International dimensions of optimal monetary policy

This paper provides a baseline general equilibrium model of optimal monetary policy among interdependent economies with monopolistic firms and nominal rigidities. An inward-looking policy of domestic price stabilization is not optimal when firms’ markups are exposed to currency fluctuations. Such a policy raises exchange rate volatility, leading foreign exporters to charge higher prices vis-à-vis increased uncertainty in the export market. As higher import prices reduce the purchasing power of domestic consumers, optimal monetary rules trade off a larger domestic output gap against lower consumer prices. Optimal rules in a world Nash equilibrium lead to less exchange rate volatility relative to both inward-looking rules and discretionary policies, even when the latter do not suffer from any inflationary (or deflationary) bias. Gains from international monetary cooperation are related in a non-monotonic way to the degree of exchange rate pass-through.     

资本项目开放过程中的本外币政策：印度的经验

在资本账户自由化过程中,印度选择的是资本项目渐进开放、汇率制度有限管理、独立货币政策的中间路线。本文回顾了印度资本项目开放的历程,着重考察在此过程中汇率政策和货币政策的演变特征,以及政策实践中遇到的困难,最后结合我国经济金融改革的实际情况,得出几点有益的启示。     

Monetary policy spillovers and the trilemma in the new normal: Periphery country sensitivity to core country conditions

We investigate why and how the financial conditions of developing and emerging market countries (peripheral countries) can be affected by the movements in the center economies – the U.S., Japan, the Eurozone, and China. We apply a two-step approach. First, we estimate the sensitivity of countries' financial variables to the center economies [policy interest rate, stock market prices, and the real effective exchange rates (REER)] while controlling for global and domestic factors. Next, we examine the association of the estimated sensitivity coefficients with the macroeconomic conditions, policies, real and financial linkages with the center economies, and the level of institutional development. In the last two decades, for most financial variables, the strength of the links with the center economies have been the dominant factor while the movements of policy interest rate also appear sensitive to global financial shocks around the emerging market crises of the late 1990s and since the global financial crisis of 2008. While certain macroeconomic and institutional variables are important, the arrangement of open macropolicies such as the exchange rate regime and financial openness are also found to have direct influence on the sensitivity to the center economies. An economy that pursues greater exchange rate stability and financial openness faces a stronger link with the center economies through policy interest rates and real effective exchange rate (REER) movements. We also find that exchange market pressure (EMP) in peripheral economies is sensitive to the movements of the center economies' REER and EMP during and after the global financial crisis. Open macro policy arrangements, especially exchange rate regimes, also have indirect effects on the strength of financial linkages, interacting with other macroeconomic conditions. Thus, trilemma policy arrangements, including exchange rate flexibility, continue to affect the sensitivity of developing countries to policy changes and shocks in the center economies.     

Effects of Macroeconomic Policies on Sectoral Prices

The effect of macroeconomic policies on the relative pricesof internationally traded and domestic goods has been the subjectof extensive study. Analysis of the way in which these policiesthen affect prices at the sectoral level is complicated by theheterogeneity of sectoral production: even the prices of singleproducts usually are determined by both domestic and tradedcomponents. We present a framework which first traces the influenceof macropolicy on the relative prices of exports, imports, andhome goods. It then accounts for each sector's degree of "tradability,"which is based on the importance of trade in sectoral income,and the influence of macroeconomic policy on sectoral prices.To illustrate the use of this approach, it is applied to a simulationof trade liberalization in Argentina. Our results suggest thateconomywide policies had substantial negative effects on boththe real exchange rate and the incentives to agricultural exports.     

Real exchange rate persistence and monetary policy rules

The objective of this paper is to analyze the effects of alternative monetary rules on real exchange rate persistence. Using a two-country stochastic dynamic general equilibrium with nominal price stickiness and local currency pricing, we will show how the persistence of purchasing power parity deviations can be related to a monetary theory of these deviations. When monetary policy lean against the wind, there is no relationship of proportionality between the time during which prices remain sticky and the persistence of the response of the real exchange rate: in this case high nominal price rigidity is not sufficient, per se, in generating any persistence following a monetary shock. Moreover, we emphasize the role of interest rates smoothing policies and relative price stickiness within countries in understanding the relationship between the real exchange rate and monetary shocks. With reasonable parameters values, a wide range of monetary policy rules can generate real exchange rate autocorrelations around the ones observed in the data.     

