State‐Dependent Forward Guidance and the Problem of Inconsistent Announcements

Forward guidance can be provided as an unconditional promise, i.e. commitment to a specific low policy rate. Alternatively, the promise may include an escape clause, i.e. a condition defining the state of the economy under which the central bank would not keep such a low rate and, instead, it would revert to setting policy under discretion. The escape clause can be expressed as a threshold in terms of a specific variable. The present paper shows that, when such a threshold is expressed in terms of an endogenous variable (e.g. output, inflation), there are cases where it becomes impossible for the central bank to act in a way that is consistent with its promise. Consistency imposes limits on the policy rate that can be set since reverting immediately to the optimal discretionary rate can be incompatible with exceeding the threshold.     

江苏省农田保护经济补偿政策绩效评价与空间差异研究

［目的］分析评价江苏省现有农田保护经济补偿政策绩效与空间差异对建立完善长效的农业生态补偿机制和推动我国农业生态环境的可持续发展具有重要意义。［方法］以江苏省为研究区域，运用熵权-TOPSIS法，选取2010—2017年全省及苏北、苏中、苏南三个区域内11个指标，计算江苏省及三大区域农田保护经济补偿政策综合绩效值与经济、生态和社会效益单项绩效值，进行比较分析。［结果］（1）江苏省农田保护经济补偿政策在2010—2017年8年综合绩效值由0189波动增长到0841，效果初现且具有较强推广价值。（2）经济效益绩效值以年均257%的增长率由0增长到1，效果最为显著，社会效益次之，生态效益自2013年后为绩效值中最低值，与前两项最大差距在05左右，反映出环境改善、农田质量提高效应远低于农户创收、社会公平效应，政策拟合度不高。（3）江苏省农田保护经济补偿政策效果存在空间差异，综合来看政策效果表现为苏南>苏中>苏北，苏南凭借经济优势在2016年和2017年的综合绩效值上比苏中苏北高出01、在经济与社会绩效值以002的差距领先且生态绩效值没有下降拐点，具有长效可持续性。［结论］现阶段农田保护经济补偿政策效果依赖地方政府经济实力，尚未形成良性长效机制，需从制度体系、环境经济手段、差别化补偿措施、农业补贴结构和宣传等5方面着手，推进农田保护经济补偿政策更好地服务生态环境。     

A single currency for the Economic Community of West Africa? An economic assessment

This paper assesses the economic support for the creation of an Economic Community of West African States (ECOWAS) monetary union encompassing all its 15 members, an objective that was set more than 30 years ago. In line with previous empirical research, our conclusion is that the adoption of a common currency by the whole region is not recommended. This work takes a step forward and assesses alternative ways to reduce the current number of currencies in circulation in the Community. Based on our results, we suggest (i) the merging of the currencies of Guinea, Liberia and Sierra Leone into a single currency and (ii) the Gambia to join the West African Economic and Monetary Union (WAEMU).     

Do firms lease to hedge? CEO risk-taking and operating lease intensity

Operating leases are used extensively for financing, but their ability to separate ownership and use also creates hedging opportunities. We investigate whether firms recognize such opportunities by examining the relation between chief executive officer (CEO) risk-taking incentives and the use of operating leases. Consistent with firms using operating leases to hedge, we find higher CEO risk-taking incentives lower operating lease intensity. To address endogeneity, we use the adoption of Statement of Financial Accounting Standards 123R as an exogenous shock to option compensation, dynamic panel generalized method of moments, simultaneous equations, and change regressions. Our results are robust to placebo and alternative tests.     

Measuring the effectiveness of US monetary policy during the COVID-19 recession

The COVID-19 recession that started in March 2020 led to an unprecedented decline in economic activity across the globe. To fight this recession, policy makers in central banks engaged in expansionary monetary policy. This paper asks whether the measures adopted by the US Federal Reserve (Fed) have been effective in boosting real activity and calming financial markets. To measure these effects at high frequencies, we propose a novel mixed frequency vector autoregressive (MF-VAR) model. This model allows us to combine weekly and monthly information within a unified framework. Our model combines a set of macroeconomic aggregates such as industrial production, unemployment rates, and inflation with high-frequency information from financial markets such as stock prices, interest rate spreads, and weekly information on the Fed's balance sheet size. The latter set of high-frequency time series is used to dynamically interpolate the monthly time series to obtain weekly macroeconomic measures. We use this setup to simulate counterfactuals in absence of monetary stimulus. The results show that the monetary expansion caused higher output growth and stock market returns, more favorable long-term financing conditions and a depreciation of the US dollar compared with a no-policy benchmark scenario.     

