How Credible Is the Federal Reserve? A Structural Estimation of Policy Re-Optimizations

2016 ◽  
Vol 8 (3) ◽  
pp. 42-76 ◽  
Author(s):  
Davide Debortoli ◽  
Aeimit Lakdawala
Keyword(s):  
Central Bank ◽  
Federal Reserve ◽  
Regime Switching ◽  
Structural Estimation ◽  
Switching Process ◽  
Macroeconomic Model ◽  
Great Moderation ◽  
Medium Scale ◽  
The Past

The paper proposes a new measure of the degree of credibility of the Federal Reserve. We estimate a medium-scale macroeconomic model, where the central bank has access to a commitment technology, but where a regime-switching process governs occasional re-optimizations of announced plans. The framework nests the commonly used discretion and commitment cases, while allowing for a continuum of intermediate cases. Our estimates reject both full-commitment and discretion. We instead identify occasional re-optimization episodes both before and during the Great Moderation period. Finally, through counterfactual analyses we assess the role of credibility over the past four decades. (JEL D78, E31, E32, E52, E58, E61)

Real Bills, The Gold Standard, and Central Bank Policy

1976 ◽  
Vol 50 (4) ◽  
pp. 503-513 ◽  
Author(s):  
Robert Craig West
Keyword(s):  
Central Bank ◽  
Discount Rate ◽  
Real World ◽  
Federal Reserve ◽  
Economic Activity ◽  
Gold Standard ◽  
Government Regulation ◽  
International Exchange ◽  
The Real ◽  
The Past

Students of the origins and accomplishments of government regulation of economic activity have open suspected that the laws on which regulation is based were addressed to problems and conditions of the past that no longer prevailed, or — what is worse — assumptions about the “real world” that are highly unrealistic. This is Professor West's main conclusion about the Federal Reserve Act of 1913, especially as regards its discount rate and international exchange policies.

scholarly journals Polityka pieniężna Narodowego Banku Polskiego od roku 1989

2015 ◽  
pp. 173-192
Author(s):  
Paweł Franka ◽  
Anna Wisz
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Banking System ◽  
Policy Instruments ◽  
Open Market ◽  
The Past ◽  
National Bank

The article discusses the activities of National Bank of Poland during the past twenty-five year and more specifically in the years 1989–2013 with particular emphasis on monetary policy. During this time, the Polish central bank has undergone fundamental change, starting from the position of the so-called monobank, i.e. bank without autonomy in activities, characteristic of planned economy. The article describes the process of transformation of the National Bank of Poland to the role of a central bank operating in a market economy. The paper emphasizes all the important events in the transformation, including building of a two-tier banking system, the gradual replacement of the administrative measures by monetary policy instruments, currency denomination, constitutional guarantees of the role and independence of the National Bank of Poland, creation of the Monetary Policy Council – a departure from the single monetary policy-making in favor of collegiality, changing the monetary policy strategy to direct inflation targeting, bank exchange rates policy, open market operations.

Islamic Banking in Indonesia

2020 ◽  
pp. 38-60
Author(s):  
M. Luthfi Hamidi ◽  
Andrew C. Worthington
Keyword(s):  
Central Bank ◽  
Financial Services ◽  
Banking Sector ◽  
Islamic Banking ◽  
Credit Allocation ◽  
Banking Services ◽  
The Past ◽  
The Government ◽  
Market Pressures

The Indonesian banking sector has been stable and generally sound over the past decade, partly through efforts by the Bank of Indonesia as Indonesia's central bank and Otoritas Jasa Keuangan as its financial services regulator. This chapter identifies important issues that remain for both conventional and Islamic banking in Indonesia. Authors suggest the government continue its efforts to reform what remains a geographically concentrated industry, to increase the role of bank credit in the economy, and to widen the provision of banking services through technology. Authors highlight the vulnerability of smaller banks in Indonesia to ongoing competitive market pressures and the necessity of creating larger banks through merger or capital raising and improving credit allocation to small and medium-sized businesses. Islamic banking has an important role to play in these developments, and those relating to Islamic social banking.

scholarly journals What Powers for the Federal Reserve?

2010 ◽  
Vol 48 (1) ◽  
pp. 134-145 ◽  
Author(s):  
Martin Feldstein
Keyword(s):  
Federal Reserve ◽  
Mortgage Lending ◽  
Policy Recommendations ◽  
Lender Of Last Resort ◽  
Holding Companies ◽  
The Past ◽  
Definition Of ◽  
New Consumer ◽  
Better Than

In this essay, I explain my reasons for the following policy recommendations: (1) The Fed should continue to manage monetary policy as it has in the past, should act as the nation's lender of last resort, should fully supervise the large bank holding companies and their subsidiary banks, and should be given resolution authority over the institutions that it supervises. (2) While a council of supervisors and regulators can play a useful role in dealing with macro prudential risks, it should not replace the central role of the Federal Reserve. (3) The virtually unlimited lending powers that the Fed has recently exercised in creating credit and helping individual institutions should be restricted in duration and subjected to formal Treasury approval backed by Congressional preauthorization of funds. (4) The Fed's capital rules for commercial banks need to be strengthened by replacing the existing risk-based capital approach with a broader definition of risk and the introduction of contingent capital. (5) Subjecting mortgage lending to a broader range of Federal Reserve regulations and allowing the Fed to deal with nonbank creators of mortgage products would be better than the creation of a new consumer financial protection organization. (JEL E52, E58, G21, G28)

scholarly journals The Federal Reserve’s Dollar Swap Lines and the European Central Bank during the global financial crisis of 2007–09