Exchange rate pass-through into import prices revisited: What drives it?

A large sample of developed and emerging economies is utilized to investigate import exchange rate pass-through. Panel models reveal that various economic aspects of the destination country can explain about one third of the total variation in pass-through elasticities and the remaining variation comes largely in the form of unobserved country-specific effects. Inflation, exchange rate volatility, openness and relative wealth play a clear role as drivers of emerging markets’ pass-through whereas the output gap and protectionism appear influential more generally. Nonlinearity regarding large-versus-small changes in the exchange rate is quite pervasive. Our evidence challenges the widely-held view that pass-through has been universally falling in developed markets and that it is higher for emerging markets. The economic drivers are shown to play a role as out-of-sample predictors of pass-through. The findings confirm pricing-to-market theories and have implications for the optimal conduct of monetary policy.     

Optimal Monetary Policy in a Small Open Economy with Home Bias

We analyze optimal monetary policy in a small open economy characterized by home bias in consumption. Peculiar to our framework is the application of a Ramsey-type analysis to a model of the recent open-economy New Keynesian literature. We show that home bias in consumption is a sufficient condition for inducing the monetary policymaker of an open economy to deviate from a strategy of strict markup stabilization and contemplate some (optimal) degree of exchange rate stabilization. We focus on the optimal setting of policy both in the case of firms setting prices one period in advance and in a gradual fashion subject to adjustment costs. While the first setup allows us to analytically highlight home bias as an independent source of equilibrium markup variability, the second setup allows to study the effects of future expectations on the optimal policy problem and the effect of home bias on optimal inflation volatility. The latter, in particular, is shown to be related to the degree of trade openness in a U-shaped fashion, whereas exchange rate volatility is monotonically decreasing in openness.     

The impact of monetary policy shocks on stock prices: Evidence from Canada and the United States

Using structural VAR models with short-run restrictions appropriate for Canada and the United States, we empirically examine whether trade and financial market openness matter for the impact on and transmission to stock prices of monetary policy shocks. We find that, in Canada, the immediate response of stock prices to a domestic contractionary monetary policy shock is small and the dynamic response is brief, whereas in the United States, the immediate response of stock prices to a similar shock is relatively large and the dynamic response is relatively prolonged. We find that these differences are largely driven by differences in financial market openness and hence different dynamic responses of monetary policy shocks between the two countries that we model in this paper.     

贸易摩擦、宏观经济波动与经济开放程度的选择

本文构建一个包含关税冲击以及外汇风险溢价的两国开放经济DSGE模型,创新地揭示了关税冲击造成实际汇率波动的“直接效应”与“间接效应”,刻画了关税变动、贸易条件与实际汇率之间的动态关系与作用机制。我们深入分析了不同经济开放程度下贸易摩擦造成的宏观经济波动以及经济福利损失。模拟结果表明,在一定贸易开放程度下,外国加收关税一方面会导致本国贸易条件恶化,引发出口及产出下降;另一方面会导致本国汇率贬值,引发出口及产出增长。关税冲击发生后短期中汇率贬值效应占优,本国产出会出现小幅上升,随后贸易条件恶化效应逐步显现,产出持续下降。福利分析结果表明,本国适度提升贸易开放度,虽然经济福利损失会小幅上升,但福利损失增加幅度小于外国,会在贸易摩擦竞争中形成相对优势;如果本国过度提高贸易开放度,则会导致本国福利损失大幅增加,并且大于外国福利损失增幅,会在贸易摩擦竞争中形成相对劣势。因此,应适度逐步有序地提升贸易开放度。此外,本国适度推进资本账户开放的政策能够改善贸易条件,促进本国经济增长。     

