How to Solve the Price Puzzle? A Meta‐Analysis

The short‐run increase in prices following an unexpected tightening of monetary policy constitutes a puzzle frequently reported in empirical studies. Yet the puzzle is easy to explain away when all published models are quantitatively reviewed. We collect and examine about 1,000 point estimates of impulse responses from 70 articles that use vector autoregressions to study monetary transmission in various countries. We find that the puzzle is created by model misspecifications: especially by the omission of commodity prices, neglect of potential output, and reliance on recursive identification. Our results also suggest that the strength of monetary policy depends on the country’s openness, phase of the economic cycle, and degree of central bank independence.     

Would a Relaxation of the Exchange Rate Regime Increase the Independence of Chinese Monetary Policy? Evidence from China

Some policymakers and academic researchers suggest that relaxing the exchange rate regime will increase the independence of Chinese monetary policy. To test this argument, we estimate spot interest rate models with dummy variable sets and derive an economic interpretation. The empirical results suggest that a relaxation of the exchange rate regime increases the independence of market-based monetary policy; however, it weakens the independence of monetary policy for forecasting future normal events, and it also imposes an ambiguous impact on the independence of monetary policy for forecasting future rare events.     

利率政策环境与央行货币政策选择

央行的货币政策实施受货币政策环境制约,特别是实施价格型货币政策时,在不同的利率环境下央行可能选择不同的利率调控模式。为此,通过构建门限回归模型对货币政策调控模式与利率区制的相依性进行实证检验,结果发现：在不同的利率区制内中央银行的政策偏好和利率调控模式存在显著差异。在高利率区制,中央银行存在针对产出缺口调整名义利率的政策偏好;在低利率区制,中央银行则不存在这种政策偏好,低利率环境下货币政策效应弱化甚至失效是导致此区制中央银行不针对产出缺口调整利率的主要原因。     

Effectiveness of alternative channels of monetary policy transmission: some evidence for India

In this article, we have employed ‘shutdown’ methodology, not used before in the Indian context, to study the relative importance of alternative channels of monetary policy transmission. We have, for the first time, studied the impact of monetary policy on consumer price index (CPI) inflation. In response to a shock to the operating target, the maximum decline in gross domestic product growth occurs with a lag of two to three quarters, while the impact on inflation (both CPI and wholesale price index) is felt with a lag of three to four quarters. The interest rate channel is found to be the most dominant channel of monetary policy transmission in India.     

Federal reserve's policy,global equity markets,and the local monetary policy stance

This paper examines the extent to which local monetary policy stance determines the strength of US monetary policy international transmission to global equities. Using a sample of 35 countries, we document that US monetary policy surprises exert significant inverse effects on global equity returns. Our results suggest that countries whose policy rates are brought into line with that of the US are less sensitive to US monetary policy shocks only when they have a high and intermediate level of cross-border financial linkages, and only when they have a low and intermediate level of exchange rate volatility.     

货币政策与汇率政策有效协调机制 ——基于金融周期视角的研究

基于马尔科夫区制转移模型,在刻画全球金融周期特征的基础上,构建包含调节效应的面板模型,对货币政策与汇率政策有效协调机制进行实证分析。结果表明：全球金融周期处于高波动率区制,即市场风险厌恶水平较高时,资本流动水平较低,浮动汇率政策能够有效缓解资本流动对货币政策独立性的影响;反之,浮动汇率政策调节效果减弱。因此在推进金融开放与人民币汇率市场化改革的进程中,要充分关注全球金融周期波动状况。     

论双支柱政策调控

货币政策的理论脉络是基于需求不足。凯恩斯学派与弗里德曼的思维逻辑差别是利率主要直接由什么决定,利率的作用会被什么因素抵消。货币政策的当代实践值得关注的问题:一是作用的对象、范围、力度、效应;二是西方货币政策传导理论的新进展;三是中国货币政策怎样传导;四是要关注货币政策作用的差别。货币政策调控的中国创造即社会融资规模。结合中国实际,中国系统性的金融风险主要是金融机构大面积的不健康;2015年中国股灾,是系统性金融风险的集中表现;要认知在中国特色社会主义制度下,金融风险和金融周期形成的特殊机制;对怎样衡量适度货币供给进行分析。     

How successful are banking sector reforms in emerging market economies? Evidence from impact of monetary policy on levels and structures of firm debt in India

Many emerging markets have undertaken significant financial sector reforms, especially in their banking sectors, that are critical for both financial development and real economic activity. In this paper, we investigate the success of banking reforms in India where significant banking reforms were implemented during the 1990s. Using the argument that well-functioning credit markets would reflect a credit channel for monetary policy at work, we test whether a change in monetary policy has a predictable impact on borrowing behaviour of several types of firms, including business group affiliated, unaffiliated private firms, state-owned firms and foreign firms. The empirical results suggest that unaffiliated private firms have the most vulnerable to monetary policy stance during tight policy regimes. We also find that during tight monetary policy regimes, bank credit of smaller firms is more sensitive to changes in the interest rate than that of large firms. In an easy money regime, monetary policy and the associated change in interest rate does not affect change in bank credit, change in total debt and the proportion of bank credit in total debt for any of the firms. We discuss the policy implications of the findings.     

