Structural Reform and Transparency in a Monetary Union

We assess how central bank transparency affects the incentives for labour market reform in a monetary union. We introduce transparency as affecting unemployment forecasts that provide information that the central bank has to the private sector and the governments. Under conditions of monetary policy opaqueness and inflation bias, we show that monetary union may induce more reform (as governments mitigate inflation surprises under idiosyncratic shocks), albeit to a lesser extent when inflation bias is only present at the national level. In the absence of inflation bias, central bank transparency, by eliminating inflation surprises in the face of idiosyncratic shocks, induces less reform in a currency union relative to monetary autonomy. Altogether, these results point to the need for a strong political commitment to reform so that member states benefit most from the combination of a credible and transparent single monetary policy with measures aimed at improving competitiveness and enhancing long-term growth.     

Bank competition and monetary policy

There is an apparent theoretical discrepancy between the effects of monetary policy shocks on economies with differently competitive banking sectors. We employ cross-country data to investigate this hypothesis with two different approaches. First, using aggregate data we analyze the correlation between two indices: (i) a cumulative impulse response function providing an index of the effect of monetary policy shocks; and (ii) Panzar and Rosse's H-statistic as an index of the state of bank competition. Second, using disaggregated data we regress bank lending on the interaction of bank competition and monetary policy shocks. The first approach does not provide any evidence of a relationship between monetary policy shocks and bank competition. However, the second approach suggests that competition in the banking industry leads to smaller monetary policy effects on bank lending.     

The lending channel of monetary policy in Indonesia

This study evaluates the bank lending channel of monetary policy in Indonesia by using quarterly bank-level data over the period of 2005-2016. I find that the lending channel of monetary policy works for all banks, both large and small. The results suggest that higher capital buffers and better liquidity positions moderate the impact of changes in monetary policy on credit growth for large banks, while capital buffers and liquidity positions do not alter the strength of the lending channel for small banks. The findings indicate that the central bank can use prudential instruments affecting capital buffers and liquidity positions for managing the strength of adjustment in the monetary policy interest rate on bank credit growth.     

Dual-track interest rates and the conduct of monetary policy in China

China has a dual-track interest-rate system: bank deposit and lending rates are regulated while money and bond rates are market-determined. The central bank also imposes an indicative target, which may not be binding at all times, for total credit in the banking system. We develop and calibrate a theoretical model to illustrate the conduct of monetary policy within the framework of dual-track interest rates and a juxtaposition of price- and quantity-based policy instruments. We show the transmission of monetary policy instruments to market interest rates, which, together with the indicative credit target in the banking system, ultimately are the means by which monetary policy affects the real economy. The model shows that market interest rates are most sensitive to changes in the benchmark deposit interest rates, significantly responsive to changes in the reserve requirements, but not particularly reactive to open market operations. These theoretical results are verified and supported by both linear and GARCH models using daily money and bond market data. Overall, the findings of this study help us to understand why the central bank conducts monetary policy in China the way it does, using a combination of price and quantitative instruments with differing degrees of potency in terms of their influence on the cost of credit.     

Does bank competition affect the transmission mechanism of monetary policy through bank lending channel? Evidence from India

This paper empirically investigates how intensified competition in the Indian banking affects the transmission of monetary policy through bank lending channel over the period 1997–2017. Additionally, this study examines the impact of deposit and loan market channels on bank’s credit growth. Results obtained through two-step system-GMM reveal that a higher degree of market power weakens the monetary policy transmission mechanism for the entire banking industry and across ownerships. Results show that higher market power in the deposit and loan markets weakens the impact of monetary policy on bank loan supply. The findings of this study extend important policy measures that can strengthen the transmission mechanism of monetary policy by reducing the adverse effects of changes in bank competition.     

中国货币政策行业非对称效应研究——基于30个行业面板数据的实证研究

本文沿银行信贷、资产负债表和相对价格三条货币政策传导渠道,从理论上分析货币政策行业非对称效应的形成机理;并基于30个典型行业月度面板数据、分四个递进层次建立实证模型检验理论结果。研究发现,行业间特征差异显著,货币政策冲击经传导后对各行业影响程度差别非常之大;行业运营资本比重、银行信贷依赖程度、财务杠杆水平和劳动密集程度越高以及行业内公司的平均规模越小,受货币政策的冲击越大。把握货币政策行业非对称效应的规律并发挥政策在调结构方面的作用,对于中央银行有较强的现实意义。中小型公司和劳动密集型行业受政策影响最大,紧缩性货币政策会加剧中国的失业问题。中央银行应尽可能提高政策的针对性和灵活性,配合信贷政策在总量和结构上调控经济。     

Expansionary monetary policy and credit allocation: Evidence from China

We identify the impact of expansionary monetary policy in China during the 2008–2009 global financial crisis on the credit and investment allocation among firms. We obtain robust evidence that expansionary monetary policy led to the misallocation of bank credit to less productive firms after controlling for confounding factors. However, we find that investment increased more for more productive firms. Additional analyses show that this occurred partly because more productive firms hoarded cash before the crisis, and partly because less productive firms invested more in financial assets.     

