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on Monetary Economics |
| By: | Zahner, Johannes; Baumgärtner, Martin |
| JEL: | C45 C53 E52 Z13 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc22:264019&r=mon |
| By: | Stempel, Daniel; Neyer, Ulrike |
| JEL: | E31 E32 E52 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc22:264053&r=mon |
| By: | Isaac Gross; Andrew Leigh |
| Abstract: | Using the Reserve Bank of Australia’s MARTIN model we compare actual monetary policy decisions to a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the downturn in 2008-2009. By contrast we find that the cash rate was too high during 2016-2019, keeping inflation below the Reserve Bank’s target band. Optimal monetary policy in 2016-2019 would have involved a substantially lower cash rate and would have produced significantly better employment outcomes. |
| Keywords: | optimal monetary policy, unemployment, output gap, inflation |
| JEL: | E47 E52 E58 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9959&r=mon |
| By: | Michaelis, Henrike |
| Abstract: | Exploiting confidential data on individual German bank balance-sheets, I analyse what characterises a bank that opts to apply negative interest rates to corporate deposits. The results suggest that banks that are highly exposed to the negative interest rate policy (NIRP), i.e. funded by a larger share of household deposits, are more likely to apply negative corporate deposit rates. Furthermore, I examine whether banks adjusted their fee and commission strategy during the NIRP period and if they do what characterises those banks. My results show that banks adjusted their strategy in deposit business with households during the NIRP period. Compared with before, they generated higher net commission income on their outstanding household deposit holdings. |
| Keywords: | Monetary policy transmissions,negative rates,deposits,excess liquidity,interest rate pass-through,fees and commissions |
| JEL: | E52 E43 E44 E58 G20 G21 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:332022&r=mon |
| By: | Dobson, Anya (University of Warwick) |
| Abstract: | This paper investigates the impact of ECB Unconventional Monetary Policy an-nouncements on the 10-year sovereign bond yields of eleven Euro area countries. Thispaper uses event study methodology to examine expansionary UMP announcements between 1st January 2007 and 31st December 2021. Consistent with the literature, I findsignificant negative announcement effects on sovereign yields collectively examining all programmes. Differences in the magnitude and significance of individual countryreactions are closely related to their solvency status. This is persistent for the most recent programmes in response to the Covid-19 pandemic which extends the scope of current literature. This paper also incorporates intraday analysis to more closely examine the determinants of announcement effects on their respective dates. |
| Keywords: | Monetary Policy ; ECB ; government bond yields ; Covid-19 JEL Classification: G21 ; G28 ; E58 ; F45 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkesp:33&r=mon |
| By: | Martin Feldkircher; Paul Hofmarcher; Pierre L. Siklos |
| Abstract: | Transparent communication is a prerequisite for delivering an effective monetary policy. In this paper, we examine over 3000 speeches from central bankers to investigate the topics euro area national banks and the ECB most frequently talk about. Text-based ideal point analysis enables us to estimate for each central bank a measure of its ideological position, which is based on differences in the tone they use to talk about the identified topics. As far as we are aware this methodology has not been applied in the present context. Our results are fourth-fold: Firstly, price stability and financial stability communication lie at the core of central bank communication in the euro area. Second, the ECB’s ideal points tend to lie systematically above that of other euro area national banks, which suggests differing outstanding, ideological position. This implies that we cannot think of the ECB’s ideal point as being formed by the ideological positions of its member states. Third, we observe variability in member states’ ideal points over time, whereas the ECB’s ideal point is rather stable. The latter finding suggests remarkable consistency in the ECB’s communication strategy through both normal and crisis times. Finally, in a VAR setting, we find that changes in ideological positions impact longer-run macroeconomic expectations. |
| Keywords: | Monetary policy; text-based ideal point model; central bankers’ speeches |
| JEL: | E58 E61 E31 E32 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-49&r=mon |
| By: | Avichai Snir; Haipeng Allan Chen; Daniel Levy (RCEA - Rimini Center for Economic Analysis, Emory University [Atlanta, GA], Bar-Ilan University [Israël], International Centre for Economic Analysis, ISET - International School of Economics at TSU) |