Is Malaysia exempted from the impossible trinity? An empirical analysis for an emerging market

This paper estimates offset and sterilization coefficients in Malaysia with the objective to assess the relevance of the Impossible Trinity for policy. The paper finds that Malaysia had scope for independent monetary policy in the short run; but in the longer run only under managed floating or capital controls. The loss of long-run monetary autonomy under peg/open capital was in line with the trinity, and may be one reason the peg was eventually abandoned for managed floating in year 2005. The results suggest that managed floating with sterilizations could be a viable monetary strategy for emerging markets facing volatile capital flows.     

中国货币政策传导变量的区域结构效应研究

本文基于2007-2019年的数据实证分析利率、信贷、汇率、股票市场和房地产市场等货币政策传导变量对中国八大综合经济区经济增长和物价的影响。研究发现,中国货币政策传导存在明显的区域非对称效应;银行信贷和利率渠道对各区域经济增长和物价影响的方向基本一致,影响幅度存在较大差异;汇率对各区域经济增长、物价影响的方向和幅度均存在非对称性;股票市场价格和房地产价格除对个别区域经济增长率和物价有一定影响外,对大部分地区影响幅度不大,但区域非对称效应比较明显。     

An Empirical Study of the Asset Price Channel of Monetary Policy Transmission in China

By testing the impact of monetary policy on the bond market and the impact of the bond market on the real macro economy using different empirical methods, this article examines the performance of the bond price transmission mechanism in China’s monetary policy. Empirical studies show that monetary policy has power over bond yield fluctuations, while the bond market has a relatively limited impact on the real macro economy. Short-term bond yields have relatively significant transmission effects on some output variables, such as consumption, investment, and the consumer price index, while the influence of long-term bonds is not significant.     

U.S. Monetary Regimes and Optimal Monetary Policy in the Euro Area

Monetary policy in the United States has been documented to have switched from reacting weakly to inflation fluctuations during the 1970s, to fighting inflation aggressively from the early 1980s onward. In this paper, I analyze the impact of the U.S. monetary policy regime switches on the Eurozone. I construct a New Keynesian two‐country model where foreign (U.S.) monetary policy switches regimes over time. I estimate the model for the U.S. and the Euro Area using quarterly data and find that the United States has switched between those two regimes, in line with existing evidence. I show that foreign regime switches affect home (Eurozone) inflation and output volatility and their responses to shocks, substantially, as long as the home central bank commits to a time‐invariant interest rate rule reacting to domestic conditions only. Optimal policy in the home country instead requires that the home central bank reacts strongly to domestic producer‐price inflation and to international variables, such as imported goods relative prices. In fact, I show that currency misalignments and relative prices play a crucial role in the transmission of foreign monetary policy regime switches internationally. Interestingly, I show that only marginal gains arise for the Euro Area when the European Central Bank (ECB) adjusts its policy according to the monetary regime in the United States. Thus, a simple time‐invariant monetary policy rule with a strong reaction to Producer Price Index (PPI) inflation and relative prices is enough to counteract the effects of monetary policy switches in the United States.     

The dynamic effects of monetary policy: A structural factor model approach

A structural factor model for 112 US monthly macroeconomic series is used to study the effects of monetary policy. Monetary policy shocks are identified using a standard recursive scheme, in which the impact effects on both industrial production and prices are zero. The main findings are the following. First, the maximal effect on bilateral real exchange rates is observed on impact, so that the “delayed overshooting” puzzle disappears. Second, after a contractionary shock prices fall at all horizons, so that the price puzzle is not there. Finally, monetary policy has a sizable effect on both real and nominal variables.     

What Is in a Name? Purchases and Sales of Financial Assets as a Monetary Policy Instrument

This paper studies optimal interest rate and balance sheet policy in a quantitative New Keynesian model with a constrained financial sector, considering commitment versus discretion in monetary policy design and fixing either instrument. Optimal interest rate policy under commitment (discretion) achieves 93.0% (82.6%) of the potential gains to dual instrument monetary policy under commitment. Optimal discretionary dual instrument policy eliminates the cost of commitment limitations and exhibits no inflationary bias. Under commitment, the optimal balance sheet policy eliminates the cost of suboptimal interest rate policy, for example, an interest rate peg. Finally, I compare optimal policies to implementable rules-based policies.     

