Private labels and public quality standards: How can consumer trust be restored after the mad cow crisis?

In those sectors faced with questions of food safety (meat, fruit, vegetables), new private labels have been set up in Europe in order to restore consumer trust. In this paper, we perform a theoretical analysis of these private labels. We propose an original model of vertical relationships between producers and retailers which takes into account two supply sources through (i) a competitive spot market on which the retailers buy a minimum quality standard product and (ii) supply contracts aimed at marketing higher quality private labels. We study how producers and retailers could cooperate in setting up these new labels. From a public point of view, we show the complementarity of a moderate increase in public quality standards and the creation of these new private labels. JEL Classification L22. L23. Q13. Q18     

Credit Conditions in Pakistan: Supply Constraints or Demand Deficiencies?

This paper attempts to pin down the key drivers of demand for and supply of real private sector credit in Pakistan. I use both the equilibrium and disequilibrium econometric frameworks, specifically tackling the issue of lack of consistency and/or efficiency of joint estimators in the former via the three‐stage least squares technique. On the demand side, I find that higher economic activity provides stimulus to credit whereas inflation dampens it. The stock market seems to play a dual role: as a source of alternative financing, a bullish market negatively impacts credit while, as an indicator of economic expectations, it provides a positive impetus. On the supply side, banks' lending capacity is found to be the major driver of credit while government borrowing has a crowding‐out effect. Pakistan currently faces supply constraints, which might put an additional check on capacity utilization by firms, thus damaging growth prospects. The results have important policy implications.     

Are SNAP benefits adequate? A geographical and food expenditure decomposition

The Supplemental Nutrition Assistance Program (SNAP) provides resources to supplement household food expenditures in order to achieve a nutritious diet. Determining the amount of support required - or extent of food expenditure poverty -- entails comparing available resources for food to a nutrition-determined threshold. Clearly the value of the threshold will affect the degree of food expenditure poverty. If the threshold value is inaccurate, the calculated degree of poverty will be inaccurate. USDA uses a threshold for setting SNAP benefits that does not vary geographically or temporally, so consequently (food expenditure) poverty may be understated or overstated in different regions and time periods. This article compares food expenditure poverty estimates for SNAP participants when geographical differences in the threshold are ignored versus not ignored. In addition, the article decomposes household food expenditures into Food-Away-From-Home (FAFH), Food-at-Home (FAH), personal funded FAH, and SNAP funded FAH in order to assess the degree to which each of these contribute to reducing food expenditure poverty. The general findings are that all food expenditure poverty measures are worse when geographical differences are taken into account. In addition, the analysis shows that FAH expenditures, and in particular SNAP FAH expenditures, contribute the most to reducing food expenditure poverty in SNAP households. The policy implications are that food expenditure poverty is currently underestimated in the US by ignoring geographical differences in thresholds, but the food expenditure poverty would be even worse without SNAP benefits. Geographical adjustments to the national threshold could help reduce food expenditure poverty across regions.     

WHAT CAN WE LEARN FROM THE IMPLEMENTATION OF MONETARY AND MACROPRUDENTIAL POLICIES: A SYSTEMATIC LITERATURE REVIEW

The emergence of macroprudential policies, implemented by central banks as a means of promoting financial stability, has raised many questions regarding the interaction between monetary and macroprudential policies. Given the limited number of studies available, this paper sheds light on this issue by providing a critical and systematic review of the literature. To this end, we divide the theoretical and empirical studies into two broad channels of borrowers – consisting of the cost of funds and the collateral constraint – and financial intermediaries – consisting of risk‐taking and payment systems. In spite of the existing ambiguity surrounding coordination issues between monetary and macroprudential policies, it is argued that monetary policy alone is not sufficient to maintain macroeconomic and financial stability. Hence, macroprudential policies are needed to supplement monetary. In addition, we find that the role of the exchange rate is critical in the implementation of monetary and macroprudential policies in emerging markets, while volatile capital flows pose another challenge. In so far as how the arrangement of monetary and macroprudential policies varies across countries, key theoretical and policy implications have been identified.     

