General equilibrium real and nominal interest rates

We derive the general equilibrium short-term real and nominal interest rates in a monetary economy affected by technological and monetary shocks and where the price level dynamics is endogenous. Assuming fairly general processes for technology and money supply, we show that an inherent feature of our equilibrium is that any real variable dynamics, in particular that of the short-term real interest rate, is driven by both monetary and real factors. This money non-neutrality is generic, as it does not stem from any friction such as price stickiness, or from a particular utility function. Non-neutrality obtains because the ex ante cost of real money holdings is random due to inflation uncertainty. We then analyze in depth a specialized version of this economy in which the state variables follow square root processes, and the representative investor has a log separable utility function. The short-term nominal rate dynamics we obtain encompasses most of the dynamics present in the literature, from Vasicek and CIR to recent quadratic and, more generally, non-linear interest rate models. Moreover, our results pave the way to several new nominal term structures.     

Banking with nominal deposits and inside money

Bank runs in the literature take the form of withdrawals of demand deposits payable in real goods, which deplete a fixed reserve of goods in the banking system. That framework describes traditional bank runs based on currency withdrawals as occurred historically in the US and more recently in developing countries. However, in a modern banking system, large withdrawals typically take the form of electronic payments of inside money, with no analog of a depletion of a scarce reserve from the banking system. In a new framework of nominal demand deposits repayable in inside money, pure liquidity-driven bank runs do not occur. If there were excessive early withdrawals, nominal deposits would hedge the bank and flexible monetary prices in the goods market would limit real consumption. The maturity mismatch of short term liabilities and long term assets is not sufficient for multiple equilibria bank runs without other frictions. A key role of the bank is to ensure optimal real liquidity, which allows markets to optimally distribute consumption goods through the price mechanism.     

Divisia Monetary Aggregates,the Great Ratios,and Classical Money Demand Functions

King et al. ( 1991 ) evaluate the empirical relevance of a class of real business cycle models with permanent productivity shocks by analyzing the stochastic trend properties of postwar U.S. macroeconomic data. They find a common stochastic trend in a three‐variable system that includes output, consumption, and investment, but the explanatory power of the common trend drops significantly when they add money balances and the nominal interest rate. In this paper, we revisit the cointegration tests in the spirit of King et al., using improved monetary aggregates whose construction has been stimulated by the Barnett critique. We show that previous rejections of the balanced growth hypothesis and classical money demand functions can be attributed to mismeasurement of the monetary aggregates.     

The role of money supply shocks in the short-run demand for money

Previous money-demand models are either inconsistent with contemporaneous adjustment of the price level to expected changes in the nominal money supply or imply implausible interest-rate fluctuations in response to innovations in nominal money. We propose a shock-absorber money- demand model in which money supply shocks affect the synchronization of asset transactions and so engender a temporary increase or decrease in desired money holdings. Expected changes do not engender such fluctuations in real money inventories. In simultaneous estimates for eight industrial countries, the shock-absorber model proved empirically superior.     

Monetary anticipations and the demand for money

It has recently been argued that unanticipated changes in nominal money supply should affect the real demand for money, and empirical results which appear to support this hypothesis have been presented. Unfortunately, the econometric techniques used by previous authors yield severel biased estimates. In this paper we show how valid estimates may easily be obtained, and present some illustrative empirical results using U.S. data. These results do not support the conclusions of earlier authors. We find that unanticipated money supply changes do indeed affect the real demand for money, but with the wrong sign, and that anticipated changes also have a significant effect.A consistency test for all models employing the anticipated-unanticipated distinction is also proposed.     

Money Illusion and TIPS Demand

The market demand for the Treasury Inflation-Protected Securities (TIPS) is rather small. This is puzzling, as we show that an agent, who derives utility from real wealth and dynamically invests into multiple asset classes over a 30-year horizon, incurs a certainty equivalent loss of 1.6% per annum from not investing in inflation-indexed bonds. However, if the investor suffers from money illusion, the perceived loss is only 0.5% per annum. Furthermore, the perceived loss is totally negligible for an unsophisticated money-illusioned investor ignoring the time variation of risk premia. Money illusion causes significant portfolio shifts from inflation-indexed toward nominal bonds, with little effects on equity allocations, contributing to the low market demand for TIPS.     