Optimal Monetary Policy in an Operational Medium‐Sized DSGE Model

We show how to construct optimal policy projections in Ramses, the Riksbank’s open‐economy medium‐sized dynamic stochastic general equilibrium model for forecasting and policy analysis. Bayesian estimation of the parameters of the model indicates that they are relatively invariant to alternative policy assumptions and supports our view that the model parameters may be regarded as unaffected by the monetary policy specification. We discuss how monetary policy, and in particular the choice of output gap measure, affects the transmission of shocks. Finally, we use the model to assess the recent Great Recession in the world economy and how its impact on the economic development in Sweden depends on the conduct of monetary policy. This provides an illustration on how Rames incoporates large international spillover effects.     

Monetary Policy Rules in an Open Economy with Heuristics: Which Model Is Best?

The choices of policy targets and the formation of agents’ expectation have been critical issues for reconsidering monetary policy management since 2008. The purpose of this article is to evaluate macroeconomic stability in a New Keynesian open economy in which agents experience cognitive limitations. The (im)perfect credibility of various monetary policies (e.g., a Taylor-type rule, strict domestic inflation targeting, strict CPI inflation targeting, exchange rate peg) may lead agents to react according to their expectation rules, and then create various degrees of booms and busts in output and inflation. Therefore, relaxation of the rational expectation hypothesis has potential consequences for policy designs. Our simulations confirm that the business cycles induced by animal spirits are enhanced by strict inflation targeting. Furthermore, a Taylor-type (CPI or domestic inflation) rule or a credible exchange rate pegging system can improve social welfare and stability in an open economy.     

我国财政政策和货币政策相互作用的实证研究——基于政策在价格决定中的作用

本文选取1980～2009年度数据为样本,利用MS-VAR模型检验我国财政政策和货币政策在价格决定中的作用区制。实证结果表明,在1980～1997年间,价格为货币政策主导区制;之后为财政政策主导区制。为检验该结果的稳健性,本文分别对李嘉图等式和财富效应进行分样本区间的实证分析。最后,本文选取1996～2010年的月度数据,利用MS-OLS模型检验财政政策和货币政策与价格的关系,发现我国互补的宏观经济政策在稳定物价上是有效的。     

开放经济下中国货币政策独立性分析——兼论通货膨胀

开放经济下,中国货币供应量受制于外汇储备使货币政策丧失独立性。双顺差积聚起的巨额外汇储备是影响中国货币政策独立性的主要因素,通货膨胀也与货币政策的内生有关。应该改善一直以来实施的强制结售汇制度为意愿结售汇制度,加速利率市场化进程,尽快打通货币市场利率与金融机构存贷款利率的传导渠道,提高货币政策的效率,才能从根本上避免长期使用外汇冲销干预带来的各种政策弊端和机制扭曲。     

Macroeconomic factors and yield curve for the emerging Indian economy

This article investigates the dynamic linkages between the estimated parameters of a zero coupon yield curve and macroeconomic variables like inflation, gross domestic product growth in the presence of a monetary policy indicator in India for the period July 1997 to February 2004. The study finds that there exists strong causality from financial factors, defined by three parameters of the yield curves (‘Level’, ‘Slope’, ‘Curvature’) to macroeconomic factors; growth, inflation and monetary policy indicators (changes in the call money rate). However, the causality in the opposite direction is found to be weaker. It is found that theyield and macro factors do not cause each other before the launch of a liquidity adjustment facility, so the evidence of causality from financial to macroeconomic factors can be attributed to the introduction of a liquidity adjustment facility in June 2000. The causality from yield factors to macro factors is primarily driven by the fact that the ‘changes in level’ of yield curve brings an impact on inflation through the changes in monetary policy. This finding suggests that monetary policy plays a key role in driving the causality. This also implies that the indirect instrument of monetary policy mechanism is becoming increasingly important to influence the aggregate demand in the economy.     

三元悖论框架下德国经济政策组合研究及启示——以1971—1990年为例

三元悖论理论因为其直观性被当做相关制度选择的标准,在研究了1971—1990年间德国的经验后发现,尽管在三元悖论框架下选择浮动汇率制度和资本开放,获得货币政策的独立性是可行的,但德国中央银行为了经济的良好运行,会有选择性地放弃货币政策的独立性。德国的经验告诉我们,资本账户的开放应该以货币政策的有效性为基础,一国经济政策的选择应该以经济长期稳定均衡发展为依据,单纯以货币政策的独立性作为政策选择的参考标准会有失偏颇。