scholarly journals Risk Premium Shifts and Monetary Policy: A Coordination Approach

2015 ◽  
Author(s):  
Stephen Morris ◽  
Hyun Song Shin
Keyword(s):  
Monetary Policy ◽  
Risk Premium

scholarly journals Macroeconomic Models for Monetary Policy: A Critical Review from a Finance Perspective

2020 ◽  
Vol 12 (1) ◽  
pp. 95-140
Author(s):  
Winston W. Dou ◽  
Andrew W. Lo ◽  
Ameya Muley ◽  
Harald Uhlig
Keyword(s):  
Monetary Policy ◽  
Risk Premium ◽  
Critical Review ◽  
Balance Sheet ◽  
Financial Sector ◽  
Central Banks ◽  
Response Analysis ◽  
Parameter Estimates ◽  
Macroeconomic Models ◽  
The Government

We provide a critical review of macroeconomic models used for monetary policy at central banks from a finance perspective. We review the history of monetary policy modeling, survey the core monetary models used by major central banks, and construct an illustrative model for those readers who are unfamiliar with the literature. Within this framework, we highlight several important limitations of current models and methods, including the fact that local-linearization approximations omit important nonlinear dynamics, yielding biased impulse-response analysis and parameter estimates. We also propose new features for the next generation of macrofinancial policy models, including a substantial role for the financial sector, the government balance sheet, and unconventional monetary policies; heterogeneity, reallocation, and redistribution effects;the macroeconomic impact of large nonlinear risk premium dynamics; time-varying uncertainty; financial sector and systemic risks; imperfect product market and markups; and further advances in solution, estimation, and evaluation methods for dynamic quantitative structural models.

Multidimensional Assessment of Economies by the Level of Sovereign Risk Premium

2020 ◽  
Vol 2020 (2) ◽  
pp. 3-27
Author(s):  
Sergey Drobyshevsky ◽  
Pavel Trunin ◽  
Lyudmila Gadiy ◽  
Mariya Chembulatova
Keyword(s):  
Monetary Policy ◽  
Risk Premium ◽  
International Market ◽  
Developed Countries ◽  
Credit Default Swaps ◽  
Sovereign Risk ◽  
Political Risks ◽  
Credit Default ◽  
Monetary Authorities

The analysis of the international market for credit default swaps (CDS) shows that the interdependence of sovereign CDS spreads is increasing and the market remains segmented. However, the reduction in the variation of sovereign CDS spreads means increased competition for capital and should be taken into account by monetary authorities of developed countries when they tighten monetary policy. The article shows a significant role of political risks in determining the level of sovereign risk.

scholarly journals MONETARY TRANSMISSION OF PERSISTENT SHOCK TO THE RISK PREMIUM: THE CASE OF INDONESIA

2011 ◽  
Vol 13 (4) ◽  
pp. 435-468
Author(s):  
Akhis R. Hutabarat
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Risk Premium ◽  
Nominal Exchange Rate ◽  
Monetary Transmission ◽  
Cost Channel ◽  
Long Run ◽  
Pass Through ◽  
Exchange Rate Pass Through

This paper investigates the relative importance of monetary transmission channel to inflation of passing persistent shock to the risk premium. The findings show that nominal exchange rate depreciation, triggered by a more persistent shock to interest risk premium, worsens the state of the economy in the short- and long-run. Such distinctive shocks effect is transmitted through the economy that typifies lack of response of consumer price disinflation to interest rate tightening caused by high real rigidity, strong cost channel of interest rate, strong cost channel of exchange rate pass-through and weak demand-side channel of exchange rate pass-through. This study suggests a proper monetary policy response, which is the smallest interest rate increases within the feasible set of monetary policy responses that the model recommends, to minimize the adverse effects of the shocks.Keywords: Exchange rate, Balance of Payment, Monetary transmission and policy, Dynamic General Equilibrium.JEL Classification: F41; E52; D58

scholarly journals Testes da Hipótese de Expectativas na Estrutura a Termo das Taxas de Juros Brasileiras

2003 ◽  
Vol 1 (1) ◽  
pp. 19
Author(s):  
Benjamin Miranda Tabak ◽  
Sandro Canesso de Andrade
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Term Structure ◽  
Risk Premium ◽  
Rational Expectations ◽  
Yield Curve ◽  
Single Equation ◽  
Expectations Hypothesis ◽  
Macro Modeling ◽  
Daily Data

We test the Expectations Hypothesis (EH) plus Rational Expectations (RE) in the Brazilian term-structure of interest rates, using maturities ranging from 1 month to 12 months, and daily data from 1995 to 2000. We rely on two methodologies based on single-equation regressions. Our results indicate a rejection of the EH plus RE, specially at the longer maturity. This may have important implications for the rational expectations macro-modeling currently being used to evaluate the conduct of monetary policy in Brazil. We also show the risk premium in the yield curve are positively related to the covered interest rate differential and to the volatility of interest rates.

Risks are high despite Turkey’s policy 'normalisation'

2020 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Risk Premium ◽  
Financial Stability ◽  
Foreign Debt ◽  
Content Type ◽  
The Public ◽  
High Inflation ◽  
The Government

Significance With the lira at a record low, the Central Bank continued to tighten monetary policy this week, funding the market through competitive one-month repo tenders at rates of around 12.5%. In recent weeks, the government and Central Bank have taken a series of steps to modify the expansionary and in some cases unorthodox policies adopted during the COVID-19 pandemic. Impacts Foreign portfolio investors could shun the Turkish market for some more months, and the risk premium will remain high. Although this year’s annual contraction in GDP, at 3-4%, may be less severe than expected, the recovery may decelerate or be interrupted. The lira may fall further with concerns about foreign debt, forex reserves, budgets, inflation and financial stability persisting into 2021. Given the weak lira, the jobs crisis and high inflation, the government will struggle to persuade the public it has managed the crisis well.

scholarly journals Show me the money: The monetary policy risk premium

2020 ◽  
Vol 135 (2) ◽  
pp. 320-339 ◽  
Author(s):  
Ali Ozdagli ◽  
Mihail Velikov
Keyword(s):  
Monetary Policy ◽  
Risk Premium ◽  
Policy Risk
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