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1.
Price Stability and the Case for Flexible Exchange Rates 总被引:1,自引:1,他引:0
We revisit Friedman’s case for flexible exchange rates in a small open economy with several distortions and rigidities and
a variety of domestic and external shocks. We find that, for external shocks, the flexible exchange rate regime outperforms
the fixed regime independent of the source of domestic nominal rigidities provided that the monetary authorities pursue a
policy of strict inflation targeting. For domestic supply shocks, a joint policy of a flexible exchange rate and strict inflation
targeting fares well when the main source of nominal rigidities is in the domestic goods markets, but not if rigidities arise
in the labor markets. 相似文献
2.
Guangling Liu 《The South African journal of economics. Suid-afrikaanse tydskrif vir ekonomie》2013,81(3):330-345
The conventional view is that a monetary policy shock has both supply‐side and demand‐side effects, at least in the short run. Barth and Ramey show that the supply‐side effect of a monetary policy shock may be greater than the demand‐side effect. We argue that it is crucial for monetary authorities to understand whether an increase in expected future inflation is due to supply shocks or demand shocks before applying contractionary policy to forestall inflation. We estimate a standard New Keynesian dynamic stochastic general equilibrium model with the cost channel of monetary policy for the South African economy to show that whether the South African Reserve Bank should apply contractionary policy to fight inflation depends critically on the nature of the disturbance. If an increase in expected future inflation is mainly due to supply shocks, the South African Reserve Bank should not apply contractionary policy to fight inflation, as this would lead to a persistent increase in inflation and a greater loss in output. Our estimation results also show that with a moderate level of cost‐channel effect and nominal rigidities, a New Keynesian dynamic stochastic general equilibrium model with the cost channel of monetary policy is able to mimic the price puzzle produced by an estimated vector autoregressive model. 相似文献
3.
In the immediate aftermath of Hurricane Katrina, speculation arose that the Federal Reserve might respond by easing monetary policy. This article uses a dynamic stochastic general equilibrium (DSGE) model to investigate the appropriate monetary policy response to a natural disaster. We show that the standard Taylor rule response in models with and without nominal rigidities is to increase the nominal interest rate. That finding is unchanged when we consider the optimal policy response to a disaster. A nominal interest rate increase following a disaster mitigates both temporary inflation effects and output distortions that are attributable to nominal rigidities. 相似文献
4.
This paper examines whether price level or inflation targeting would have been appropriate policy choices for Japan during its disinflation and deflation period. We employ Markov switching and structural vector autoregressions, together with structural IS equations, to investigate monetary policy effectiveness during the Japanese disinflation. We find evidence of regime switching in the mid-1990s in a model including the nominal policy interest rate. When monetary policy shocks are identified by using the McCallum rule for monetary base, a monetary expansion is found to have a statistically significant impact on prices. Moreover, a lower real ex ante interest rate can still stimulate the economy despite the zero lower bound on nominal interest rates. 相似文献
5.
This paper develops a New Keynesian dynamic stochastic general equilibrium model with energy factors to study various channels through which China's economic fluctuations are linked to energy price shocks and to search for the optimal monetary policy to cope with energy price shocks. We conclude that there are channels through which changes in energy prices will have the following cause–effect relationships. First, a rise in energy price as a negative technology shock will raise the costs of providing capital services per unit of capital, thereby reducing output. Second, a rising energy price distorts the intertemporal choices of households and firms, creating downward pressure on the expected future return on capital. Third, an energy price shock places upward pressure on the marginal costs associated with an increase in inflation. Numerical simulation results show that a positive energy price shock has a positive effect on energy technology improvements. In addition, the effects of energy price shocks can be mitigated by nominal rigidities, and interest rate rules will determine the magnitude of those effects. Using the efficient frontier method, we also show that optimal monetary policy in China should help control energy price volatility. 相似文献
6.
C.K. Folkertsma 《De Economist》1999,147(4):461-488
This paper describes a model in which monetary shocks have persistent real effects. Starting from the limited participation model of Christiano (1991) with capital adjustment costs as suggested by Dow (1995) it is confirmed that costs of equipment installation and restrictions on consumer portfolio choices alone cannot account for the observed effects of monetary policy. However, after introducing nominal wage contracts as a third friction, the model generates real effects of monetary shocks. It is shown that these real effects are highly persistent for a realistic size of adjustment costs and strongly autocorrelated money growth shocks which are typical for Europe. 相似文献
7.
Ali Dib 《Open Economies Review》2011,22(5):769-796
This paper compares monetary policy effects in New-Keynesian models of small open and closed economies fit to Canada. A monetary
policy rule allows the central bank to systematically manage the nominal interest rate in response to inflation, output, and
money growth variations. The structural parameters of a small open-economy (SOE) and a closed-economy (CE) models are estimated
using a maximum-likelihood procedure with a Kalman filter. Estimation results show that the SOE and CE models lead to qualitatively
similar estimates for the Canadian economy. Also, the effects of monetary policy shocks, and of other domestic shocks, generated
in the SOE model resemble to those generated in the CE model. In addition, the forecast-error decomposition shows that foreign
shocks account for small fractions of the variability observed in Canadian macroeconomic variables. 相似文献
8.
