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on Monetary Economics |
| By: | Hoffmann, Mathias; Mönch, Emanuel; Pavlova, Lora; Schultefrankenfeld, Guido |
| Abstract: | We study how households adjust their medium-term inflation expectations under the new ECB inflation targeting strategy. Survey respondents make little difference between the previous strategy of targeting inflation rates close to but below 2% and the new strategy with a 2% point target. Participants who learn about the inherent asymmetry in the ECB's reaction to potential off-target inflation expect moderately higher medium-term inflation. Respondents asked to assume a scenario of current inflation running below target place a significantly higher probability on medium-term outcomes above 2%. In a scenario of inflation currently running above target, however, participants do not in turn expect an undershooting of medium-term inflation. |
| Keywords: | Monetary Policy Strategy, Household Inflation Expectations, Randomized Control Trial, Survey Data |
| JEL: | F33 E31 E52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312570 |
| By: | Burdekin, Richard C. K.; Siklos, Pierre L. |
| Abstract: | The monetary policy of the People's Bank of China (PBoC) during 2001-2023 is assessed in terms of Taylor and McCallum rules, as well as a proposed composite monetary policy rule. PBoC policy is found to be responsive to the gap between target and actual nominal GDP in the McCallum rule, as well as the output and inflation gaps in the Taylor rule. We find a relatively close fit between actual and predicted monetary policy moves under both rules, and a superior fit with our composite rule incorporating monetary and interest-rate factors. The policy reactions persist across a series of transitions between high- and low-volatility regimes identified via Markov-switching regressions. The results are shown to be robust using several techniques. |
| Keywords: | monetary policy, People's Bank of China, policy rules, inflation, deflation |
| JEL: | E58 E52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofitp:315478 |
| By: | Almerud, Jakob (Monetary Policy Department, Central Bank of Sweden); Krygier, Dominika (Monetary Policy Department, Central Bank of Sweden); Lundvall , Henrik (Monetary Policy Department, Central Bank of Sweden); Njie, Mambuna (Monetary Policy Department, Central Bank of Sweden) |
| Abstract: | We construct and make available a new monetary policy event study database with high-frequency financial market reactions to Riksbank communications, spanning a period of 20 years. Using these data as instruments, we estimate the macroeconomic effects of monetary policy shocks in Sweden. A temporary, unexpected policy rate tightening induces an immediate and persistent appreciation of the krona exchange rate, as well as a gradual, negative response in output and consumer prices. These results are statistically significant, economically meaningful and robust to a number of variations in our econometric specification. In particular, we consider the possibility that financial market reactions to Riksbank communications may consist not only of pure monetary policy shocks, but could also reflect market participants’ updates concerning the central bank’s reaction function. |
| Keywords: | monetary policy surprise database; monetary policy shocks; intraday; event study; proxy VAR; macroeconomic effects |
| JEL: | E43 E44 E52 E58 G14 |
| Date: | 2024–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0445 |
| By: | Carlos Goncalves; Mauro Rodrigues; Fernando Genta |
| Abstract: | We investigate the impact of high frequency monetary policy shocks in Brazil using daily data and Rigobon’ s identification via heteroskedasticity. We show that positive changes in interest rates cause inflation expectations to decline and the exchange rate to appreciate. To the best of our knowledge, this is the first paper to study how monetary policy affects inflation expectations in an emerging economy using high frequency identification techniques. |
| Keywords: | Monetary policy; inflation expectations; Brazil |
| Date: | 2025–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/048 |
| By: | Pedemonte, Mathieu; Toma, Hiroshi; Verdugo, Esteban |
| Abstract: | We explore the implications of heterogeneous, history-dependent inflation expectations in a general equilibrium setting. We propose an experience-based expectations-augmented Kalman filter to represent consumers' heterogeneous inflation expectations, where heterogeneity arises from an anchoring-to-the-past mechanism. Using survey data, we show that the model replicates US consumers' inflation expectations and their heterogeneity across cohorts. We introduce this mechanism into a New Keynesian model and find that heterogeneous expectations anchor aggregate responses to the agents' inflation history, producing sluggish expectations dynamics. Central banks should be active to prevent inflationary episodes that agents will remember far into the future. |
| Keywords: | Belief formation;Heterogeneous expectations;survey data;Overextrapolation |