| Abstract: | We assess the role of cognitive convenience in the popularity and rigidity of 0ending prices in convenience settings. Studies show that 0-ending prices are common at convenience stores because of the transaction convenience that 0-ending prices offer. Using a large store-level retail CPI data, we find that 0-ending prices are popular and rigid at convenience stores even when they offer little transaction convenience. We corroborate these findings with two large retail scanner price datasets from Dominick's and Nielsen. In the Dominick's data, we find that there are more 0-endings in the prices of the items in the front-end candies category than in any other category, even though these prices have no effect on the convenience of the consumers' check-out transaction. In addition, in both Dominick's and Nielsen's datasets, we find that 0-ending prices have a positive effect on demand. Ruling out consumer antagonism and retailers' use of heuristics in pricing, we conclude that 0-ending prices are popular and rigid, and that they increase demand at convenience settings, not only for their transaction convenience, but also for the cognitive convenience they offer. |
| Keywords: | Cognitive Convenience,Transaction Convenience,Price Rigidity,Price Stickiness,Sticky Prices,Rigid Prices,0-Ending Prices,Round Prices,Convenient Prices,9-Ending Prices,Just Below Prices,Psychological Prices,Price Points |
| Date: | 2022–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03793887&r=mon |
| By: | Baltzer, Markus; Schlepper, Kathi; Speck, Christian |
| Abstract: | The Eurosystem's asset purchase programmes reduced the free float of German Bunds. Market participants feared impaired market functioning in the Bund market and monetary policymakers unintended consequences for monetary policy transmission. We study the intended and unintended consequences of asset purchases in the repo market with Bund collateral. Bunds that are eligible for APP purchases carry a repo specialness premium even when they are not purchased. This "eligibility premium" is larger than the actual flow effect of purchases identified in previous research. Securities lending (SecL) operations have a flow effect, but its magnitude is even smaller than the flow effect of APP purchases. Therefore, the impact of SecL in the repo market is only of a quite limited extent. Furthermore, the effects of APP and SecL on repo specialness are relatively small compared to those caused by banks' balance sheets window dressing at quarter ends and by the hedging pressure for Bund Futures. |
| Keywords: | Repos,Quantitative Easing,Securities Lending,Eurosystem,PSPP |
| JEL: | E43 E58 G12 G28 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:392022&r=mon |
| By: | Leonie Bräuer (University of Geneva; Swiss Finance Institute, Students); Harald Hau (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)) |
| Abstract: | Over the last decade foreign bond portfolio positions in US dollar assets have risen above the reciprocal US investor positions in foreign currencies. In periods of increased economic uncertainty, institutional investors hedge their international bond positions, which creates a net hedging demand for dollar assets that depreciates USD rates in both the forward and spot markets. We document the time-varying nature of this net hedging demand and show how it relates to economic uncertainty and the US net foreign bond position in various currencies. Based on a parsimonious VAR model, we find that changes in FX hedging pressure can account for approximately 30% of all monthly variation in the seven most important dollar exchange rates from 2012 to 2022. |
| Keywords: | Exchange Rate, Hedging Channel, Institutional Investors |
| JEL: | E44 F31 F32 G11 G15 G23 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2277&r=mon |
| By: | Cloyne, James S.; Hürtgen, Patrick; Taylor, Alan M. |
| Abstract: | Identifying exogenous variation in monetary policy is crucial for investigating central bank policy transmission. Using newly-collected archival real-time data utilized by the Central Bank Council of the German Bundesbank, we identify unexpected changes in German monetary policy from 580 policy meetings between 1974 and 1998. German monetary policy shocks produce conventional effects on the German domestic economy: activity, prices, and credit decline significantly following a monetary contraction. But given Germany's central role in the European Monetary System (EMS), we can also shed light on debates about the international transmission of monetary policy and the relative importance of the U.S. Federal Reserve for the global cycle during these years. We find that Bundesbank policy spillovers were much stronger in major EMS economies with Deutschmark pegs than in non-EMS economies with floating exchange rates. Furthermore, compared to monetary spillovers from the U.S., German spillovers were comparable or even larger in magnitude for both pegs and floats. |
| Keywords: | Monetary policy,Bundesbank,trilemma,exchange rate,spillovers |