Implications of the Dual Banking System in the US

This paper examines the differences in characteristics of federal and state chartered banks by using individual commercial bank’s data sets from 1984 to 2006. The findings indicate significant differences between these two groups of banks in terms of their asset and liability management strategies. In line with these differences, credit channel of monetary policy is found to work differently for state and federal banks. Federal banks are found to be more responsive to monetary policy changes.     

Microdata Evidence on the Bank Lending Channel in the Netherlands

This study contributes to the empirical evidence on the lending channel in the Netherlands using individual bank data. The main conclusion is that a lending channel is operative in the Netherlands. However, it is only operative for unsecured lending and not for secured lending, possibly because loans with government guarantees get special treatment by banks. Effects of monetary tightening on unsecured lending are more negative for smaller, less liquid and less capitalised banks, in line with the lending channel theory. The contribution of this study is that it gives evidence that the monetary policy impact on bank lending also depends on the market segment in which a bank is active. The evidence suggests that the policy impact is weaker on credit to households than it is on lending to firms.     

Monetary policy transmission and macroeconomic policy coordination in Pacific island countries

During the global financial crisis, central banks in Pacific island countries eased monetary policy to stimulate economic activity. Judging by the ensuing movements in commercial bank interest rates and private sector credit, monetary policy transmission appears to be weak. This is confirmed by an empirical examination of interest rate pass‐through and credit growth. Weak credit demand and under‐developed financial markets seem to have limited the effectiveness of monetary policy, but the inflexibility of exchange rates and rising real interest rates have also served to frustrate the central banks' efforts despite a supporting fiscal policy. While highlighting the importance of developing domestic financial markets in the long run, this experience also points to the need to coordinate macroeconomic policies and to use all macroeconomic tools available in conducting countercyclical policies, including exchange rate flexibility.     

从差别存款准备金率制度看金融监管创新

在我国货币供应量、银行信贷增速出现了回升和某些行业已经出现投资性过热的背景下 ,央行宣布从 2 0 0 4年 4月 2 5日起实行差别存款准备金率制度。这一政策不仅是一项旨在调节货币供求的货币政策 ,而且是金融监管的一个创新。本文阐述了该政策的基本原理 ,介绍了该政策出台的     

Bank loans and the effects of monetary policy in China: VAR/VECM approach

In this paper, we test the differential effects of monetary policy shock on aspects of banks' balance sheets (deposits, loans, and securities) across bank categories (aggregate banks, state banks, and non-state banks) as well as on macroeconomic variables (output, consumer price index, exports, imports, and foreign exchange reserves). We do so by estimating VAR/VEC Models to uncover the transmission mechanisms of China's monetary policy. Also we identify the cointegrating vectors to establish the long-run relationship between these variables. By using monthly aggregate bank data and disaggregated data on bank and loan types from 1996 to 2006, our study suggests the existence of a bank lending channel, an interest rate channel and an asset price channel. Furthermore, we discuss and explore the distribution and growth effects of China's monetary policy on China's real economy. In addition, we investigate the effects of China's monetary policy on China's international trade. Finally, we identify the cointegrating vectors among these variables and set up VEC Models to uncover the long-run relationships that connect the indicators of monetary policy, bank balance sheet variables and the macroeconomic variables in China.     

Financial Deregulation and the Bank Lending Channel in Developing Countries: The Case of Indonesia

The dominant role of commercial banks as a source of finance and the considerable asymmetry of information in financial markets in developing countries have raised an argument that the bank lending channel of monetary transmission mechanism would be very important in such countries. This study addresses the issue by investigating empirically whether there are differential effects of monetary policy on banks' balance sheets, and its implications to the existence of the bank lending channel of monetary policy in Indonesia, especially since the early 1980s when the government adopted a policy of financial deveculation. We find significant differences of balance sheet behaviour across bank classes in response to a change in monetary policy, consistent with the predictions of the bank lending view. We also found that because of access to foreign funds and the existence of bank loan commitment, the monetary policy was unable to constrain loan supply by the large (state) banks, indicating that the bank lending channel operates through smaller (non-state) banks.     

