over a century and a half of data, selecting dynamics, relevant variables, non-linearities and location and trend shifts using indicator saturation estimation. The four congruent econometric equations highlight complex interacting empirical relations. The production function reveals a major role for energy inputs additional to capital and labour, and although the price inflation equation shows a small direct impact of energy prices, the substantial rise in oil and gas prices seen by mid-2022 contribute half of the increase in price inflation. We find empirical evidence for non-linear adjustments of real wages to inflation: a wage-price spiral kicks in when inflation exceeds about 6–8% p.a. We also find an additional non-linear reaction to unemployment, consistent with involuntary unemployment. A reduction in energy availability simultaneously reduces output and exacerbates inflation.
    Keywords: Energy; Inflation; Location Shifts; Indicator Saturation Estimation; Equilibrium Correction.
    JEL: C51 C22
    Date: 2022–09
  23. By: Gaffney, Edward (Central Bank of Ireland); Hennessy, Christina (Central Bank of Ireland); McCann, Feargal (Central Bank of Ireland)
    Abstract: In this Note, we outline the growing role that non-bank lenders are playing in the Irish mortgage market. We show that market share of new lending has increased from 3 per cent in 2018 to 13 per cent in 2021. Non-bank lending is currently concentrated in the buy-to-let and refinance segments of the market, when compared to lending by retail banks. On loan pricing, we show that non-banks had higher interest rates in 2018, but have reduced rates to the point where average interest rates were lower than retail banks in 2021. Among home buyers, customers of non-banks and retail banks have similar characteristics, with the exception that non-bank customers access mortgage finance almost uniquely through mortgage brokers. We complement the data with a discussion of the economic benefits that non-bank lending can bring, as well as sources of potential financial stability risks.
    Date: 2022–05
  24. By: Morley, James; Palenzuela, Diego Rodriguez; Sun, Yiqiao; Wong, Benjamin
    Abstract: We estimate the euro area output gap by applying the Beveridge-Nelson decomposition based on a large Bayesian vector autoregression. Our approach incorporates multivariate information through the inclusion of a wide range of variables in the analysis and addresses data issues associated with the COVID-19 pandemic. The estimated output gap lines up well with the CEPR chronology of the business cycle for the euro area and we find that hours worked, more than the unemployment rate, provides the key source of information about labor utilization in the economy, especially in pinning down the depth of the output gap during the COVID-19 recession when the unemployment rate rose only moderately. Our findings suggest that labor market adjustments to the business cycle in the euro area occur more through the intensive, rather than extensive, margin. JEL Classification: C18, E17, E32
    Keywords: Bayesian estimation, Beveridge-Nelson decomposition, multivariate information, output gap
    Date: 2022–08
  25. By: Howard Diesel; Mukelani Nkuna; Tim Olds; Daan Steenkamp
    Abstract: The cost of complying with Basel III liquidity regulations for South African banks
    Date: 2022–08–12

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