| JEL: | E32 E52 F42 F44 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:342022&r=mon |
| By: | Daniel Levy (Bar-Ilan University); Avichai Snir |
| Abstract: | We assess the role of cognitive convenience in the popularity and rigidity of 0-ending prices in convenience settings. Studies show that 0-ending prices are common at convenience stores because of the transaction convenience that 0-ending prices offer. Using a large store-level retail CPI data, we find that 0-ending prices are popular and rigid at convenience stores even when they offer little transaction convenience. We corroborate these findings with two large retail scanner price datasets from Dominick’s and Nielsen. In the Dominick’s data, we find that there are more 0-endings in the prices of the items in the front-end candies category than in any other category, even though these prices have no effect on the convenience of the consumers’ check-out transaction. In addition, in both Dominick’s and Nielsen’s datasets, we find that 0-ending prices have a positive effect on demand. Ruling out consumer antagonism and retailers’ use of heuristics in pricing, we conclude that 0-ending prices are popular and rigid, and that they increase demand at convenience settings, not only for their transaction convenience, but also for the cognitive convenience they offer. |
| Keywords: | Cognitive Convenience, Transaction Convenience, Price Rigidity, Price Stickiness, Sticky Prices, Rigid Prices, 0-Ending Prices, Round Prices, Convenient Prices, 9-Ending Prices, Just Below Prices, Psychological Prices, Price Points |
| JEL: | E31 L16 D90 E70 M30 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2022-07&r=mon |
| By: | Böhl, Gregor |
| JEL: | E63 C63 E58 E32 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc22:264141&r=mon |
| By: | Kroczek, Martin; Kugler, Philipp |
| JEL: | I11 J21 J62 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc22:264108&r=mon |
| By: | Kai Schellekens; Patty Duijm |
| Abstract: | At the start of the COVID-19 pandemic the increased market volatility and risk aversion led to a deterioration of U.S. Dollar funding conditions in the Euro Area. The swap line interventions by the ECB and Federal Reserve on March 15, 2020 aimed to alleviate the mispricing of EUR/USD FX swaps. We find that these swap line interventions were effective since they alleviated part of the mispricing. The announcement effect of the interventions is however limited; the impact of the swap line interventions is larger and more significant closer to the implementation date. This study provides insight into the effectiveness of central bank interventions in the FX swap market during turbulent periods. |
| Keywords: | Central Bank Policy: FX Swaps: Financial Markets: Covid-19 |
| JEL: | E58 G2 G15 H12 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:752&r=mon |
| By: | Gautier, Erwan; Conflitti, Cristina; Faber, Riemer P.; Fabo, Brian; Fadejeva, Ludmila; Jouvanceau, Valentin; Menz, Jan-Oliver; Messner, Teresa; Petroulas, Pavlos; Roldan-Blanco, Pau; Rumler, Fabio; Santoro, Sergio; Wieland, Elisabeth; Zimmer, Hélène |
| Abstract: | Using CPI micro data for 11 euro area countries covering about 60% of the euro area consumption basket over the period 2010-2019, we document new findings on consumer price rigidity in the euro area: (i) each month on average 12.3% of prices change, which compares with 19.3% in the United States; when we exclude price changes due to sales, however, the proportion of prices adjusted each month is 8.5% in the euro area versus 10% in the United States; (ii) differences in price rigidity are rather limited across euro area countries but much larger across sectors; (iii) the median price increase (resp. decrease) is 9.6% (13%) when including sales and 6.7% (8.7%) when excluding sales; cross-country heterogeneity is more pronounced for the size than for the frequency of price changes; (iv) the distribution of price changes is highly dispersed: 14% of price changes in absolute values are lower than 2% whereas 10% are above 20%; (v) the overall frequency of price changes does not change much with inflation and does not react much to aggregate shocks; (vi) changes in inflation are mostly driven by movements in the overall size; when decomposing the overall size, changes in the share of price increases among all changes matter more than movements in the size of price increases or the size of price decreases. These findings are consistent with the predictions of a menu cost model in a low inflation environment where idiosyncratic shocks are a more relevant driver of price adjustment than aggregate shocks. |
| Keywords: | price rigidity,inflation,consumer prices,micro data |
| JEL: | D40 E31 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:322022&r=mon |
| By: | Roland Meeks; Francesca Monti |