Too small to be independent? On the influence of ECB monetary policy on interest rates of the EEA countries

Monetary policy independence is regarded as the central argument in favour of floating exchange rates and monetary integration. We evaluate the actual independence of non-euro members of the European Economic Area by using heterogeneous panel cointegration methods that allow cross-dependency. We show that domestic interest rates follow the euro interest rates. These spillovers imply a low monetary independence despite the insulation given by floating exchange rate regimes and inflation-targeting frameworks. We therefore find significant spillover effects of the European Central Bank policy and argue that the costs of monetary integration in Europe may be lower than expected.     

金融市场化进程是否改变了中国货币政策不同传导渠道的相对效应？

本文利用SVAR模型脉冲偏导分离技术,从利率市场化和影子银行两个维度测算了金融市场化进程对货币政策不同传导渠道相对地位的影响。实证结果揭示了中国货币政策传导的一些重要特征:第一,以信贷渠道为代表的数量化渠道效应要强于以利率和汇率渠道为代表的价格渠道,并且该结果没有因金融市场化的推进而改变。第二,利率市场化的推进主要强化了利率渠道的作用,但一定程度上弱化了其他渠道尤其是信贷渠道的作用。第三,影子银行的发展,强化了资产价格渠道的效应,而相对弱化了信贷渠道和利率渠道的效应。研究为在金融与实体经济市场仍存在一定程度摩擦的条件下,央行采用价格与数量货币政策调控方式有机结合的必要性与有效性,提供了实证支持。同时研究还表明,要充分发挥利率市场化改革完善货币政策价格传导机制的作用,既需要加强对各种形式金融创新的监管,还需要实体经济体系进一步市场化改革相配合。     

THEORY AND EVIDENCE IN PSYCHOLOGY AND ECONOMICS ABOUT MOTIVATION CROWDING OUT: A POSSIBLE CONVERGENCE?

The empirical relevance of motivation crowding out is a controversial issue in economics and psychology. As already pointed out by Frey and Jegen ( 2001 ), this is partly due to the historical development of two distinct and parallel strands of literature that stem from different theoretical traditions, have radically different tenets and therefore, are difficult to reconcile. In this survey, we go back to the details of the debates that took place independently among psychologists and economists, and sketch an integrative interdisciplinary approach likely to favor a more fruitful collaboration between economics and psychology. From this perspective, experimental economics (both field and laboratory) is viewed as a major research field shedding new light on the conditions of relevance of motivation crowding out.     

Monetary policy and the term premium

The term premium has become increasingly important in discussions of monetary policy formulation. This paper reviews two approaches to embedding a variable term premium into an otherwise standard modern DSGE model. The first approach maintains frictionless asset trade but alters preferences so that agents are more averse to the risk in long bonds. The second approach uses traditional preferences, but segments asset trade between long and short bonds. Policy issues are also discussed.     

Fiscal and monetary policies in complex evolving economies

What is the most appropriate combination of fiscal and monetary policies in economies subject to banking crises and deep recessions? We study this issue using an agent-based model that is able to reproduce a wide array of macro- and micro-empirical regularities. Simulation results suggest that policy mixes associating unconstrained, counter-cyclical fiscal policy and monetary policy targeting employment is required to stabilise the economy. We also show that “discipline-guided” fiscal rules can be self-defeating, as they depress the economy without improving public finances. Finally, we find that the effects of monetary and fiscal policies become sharper as the level of income inequality increases.     

Monetary policy and risk taking

We assess the effects of monetary policy on bank risk to verify the existence of a risk-taking channel – monetary expansions inducing banks to assume more risk. We first present VAR evidence confirming that this channel exists and is particularly significant on the bank funding side. Then, to rationalize this evidence we build a macroeconomic model where banks subject to runs endogenously choose their funding structure (deposits vs. capital) and risk level. A monetary expansion increases bank leverage and risk. In turn, higher bank risk in steady state increases asset price volatility and reduces equilibrium output.