Monetary Policy and Short-term Interest Rates: An Efficient Markets-Rational Expectations Approach

This paper is an application of efficient markets-rationael xpectations theory to analyze empirically the relationship of money supply growth and short-term interest rates, a hotly debated issue in the literature. This approach has the advantage over earlier research on this subject in that it imposes a theoretical structure that allows easier interpretation of the empirical results as well as more powerful statistical tests. The empirical results uniformly do not support the proposition that increases in money growth are correlated with declines in short rates.     

Monetary policy and long-term interest rates: An efficient markets approach

This paper is an application of efficient markets theory to analyze empirically the relationship of money supply growth and long-term interest rates. This approach has the advantage over calier research on this subject in that it imposes a theoretical structure on this relationship that flows easier interpretation of the empirical results as well as more powerful statistical tests on the interest of ascertaining the robustness of the results, many different empirical tests are carried out in this paper, and they uniformly do not support the preposition that increases in the money supply are correlated with declines in long rates.     

Inside–outside money competition

We study how competition from privately supplied currency substitutes affects monetary equilibria. Whenever currency is inefficiently provided, inside money competition plays a disciplinary role by providing an upper bound on equilibrium inflation rates. Furthermore, if “inside monies” can be produced at a sufficiently low cost, outside money is driven out of circulation. Whenever a ‘benevolent’ government can commit to its fiscal policy, sequential monetary policy is efficient and inside money competition plays no role.     

Financial Innovations,Money Demand,and the Welfare Cost of Inflation

In the 1990s, the empirical relationship between money demand and interest rates began to fall apart. We analyze to what extent financial innovations can explain this breakdown. For this purpose, we construct a microfounded monetary model with a money market that provides insurance against liquidity shocks by offering short‐term loans and by paying interest on money market deposits. We calibrate the model to U.S. data and find that the introduction of the sweep technology at the beginning of the 1990s, which improved access to money markets, can explain the behavior of money demand very well. Furthermore, by allowing a more efficient allocation of money, the welfare cost of inflation decreased substantially.     

货币供应量、利率与银行系统性金融风险——基于CoVaR方法的实证研究

在常态化疫情防控的背景下,商业银行系统性金融风险有上升迹象,这对央行实施货币政策工具和力度的把握提出了更高要求。本文利用条件在险值模型检验了我国货币供应量、利率与银行系统性金融风险的关系。研究结果表明,货币供应量和利率与银行系统性风险之间的关系不是线性的,而是U型的,即存在最优的货币供应量和利率能够使商业银行的系统性金融风险最低。当货币供应量和利率小于这个最优组合时,增加货币供应量和提高利率能够有效降低商业银行的系统性金融风险;而当货币供应量和利率大于这个最优组合时,增加货币供应量和提高利率反而会增加银行系统性金融风险,进而降低商业银行的金融稳定性。     

An economy with personal currency: theory and experimental evidence

Is personal currency issued by participants sufficient to operate an economy efficiently, with no outside or government money? Sahi and Yao (in J Math Econ, 1989) and Sorin (in J Econ Theory, 1996) constructed a strategic market game to prove that this is possible. We conduct an experimental game in which each agent issues his/her personal IOUs, and a costless efficient clearinghouse adjusts the exchange rates among them so the markets always clear. The results suggest that if the information system and clearing are so good as to preclude moral hazard, any form of information asymmetry, and need for trust, the economy operates efficiently at any price level without government money. These conditions cannot reasonably be expected to hold in natural settings. In a second set of treatments when agents have the option of not delivering on their promises, a high enough penalty for non-delivery is necessary to ensure an efficient market; a lower penalty leads to inefficient, even collapsing, markets due to moral hazard.     