2020 ◽  
Vol 44 (4) ◽  
pp. 723-747 ◽  
Author(s):  
Emmanuel Carré ◽  
Laurent Le Maux
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Federal Reserve ◽  
European Central Bank ◽  
Global Financial Crisis ◽  
Lender Of Last Resort ◽  
European Central ◽  
The Interest Rate ◽  
The Global Financial Crisis

Abstract Although the literature has studied the role of the Federal Reserve as the global lender of last resort in 2007–09, many aspects of the Dollar Swap Lines to the European Central Bank need further exploration. Accordingly, we provide original evidence about the auction operations, allotted amounts and interest rates with regard to the Federal Reserve’s dollar swaps and the European Central Bank’s dollar provision. More specifically, we examine the demand side of the Dollar Swap Lines (whereas the existing literature mentions the supply side only) and we scrutinise the interest rate (whereas the literature concentrates on volumes) set by the Federal Reserve, and also the rate set by the European Central Bank. Our findings cast light on the nature of the relationship between the Federal Reserve and the European Central Bank. Finally, we contribute to the literature on the global lender of last resort by coining the notion of the financial dilemma, under the dollar system within a framework of globalised financial markets.

scholarly journals Cooperation, Conflict, and the Emergence of a Modern Federal Reserve

2014 ◽  
pp. 1-4
Author(s):  
Owen F. Humpage
Keyword(s):  
Central Bank ◽  
Federal Reserve ◽  
Short Version ◽  
Federal Reserve Bank ◽  
Working Paper ◽  
The Past ◽  
Reserve Bank ◽  
Complete Set ◽  
Reserve System

The Federal Reserve System is a model of an independent central bank, with the authority to resist political pressure and act in the long-term best economic interest of the country. But this has not always been the case. In the past—and not too distant past at that—US monetary policy has frequently yielded to other governmental requirements. Even for the modern Federal Reserve, independence is a nuanced, mutable and, ultimately, fragile concept, but one that is essential to maintain.. This Economic Commentary is a short version of: “Independence within—not of—Government: The Emergence of the Federal Reserve as a Modern Central Bank,” Owen F. Humpage, 2014. Federal Reserve Bank of Cleveland, working paper no. 14-02. That paper contains a complete set of references and figures.

Price Stability and Central Bank Independence: Discipline, Credibility, and Democratic Institutions

2014 ◽  
Vol 69 (1) ◽  
pp. 35-61 ◽  
Author(s):  
Cristina Bodea ◽  
Raymond Hicks
Keyword(s):  
Central Bank ◽  
Money Demand ◽  
Political Institutions ◽  
Central Bank Independence ◽  
Price Stability ◽  
Inflation Expectations ◽  
The Past ◽  
Political Interference ◽  
Yearly Data

AbstractDespite mixed empirical evidence, in the past two decades central bank independence (CBI) has been on the rise under the assumption that it ensures price stability. Using an encompassing theoretical approach and new yearly data for de jure CBI (seventy-eight countries, 1973–2008), we reexamine this relationship, distinguishing the role of printing less money (discipline) from the public's beliefs about the central bank's likely actions (credibility). Democracies differ from dictatorships in the likelihood of political interference and changes to the law because of the presence of political opposition and the freedom to expose government actions. CBI in democracies should be directly reflected in lower money supply growth. Besides being more disciplinarian, it also ensures a more robust money demand by reducing inflation expectations and, therefore, inflation. Empirical results are robust and support a discipline effect conditioned by political institutions, as well as a credibility effect.

scholarly journals The Role of Board Oversight in Central Bank Governance

2019 ◽  
Vol 19 (293) ◽  
Author(s):  
Wouter Bossu ◽  
Arthur D. P. Rossi
Keyword(s):  
Decision Making ◽  
Central Bank ◽  
Central Banks ◽  
Policy Formulation ◽  
Central Feature ◽  
The Past ◽  
Legal Structure ◽  
Bank Governance ◽  
Internal Body

This paper discusses key legal issues in the design of Board Oversight in central banks. Central banks are complex and sophisticated organizations that are challenging to manage. While most economic literature focuses on decision-making in the context of monetary policy formulation, this paper focuses on the Board oversight of central banks—a central feature of sound governance. This form of oversight is the decision-making responsibility through which an internal body of the central bank—the Oversight Board—ensures that the central bank is well-managed. First, the paper will contextualize the role of Board oversight into the broader legal structure for central bank governance by considering this form of oversight as one of the core decision-making responsibilities of central banks. Secondly, the paper will focus on a number of important legal design issues for Board Oversight, by contrasting the current practices of the IMF membership’s 174 central banks with staff’s advisory practice developed over the past 50 years.

On Future Directions in Pathology

1982 ◽  
Vol 40 ◽  
pp. 274-277
Author(s):  
Benjamin F. Trump ◽  
Irene K. Berezesky ◽  
Raymond T. Jones
Keyword(s):  
Electron Microscopy ◽  
Transmission Electron Microscopy ◽  
Clinical Pathology ◽  
Future Directions ◽  
Diagnostic Pathology ◽  
The Past ◽  
Transmission Electron ◽  
Organ Systems ◽  
The Many

The role of electron microscopy and associated techniques is assured in diagnostic pathology. At the present time, most of the progress has been made on tissues examined by transmission electron microscopy (TEM) and correlated with light microscopy (LM) and by cytochemistry using both plastic and paraffin-embedded materials. As mentioned elsewhere in this symposium, this has revolutionized many fields of pathology including diagnostic, anatomic and clinical pathology. It began with the kidney; however, it has now been extended to most other organ systems and to tumor diagnosis in general. The results of the past few years tend to indicate the future directions and needs of this expanding field. Now, in addition to routine EM, pathologists have access to the many newly developed methods and instruments mentioned below which should aid considerably not only in diagnostic pathology but in investigative pathology as well.

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