scholarly journals The Information Content of the Interest Rate and Optimal Monetary Policy

1983 ◽  
Vol 98 (4) ◽  
pp. 545 ◽  
Author(s):  
Matthew B. Canzoneri ◽  
Dale W. Henderson ◽  
Kenneth S. Rogoff
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Information Content ◽  
Optimal Monetary Policy ◽  
The Interest Rate

scholarly journals The Information Content of the Interest Rate and Optimal Monetary Policy

1981 ◽  
Vol 1981 (192) ◽  
pp. 1-35 ◽  
Author(s):  
Matthew B. Canzoneri ◽  
◽  
Dale W. Henderson ◽  
Kenneth S. Rogoff
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Information Content ◽  
Optimal Monetary Policy ◽  
The Interest Rate

PARAMETER UNCERTAINTY AND NONLINEAR MONETARY POLICY RULES

2010 ◽  
Vol 15 (2) ◽  
pp. 184-200 ◽  
Author(s):  
Peter Tillmann
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Empirical Evidence ◽  
Parameter Uncertainty ◽  
Phillips Curve ◽  
Optimal Monetary Policy ◽  
Worst Case ◽  
Rate Adjustment ◽  
The Interest Rate

Empirical evidence suggests that the instrument rule describing the interest rate–setting behavior of the Federal Reserve is nonlinear. This paper shows that optimal monetary policy under parameter uncertainty can motivate this pattern. If the central bank is uncertain about the slope of the Phillips curve and follows a min–max strategy to formulate policy, the interest rate reacts more strongly to inflation when inflation is further away from target. The reason is that the worst case the central bank takes into account is endogenous and depends on the inflation rate and the output gap. As inflation increases, the worst-case perception of the Phillips curve slope becomes larger, thus requiring a stronger interest rate adjustment. Empirical evidence supports this form of nonlinearity for post-1982 U.S. data.

scholarly journals An optimal control problem of monetary policy

2021 ◽  
Vol 26 (11) ◽  
pp. 5769
Author(s):  
Andrea Bacchiocchi ◽  
Germana Giombini
Keyword(s):  
Optimal Control ◽  
Monetary Policy ◽  
Interest Rate ◽  
Optimal Control Problem ◽  
Continuous Time ◽  
Phillips Curve ◽  
Optimal Monetary Policy ◽  
Trade Off ◽  
Long Run ◽  
The Interest Rate

<p style='text-indent:20px;'>This paper analyses an optimal monetary policy under a non-linear Phillips curve and linear GDP dynamics. A central bank controls the inflation and the GDP trends through the adjustment of the interest rate to prevent shocks and deviations from the long-run optimal targets. The optimal control path for the monetary instrument, the interest rate, is the result of a dynamic minimization problem in a continuous-time fashion. The model allows considering various economic dynamics ranging from hyperinflation to disinflation, sustained growth and recession. The outcomes provide useful monetary policy insights and reveal the dilemma between objectives faced by the monetary authority in trade-off scenarios.</p>

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

scholarly journals Monetary Policy in the Post Keynesian Theoretical Framework

2017 ◽  
Vol 37 (1) ◽  
pp. 45-64
Author(s):  
FÁBIO HENRIQUE BITTES TERRA ◽  
PHILIP ARESTIS
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Inflation Targeting ◽  
Debt Management ◽  
Policy Framework ◽  
Original Writings ◽  
Policy Model ◽  
Original Contribution ◽  
The Interest Rate ◽  
Monetary Policy Framework

ABSTRACT The purpose of this contribution is to develop a Post Keynesian monetary policy model, presenting its goals, tools, and channels. The original contribution this paper develops, following (Keynes’s 1936, 1945) proposals, is the use of debt management as an instrument of monetary policy, along with the interest rate and regulation. Moreover, this paper draws its monetary policy model by broadly and strongly relying on Keynes’s original writings. A monetary policy model erected upon this basis relates itself directly to the Post Keynesian efforts to offer a monetary policy framework substantially different from the Inflation Targeting Regime of the New Macroeconomic Consensus.

scholarly journals The impact of Musharakah financing on the monetary policy in the Islamic economy

2018 ◽  
Vol 3 (3/4) ◽  
pp. 139-152
Author(s):  
Hatem Adela
Keyword(s):  
Economic Theory ◽  
Monetary Policy ◽  
Interest Rate ◽  
Economic Activity ◽  
Methodological Framework ◽  
Mathematical Methods ◽  
Content Type ◽  
Return Rates ◽  
The Interest Rate ◽  
The Impact