Money,Bonds, and the Liquidity Trap

This paper examines a search model of money and public bonds in which coordination frictions lead to multiple, Pareto ranked equilibria. Whether money and bonds are substitutes or complements, is not a primitive of the economy, but an equilibrium outcome. There exists an equilibrium resembling a liquidity trap, in which money and bonds are perfect substitutes, interest rates are zero, and monetary policy is ineffective; and a superior equilibrium in which money and bonds are complements, interest rates are positive and monetary policy has a liquidity effect. On this view, the liquidity trap is a belief-driven phenomenon.     

关于我国利率和利率传导关系的思考

当前我国银行体系利率大致可分为货币市场利率和信贷市场利率,其中由央行指定的利率主要有存贷款基准利率、再贴现率等。在货币市场上,隔夜同业拆借利率具有基准利率的地位。在信贷市场上,在特定时期,保持适当的存贷款利差具有积极意义。由于一些阻碍信贷市场与货币市场统一的制度安排的存在,这两个市场间的利率传导呈现出一定的不对称性。为推进利率市场化,进一步完善我国利率体系,下一步应逐步弥合市场分割,加强货币市场基准利率建设,培育商业银行利率定价能力。     

MONEY SUPPLY ANNOUNCEMENTS AND INTEREST SENSITIVE STOCKS

Much of the money announcement literature provides evidence that there is a significant response of nominal interest rates to unexpected changes in the money stock, especially in the October 1979-October 1982 period. These money announcements provide a proxy for unexpected interest rate changes which can be used in a novel test for the interest sensitivity of stocks. Using the response of disaggregated stock price data to money announcements, we reach two major conclusions. First, that the interest rate response observed in the money announcement literature was predominantly a change in real rates. Second, an unusual group of stocks are excessively sensitive to these real rate changes and many groups of stocks that might logically have been expected to be sensitive are not.     

The Effects of Inflation and Money Supply Announcements on Interest Rates

This paper examines the impact of the money supply and inflation rate announcements on interest rates. Survey data on expectations of the money supply and consumer and producer price indexes are used to distinguish anticipated and unanticipated components of the announcements. This distinction is used to test for the efficiency of the financial market response to the announcements of new information. The results indicate that the unanticipated components of the announced changes in the Producers Price Index and in the money supply have an immediate positive effect on short-term interest rates. The Consumer Price Index announcement has no apparent effect. There is no evidence of a delayed announcement effect. However, there is some indication of a liquidity effect of the money supply change on interest rates. This takes place when reserves are changing and several weeks prior to the information announcement.     

Equilibrium traits of durable commodity money

A dynamic model of utility-maximizing agents explains why scarce, durable commodities are typically monetary. The model provides quantitative criteria for distinguishing between monetary and non-monetary durables, and is also used to analyze symmetallic equilibria.The model is then extended to analyze commodity-backed paper money. It is demonstrated that the backing generates trust in the paper money in the dynamic-consistency sense. The model predicts regular devaluations as an equilibrium phenomenon, but finds such behavior to be efficient. Finally, the results are integrated to make a technical point about dynamic models of pure fiat money.     

论加强对虚拟货币市场的监管

随着信息技术与互联网的高速发展,虚拟货币成为必不可少的网络小额支付手段,其方便、快捷、高效和经济的结算方式带来了极大的社会效益,但其应用也带来了诸多风险。本文从虚拟货币的定义、功能、特点入手,分析虚拟货币市场潜在的风险,并提出相关监管建议。     

Long- and short-term interest rates in a risky world

The paper develops and tests a general equilibrium model in which variability, or risk, affects the choice of portfolios. Our measures of variability include only the variability of unanticipated growth in monetary and non-monetary aggregates, and our tests use data ending with the change in Federal Reserve procedures in October 1979. We find that increased variability of unanticipated money growth raises demands for debt and money, and reduces the demand for real capital. Interest rates on both short- and long-term debt rise by a risk premium. We estimate the size of the risk premium before and after the October 1979 change, and we show that the change in Federal Reserve procedures moved the economy to a less efficient point.     