Juha Tervala 《Open Economies Review》2010,21(5):629-654
This paper analyses the international transmission of monetary policy in the case where all export prices are set in US dollars.
“Dollar pricing” implies that the international effects of US monetary shocks are different from those of European shocks
because of an asymmetric exchange rate pass-through to import prices. A dollar pricing model can explain the observed asymmetry
in the transmission of monetary policy: US monetary policy affects US output more than European monetary policy affects European
output. I also show that the current account is an important channel through which monetary policy affects welfare. The paper
concludes that under dollar pricing a monetary expansion is a beggar-thy-neighbour policy. 相似文献
9.
Torben M. Andersen 《Open Economies Review》2010,21(4):483-514
This paper takes a first step in analysing how a monetary union performs in the presence of labour market asymmetries. Differences
in wage flexibility, market power and country sizes are allowed for in a setting with both country-specific and aggregate
shocks. The implications of asymmetries for both the overall performance of the monetary union and the country-specific situation
are analysed. It is shown that asymmetries are not only critical for country-specific performance but also for the overall
performance of the monetary union. A striking finding is that aggregate output volatility is not strictly increasing in nominal
rigidities but hump-shaped. Moreover, a disproportionate share of the consequences of wage inflexibility may fall on small
countries. In the case of country-specific shocks, a country unambiguously benefits in terms of macroeconomic stability by
becoming more flexible, while this is not necessarily the case for aggregate shocks. There may thus be a tension between the
degree of flexibility considered optimal at the country level and at the aggregate level within the monetary union. 相似文献
10.
This article employs a rational expectations IS-LM model with price adjustment to study the effect of domestic monetary and fiscal policy and world interest rate disturbances on the real and nominal small open economy term structure of interest rates. The impact of both temporary and permanent shocks are investigated. Notable results include the fact that monetary expansions lead to positive yield curves, while the implications of fiscal expansions and increases in the world interest rate depend crucially on the duration of the shock. 相似文献
11.
The Performance of Simple Fiscal Policy Rules in Monetary Union 总被引:1,自引:1,他引:0
The paper analyses the stabilising potential of simple fiscal policy rules for a small open economy in monetary union in a 2-region DSGE model with nominal and real rigidities. We consider simple fiscal instrument rules for government purchases, transfers, and consumption, labour and capital taxes in analogy to interest rate rules in monetary policy. The paper finds a dichotomy in the welfare effects of fiscal policy for liquidity-constrained and intertemporal optimising households, i.e. policies enhancing the welfare of one group tend to reduce the welfare of the other one. The moderate average welfare gains from optimal policy contrast with potentially large welfare losses from non-optimal policy. Fiscal rules that respond to employment fluctuations may be preferred to fiscal rules responding to indicators of price competitiveness, because optimal policy corresponds more closely to the idea of countercyclical stabilisation in the former case. The simulations also emphasise the crucial impact of the budgetary closure rule on the welfare consequences of fiscal business-cycle stabilisation. 相似文献
12.
This paper contributes to the research on regional economic responses to monetary policy shocks in two ways. First, rather
than just model the Canadian economy at the national level, we examine the impact of monetary policy shocks across five separate
Canadian regions. The second extension of the literature is our focus upon estimating the impact from both Canadian and U.S.
monetary policy shocks upon regional Canadian economic activity. The findings are broadly consistent with results from previous
research modeling the national Canadian economy, but noteworthy regional differences are observed. Eastern Canadian regions,
defined as Ontario (ON), Quebec (QU), and Atlantic (AT), exhibit greater sensitivity to Canadian monetary policy shocks than
do Western Canadian regions. We also find that U.S. monetary policy shocks have a discernable impact on Canadian regional
economic activity, but the impact varies across regions. For the three Eastern Canadian regions ON, QU, and AT, there is a
significant impact upon regional economic activity from a U.S. monetary policy shock, but not for the two Western Canadian
regions Prairie (PR) and West (WE). Moreover, the impact on ON, QU, and AT from a fed funds shock is quite similar to the
impact from a shock to the Canadian Bank Rate. 相似文献
13.
Abstract Staggered wage-setting and price-setting have frequently been used to construct business cycle models that can replicate long-lasting real effects of monetary shocks. We examine how the two seemingly equivalent sources of nominal rigidities compare in generating persistence in real output following monetary expansion. We show that staggered wage-setting is in general better able to generate persistence, because it can lower the procyclicality of marginal cost considerably more than staggered price-setting does. 相似文献
14.