| Abstract: | Heterogeneous beliefs modify the New Keynesian Phillips curve by introducing a term in the cross-section distribution of expectations. We develop a novel functional data approach to estimation and inference in survey-based Phillips curves that accounts for variation in distributions of expectations, generalizing standard approaches. Our findings demonstrate the statistical and economic importance of heterogeneous beliefs for inflation dynamics, especially during periods of macroeconomic disruption.Our findings hold in similar form across two major economies. |
| Keywords: | Inflation dynamics, New Keynesian Phillips curve, Survey expectations, Functional principal Components, Functional regression |
| JEL: | C4 C55 D84 E31 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-51&r=mon |
| By: | Matschke, Johannes; Lovchikova, Marina |
| JEL: | F36 F38 F41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc22:264039&r=mon |
| By: | Mangal Goswami (South East Asian Central Banks (SEACEN) Research and Training Centre); Victor Pontines (South East Asian Central Banks (SEACEN) Research and Training Centre); Yassier Mohammed (South East Asian Central Banks (SEACEN) Research and Training Centre) |
| Abstract: | Using high-frequency, proprietary data on daily net non-resident portfolio flows to emerging markets, our study finds in the time domain connectedness framework that, to varying degrees, there is less interconnectedness in non-resident debt and equity portfolio flows to our sample of emerging market (EM) economies during normal times. In contrast, during times of uncertainty and stress, the interconnectedness of portfolio flows intensifies. This indicates the notion of asymmetry in the spillovers of these portfolio flows during periods of stress relative to normal times. More importantly, over most of the sample period, we find that shocks in the broad EM US dollar exchange rate can have important effects on these interconnections where, based on estimates of the net directional spillover index, the broad EM US dollar exchange rate is a net transmitter of shocks to debt and equity portfolio flows of the EM economies. Using the more recent frequency domain approach to connectedness, we find that the broad EM US dollar exchange rate is a net transmitter of shocks to the EM economies' debt and equity flows with the impact of such shocks hitting portfolio capital flows within at least a week to 100 days. In addition to the importance of pre-emptive prudential policy levers, efforts toward better monitoring of risks can contribute to creditors and investors in EM economies becoming more resilient to global shocks, particularly, during times of US dollar appreciations when these portfolio flows tend to reverse. |
| Keywords: | portfolio debt flows, portfolio equity flows, connectedness, directional spillover |
| JEL: | C58 F31 F41 G15 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:sea:wpaper:wp48&r=mon |
| By: | Drott, Constantin; Goldbach, Stefan; Jochem, Axel |
| Abstract: | This paper examines German and foreign bank factors that can explain cross-border central bank liquidity flows between Germany and the rest of the euro area. Using data from the German component of Eurosystem's real-time gross settlement system TARGET2 and BankFocus for the period between 2009 and 2021, we provide empirical evidence that only few balance sheet items and profit and loss accounts affect flows with Germany. We control for bilateral bank-specific relationships and time-varying macroeconomic country effects in our regressions. In general, German bank factors seem to be more important than characteristics of foreign banks. A German bank that exhibits relatively high claims against a central bank seems to attract less additional central bank liquidity from abroad than a German bank with fewer existing central bank claims. However, higher overall liquidity of a German credit institution corresponds to additional net inflows. Foreign bank factors only matter for central bank payments and intragroup payments. We also document heterogeneities across different types of transactions which influence the German TARGET2 balance. While customer payments, interbank payments and central bank payments have increased net flows to Germany in sum, intragroup payments and ancillary systems' transactions have led to net outflows. |
| Keywords: | Capital flows,TARGET2 transactions,central bank liquidity |
| JEL: | F3 F32 G15 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:402022&r=mon |
| By: | Callum Jones; Mariano Kulish; James Morley |
| 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 for 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: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-61&r=mon |
| By: | Wahyoe Soedarmono; Iman Gunadi (Bank Indonesia); Sudiro Pambudi (Bank Indonesia); Tika Nurhayati |