Purpose This paper aims to contribute to formulating the methodological framework for a paradigm of Islamic economics, using the development of the conventional economics, theoretical and mathematical methods. Design/methodology/approach The study based on the inductive and mathematical methods to contribute to economic theory within the methodological framework for Islamic Economics, by using the return rate of Musharakah rather than the interest rate in influence the economic activity and monetary policy. Findings Via replacement, the concept of the interest rate by the return rates of Musharakah. It concludes that the central bank can control the monetary policy, economic activity and the efficient allocation of resources by using the return rates of Musharakah through the framework of Islamic economy. Practical/implications The study is a contribution to formulate the methodological framework for a paradigm of Islamic economics, where it investigates the impact of return rates of Musharakah on the money market and monetary policy, by the mathematical methods used in the conventional economy. Also, the study illustrates the importance of further studies that examine the methodological framework for Islamic Economics. Originality/value The study aims to contribute to formulating the Islamic economic theory, through the return rate of Musharakah financing instead of the interest rate, and its effectiveness of the monetary policy. As well as reformulating the concepts of the investment function, the present value and the marginal efficiency rate of investment according to the Islamic economy approach.

OPTIMAL MONETARY POLICY FOR THE EMU ACCESSION COUNTRIES. A NEW KEYNESIAN APPROACH

2014 ◽  
Vol 19 (7) ◽  
pp. 1427-1475 ◽  
Author(s):  
Anna Lipińska
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Optimal Policy ◽  
Nominal Exchange Rate ◽  
Nominal Interest Rate ◽  
Output Gap ◽  
Optimal Monetary Policy ◽  
Accession Countries ◽  
Dynamic Stochastic ◽  
Maastricht Criteria

This paper uses a dynamic stochastic general equilibrium model of a two-sector small open economy to analyze how the Maastricht criteria modify a fully credible optimal monetary policy in the Economic and Monetary Union accession countries. We show that if the country is not constrained by the criteria, optimal policy should stabilize fluctuations in PPI inflation, in the aggregate output gap, and in the domestic and international terms of trade. The optimal policy constrained permanently by the Maastricht criteria is characterized by reduced variability of the nominal exchange rate, CPI inflation, and the nominal interest rate and by lower optimal targets for CPI inflation and nominal interest rate. This policy results in higher variability and nonzero means for both PPI inflation and output gap, thus leading to additional, but small, welfare costs compared with the unconstrained policy.

Brazil: monetary policy and the neutral interest rate

2016 ◽  
Vol 43 (6) ◽  
pp. 966-979
Author(s):  
Cleomar Gomes da Silva ◽  
Rafael Cavalcanti de Araújo
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Real Interest Rate ◽  
Design Methodology ◽  
Macroeconomic Model ◽  
Natural Rate ◽  
Content Type ◽  
Natural Rate Of Interest ◽  
The Interest Rate ◽  
Definition Of

Purpose The purpose of this paper is to analyze the conduct of monetary policy in Brazil and estimate the country’s neutral real interest rate. Design/methodology/approach The authors make use of a state-space macroeconomic model representation. Findings The period of analysis goes from 2003 up to the end of 2013 and the results show that the country’s natural rate of interest was around 4.2 percent in December 2013. Originality/value One of the main differences of this work is the inclusion of variables such as the real exchange rate and world interest rate. This is important because these variables play an important role in the definition of the interest rate and, consequently, in the definition of the neutral interest rate.

scholarly journals Safe Assets, Liquidity, and Monetary Policy

2017 ◽  
Vol 9 (2) ◽  
pp. 182-227 ◽  
Author(s):  
Pierpaolo Benigno ◽  
Salvatore Nisticò
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Risk Sharing ◽  
Balance Sheet ◽  
Multiple Assets ◽  
Interest Rate Spreads ◽  
The Interest Rate ◽  
Liquidity Shock ◽  
Deep Recession

This paper studies monetary policy in models where multiple assets have different liquidity properties: safe and “pseudo-safe” assets coexist. A shock worsening the liquidity properties of the pseudo-safe assets raises interest rate spreads and can cause a deep recession-cum-deflation. Expanding the central bank’s balance sheet fills the shortage of safe assets and counteracts the recession. Lowering the interest rate on reserves insulates market interest rates from the liquidity shock and improves risk sharing between borrowers and savers. (JEL E31, E32, E43, E44, E52)

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