Spillovers of U.S. unconventional monetary policy to emerging markets: The role of capital flows

We employ a structural global VAR model to analyze whether U.S. unconventional monetary policy shocks, identified through changes in the central bank’s balance sheet, have an impact on financial and economic conditions in emerging market economies (EMEs). Moreover, we study whether international capital flows are an important channel of shock transmission. We find that an expansionary policy shock significantly increases portfolio flows from the U.S. to EMEs for almost two quarters, accompanied by a persistent movement in real and financial variables in recipient countries. Moreover, EMEs on average respond to the shock with an easing of their own monetary policy stance. The findings appear to be independent of heterogeneous country characteristics like the underlying exchange rate arrangement, the quality of institutions, or the degree of financial openness.     

Identifying VARS based on high frequency futures data

Using the prices of federal funds futures contracts, we measure the impact of the surprise component of Federal Reserve policy decisions on the expected future trajectory of interest rates. We show how this information can be used to identify the effects of a monetary policy shock in a standard VAR. This alternative approach to identification is quite different, and, we argue, more plausible, than the conventional identifying restrictions. We find that a usual recursive identification of the model is rejected, as is any identification that insists on a monetary policy shock having an exactly zero effect on prices contemporaneously. We nevertheless agree with the conclusion of much of the VAR literature that only a small fraction of the variance of output can be attributed to monetary policy shocks.     

Flexible inflation targeting and financial stability: Is it enough to stabilize inflation and output?

We investigate empirically whether a central bank can promote financial stability by stabilizing inflation and output, and whether additional stabilization of asset prices and credit growth would enhance financial stability in particular. We employ an econometric model of the Norwegian economy to investigate the performance of simple interest rate rules that allow a response to asset prices and credit growth, in addition to inflation and output. We find that output stabilization tends to improve financial stability. Additional stabilization of house prices, equity prices and/or credit growth enhances stability in both inflation and output, but has mixed effects on financial stability. In general, financial stability as measured by e.g., asset price volatility improves, while financial stability measured by indicators that depend directly on interest rates deteriorates, mainly because of higher interest rate volatility owing to a more active monetary policy.     

货币政策纳入资产价格目标后能更好地调控经济波动吗——基于金融结构视角的分析

本文通过构建包含金融结构的NK-DSGE模型,分析在不同的金融结构下,包含金融资产价格稳定目标的扩展型货币政策能否更加有效地熨平经济波动.研究表明:(1)相比传统货币政策,包含金融资产价格稳定目标的货币政策不仅能更好地熨平宏观经济波动、缩短波动持续期,还能提升社会福利;(2)在扩展型货币政策框架下,央行需结合不同类型冲击下金融结构与宏观调控变量波动的异质相关性,依据金融结构市场化进程,灵活调整其对各个变量的调控力度;(3)在扩展型货币政策框架下,当经济体系面临非持续性技术冲击、投资边际效率冲击或金融冲击时,金融结构市场化程度越高,社会福利增进效果越好.本文的研究为宏观经济调控政策特别是货币政策决策提供了有益启示,或可为新时期增强宏观经济调控效果、构建兼顾金融稳定和经济稳定的平衡发展路径提供新思路和新抓手.     

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.     

Bank loan supply and monetary policy transmission in Germany: An assessment based on matching impulse responses

This paper addresses the credit channel in Germany by using aggregate data. We present a stylized model of the banking firm in which banks decide on their loan supply in the light of expectations about the future course of monetary policy. Applying a VAR model, we estimate the response of bank loans to a monetary policy shock taking account of the reaction of the output level and the loan rate. We estimate our model to evaluate the response of bank loans by matching the theoretical impulse responses with the empirical impulse responses to a monetary policy shock. Evidence in support of the credit channel can be reported.     

Monetary policy matters: Evidence from new shocks data

The evidence suggests that monetary policy post 1988 became more forward-looking, invalidating the identifying assumptions in conventional methods of measuring monetary policy's effects, leading to spurious and unlikely results for this period. We propose a new identification scheme that uses factors extracted from Fed Funds futures to measure exogenous changes in policy. Using this shock series in a VAR, we recover the contractionary effect of monetary tightening on output. Moreover, we find that as much as half of the variability in output was driven by monetary policy shocks, and that there is a mild price puzzle.     