The Neutrality Illusion: Biased Economics,Biased Training,and Biased Monetary Policy. Testing the Role of Ideology on FOMC Voting Behaviour

This research is trying to shed light on two myths that are usually widespread: the first one being the idea of the academic economist as a neutral scientist finding uncontestable consensual truths, thanks to uncontestable empirical methods, the second, the idea of the central banker as a Weberian neutral bureaucrat setting aside personal beliefs to act mechanically for the common good. Deconstructing this ‘neutrality illusion’, this work argues that economics is actually a divided and ideologically marked discipline despite its aim at natural-science-type-legitimacy. It argues in a related discussion that such ideological bias also impedes a purely neutral conduct of monetary policy, undermining the very idea of central bank independence. Linking these two arguments, it argues that graduate training in economics is the first place for the formation of biased preferences, because of the substantial ideological sorting that exists across universities. Using a unique database on FOMC members’ votes and ideology, the paper tests this idea empirically and despite unavoidable caveats, finds robust evidence of a systematic impact of the ideological features of their alma mater on FOMC members’ voting behaviour – impact that we found more important than the other traditional determinants of central bankers’ actions.     

Stock Market Reaction to Monetary Policy: An Event Study Analysis of the Brazilian Case

This article examines the relationship between the monetary policy implemented by the Central Bank of Brazil and the stock market. We implement event study analysis and analyze the effect of the anticipated and unanticipated components of monetary policy decisions on the returns of the IBOVESPA index and 53 stocks. We find that monetary policy has a significant effect on the stock market, but is only responsible for a small proportion of market variation. The analysis at the sector level with expected returns identifies that the financial sector is the most affected by this policy, whereas with excess returns only industrial goods are significantly affected. Moreover, individual assets respond in a rather heterogeneous fashion to monetary policy; however, when we look at excess returns, we identify a reduction in the intensity and in the number of companies impacted by monetary policy. Finally, the monetary shock is explained by unanticipated variations in the unemployment rate, in the Industrial Production Index, in the General Market Price Index, and in the Broad Consumer Price Index.     

CEO compensation in EU telecom companies: Does the state design the right incentives?

This paper analyzes the structure of CEO pay in European fixed telecommunication companies, focusing on the impact of state ownership. Results show that, under the (partial or total) control of the state, the level of CEO compensation is lower and pay-performance sensitivity is higher than in privately-controlled firms. This finding suggests the state provides an incentive as well as a monitoring effect. However, when the state holds the majority of the shares, the pay level is significantly affected by the CEO power, suggesting that in these firms, CEOs are more likely to be entrenched with boards and succeed in raising their pay.     

Does the Reserve Bank of Australia follow a forward-looking nonlinear monetary policy rule?

ABSTRACT

The conventional monetary policy rule describes a simple linear relationship between the domestic interest rate, inflation rate and output gap. An important extension to this rule is to incorporate the forward-looking behaviour of central banks, where it is assumed that they target an expected level of inflation instead of its current realised value. Using quarterly observations for the period 1993:1-2018:2, this paper investigates whether the conduct of monetary policy in Australia can be described by a forward-looking linear monetary policy rule, or by a nonlinear forward-looking monetary policy rule. In particular, the nonlinear forward-looking monetary policy rule is analysed in a regime-switching framework using a smooth logistic transition regression model. While the results show that the conventional forward-looking linear monetary policy rule describes the application of monetary policy in Australia reasonably well, the interest rate setting behaviour of the RBA is best described by a nonlinear forward-looking monetary policy rule.     

The impact of (un)conventional expansionary monetary policy on income inequality – lessons from Japan

ABSTRACT

This paper analyzes the impact of conventional and unconventional monetary policy on income inequality in Japan, using hitherto unexplored data from the Japan Household Panel Survey. Empirical evidence shows that expansionary monetary policy in Japan has contributed to diminishing the gender pay gap through an increase in working time of women relative to men, but also to increasing the education pay gap. These effects may have materialized via the aggregate demand channel and the labour productivity channel. In contrast, expansionary monetary policy has had no significant impact on the development of the age pay gap.