| Abstract: | In this paper, we analyze the effectiveness of the bank lending channel in Indonesia. Our findings highlight that the bank lending channel occurs with a time lag of two quarters. In other words, monetary policy tightening deteriorates bank loan growth two quarters ahead. Moreover, we also find that the presence of the bank lending channel is conditional on the extent to which credit crunch may occur. Specifically, bank loan growth two quarters ahead is negatively affected by monetary policy tighthening when funding liquidity and undisbursed loans decrease. Hence, higher funding liquidity and undisbursed loans depicting credit crunch can impede the bank lending channel. In addition, we highlight that a decline in loan growth two quarters ahead following monetary policy tightening is partly attributed to a decline in bank capital ratio, supporting the bank capital channel hypothesis. Eventually, strengthening bank capital management is essential for the effectiveness of the bank lending channel, while other measures than monetary policy expansions are also worth considering to boost bank lending, particularly in times of credit crunch. |
| Keywords: | Bank lending channel, credit crunch, bank capitalization, Indonesia |
| JEL: | G21 G28 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:idn:wpaper:wp042021&r=mon |
| By: | Coleman, Winnie; Nautz, Dieter |
| JEL: | E31 E52 E58 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc22:264094&r=mon |
| By: | Guillaume Plantin (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Eric Mengus (HEC Paris - Ecole des Hautes Etudes Commerciales); Jean Barthelemy (Centre de recherche de la Banque de France - Banque de France) |
| Abstract: | This paper studies a model in which the price level is the outcome of dynamic strategic interactions between a fiscal authority, a monetary authority, and investors in government bonds and reserves. The "unpleasant monetarist arithmetic", whereby aggressive fiscal expansion forces the monetary authority to chicken out and to lose control of inflation, occurs only if the public sector lacks fiscal space, in the sense that public debt along the optimal fiscal path gets sufficiently close to the threshold above which the fiscal authority would find default optimal. Otherwise, monetary dominance prevails even though the central bank has neither commitment power nor fiscal backing. |
| Date: | 2022–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03792094&r=mon |
| By: | Drott, Constantin; Goldbach, Stefan; Nitsch, Volker |
| Abstract: | This short paper examines the effect of financial sanctions at the most disaggregated level possible, individual bank accounts. Using data from the Eurosystem's real-time gross settlement system TARGET2, we provide empirical evidence that sanctions imposed by the European Union on Russian banks following the country's military interventions in Ukraine in 2014 and 2022 have sizably reduced financial transactions with sanctioned Russian bank accounts. Among the various sanction measures taken, exclusion from SWIFT, a global provider of secure financial messaging services, turns out to have the largest effects. |
| Keywords: | financial flows,transactions,restrictions |
| JEL: | F38 F51 G28 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:382022&r=mon |
| By: | Reichlin, Lucrezia (London Business School & CEPR); Ricco, Giovanni (University of Warwick, OFCE SciencesPo & CEPR); Matthieu Tarbe (London Business School) |
| Abstract: | We study the monetary- fiscal mix in the European Monetary Union. The medium and long-run effects of conventional and unconventional monetary policy are analysed by combining monetary policy shocks identified in a Structural VAR, and the general government budget constraint featuring a single central bank and multiple fiscal authorities. In response to a conventional easing of the policy rate, the cumulated response of the fiscal deficit is positive. Conversely, in response to an unconventional easing affecting the long end of the yield curve, the primary fiscal position barely moves. This is consistent with the long-run effect of unconventional monetary easing on the price index, which is about half that of conventional easing. The aggregate long-run cumulated surplus is mainly driven by Germany's fiscal policy during the period in which unconventional monetary policy was adopted. |
| Keywords: | monetary- fiscal interaction ; fiscal policy ; monetary policy ; intertemporal government budget constraint JEL Codes: E31 ; E63 ; E52 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1432&r=mon |
| By: | Laurent Ferrara; Aikaterina Karadimitropoulou; Athanasios Triantafyllou; Theodora Bermpei |
| Abstract: | Exchange rates of commodity exporting countries, generally known as commodity currencies, are often considered to be driven by some specific commodity prices. In this paper, we show that the uncertainty common to a basket of commodity prices is also a significant driver of exchange rate dynamics for a panel of commodity exporting countries. In particular, a positive shock on global commodity price uncertainty leads to a short-run depreciation of the effective exchange rate in commodity currency countries, followed by a medium-term overshooting. We document that this pattern is specific to commodity currencies and is not visible on benchmark currencies like the euro or the U.S. dollar, the latter acting as a typical safe haven currency. We refer to this pattern as the “commodity uncertainty currency” property. |