| JEL: | D84 E31 E58 E71 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14068 |
| By: | Ralf R. Meisenzahl; Friederike Niepmann; Tim Schmidt-Eisenlohr |
| Abstract: | This paper documents a new dollar channel that transmits monetary policy across borders. Exploiting unique features of the syndicated loan market for identification, we show that changes in the euro-dollar exchange rate around ECB monetary policy announcements that are orthogonal to simultaneous changes in euro-area interest rates and stock prices affect U.S. leveraged loan spreads. Specifically, in response to dollar appreciation, investors require higher compensation for risk, and borrowing costs for U.S. firms increase. These findings imply a causal link between the U.S. dollar and investors’ risk appetite. |
| Keywords: | loan pricing, monetary policy spillovers, dollar, institutional investors, risk taking |
| JEL: | F15 G15 G21 G23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11777 |
| By: | Mr. Serhan Cevik; Alice Fan; Sadhna Naik |
| Abstract: | Central banks conduct monetary policy to achieve price stability, but decisions also have effects on labor-market outcomes. In this paper, we identify exogenous monetary shocks with the ‘interest rate surprise’ approach based on high-frequency changes in forward-looking interest rates and use daily data on online job vacancy postings to investigate the impact of monetary policy on labor markets in three European countries (Estonia, Latvia and Lithuania) during the period 2018–2024. Our results indicate that monetary policy exerts significant and durable effects on labor-market conditions as measured by online job vacancy postings in our sample of countries. First, a contractionary (expansionary) monetary policy shock leads to a persistent decline (increase) in online job vacancy postings. Across all countries, the average effect amounts to about 2 percent in 15 days after a contractionary monetary policy shock (i.e., an unanticipated increase of 1 percentage point in short-term interest rates). Second, there is significant heterogeneity in the magnitude and persistence of how monetary policy affects the labor market across three countries in our sample, varying from 0.5 percent in Latvia to 2 percent in Estonia and 3.2 percent in Lithuania. Taken together, these results are both of direct concern for policymakers and important for the transmission of monetary policy. |
| Keywords: | Monetary policy; labor markets; online job vacancy postings; local projections; Europe; Estonia; Latvia; Lithuania |
| Date: | 2025–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/058 |
| By: | Mr. Divya Kirti; Akshat V. Singh |
| Abstract: | We study the role of life insurers in the transmission of US monetary policy. Insurers have uniquely long-term liabilities. We posit that they face a trade-off between matching liability duration exposure by investing in long-term government debt and earning higher yields by shifting to risky—but shorter-term—private debt. We show that, due to this tradeoff, long-term risk free rates play a critical role in shaping insurers' demand for risky private debt. Contractionary monetary policy shocks that raise long-term risk-free rates reduce insurers' demand for private debt, raising risk premia. We use granular, high frequency data and regulatory changes to trace how insurers' investment behavior transmits monetary policy shocks to risk premia. |
| Keywords: | Monetary policy; risk premia; NBFIs; life insurance |
| Date: | 2025–03–14 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/054 |
| By: | Kevin J. Lansing |
| Abstract: | I use Phillips curve type regressions to assess the relative contributions of demand and supply forces to U.S. inflation during the pandemic era from February 2020 onward and the decade following the end of the Great Recession. In the first specification (Model 1), demand and supply forces are measured using the vacancy-unemployment ratio and the New York Fed’s Global Supply Chain Pressure Index, respectively. In the second specification (Model 2), demand and supply forces are measured using the demand-driven and supply-driven components of PCE inflation from Shapiro (2025). The results derived from the two models are largely in agreement. For both models, variance decompositions imply that demand forces became more important for inflation during the pandemic era and dominated the influence of supply forces. In counterfactual simulations, both models imply that supply forces, together with the endogenous response of expected inflation, were the primary drivers of persistently low inflation after the Great Recession. Given that monetary policy operates to influence demand-driven inflation, this result helps to account for the Fed’s difficulty in achieving its 2% inflation goal during these years. |
| Keywords: | Phillips Curve; demand; supply; expected inflation |
| JEL: | E31 E32 E37 |
| Date: | 2024–04–24 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:99904 |
| By: | Gerlach, Stefan; Stuart, Rebecca |
