International Monetary Policy Uncertainty Spillover

There has long been a presumption that the price-level stabilization frameworks of Irving Fisher and Chicagoans Henry Simons and Lloyd Mints were essentially equivalent. I show that there were subtle, but important, differences in the rationales underlying the policies of Fisher and the Chicagoans. Fisher’s framework involved substantial discretion in the setting of the policy instruments; for the Chicagoans the objective of a policy rule was to tie the hands of the authorities in order to reduce discretion and, thus, monetary policy uncertainty. In contrast to Fisher, the Chicagoans provided assessments of the workings of alternative rules, assessed various criteria—including simplicity and reduction of political pressures—in the specification of rules, and concluded that rules would provide superior performance compared with discretion. Each of these characteristics provided a direct link to the rules-based framework of Milton Friedman. Like Friedman’s framework, Simons’s preferred rule targeted a policy instrument.

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How the fiscal and monetary policy uncertainty of China respond to global oil price volatility: A multi-regime-on-scale approach

Resources Policy ◽

10.1016/j.resourpol.2021.102121 ◽

2021 ◽

Vol 72 ◽

pp. 102121

Author(s):

Qisheng Jiang ◽

Sheng Cheng

Keyword(s):

Monetary Policy ◽

Price Volatility ◽

Oil Price ◽

Policy Uncertainty ◽

Oil Price Volatility ◽

Fiscal And Monetary Policy

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South Africa’s economic response to monetary policy uncertainty

Journal of Economic Studies ◽

10.1108/jes-07-2015-0131 ◽

2017 ◽

Vol 44 (2) ◽

pp. 282-293 ◽

Cited By ~ 1

Author(s):

Mehmet Balcilar ◽

Rangan Gupta ◽

Charl Jooste

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Stochastic Volatility ◽

Stochastic Volatility Model ◽

Economic Consequences ◽

Policy Uncertainty ◽

Dsge Model ◽

Content Type ◽

Volatility Model ◽

Central Bankers

Purpose The purpose of this paper is to study the evolution of monetary policy uncertainty and its impact on the South African economy. Design/methodology/approach The authors use a sign restricted SVAR with an endogenous feedback of stochastic volatility to evaluate the sign and size of uncertainty shocks. The authors use a nonlinear DSGE model to gain deeper insights about the transmission mechanism of monetary policy uncertainty. Findings The authors show that monetary policy volatility is high and constant. Both inflation and interest rates decline in response to uncertainty. Output rebounds quickly after a contemporaneous decrease. The DSGE model shows that the size of the uncertainty shock matters – high uncertainty can lead to a severe contraction in output, inflation and interest rates. Research limitations/implications The authors model only a few variables in the SVAR – thus missing perhaps other possible channels of shock transmission. Practical implications There is a lesson for monetary policy: monetary policy uncertainty, in isolation from general macroeconomic uncertainty, often creates unintended adverse consequences and can perpetuate a weak economic environment. The tasks of central bankers are incredibly difficult. Their models project output and inflation with relatively large uncertainty based on many shocks emanating from various sources. It matters how central bankers react to these expectations and how they communicate the underlying risks associated with setting interest rates. Originality/value This is the first study that looks into monetary policy uncertainty into South Africa using a stochastic volatility model and a nonlinear DSGE model. The results should be very useful for the Central Bank as it highlights how uncertainty, that they create, can have adverse economic consequences.

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