Real Balance Effects,Timing, and Equilibrium Determination

By assuming that money balances at the beginning instead of at the end of the period provide transaction services, standard results on nominal and real determinacy in monetary models are overturned. The key is that predetermined real money balances can be a state variable. Whereas the determination of the absolute price level typically depends on fiscal policy under an exogenous interest setting, nominal determinacy is now achieved even when fiscal policy is Ricardian. Also, in contrast to the Taylor principle, the interest rate policy should respond passively to changes in inflation, thus ensuring nonoscillatory and locally stable equilibrium sequences.     

含有货币变量的宏观经济模型简析

现代宏观经济分析中,一般均衡框架是必不可少的重要因素。但是传统的一般均衡模型通常缺乏实际经济运行过程中一种不可或缺的因素———货币。所以,在传统的均衡或者非均衡模型中引入货币变量,并且判断和分析货币变量及货币政策的作用机制,就成为了货币经济学面对的一个挑战。通过对Tobin货币模型、货币内在效用模型和现金在先模型的分析表明,货币在经济中应该起到的确切作用和所承担的功能,尚未完全被清楚地认识,这为货币政策传导机制和作用机制过程中存在的不确定性留有大量理论探索的余地。     

Rational speculation and exchange rates

Models of exchange rates have typically failed to produce results consistent with the key fact that real and nominal exchange rates move in ways not closely connected to current (or past) macroeconomic variables. Models that rely on the same shocks to drive fluctuations in macroeconomic variables and exchange rates typically imply counterfactually-strong co-movements between them. We develop a model in which new information leads agents to change their rational beliefs about risk premia on foreign exchange markets. These changes in risk premia work through asset markets to cause real and nominal exchange rates to change without corresponding changes in GDP, productivity, money supplies, and other key macro variables.     

A model of a currency shortage

Until the mid-19th century, shortages of currency were common. Moreover, a frequent policy response was a prohibition on the export of coins. We use a random matching model with indivisible money to explain a shortage and to judge the desirability of a prohibition on the export of coins. The model, although extreme in many regards, represents better than earlier models a demand for outside money and the problems that arise when that money is indivisible. It can also rationalize a prohibition on the export of money.     

Money,interest, inflation and growth in Turkey

This paper estimates a two equation model of inflation and growth in Turkey over the period 1950–1977. Inflation is determined by the difference between the rates of change in nominal money supply and real money demand. The short-run growth function consists of an expectations augmented Phillips curve, to which a credit availability effect is added. Under Turkey's disequilibrium institutional interest rate and exchange control systems, the real supply of domestic credit is determined, in large part, by real money demand which is, in turn, influenced by the real deposit rate of interest. The central bank can use both the nominal money supply and the nominal deposit rate of interest as policy instruments for stabilisation purposes.     

Monetary Pressures and Inflation Dynamics in Turkey: Evidence from P-Star Model

This paper uses the P-star model to explain inflation dynamics in Turkey. In P-star models, money determines the price gap, which is postulated to measure the pressure on prices in an economy. This pressure emerges when output is above the potential, the interest rate is lower than the natural rate, or there is pure excess money in the economy. The estimation results with the Turkish data show that the price gap contains considerable information for explaining inflation dynamics. Moreover, the model selection criterion that compares the empirical performance of the P-star model with the new classical Phillips curve relation favors the P-star model over the Phillips curve relationship. We conclude that money is efficacious in predicting risk in price stability in Turkey.     

开放经济下我国货币需求长期稳定性研究

本文利用我国1996—2011年的月度数据,分别使用Johansen协整检验与Engle—Granger两步法,对传统货币需求模型、开放条件下的货币需求模型以及引入制度因素的货币需求模型进行实证检验,研究货币需求的长期稳定性及各因素对货币需求的影响,建立货币需求模型,对于提高我国货币政策的调控效率具有重要意义。     

Risk Premium Shocks and the Zero Bound on Nominal Interest Rates

Quantitative dynamic stochastic general equilibrium (DSGE) models often admit that the zero bound on nominal interest rates does not constrain (optimal) monetary policy. Recent economic events, however, have reinforced the relevance of the zero bound. This paper sheds some light on this disconnect by studying a broad range of shocks within a standard DSGE model. In contrast to earlier studies, we find that risk premium shocks are key to building quantitative models where the zero bound is relevant for monetary policy design. Other commonly included shocks, such as productivity, government spending, and money demand shocks, are unable to push nominal rates close to zero.     