| Abstract: | We argue that measurement error in historical price data has led researchers to erroneously believe that there was little persistence of inflation during the 19th century. Using a statistical technique that accounts for these errors, we estimate the persistence of (a) US inflation and (b) inflation in 14 other economies over the period 1842-1913. Our results indicate that persistence approximately doubles when we use this technique. |
| Keywords: | Inflation persistence, gold standard, measurement errors, instrumental variables |
| JEL: | E31 F40 N10 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qucehw:315743 |
| By: | Sahasrabuddhe, Aditi; Seddon, Jack |
| Abstract: | Recent crises have cast doubt on the legitimacy of technocratic power, yet its role in global economic governance remains poorly understood. Revisiting the collapse of Bretton Woods, we propose a dynamic theory of global monetary governance to explain how expanding central bank discretion can destabilize systems. While most studies attribute the postwar system's failure to geopolitical struggles, institutional weaknesses, or shifting economic ideas, they overlook the policies designed to manage and stabilize it. Drawing on historical institutionalism, we show how coordination tensions between rule-bound and discretionary policymakers-and the mutually reinforcing adaptation risks they faced-produced responses that appeared stabilizing in the short term but ultimately eroded long-run stability. New archival evidence from the IMF, BIS, and OECD reveals how tools like the London Gold Pool and currency swap lines extended central bank power, concealed macroeconomic imbalances, and crowded out political momentum for structural reform. As technocratic authority grew misaligned with political support and functional economic adjustment, it became a liability. This challenges the dominant view that technocratic actors are inherently superior in managing global economic policy |
| Keywords: | Bretton Woods, London Gold Pool, monetary history, monetary governance, historical institutionalism |
| JEL: | E42 E58 F33 N10 N14 N20 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qucehw:315744 |
| By: | Frank van der Horst; Anneloes van Gent |
| Abstract: | The national central banks of the Eurosystem are investigating the possibility of issuing a retail central bank digital currency (CBDC) – the digital euro – alongside cash. The digital euro would be subject to a holding limit, meaning there would be limit to the amount of digital euro an individual can hold. A holding limit would prevent excessive outflows from the banking system, which could endanger financial stability. For the offline digital euro, a specific consideration for setting a holding limit is also to mitigate anti-money laundering/ countering the financing of terrorism (AML/CFT) risks. At the same time, given that the digital euro is a public means of payment, it is important that everyone is able to use it. A holding limit should therefore not hamper the usability of the digital euro. In existing research on CBDC, this user-centred perspective to holding limits has received limited attention. The added value of this study lies in taking a user-centred perspective. De Nederlandsche Bank conducted an experiment on offline digital euro holding limits among 2, 000 adult participants in the Netherlands. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbocs:2502 |
| By: | Yasuo Hirose; Munechika Katayama; Kozo Ueda; Kota Watanabe |
| Abstract: | This study empirically examines the differences in inflation dynamics between the US and Japan. Using a structural model of sectoral inflation, we quantify the roles of production networks, price stickiness, and structural shocks in driving these variations. Our partial equilibrium framework captures sectoral inflation as a tractable form, enabling us to estimate the model and analytically explore the channels through which pass-through to inflation operates. The model can generate inflation persistence across sectors through production networks, further reinforced by price stickiness within each sector. The full-information Bayesian estimation results reveal that impulse response functions to sectoral shocks are similar between the two countries but that differences in inflation dynamics arise from two factors: the different sources of specific sectoral inflation, particularly in an energy-related sector, and contrasting price-setting behaviors. US firms tend to change prices in the same direction as import price shocks, leading to higher pass-through, whereas Japanese firms are inclined to set prices to absorb import price shocks. Policy experiments based on the estimated model demonstrate that a 10% increase in tariffs results in a 0.6–1.2% rise in US producer price inflation. |
| Keywords: | inflation dynamics, production networks, input-output linkages, price stickiness |
| JEL: | E3 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-22 |
| By: | Klein, Mathias (Research Department, Central Bank of Sweden); Zhang, Xin (Research Department, Central Bank of Sweden) |