贸易摩擦、宏观经济波动与经济开放程度的选择

本文构建一个包含关税冲击以及外汇风险溢价的两国开放经济DSGE模型,创新地揭示了关税冲击造成实际汇率波动的“直接效应”与“间接效应”,刻画了关税变动、贸易条件与实际汇率之间的动态关系与作用机制。我们深入分析了不同经济开放程度下贸易摩擦造成的宏观经济波动以及经济福利损失。模拟结果表明,在一定贸易开放程度下,外国加收关税一方面会导致本国贸易条件恶化,引发出口及产出下降;另一方面会导致本国汇率贬值,引发出口及产出增长。关税冲击发生后短期中汇率贬值效应占优,本国产出会出现小幅上升,随后贸易条件恶化效应逐步显现,产出持续下降。福利分析结果表明,本国适度提升贸易开放度,虽然经济福利损失会小幅上升,但福利损失增加幅度小于外国,会在贸易摩擦竞争中形成相对优势;如果本国过度提高贸易开放度,则会导致本国福利损失大幅增加,并且大于外国福利损失增幅,会在贸易摩擦竞争中形成相对劣势。因此,应适度逐步有序地提升贸易开放度。此外,本国适度推进资本账户开放的政策能够改善贸易条件,促进本国经济增长。     

Do insurers respond to active purchasing? Evidence from the Massachusetts health insurance exchange

Health insurance markets face continued challenges with high premiums and limited insurer competition. We describe a unique set of “active purchasing” policies used by Massachusetts' pioneer health insurance exchange to shape the rules of competition and reward lower-price insurers with additional customers. We provide evidence that these policies significantly influenced insurer pricing. Between 2010 and 2013, over 80% of insurer prices were set exactly at or within 1% of pricing thresholds created by active purchasing policies. A key “limited choice” policy was associated with a 16%–20% reduction in average insurance prices relative to comparison markets in 2012–2014. Insurers achieved these price cuts partly through cost reductions via narrower provider networks and partly through reduced profit margins.     

人民币汇率与我国股价、房价的联动关系研究

近年来,我国人民币汇率形成机制、股票市场和房地产市场发生了巨大变化,人民币汇率和股价、房价之间的信息传导和波动关联备受瞩目。本文采用VAR-MGARCH-BEKK模型,分析了我国人民币汇率、股价和房价之间的联动关系。研究结果表明,从波动的溢出效应来看,人民币汇率的波动率、股票价格的增长率和房地产价格的增长率之间存在非常明显的波动溢出效应;从资产价格的水平影响来看,人民币汇率与股票价格、房地产价格等国内资产价格的水平相关性较弱,而股票价格对房地产价格的影响较明显,并就该结论提出了相关的理论解释和政策建议。     

全球金融周期、美国货币政策与“三元悖论”

全球金融周期存在的背景下“三元悖论”是否依然成立充满争议。本文通过构建包含银行与金融摩擦的两国DSGE模型,为考察全球金融周期的形成提供了理论依据。美国货币政策通过资本流动传导到外围国金融市场,使外围国信贷利率、银行风险承担以及杠杆率与美国银行趋同,形成全球金融周期。金融渠道的传导速度快于实体经济渠道导致外围国国内经济周期与金融周期相背离,外围国想要稳定经济就不得不与美国保持同向的政策利率变化,货币政策独立性将不再存在。随着全球经济一体化进程加速,估值效应的作用越来越明显,浮动汇率制度并不能隔离全球金融周期的影响也无法保证货币政策的独立性。在资本账户开放的情况下,外围国金融市场越不发达,受全球金融周期的影响越大,货币政策越不独立。     

住房价格、金融稳定与宏观审慎政策

本文通过建立包含异质性家庭、异质性厂商和金融机构的DSGE模型,分析对预期房价作出反应的货币政策和宏观审慎政策的传导机制和政策效果,研究不同政策的选择和协调问题。研究发现,首先,由于政策的作用范围不同,不同政策会对金融稳定和经济稳定产生不同影响。对预期房价作出反应的货币政策能够抑制住房需求和信贷供给,但也会抑制消费需求和产出;而对预期房价作出反应的逆周期LTV政策和逆周期资本充足率政策在应对房价波动导致的金融稳定问题时更加有的放矢。其次,外生冲击的来源会影响政策的选择和协调——当经济波动来源于需求冲击时,固定LTV政策搭配逆周期资本充足率的宏观审慎政策、不对预期房价作出反应的货币政策表现最优;当经济波动来源于供给冲击时,固定LTV政策搭配逆周期资本充足率的宏观审慎政策、对预期房价作出反应的货币政策表现最优。     