Commodity money inflation: theory and evidence from France in 1350–1436

This paper presents a theory of inflation in commodity money and supports it by evidence from inflationary episodes in France during the 14th and 15th centuries. The paper shows that commodity money can be inflated similarly to fiat money through repeated debasements, which act like devaluations. Furthermore, as with fiat money, demand for commodity money falls with inflation. However, at high rates of inflation demand for commodity money becomes insensitive to inflation, since commodity money has intrinsic value in addition to its transactions value. Finally, we show that anticipated stabilization reduces demand for commodity money.     

Money,Asset Prices,and the Liquidity Premium

This paper examines the effect of monetary policy on the market value of the liquidity services that financial assets provide, known as the liquidity premium. The theory predicts that money supply and nominal interest rates have positive effects on the liquidity premium, but asset supply has a negative effect. The empirical analysis with U.S. data confirms the theoretical predictions. The theory also proposes that the liquidity properties of assets can cause negative nominal yields when the money holding cost is low and liquid assets are scarce. The suggestive empirical findings in Switzerland to support this theoretical result are presented.     

关于我国货币需求函数研究的几点看法

本论文在对过去20年我国货币需求甬数相关研究的文献总结后发现:货币需求函数研究是个传承与分化的过程;"三分法"不利于货币需求函数研究的模型表达;当前文献中广泛使用的制度变量替代形式可能存在严重缺陷;货币层次的传统分类方法使货币需求函数稳定性检验产生误差.论文由此提出建立目标取向基础上的货币需求甬数体系.     

结构扭曲与中国货币之谜——基于转型经济金融抑制的视角

转型经济中金融抑制的表现是对利率和汇率的管制。本文认为利率和汇率管制降低了持币成本,直接增加了货币需求,其导致的投资和对外经济结构扭曲则间接地增加了货币需求。中国的高货币速增长就是为了满足超额货币需求所致。我们利用中国1994年第1季度到2010年第2季度数据估计了M1和M2的真实余额需求的协整和误差修正方程。实证结果基本支持本文的金融抑制假说。在一个保守估计下,我们认为金融的抑制至少导致了现有的M2/GDP偏高30%。     

Money stock revisions and unanticipated money growth

An important ‘empirical regularity’ is the strong positive effect of money shocks on output and employment. One strand of business cycle theory relates this finding to temporary confusions between absolute and relative price changes. These models predict positive output effects of unperceived monetary movements, but the quantitative importance of unperceived shifts in nominal aggregates is subject to question. Another strand of theory, based on long-term nominal contracts and analogous price-setting institutions, generates output effects from unanticipated, but not necessarily contemporaneously unperceived, money shocks. However, the real effects of unpredicted, but contemporaneously understood, monetary changes are not obviously consistent with efficient institutional arrangements. The present paper provides some empirical evidence on the two types of theories by analyzing the output effects associated with revisions in the money stock data, where the revisions are interpreted as components of unperceived monetary movements. The revisions turn out to have no significant explanatory power for output. Previous findings that innovations from an estimated money growth equation have a significant output effect remain intact when the revisions are included as separate explanatory variables. Overall, the study provides a small amount of evidence against the special role of unperceived, as opposed to unanticipated, money movements as a determinant of business fluctuations.     

经济开放与货币需求:国际金融风险及持币成本的测度

在中国开放经济体制下的基准货币需求模型中,本文将源于国际金融市场的持币成本设为遗漏潜变量,并构建特定的国际金融综合指数(CIFI)作为该潜变量的测度。借鉴机器学习与测度理论,本文利用对数误差修正模型提出了分步降维的CIFI构造算法,构造了长期CIFI和短期CIFI。结果表明,CIFI构造中的无监督降维步骤有助于减少高维金融数据中的冗余信息。实证分析发现,国际机会成本对中国货币需求具有规律性的前导影响,而在2007至2008年国际金融危机期间,央行的应急措施对长期CIFI所代表的非均衡冲击起到明显的阻截效果,对短期CIFI的影响基本是持续不变的。通过综合指数构造与宏观货币需求模型的算法连接,可以利用CIFI的构成结构从前导时间与影响强度两方面追踪冲击货币需求的国际金融风险的具体来源,这为宏观决策者监测国际金融市场提供了颇有规律的信息。在方法论上,本研究为如何利用模型监测国际金融市场影响宏观经济开辟了一条新路。