| Abstract: | We provide new evidence on the inflationary effects of Quantitative Easing (QE) using Swedish administrative data at the bank, firm, and product level. For identification, we rely on bank-firm lending relationships and the heterogeneous participation rates of banks in the government bond purchase program by the Swedish central bank. Our results show that the bond purchase program led to a significant and persistent increase in producer prices. Importantly, we find that the degree of financial frictions considerably influences firms’ price response: low leverage firms do not change their prices, whereas high leverage firms raise their prices significantly. This divergent pricing behaviour can be rationalized by a significant increase in long-term borrowing and interest rate expenses among high leverage firms. The difference in price responses across high and low leverage firms is less pronounced for exogenous changes in the repo rate implying that the transmission mechanism of QE differs from the one of conventional interest rate policy. |
| Keywords: | Quantitative easing; price dynamics; financial frictions |
| JEL: | E31 E51 E58 |
| Date: | 2025–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0447 |
| By: | Francesco D'Acunto; Janet Gao; Lu Liu; Kai Lu; Zhengwei Wang; Jun Yang |
| Abstract: | Using a customized survey and an information-provision experiment, we establish that loan officers’ individual subjective expectations about inflation, GDP growth, and policy rates vary substantially within and across bank types and have a sizable causal effect on credit supply decisions. Decisions about loan issuance and pricing exhibit large heterogeneity based on loan officers’ subjective expectations even for the same borrower assessed at the same time. Moreover, officers with rosier macroeconomic expectations penalize less borrowers with worsening fundamentals than do officers with more pessimistic expectations. Our findings have implications for theories of financial intermediation and reveal an overlooked human-based friction to the transmission of monetary policy. |
| Keywords: | credit supply, financial frictions, behavioral macroeconomics, behavioral finance, monetary policy, banking, micro-to-macro, randomized control trials, surveys. |
| JEL: | D84 D91 E44 G21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11780 |
| By: | Mr. Marco Pani; Mr. Rodolfo Maino |
| Abstract: | Private and public agents’ plans and actions to introduce digital currencies and other innovative payment instruments could produce some unintended consequences, including the potential disappearance of physical cash. This study employs a two-sided market model to examine how payment systems might respond to new currencies. Numerical simulations indicate that the success of a new currency hinges on a large-scale launch. However, even unsuccessful attempts could disrupt existing systems, potentially resulting in the elimination of cash. If cash plays a critical role as a safeguard, regulatory and monetary authorities should give due consideration to ensure its continued availability when payment innovations are introduced. |
| Keywords: | Payment systems; two-sided markets; digitalization; digital currencies; technological innovation |
| Date: | 2025–03–21 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/056 |
| By: | Roshin Paul P (Reserve Bank of India); Toniya Ghosh (Indira Gandhi Institute of Development Research) |
| Abstract: | Using the Reserve Bank of India's inflation expectations survey of households (IESH) covering the period 2008 to 2023, we analyze the qualitative inflation expectations (IE) of Indian households at the general and item-wise level. We determine whether they have any forward-looking properties and additionally study the pattern of uncertainties and disagreements associated with households' IE during various economic episodes in India. We find that the households have different opinions on the IE of different items, and they are influenced by various macroeconomic shocks. Additionally, their three-months-ahead overall IE are formed mainly based on their IE on food products, followed by cost of services and non-food products, while their one-year-ahead IE are formed mainly based on the IE of non-food products, followed by cost of services and food products. Moreover, the quantified three-months-ahead IE and one-year-ahead IE when fitted into the hybrid version of the New Keynesian Phillips Curve were found to be statistically significant in predicting inflation. Further, the respondents' demographic characteristics have an impact on their qualitative IE and the uncertainty that comes with it. Lastly, we discovered that the inflation shocks in either direction led to an increase in the disagreements on IE of households. |
| Keywords: | Cross-Sectional Models, Disagreement, Inflation, Inflation expectations, Survey, Uncertainty |
| JEL: | C21 C83 D84 E31 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ind:igiwpp:2025-001 |
| By: | Zhai, Weiyang |