| Keywords: | Commodity currencies, Uncertainty co-movement, Commodity prices, SVAR model |
| JEL: | F43 F31 C50 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2022-24&r=mon |
| By: | Solikin M. Juhro (Bank Indonesia); Prayudhi Azwar |
| Abstract: | This study aims to measure the effectiveness of foreign exchange (FX) intervention strategy in Indonesia in affecting the rupiah exchange rate stability. Using the instrumental variable (IV) approach to analyze FX intervention strategies from January 2010 to December 2020, we find that there are differences in the effectiveness of intervention in the spot market and the derivative market. Partially, FX intervention is more effective in the spot market than in the derivative market. We find also that intervention strategies carried out simultaneously by Bank Indonesia in the spot and derivative markets effectively improves the effectiveness of policy strategy in affecting rupiah exchange rate stability. Amid increasingly complex challenges facing by central banks in managing exchange rate stability, this study brings fundamental policy implications regarding to the importance of an integrated intervention strategy; not only in spot and derivative markets, but also in bond markets. |
| Keywords: | Effectiveness, FX Intervention, Spot Market, Derivative Market. |
| JEL: | F31 E58 C22 O24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:idn:wpaper:wp032021&r=mon |
| By: | Guillaume Plantin (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Abstract. In a model with multiple price-setting equilibria with varying price rigidity a` la Ball and Romer (1991), a central bank using a Taylor rule may inadvertly create asset bubbles instead of reaching its inflation target regardless of the value of the natural rate. These monetary bubbles differ from natural ones in three important ways: i) They do not push up the interest rate no matter their size and thus earn low returns themselves; ii) They burst when inflation picks up; iii) They always crowd out investment by draining resources from the most financially constrained agents. |
| Date: | 2021–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03792088&r=mon |
| By: | Ferry Syarifuddin (Bank Indonesia); Toni Bakhtiar |
| Abstract: | With their various motivations, many central banks still develop CBDC to explore its potentials and the drawback of implementation. This research examines the macroeconomic and monetary policy consequences, then determine optimal CBDC design to support monetary policy strategy. First, this research wants to develop DSGE model to quantify macroeconomic and monetary policy consequences in implementing CBDC. The DSGE model is consist of seven sectors namely households, retail firms, wholesale firms, capital producing firms, banks, central bank, and government. Shock generator that used in this model is technology shock and the shock on Taylor rule of interest rate. Second, as we know the outcome of the consequences, we continue to determine optimal CBDC design using SWOT with purposive sampling meta-analysis approach and its implementation strategies. According to the simulation, CBDC could effectively maintain inflation through CBDC rate. Meanwhile, optimal CBDC design that could support monetary policy is retail and wholesale coverage, interest bearing (wholesale) and non-interest bearing (retail) remuneration, account-based and tokenbased payment system, traceable degree of anonymity, hybrid architecture, DLT ledger system, and domestic and cross-border scope. |
| Keywords: | CBDC, Optimal design, DSGE, SWOT, Monetary policy |
| JEL: | E42 E44 E52 E58 G21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:idn:wpaper:wp092021&r=mon |
| By: | Melchisedek Joslem Ngambou Djatche (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur) |
| Abstract: | In this paper, we analyse the link between monetary and banks' activity and risk-taking. Some theoretical and empirical studies show that monetary easing increases banks' appetite for risk, affect credit allocation and bank's profitability. Our study adds to analyses of the monetary risk-taking channel considering monetary surprise, i.e. the impact of unexpected changes in monetary policy on bank's risk and activity. Using a dataset of US banks, we find that higher increase or lower decrease of interest rates than expected (negative surprise) leads banks to take more risk, to grant more corporate loans than consumption loans, and to be more profitable. We complement the literature on the risk-taking channel and provide arguments that Central Banks can manage financial stability. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03807034&r=mon |
| By: | Tischer, Johannes |
| JEL: | E51 E58 G11 G21 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc22:264035&r=mon |