贷款基础利率运行特征与影响

贷款基础利率（LPR）的推出是我国利率市场化的重要一步。LPR运行半年来,总体呈平稳单边上行走势,波动幅度较小,但与货币市场基准利率存在一定背离。文章分析指出,存贷款利率或额度管理、货币市场与信贷市场资金流通存在障碍是LPR与货币市场利率背离的主要原因;LPR缓慢上行主要受到银行存款贷款增速下滑的影响。文章从完善LPR报价模型、推广LPR在信贷产品中的运用等方面提出进一步发挥LPR基准作用的建议。     

Testing for nonlinear Granger causality from fundamentals to exchange rates in the ERM

This paper presents evidence that two ERM exchange rates are Granger caused in a nonlinear fashion by relative money supply. This finding can be interpreted as evidence that the underlying relationship between money and exchange rates is nonlinear in a target-zone arrangement, which is consistent with the target-zone literature introduced by Krugman, 1991. Target zones and exchange rate dynamics, Q. J. Econ. 106 (3), 669–682. Moreover, we find weak or no evidence that relative output nonlinearly Granger causes the exchange rate. Thus, relative money is more important than relative output in explaining the nonlinearity in the exchange rate-fundamentals relationship.     

MONETARY AND FISCAL POLICIES AND STOCK PRICES

Investigations into business cycles have found money supply to be a lead variable to stock prices. However, some would argue that the stock market, being efficient, anticipates money supply changes and therefore, stock prices are lead variables to money supply changes. Recent developments in time series methods have facilitated the testing of these relationships through identifying bivariate and multivariate autoregressive models. However, in many cases, the results using different procedures contradict themselves and are in conflict with theoretical reasonings. In this paper the causal relationship is tested between fiscal and monetary policies and stock prices using Canadian data and bivariate andmultivariate autoregressive models.     

Private monitoring,collusion, and the timing of information

When a principal's monitoring information is private (nonverifiable), the agent should be concerned that the principal could misrepresent the information to reduce the agent's wage or collect a monetary penalty. Restoring credibility may lead to an extreme waste of resources—the so‐called burning of money. A more realistic and efficient outcome is feasible when the private information arrives in time to rescale the agent's effort. Rescaling is more effective than pure monetary penalties because effort has different values to different parties whereas money is equally valuable to all parties. Furthermore, when rescaling is feasible, private monitoring is more efficient than public monitoring subject to collusion because nonmonetary penalties are ineffective to deter collusion.     

Spectral analysis of the structure of interest rates in the Netherlands

Spectral methods are used to examine the relationships among the rates of return on financial assets observed in the Netherlands during the period 1962–1970. It is found that both the rates on short-term loans and bonds display seasonal movements, which are related to the periodic contractions of the money supply. Furthermore, there is evidence of a four-year cycle which presumably must be attributed to the cyclical tightness of monetary conditions in the Netherlands. It is concluded that the customary distinction between the money market and the capital market, and the subdivision of the latter into a market for bonds and a stock market, is empirically meaningful.     

The Valuation of American Options with Stochastic Interest Rates: A Generalization of the Geske—Johnson Technique

The Geske–Johnson approach provides an efficient and intuitively appealing technique for the valuation and hedging of American-style contingent claims. Here, we generalize their approach to a stochastic interest rate economy. The method is implemented using options exercisable on one of a finite number of dates. We illustrate how the value of an American-style option increases with interest rate volatility. The magnitude of this effect depends on the extent to which the option is in the money, the volatilities of the underlying asset and the interest rates, as well as the correlation between them.     

The Liquidity Effect in the Federal Funds Market: Evidence at the Monthly Frequency

In this paper, we argue that much of the research into the link between money and interest rates suffers from misspecification. The measure of money and the measure of interest rates are not always well matched. In examining the transmission of monetary policy, we show that using an appropriate measure of money, Federal Reserve balances, and the appropriate interest rate, the federal funds rate, a clear liquidity effect exists. Furthermore, we explain how a lack of a clear institutional understanding may have contributed to the finding of a "liquidity puzzle" in the past.