| Abstract: | We apply a Bayesian structural vector autoregression (VAR) model to estimate the impact of oil and exchange rate shocks on Japan’s gasoline prices and, furthermore, Japan’s gasoline price pass-through into CPI inflation. In addition to the traditional zero and sign restrictions, we adopt a Bayesian framework, which provides a broader set of credible regions. After evaluating the influence of oil supply shocks, economic activity shocks, oil-specific demand shocks, and exchange rate shocks, we found evidence that an increase in gasoline prices is associated with a positive economic activity shock and oil-specific demand shock. On the other hand, the impact of any of the above shocks was not observed on the Japanese consumer price index from the estimated results. |
| Keywords: | Consumer price index; Structural VAR; Pass-through; Oil prices; Gasoline prices |
| JEL: | E31 F31 Q41 Q43 |
| Date: | 2025–03–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124208 |
| By: | Weber, Philipp; Feld, Lars P. |
| Abstract: | In the early 2020s sharp surge of inflation, unprecedentedly high levels of government debt and deficits fueled attention for the Fiscal Theory of the Price Level (FTPL). This theoretical framework for fiscally induced inflation is well-known and controversially discussed. However, empirical tests are scarce. This paper aims at testing the FTPL empirically by applying a tractable functional form of the intertemporal budget function to a wide range of crises in OECD countries between the years 1980 and 2023. The results imply that between 35 and 40 percent of excess government deficits and spending in times of crises are not financed by orthodox fiscal policy alternatives but instead result in higher prices. This provides empirical evidence for non-Ricardian fiscal policies in times of crises and strengthens the arguments of the FTPL. |
| Keywords: | Fiscal Theory of the Price Level, inflation, fiscal policy, government debt |
| JEL: | E31 E62 H62 H63 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:aluord:315750 |
| By: | Nieminen, Mika; Norring, Anni |
| Abstract: | Countries choose diverse policy mixes of macroprudential and capital flow management measures, yet the drivers behind these policy choices remain largely unexplored. We identify potential conditions for the adoption and determinants of the use of macroprudential and capital flow management measures from the theoretical literature and test them empirically. Rich and high-growth economies tend to rely on macroprudential policy measures, while the use of capital flow management measures decreases as the regulatory environment improves. Countries with a large foreign bank presence tend to implement fewer macroprudential and capital flow management measures. |
| Keywords: | Macroprudential policy, Capital controls, Foreign banks |
| JEL: | E58 F33 F38 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofitp:315479 |
| By: | Biagio Rosso; Matteo Gatto |
| Abstract: | The role of Occasionally Binding Constraints (OBCs) in transmitting and amplifying macroeconomic shocks in economies institutionally chracterised by market-incompleteness is of increasing interest to quantitative theory and policy. This paper presents a novel framework and iterative algorithm to efficiently formulate and solve for transitional dynamics in a wide class of heterogeneous agent DSGE (HA-DSGE) models with OBCs. The framework accommodates a wide range of constraints, such as policy bounds, without requiring any specific assumptions as to the form of the aggregate shocks must take at an equilibrium solution, and is modelunspecific, marking a departure from the methodological literture on the topic. More imporantly, it preserves key nonlinearities often lost in perturbation-based methods important to retain for a more granular analysis of the interaction between agent heterogeneity and OBCs and its implications for modelling policy transmission through the distribution. In particular, the nonlinearity arising from the interaction, in a rational expectations and forward-looking setting, between the endogenous regime sequence (whether the constraint binds) and the behaviour of heterogeneous agents. The proposed Double Shooting algorithm novelly integrates the Sequence- Space OccBin approach with an iterative and informationally efficient method for solving nonlinearly HA-DSGE models in the sequence space that exploits the availability of a Directed Acyclic Graph (DAG) to efficiently partition the system of equations holding at a sequence space equilibrium and generalising the solution procedure for deterministic transition paths familiar from KS modelling. The algorithm developed is then applied to a fully-fledged one-asset HANK model with a zero lower bound (ZLB) on interest rate. The analysis highlights how wealth distributional dynamics along the transition path can critically influence monetary policy effectiveness (and vice versa) both outside and especially at the ZLB. Thereby, we highlight through the potential role of unconventional redistributive fiscal measures and fiscal forward guidance in addressing recessionary-deflationary episodes, converging in a rich quantitative setting to intuitions familiar from the Keynesian and Post-Keynesian literatures. |