Spillover effects from Euro area monetary policy across Europe: A factor-augmented VAR approach

I analyze spillover effects from a Euro area monetary policy shock to fourteen European countries outside the Euro area. The analysis is based on a factor-augmented VAR model with two blocks, which exploits a large cross-country data set. After a Euro area monetary policy expansion, production increases in most non-Euro area countries, whereas short-term interest rates and financial uncertainty decline. These effects are on average comparable to the responses in the aggregate Euro area. However, the size of spillover effects varies with country characteristics. Spillovers on production are larger in non-Euro area economies with higher trade openness, whereas financial variables react to a higher extent in countries with higher financial integration. Regarding the exchange rate regime, countries with fixed exchange rates show stronger spillovers both in terms of production and interest rates. Finally, prices increase in Western European economies outside the Euro area, but decline or do not respond in Central and Eastern Europe.     

Asset price dynamics,inflation and sectoral composition of output: a dependent economy model

This article develops a dependent economy model that focuses on the interactions between inflation and asset price dynamics under a flexible exchange rate and rational expectation. We assume that money wage adjusts instantaneously to clear the labour market. The asset prices are represented by the Tobin’s q and exchange rate. Using this framework, we will examine implications of monetary policy, fiscal policy, tariff liberalization and exogenous capital flows for inflation and asset prices, which in turn determine the allocation of labour and the sectoral composition of output. The effects of different exogenous and policy-induced shocks critically depend on the difference in the speeds of adjustment in commodity price and asset prices and multiple cross effects generated by changes in these prices.     

Activist monetary policy and exchange-rate overshooting: The Deutsche mark/dollar rate

After a decade of generalized floating, it is clear that bilateral exchange rates exhibit more variability than the economic aggregates—relative prices, incomes, and money supplies—which generally comprise the fundamentals of theories of exchange-rate determination. Dornbusch's overshooting hypothesis is the best known explanation of this phenomenon. This paper shows that accommodative monetary policy (with respect to prices) has the potential to cause the economy to switch from exchange rate overshooting to undershooting. Using constrained maximum likelihood methods, the model is estimated for Germany and the United States. The results provide strong evidence in support of the overshooting hypothesis for the Deutsche mark/dollar exchange rate.     

Asset Prices,Liquidity, and Monetary Policy in an Exchange Economy

I formulate a model in which money coexists with equity shares on a risky aggregate endowment. Agents can use equity as a means of payment, so shocks to equity prices translate into aggregate liquidity shocks that disrupt the mechanism of exchange. I characterize a family of optimal monetary policies and find that the resulting equity prices are independent of monetary considerations. I also study a perturbation of the family of optimal policies that targets a positive constant nominal interest rate and find that in this case the real equity return includes a liquidity return that depends on monetary considerations.     

World food prices and monetary policy

How should monetary policy respond to large fluctuations in world food prices? We study this question in an open economy model in which imported food has a larger weight in domestic consumption than abroad and international risk sharing can be imperfect. A key novelty is that the real exchange rate and the terms of trade can move in opposite directions in response to world food price shocks. This exacerbates the policy trade-off between stabilizing output prices vis a vis the real exchange rate, to an extent that depends on risk sharing and the price elasticity of exports. We characterize implications for dynamics, optimal monetary policy, and the relative performance of practical monetary rules. While CPI targeting and expected CPI targeting can dominate PPI targeting if international risk sharing is perfect, even seemingly mild departures from the latter make PPI targeting a winner.     

Bond Market Development,Economic Growth and Other Macroeconomic Determinants: Panel VAR Evidence

This paper examines causal relationships between bond market development, economic growth and four other macroeconomic variables in 35 countries for the period 1993–2011. Bond market development is defined in terms of the significance and presence of public sector, private sector, and international bond issues. Additional covariates being considered are the inflation rate, the real effective exchange rate, the real interest rate, and a measure of openness to international trade. We use a panel vector auto-regression model to reveal the nature of Granger causality among these variables. Specifically, we find that bond market development and the four macroeconomic covariates may be long-run causative factors for economic growth. Thus, policy makers seeking to foster economic growth are warned to check multi-causal studies involving all these variables before setting their policies.