The Anh Pham 《International Economics and Economic Policy》2011,8(3):307-322
The paper aims to analyse the question of how cyclical fluctuations might affect long run growth. The analysis is based on
a dynamic stochastic general equilibrium model for an imperfectly competitive economy with fully optimising agents. The model
is characterized with nominal rigidities, an endogenous technology, and multiple shocks. It predicts either a negative or
positive relationship between short run volatility and long run growth depending on the source of shocks and the reaction
of the central bank. The model also shows that, even when the negative relationship exits the policy that is designed to stabilise
short run volatility may either increase or decrease growth depending on the source of shocks. 相似文献
15.
This study examines the macroeconomic effects of monetary policy in Japan. We apply the new identification strategy proposed by Bu et al. (2021) to the Japanese case and estimate monetary policy shocks that bridge periods of conventional and unconventional monetary policymaking. We show the macroeconomic effects of monetary policy; a contractionary monetary policy shock significantly decreases output and inflation rates even under the effective lower bound. However, because the shorter-term and longer-term nominal interest rates are already close to zero, the magnitude of monetary policy shocks on the macroeconomic variables is modest. 相似文献
16.
Mark Lungu 《Revue africaine de developpement》2007,19(3):432-468
Abstract: Macroeconomic models currently used by policymakers generally assume that the functioning of financial markets can be fully summarized by financial prices, because the Modigliani and Miller (1958) theorem holds. However, the assumption that this theorem holds is questionable. This paper argues that there are frictions in the market which traditional models based on the Modigliani and Miller theorem fail to take into account in explaining how monetary policy and other shocks are transmitted to the economy and points to new directions. A comprehensive macroeconomic model should incorporate financial market interactions to enhance the understanding of the transmission mechanisms of monetary policy and other shocks. If market dynamics are not taken into account, macroeconomic models used by policymakers may point to wrong policy choices. Motivated by the lack of assessment of the recently launched financial reforms, deregulation, consolidations, financial innovations and joint payment systems, the paper assesses the process of monetary transmission mechanism by investigating evidence of a bank lending channel in SADC during the period 1990–2006 using data from the banking sector. Data from a panel of banks is used to identify shifts in the loan supply curve in response to changes in monetary policy using a vector autoregression (VAR) model. Although the results are mixed the paper generally reports the existence of a bank‐lending channel in all SADC countries in the sample. The take‐off point for monetary policy effects differs from one country to another. 相似文献
17.
In this paper we develop Dixon and Hansen (1997) to allow for two-sector small open economy in which the non-traded sector is monopolistic. The closed economy version of the model generalises Dixon/Hansen to allow for diminishing returns on the traded sector. We compare the short-run impact of menu costs on the economy and also the size of menu costs needed to sustain nominal rigidity in both the open and closed economies. We find that whilst the welfare gains from monetary expansion are of a similar magnitude, nominal rigidity can occur for much smaller menu costs than in the closed economy case. Hence we argue that menu costs and the resultant nominal rigidities are more likely to be important in an open economy. 相似文献
18.
Michal Andrle Andrew Berg R. Armando Morales Rafael Portillo Jan Vlcek 《The South African journal of economics. Suid-afrikaanse tydskrif vir ekonomie》2015,83(4):475-505
We develop a semi‐structural new‐Keynesian open‐economy model – with separate food and non‐food inflation dynamics to study the sources of inflation in Kenya in recent years. To do so, we filter international and Kenyan data (on output, inflation and its components, exchange rates and interest rates) through the model to recover a model‐based decomposition of most variables into trends (or potential values) and temporary movements (or gaps) – including for the international and domestic relative price of food. We use the filtration exercise to recover the sequence of domestic and foreign macroeconomic shocks that account for business cycle dynamics in Kenya over the last few years, with a special emphasis on the various factors (international food prices, monetary policy) driving inflation. We find that while imported food price shocks have been an important source of inflation, both in 2008 and more recently, accommodating monetary policy has also played a role, most notably through its effect on the nominal exchange rate. We also discuss the implications of this exercise for the use of model‐based monetary policy analysis in sub‐Saharan African countries. 相似文献
19.
Chak Hung Jack Cheng 《Global Economic Review》2013,42(3):221-243
AbstractThis paper develops a small open economy model with nominal rigidities and search-matching frictions to study the implications of exchange rate pass-through for monetary policy in emerging countries. I find that, with complete exchange rate pass-through, the optimal policy rule features unemployment targeting as well as inflation targeting. However, the welfare gain from responding to unemployment fluctuations diminishes as the rate of exchange rate pass-through to import prices decreases. With low exchange rate pass-through, the optimal monetary policy is strict inflation targeting. 相似文献
20.
We log-linearise the Dellas and Tavlas (DT) model of monetary union and solve it analytically. We find that the intuition
of optimal currency area analysis of DT’s second generation open economy model is essentially the same as that of first generation
models. Monetary union results in no welfare loss if its member states are symmetric. However, asymmetry causes loss in welfare
both due to the failure of the union policy to deal suitably with a country’s asymmetric shocks and due to an active monetary
policy by the union in pursuit of its distinct objectives. The asymmetry in DT is largely due to the differing wage rigidities
across countries.
JEL Classification Numbers: F41, F42, E4 相似文献