| Keywords: | Heterogeneous Agents DSGE, Occasionally Binding Constraints, Liquidity Trap, In- equality and Monetary Policy, Unconventional Fiscal-Monetary Policy |
| JEL: | C63 D31 E21 E32 E52 E60 E63 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2511 |
| By: | Thuy Hang Duong; Weifeng Larry Liu |
| Abstract: | From the 1990s until COVID-19, the world experienced a sustained period of low and stable inflation, alongside a marked increase in trade integration among countries. This paper examines the impacts of international trade on inflation through production networks. We first construct a theoretical model of an open economy to illustrate how input-output networks propagate the price impacts of trade shocks. Using Australia as a case study, we find that the network impacts of trade shocks on inflation are as significant as their direct impacts, and primarily propagate upstream, based on data of 47 manufacturing industries from 2000 to 2023. Australia’s low inflation before COVID benefited from increasing exposure to China’s low-cost exports, while inflation surged during COVID due to global supply chain disruptions, among other factors. This paper underscores the importance of economic globalization for inflation through production networks, and offers several implications for monetary and trade policies. |
| Keywords: | inflation, international trade, production networks, propagation of shocks |
| JEL: | C67 D57 E31 F13 F41 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-23 |
| By: | Thomas Lejeune (Economics and Research Department, National Bank of Belgium); Jolan Mohimont (Economics and Research Department, National Bank of Belgium) |
| Abstract: | We extend the reference DSGE model used for policy analysis at the NBB with a financial sector, by incorporating multi-period fixed-rate corporate and mortgage loans, an imperfect pass-through from policy rates to the deposit rate, and bank capital re-quirements. Adding multi-period fixed-rate loans amplifies the propagation of default risks and strengthens the effectiveness of macroprudential policy. This amplification operates through a bank capital channel and a market timing effect that delays borrowing and investment when rates are expected to fall. The bank capital channel also propagates shocks across sectors, and amplifies the effects of monetary policy when the duration of banks’ assets is larger than that of their liabilities. With universal banks, that grant both corporate and mortgage loans, sectoral prudential policy instruments can have unintended consequences on credit supply in the untreated sector. These crowding out effects increase with the loan duration in the treated sector and decrease with the risk weight differential between the treated and untreated sectors. Finally, we apply our model to the mortgage risk weight add-on introduced by the NBB in 2013. |
| Keywords: | Macroprudential policy, credit risks, loan maturity, financial accelerator, sectoral spillovers, unintended consequences, DSGE. |
| JEL: | E3 E44 E5 G21 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202504-474 |
| By: | Enikolopov, Ruben; Kirschenmann, Karolin; Schoors, Koen; Sonin, Konstantin |
| Abstract: | How does government control over mass media affect banking system? Our theoretical model predicts that if the media are biased, depositors are less likely to run on their bank, but also less likely to deposit their money in the banking system in the first place. Empirically, we show that countries with more media freedom experience both more frequent banking crises and higher levels of financial development. We pin down the underlying mechanism with a case study from Russia's 1998 banking crisis. Banks in areas with more access to an independent TV channel saw their depositors return faster in the aftermath of the crisis, in line with the reasoning that the crisis revealed differences in media bias across TV channels and induced differences in financial development at the bank level. |
| Keywords: | bank runs, systemic stability, media freedom, information manipulation |
| JEL: | G01 G21 G51 H12 L82 O16 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312573 |
| By: | Evans, Olaniyi |
| Abstract: | The study provides evidence on the effects of changes in oil price, inflation, interest rate, budget balance, economic growth, external debt, domestic investment, and current account balance on exchange rate fluctuations in using the ARDL approach for the period 1970-2015 for the case of the Naira and Dollar. The study shows that changes in oil price, inflation, the current account and domestic investment have significant effects on exchange rate fluctuations both in the short and long run. Changes in external debt has significant effects on exchange rate fluctuations only in the long run. Changes in interest rate, budget balance and economic growth have significant effects on exchange rate only in the short run. In other words, a significant proportion of the high volatility of exchange rate in Nigeria is as a result of changes in oil price, inflation, interest rate, budget balance, economic growth, external debt, domestic investment, and current account balance. The logical conclusion is that in order to stabilize exchange rate in Nigeria, measures should be aimed at diversifying the economy, improving the current account position as well as reducing inflation. |