货币政策、消费品和投资品通货膨胀——基于金融加速器视角

本文建立一个包含消费品和投资品生产的两部门新凯恩斯DSGE模型,并且引入金融加速器以分析货币政策对消费品和投资品通货膨胀的影响机制,同时使用1999Q1至2015Q4的中国宏观经济数据对模型进行贝叶斯估计。估计结果表明,两个部门的菲利普斯曲线都具有较高的价格粘性。外部融资溢价对两个部门企业投资的影响存在异质性,投资品部门的金融加速器效应更加明显。脉冲响应分析表明货币政策扩张时,投资品部门的产出和通胀膨胀上升幅度比消费品部门更大。理论模型的脉冲响应与VAR实证分析得到的经验事实相一致。金融摩擦导致的消费品和投资品部门需求结构的异质性是解释货币政策对两个部门影响差异的关键。数值模拟分析发现金融加速器机制主要改变货币政策对投资品产出和通货膨胀的影响,对消费品部门影响改变较小。方差分解结果表明加总技术冲击、投资边际效率冲击和货币政策冲击是经济波动的主要来源。     

Monetary and financial stability in the euro area: Pro-cyclicality versus trade-off

This paper investigates the nexus between monetary stability and financial stability. We examine, in the experience of EMU between 1994 and 2008, first, the response of the term structure of interest rates, share prices, exchange rates, property price inflation and the deposit–loan ratio of the banking sector (our proxies for financial stability) to changes in the consumer price level and ECB policy rate (our proxies for monetary stability); second, whether and to what extent lower inflation has caused share price stability and how ECB policy rate has reacted to inflation. Using a sign-restriction-based VAR approach, we find that there is a pro-cyclical relationship between monetary and financial stability in the long-run. With a positive inflation shock, we find on average a 2% estimated decline in share prices. This suggests that the interest rate instrument used for inflation targeting is conducive to financial stability.     

我国货币政策信贷传导渠道的实证分析

为应对国际金融危机的挑战和解决国内经济运行中的突出矛盾,我国的货币政策已发生了根本性的转变,即从偏紧缩的政策转为促进经济增长的适度宽松的政策。本文通过采用向量自回归模型、冲击反应分析和预期误差项方差分解等方法,发现信贷传导渠道是我国货币政策的重要传导渠道,并且信贷传导渠道具有有效性。     

Determinants of global spillovers from US monetary policy

This paper assesses the global spillovers from identified US monetary policy shocks in a global VAR model. US monetary policy generates sizable output spillovers to the rest of the world, which are larger than the domestic effects in the US for many economies. The magnitude of spillovers depends on the receiving country's trade and financial integration, de jure financial openness, exchange rate regime, financial market development, labour market rigidities, industry structure, and participation in global value chains. The role of these country characteristics for the spillovers often differs across advanced and non-advanced economies and also involves non-linearities. Furthermore, economies that experience larger spillovers from conventional US monetary policy also displayed larger downward revisions of their growth forecasts in spring 2013 when the Federal Reserve upset markets by discussing tapering off quantitative easing. The results of this paper suggest that policymakers could mitigate their economies' vulnerability to US monetary policy by fostering trade integration as well as domestic financial market development, increasing the flexibility of exchange rates, and reducing frictions in labour markets. Other policies – such as inhibiting financial integration, industrialisation and participation in global value chains – might mitigate spillovers from US monetary policy, but are likely to reduce long-run growth.     

美联储货币政策对我国资产价格的影响

本文利用事件研究法考察了美联储货币政策对我国资产价格的影响。研究发现美联储货币政策会显著影响我国资产价格,美联储加息会降低我国债券和股票回报,降息则会提高债券和股票回报。将美联储货币政策进行细分后发现,预期到的货币政策调整对债券市场和股票市场的回报都有显著影响,而未预期到的货币政策调整和前瞻性指引只影响债券市场。进一步的研究表明,未预期到的美联储货币政策调整和前瞻性指引还会加剧我国金融市场的波动率。本文的研究结论为美联储货币政策对我国经济金融的影响提供了新的证据,对于投资者提高投资收益、降低投资风险以及货币当局完善我国货币政策调控和维护我国金融市场稳定具有重要意义。     

Financial stress and economic dynamics: The transmission of crises

A financial stress index for the United States is introduced—one used by the staff of the Federal Reserve Board during the financial crisis of 2008–2009—and its׳ interaction with real activity, inflation and monetary policy is investigated using a Markov-switching VAR model, estimated with Bayesian methods. A “stress event” is defined as a period of adverse latent Markov states. Results show that time variation is statistically important, that stress events line up well with historical events, and that shifts to stress events are highly detrimental for the economy. Conventional monetary policy is shown to be weak during such periods.     

