Macroeconomic Volatility Trade-off and Monetary Policy Regime in the Euro Area

2003 ◽  
Author(s):  
Alvaro Pinto Coelho de Aguiar ◽  
Manuel Mota Freitas Martins
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Policy Regime ◽  
Trade Off ◽  
Macroeconomic Volatility

scholarly journals Optimal Simple Objectives for Monetary Policy when Banks Matter

2020 ◽  
Vol 20 (244) ◽  
Author(s):  
Lien Laureys ◽  
Roland Meeks ◽  
Boromeus Wanengkirtyo
Keyword(s):  
Monetary Policy ◽  
Resource Utilization ◽  
Euro Area ◽  
Inflation Targeting ◽  
Financial Frictions ◽  
Bank Credit ◽  
Optimal Monetary Policy ◽  
Trade Off ◽  
Welfare Benefits ◽  
Financing Frictions

We reconsider the design of welfare-optimal monetary policy when financing frictions impair the supply of bank credit, and when the objectives set for monetary policy must be simple enough to be implementable and allow for effective accountability. We show that a flexible inflation targeting approach that places weight on stabilizing inflation, a measure of resource utilization, and a financial variable produces welfare benefits that are almost indistinguishable from fully-optimal Ramsey policy. The macro-financial trade-off in our estimated model of the euro area turns out to be modest, implying that the effects of financial frictions can be ameliorated at little cost in terms of inflation. A range of different financial objectives and policy preferences lead to similar conclusions.

Monetary policy and the effect of the transfer of oil prices to inflation

2020 ◽  
pp. 41-50
Author(s):  
Ph. S. Kartaev ◽  
I. D. Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Negative Effects ◽  
Price Shocks ◽  
Policy Regime ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

The influence of inflation targeting on the pass-through effect of the exchange rate

2018 ◽  
pp. 70-84
Author(s):  
Ph. S. Kartaev ◽  
Yu. I. Yakimova
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Short And Long Term ◽  
The Exchange Rate ◽  
Pass Through ◽  
The Impact

The paper studies the impact of the transition to the inflation targeting regime on the magnitude of the pass-through effect of the exchange rate to prices. We analyze cross-country panel data on developed and developing countries. It is shown that the transition to this regime of monetary policy contributes to a significant reduction in both the short- and long-term pass-through effects. This decline is stronger in developing countries. We identify the main channels that ensure the influence of the monetary policy regime on the pass-through effect, and examine their performance. In addition, we analyze the data of time series for Russia. It was concluded that even there the transition to inflation targeting led to a decrease in the dependence of the level of inflation on fluctuations in the ruble exchange rate.

Do Money Targets Matter for Monetary Policy in Kenya?

2018 ◽  
Author(s):  
Michal Andrle ◽  
Andrew Berg ◽  
Enrico Berkes ◽  
R. Armando Morales ◽  
Rafael Portillo ◽  
...  
Keyword(s):  
Monetary Policy ◽  
Money Demand ◽  
Aggregate Demand ◽  
Demand Forecasting ◽  
Money Growth ◽  
Structural Shocks ◽  
Macroeconomic Volatility ◽  
Ex Post ◽  
Policy Shocks ◽  
General Specification

The framework in Chapter 15 is extended to incorporate an explicit role for money aggregates, with an application to Kenya. The chapter provides a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. A novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc.) is presented. In the case of Kenya, the authors find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex post target adherence, the greater the macroeconomic volatility.

Country-specific euro area government bond yield reactions to ECB’s non-standard monetary policy program announcements

2020 ◽  
Vol 21 (4) ◽  
pp. 417-474 ◽  
Author(s):  
Ralf Fendel ◽  
Frederik Neugebauer
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Yield Reduction ◽  
Government Bond ◽  
Bond Yields ◽  
Bond Yield ◽  
Current Spread ◽  
Policy Program ◽  
Government Bond Markets ◽  
Country Specific

AbstractThis paper employs event study methods to evaluate the effects of ECB’s non-standard monetary policy program announcements on 10-year government bond yields of 11 euro area member states. Measurable effects of announcements arise with a one-day delay meaning that government bond markets take some time to react to ECB announcements. The country-specific extent of yield reduction seems inversely related to the solvency rating of the corresponding countries. The spread between core and periphery countries reduces because of a stronger decrease in the latter. This result is confirmed by letting the announcement variable interact with the current spread level.

scholarly journals Exiting from quantitative easing

2019 ◽  
Vol 10 (3) ◽  
pp. 1069-1107 ◽  
Author(s):  
Fumio Hayashi ◽  
Junko Koeda
Keyword(s):  
Monetary Policy ◽  
Regime Switching ◽  
Economic Conditions ◽  
Quantitative Easing ◽  
Structural Vector Autoregression ◽  
Policy Regime ◽  
State Of The Economy ◽  
Macroeconomic Effects ◽  
Structural Vector ◽  
Empirical Framework

We propose an empirical framework for analyzing the macroeconomic effects of quantitative easing (QE) and apply it to Japan. The framework is a regime‐switching structural vector autoregression in which the monetary policy regime, chosen by the central bank responding to economic conditions, is endogenous and observable. QE is modeled as one of the regimes. The model incorporates an exit condition for terminating QE. We find that higher reserves at the effective lower bound raise inflation and output, and that terminating QE may be contractionary or expansionary, depending on the state of the economy at the point of exit.

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