| Keywords: | Naira-Dollar exchange rate fluctuations, Oil Price, Debt, Inflation, Interest, Growth, Investment, Budget, Current Account, ARDL |
| JEL: | F4 F41 M2 M21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124158 |
| By: | Mr. Tigran Poghosyan |
| Abstract: | The substantial increase in public sector wages in Mongolia introduced in the 2023 supplementary budget has raised concerns about its potential spillover effects on private sector wages and subsequent inflationary pressures. Furthermore, both public and private sector wages have grown on average faster than labor productivity in Mongolia during 2000-2023 with substantial implications for inflation. This paper aims to empirically investigate the relationship between public sector wages, private sector wages, and inflation in Mongolia, utilizing a quarterly dataset spanning from 2000Q4 to 2023Q4. Employing a structural vector autoregression (SVAR) model, we analyze the dynamic interactions among these variables to uncover the causal relationships. The findings indicate that a shock to private sector wages exerts a stronger immediate impact on inflation, peaking within the first four quarters, while a shock to public sector wages manifests a delayed effect on inflation, peaking between the sixth and ninth quarters. Additionally, shocks to public sector wages have a small and short-lived effect on private sector wages, whereas shocks to private sector wages significantly influence public sector wages, suggesting that private sector has a more leading role in wage setting behavior. These results have important policy implications, highlighting the need for public wage policies that are closely aligned with productivity changes and can contribute to macroeconomic and price stability in Mongolia. |
| Keywords: | Public wages; private wages; inflation; Mongolia |
| Date: | 2025–03–14 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/053 |
| By: | Giraldo, Carlos (Latin American Reserve Fund); Giraldo-Salazar, Iader (Latin American Reserve Fund); Gomez-Gonzalez, Jose E. (City University of New York – Lehman College); Uribe, Jorge M. (Universitat Oberta de Catalunya) |
| Abstract: | We assess the effectiveness of the Gross Leverage Position in Foreign Exchange Derivatives (PBA), a macroprudential policy implemented by the Colombian central bank in 2007, in regulating housing price fluctuations. Using the synthetic control method, we demonstrate that the PBA significantly reduced the pace of housing price growth, particularly during the Global Financial Crisis from 2008 to 2010. Prior to the introduction of the PBA, Colombia experienced unsustainable housing price increases fueled by rapid credit expansion and substantial capital inflows. The PBA successfully reversed this trend, contributing to a decline in housing price appreciation and enhancing financial stability during times of uncertainty. The convergence of housing price growth rates between Colombia and the synthetic control further supports the notion of the PBA’s causal influence. Our findings highlight the value of targeted macroprudential policies for maintaining stability within housing markets and preventing asset bubbles. This study provides insights for emerging economies facing similar challenges, emphasizing the importance of responsive policy measures tailored to specific economic contexts while also suggesting avenues for future research on the long-term effects of such interventions. |
| Keywords: | : Macroprudential policy; PBA; Housing price growth; Synthetic control method; Emerging economies |
| JEL: | E58 G18 R31 |
| Date: | 2025–04–21 |
| URL: | https://d.repec.org/n?u=RePEc:col:000566:021366 |
| By: | Mai Dao; Pierre-Olivier Gourinchas |
| Abstract: | We study the behavior of Covered Interest Parity (CIP) deviations – aka the CIP basis - in Emerging Markets (EM). A major challenge in computing the CIP basis in EM’s lies in measuring local currency interest rates which are free of local credit risk. To do so, we construct a ‘purified’ CIP basis for eight major EM currencies using supranational bonds issued in EM local currencies and US dollar going back twenty years. We show that this ‘purified’ CIP basis aligns well with theory-implied predictions. In the cross-section and the timeseries, the basis correlates with fundamental forces driving supply and demand for dollar forwards. Shocks to global dollar funding costs, global intermediary’s balance sheet capacity, and the demand for dollar safe assets interact with currency-specific dollar hedging and funding needs in moving the CIP basis in EM’s. |
| Keywords: | Covered Interest Parity; intermediation frictions; emerging markets; forward exchange rates |
| Date: | 2025–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/057 |