紧缩性货币政策下城市商业银行营销策略

受国内外经济环境共同影响,我国央行将在较长的时间内实行从紧的货币政策,它对城市商业银行的基础货币环境、资金运用、信贷结构以及收入的影响是双重的。城市商业银行应该积极应对,运用差异化营销、关系营销等策略,通过树立品牌效应,积极推进金融产品创新和高级人才培养,消除紧缩性货币政策带来的负面效应。     

The Asymmetric Loss Function and the Central Banks’ Ability in Developing Countries

Abstract

This paper seeks to develop a theoretical strand of research in monetary economics by modelling central bank ability in the loss function. Recently, many working papers issued by the International Monetary Fund (IMF) prove that some central banks, particularly from developing countries, are suffering from serious operational problems that might affect their abilities to control the economy. Simultaneously, a literature review shows that the movements are toward using asymmetric loss function. Therefore, we utilize this function in the standard monetary approach. The results proved that both central bank ability and preference in developing countries are fundamental to explain inflation bias and the movement of monetary policy instrument.     

The Evolution of Australian Monetary Policy in the 1950s

The 1950s in Australia was a decade of major change in both central banking and the financial system. The changes fed upon one another: financial innovation responded to monetary policy; the authorities adapted their strategy in response. The private banks resisted the harnessing of their balance sheets to policy, and a protracted process of conflict and compromise unfolded. Meanwhile, the growth of non‐bank financial institutions undermined bank‐centred policy. Official controls on bank interest rates opened a space for the new intermediaries. The central bank's attempt to restrain their growth contributed to a credit squeeze at the turn of the 1960s.     

Bank profitability and the bank lending channel: Evidence from China

This paper uses bank-level data to investigate whether the impact of monetary policy on bank lending depends on the characteristics of Chinese banks during the period 1985–2007. We find that the impact of monetary policy on lending is weaker for larger banks and banks with lower levels of liquidity, and that banks’ responses to monetary policy do not necessarily vary according to their capital. Further, to identify the bank lending channel more clearly, we test whether the impact of monetary policy varies according to profitability. The results show that profitable banks tend to be less sensitive to monetary policy, because when tight monetary policy leads to a fall in deposits, less profitable banks face a higher cost of capital.     

Monetary Policy Implementation in Japan: What They Say versus What They Do

Since the 1970s, many central banks – including the Bank of England, the Bank of France, the Bank of Korea and the Bank of Japan – have announced that they have ceased direct credit controls. Researchers have tended to accept 'what they say', without gathering empirical evidence on 'what they do'. The Bank of Japan announced that it was abandoning direct credit controls in 1982. Since then, the monetary policy literature on Japan has focussed on formal policy tools, such as interest rates. This paper presents empirical research on the actual implementation of monetary policy by the Japanese central bank. The emphasis is on the period in the mid- to late-1980s when monetary policy was stimulatory and real-estate-related lending expanded rapidly, and the period in the early 1990s, when asset prices fell, resulting in the subsequent banking crisis and recession. The paper first briefly surveys the literature. Empirical research is then presented in three parts. Secondary sources are accessed to gain information on the mechanism of monetary policy conduct. New field work is then presented, which uses primary sources to probe the details of monetary policy implementation. Finally, econometric evidence is gathered to test various hypotheses concerning monetary policy procedures. The research successfully establishes the details and nature of the Bank of Japan's monetary policy implementation during the 1980s and early 1990s. The findings suggest the need for a modification of the generally prevailing view, as well as the need for further research on the actual implementation of monetary policy in other countries.     

关于利率政策与货币政策效力关系的一点思考与探索

利率政策会影响一国货币政策的制定和实施，尤其在开放经济条件下，利率效应在国际间存在传递，加剧了央行制定货币政策的难度。货币政策效力趋于减弱甚至无效。本文从消费、投资两个方面分析了我国利率政策效率低下，货币政策效力不大。在此基础上，提出了如何改善利率政策，进而提高货币政策效力。     

货币政策规则非对称性及其在我国的检验

 基于最优货币政策规则的研究框架,本文从非线性总供给曲线和中央银行非对称偏好的角度来阐述货币政策规则中非对称性的理论形成,并利用GMM方法估计和检验了我国货币政策反应函数中的非对称性。研究结果表明非线性总供给曲线可以作为解释我国货币政策非对称反应的一种来源,更重要的是,中央银行对通胀缺口存在负向偏好,且这种负向的通胀偏好可以很好地解释我国“后金融危机时代”的通货膨胀偏差,但对产出缺口的非对称偏好并不显著。此外,不同通胀目标的稳健性研究表明,中央银行都存在负向的通胀偏好,而且该负向偏好随着通胀目标的降低而逐渐减弱。