Level,slope, curvature of the sovereign yield curve,and fiscal behaviour

We study fiscal behaviour and the sovereign yield curve in the US and Germany. We obtain the latent factors, level, slope and curvature, with the Kalman filter, and use them in a VAR with macro, fiscal and financial stress variables. In the US, fiscal shocks generate an immediate response of the short-end of the yield curve, associated with monetary policy, lasting 6–8 quarters, followed by a response of the whole yield curve lasting 3 years, with an implied elasticity of long-term yields of 80% for the government debt shock and 48% for the budget balance shock. In Germany, fiscal shocks have entailed no significant reactions of the yield curve shape and no response of the monetary policy interest rate, notably after 1999; only in the case of debt shocks there is a short-lived decrease in the medium-end of the yield curve in the following 2nd and 3rd quarters.     

Can central banks’ monetary policy be described by a linear (augmented) Taylor rule or by a nonlinear rule?

The original Taylor rule establishes a simple linear relation between the interest rate, inflation and the output gap. An important extension to this rule is the assumption of a forward-looking behaviour of central banks. Now they are assumed to target expected inflation and output gap instead of current values of these variables. Using a forward-looking monetary policy reaction function, this paper analyses whether central banks’ monetary policy can indeed be described by a linear Taylor rule or, instead, by a nonlinear rule. It also analyses whether that rule can be augmented with a financial conditions index containing information from some asset prices and financial variables. The results indicate that the monetary behaviour of the European Central Bank and Bank of England is best described by a nonlinear rule, but the behaviour of the Federal Reserve of the United States can be well described by a linear Taylor rule. Our evidence also suggests that only the European Central Bank is reacting to financial conditions.     

Optimal monetary policy with durable consumption goods

We document that the durable goods sector is much more interest-sensitive than the nondurables sector, and then investigate the implications of these sectoral differences for monetary policy. We formulate a two-sector general equilibrium model that is calibrated both to match the sectoral responses to a monetary shock derived from our empirical VAR and to imply an empirically realistic degree of sectoral output volatility and comovement. While the social welfare function involves sector-specific output gaps and inflation rates, the performance of the optimal policy rule can be closely approximated by a simple rule that targets a weighted average of aggregate wage and price inflation. In contrast, a rule that stabilizes a more narrow measure of final goods price inflation performs poorly in terms of social welfare.     

Monetary News Shocks

We pursue an empirical strategy to identify a monetary news shock in the U.S. economy. We use a monetary policy residual, along with other variables in a vector autoregression (VAR), and identify a monetary news shock as the linear combination of reduced-form innovations that is orthogonal to the current residual and that maximizes the sum of contributions to its forecast error variance over a finite horizon. Real GDP declines in a persistent manner after a positive monetary news shock. This contraction in economic activity is accompanied by a fall in inflation and a rapid increase in the nominal interest rate.     

Monetary policy shocks, Choleski identification, and DNK models

A popular identifying assumption in structural VAR studies is that the monetary policy shock does not affect macroeconomic variables contemporaneously. We examine the consequences of using this identification strategy when the data-generating process is a basic Dynamic New Keynesian (DNK) model but without these assumed time delays. The principle conclusion is that the standard Choleski assumption can severely distort the impulse response functions, producing price puzzles and muted responses of inflation and the output gap to monetary shocks.     

Financial fragility in the Great Moderation

A nascent literature explores the measurement of financial fragility. This paper considers evidence for rising financial fragility during the 1984–2007 Great Moderation in the U.S. The literature suggests that macroeconomic stability combined with strong growth of credit to asset markets, in asset prices and in credit relative to output are all indicators of rising financial fragility. We show each of these trends in the Great Moderation. We derive the testable implication that in the Great Moderation credit growth is driven more by past credit growth and less by output growth (Allen and Gale, 2000), relative to pre-Great Moderation years. Results from a VAR model estimated on quarterly data for 1955–2007 are consistent with the hypothesis. This invites a reinterpretation of the Great Moderation. Our methodology may help understand when a credit boom turns into a credit bubble, and contributes to the development of methods of measuring financial fragility.     

Systemic risk: A new trade-off for monetary policy?

We introduce time-varying systemic risk (à la He and Krishnamurthy, 2014) in an otherwise standard New-Keynesian model to study whether simple leaning-against-the-wind interest rate rules can reduce systemic risk and improve welfare. We find that while financial sector leverage contains additional information about the state of the economy that is not captured in inflation and output leaning against financial variables can only marginally improve welfare because rules are detrimental in the presence of falling asset prices. An optimal macroprudential policy, similar to a counter cyclical capital requirement, can eliminate systemic risk raising welfare by about 1.5%. Also, a surprise monetary policy tightening does not necessarily reduce systemic risk, especially during bad times. Finally, a volatility paradox a la Brunnermeier and Sannikov (2014) arises when monetary policy tries to excessively stabilize output.