scholarly journals Analysis of Monetary Policy Responses after Financial Market Crises in a Continuous Time New Keynesian Model

2014 ◽  
Author(s):  
Bernd Hayo ◽  
Britta Niehof
Keyword(s):  
Monetary Policy ◽  
Financial Market ◽  
Continuous Time ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Policy Responses ◽  
Keynesian Model

ARE MAJOR CENTRAL BANKS BLINDED BY THE ANALYTICAL ELEGANCE OF THEIR MODELS? POSSIBLE COSTS OF UNCONVENTIONAL MONETARY POLICY MEASURES

2017 ◽  
Vol 62 (01) ◽  
pp. 87-108 ◽  
Author(s):  
PIOTR CIŻKOWICZ ◽  
ANDRZEJ RZOŃCAZ
Keyword(s):  
Monetary Policy ◽  
Global Financial Crisis ◽  
Significant Risk ◽  
Central Banks ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Unconventional Monetary Policy ◽  
Keynesian Model ◽  
Policy Measures ◽  
The Global Financial Crisis

We survey the possible costs of the unconventional monetary policy measures undertaken by major central banks after the outbreak of the global financial crisis in 2008. We argue that these costs are not easily discernable in the new Keynesian (NK) model, which defines a theoretical framework for monetary policy. First, the costs may result from the effects of unconventional monetary policy measures on the intensity of restructuring and the persistence of uncertainty (which increased after the outbreak of the crisis). However, neither of these processes is considered in the new Keynesian model. Second, costs may be generated not only by distortions in the choices made by economic agents but may also be a result of the decisions made by governments, particularly in terms of the fiscal deficit level. However, the new Keynesian model does not consider the effects of unconventional monetary policy measures on the quality of fiscal policy. Without carefully considering the costs, there is a significant risk that unconventional monetary policy measures could become a conventional response to recurrent crises.

Generalizing the Taylor Principle: Reply

2010 ◽  
Vol 100 (1) ◽  
pp. 618-624 ◽  
Author(s):  
Troy Davig ◽  
Eric M Leeper
Keyword(s):  
Monetary Policy ◽  
Regime Switching ◽  
Multiple Solutions ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Keynesian Model ◽  
The One

Farmer, Waggoner, and Zha (2009) (FWZ) show that a new Keynesian model with regime-switching monetary policy can support multiple solutions, appearing to contradict findings in Davig and Leeper (2007) (DL). The explanation is straightforward: FWZ derive solutions using a model that differs from the one to which the DL conditions apply. The FWZ solutions also require that the exogenous driving process is a function of private and policy parameters. This undermines the sharp distinctions among “deep parameters” typical of optimizing models and makes it difficult to ascribe economic interpretations to FWZ's additional solutions. (E12, E31, E43, E52)

Estimation of Macro-financial Linkages for the Indian Economy

2020 ◽  
pp. 097265272092785
Author(s):  
Shesadri Banerjee ◽  
Jayanthi K. Anand ◽  
Shashanka Bhide
Keyword(s):  
Financial Market ◽  
Policy Evaluation ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Relevant Literature ◽  
New Keynesian ◽  
Market Segment ◽  
New Keynesian Model ◽  
Jel Codes ◽  
Keynesian Model

The widespread impacts of global financial crisis (2008-09) reinstate the need for better assessment of the macro-financial linkages for forecasting and policy evaluation. Our paper contributes to the relevant literature with evidence from the Indian financial sector. Following Castelnuovo (2013), a New Keynesian model with macro-financial linkages is estimated by the Bayesian technique for the sample period 2004: Q3 to 2019: Q1. We find that, in an Emerging Market Economy like India, business cycle leads financial cycle through the channel of expectations. Further, our results show that the linkages are heterogeneous in size depending on the financial market segment and market-specific shocks. JEL Codes: C11, E44, G10

scholarly journals Dynamic Debt Deleveraging and Optimal Monetary Policy

2020 ◽  
Vol 12 (2) ◽  
pp. 310-350 ◽  
Author(s):  
Pierpaolo Benigno ◽  
Gauti B. Eggertsson ◽  
Federica Romei
Keyword(s):  
Monetary Policy ◽  
Lower Bound ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Optimal Monetary Policy ◽  
Natural Rate ◽  
Keynesian Model ◽  
Natural Rate Of Interest ◽  
Standard Framework

This paper proposes a postcrisis New Keynesian model that incorporates agent heterogeneity in borrowing and lending with a minimum set of assumptions. Unlike the standard framework, this model makes the natural rate of interest endogenous and dependent on macroeconomic policy. The main application is to study optimal monetary policy at the zero lower bound (ZLB). Such policy succeeds in raising the natural rate of interest by creating an environment that speeds up deleveraging and thus endogenously shortens the crisis and the duration of binding ZLB. Inflation should be front-loaded and should overshoot its long-term target during the ZLB episode. (JEL E12, E31, E32, E43, E52)

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