Managing financial market expectations: The role of central bank transparency and central bank communication

In this paper, we study the influence of central bank transparency and informal central bank communication on the formation of money market expectations. The sample covers nine major central banks from January 1999 to July 2007. We find, first, that transparency reduces the bias in money market expectations and dampens their variation. Second, informal communications help manage financial market expectations by reducing the variation of expectations. Third, various subcategories of the Eijffinger and Geraats (2006) transparency index lead to a smaller bias in expectations (in particular, evaluation of policy outcome and explanation of interest rate decisions) and to a reduction in the variation of expectations (in particular, explicit prioritization of objectives and provision of information on unanticipated macroeconomic disturbances).     

Debt,inflation and central bank independence

Increasing the independence of a central bank from political influence, although ex-ante socially beneficial and initially successful in reducing inflation, would ultimately fail to lower inflation permanently. The smaller anticipated policy distortions implemented by a more independent central bank would induce the fiscal authority to decrease current distortions by increasing the deficit. Over time, inflation would increase to accommodate a higher public debt. By contrast, imposing a strict inflation target would lower inflation permanently and insulate the primary deficit from political distortions.     

Central bank independence,inflation and political instability in developing countries

We test whether political instability affects central bank independence in developing countries. Both a legal measure and the turnover tate of central bank governors are used as proxies for central bank independence and the frequency of government transfers is used to proxy political instability. Only the number of coups affects the turnover rate of central bank governors. We also find that both the turnover rate of central bank governors and political instability affect the rate of inflation.     

Reactions of real yields and inflation expectations to forward guidance in the United States

We study the impact of forward policy rate guidance by the Federal Reserve’s Federal Open Market Committee (FOMC) used as an unconventional monetary policy tool at the zero lower bound of the policy rate on real and breakeven US Treasury yield curves. We find that explicit FOMC policy rate guidance announcements led to a significant reduction in real yields at horizons of 2 to 5 years ahead. By contrast, long-term breakeven inflation rates were little affected, suggesting that inflation expectations have remained well anchored, and that explicit FOMC policy rate guidance has not adversely affected central bank credibility.     

Exchange rates,central bank news and the zero lower bound*

The zero lower bound (ZLB) may restrict the responsiveness of exchange rates to news. A proxy for central bank communication is added as a determinant in a model of exchange rate movements. Two reserve currencies, the British pound and euro, and two currencies of small open economies, the Canadian dollar and Swedish krona, are examined. Reserve currencies are more vulnerable to the ZLB constraint, while the currencies of small open economies become more responsive to foreign central bank announcements. Certain unconventional monetary policy announcements were found to significantly impact exchange rates at the ZLB.     

Transparency of Monetary Policy: Theory and Practice

Transparency has become one of the main features of monetarypolicymaking during the last decade. This article establishesstylized facts and provides a systematic overview of the practiceof monetary policy transparency around the world. It shows muchdiversity in information disclosure, even for central bankswith the same monetary policy framework, including inflationtargeting. Nevertheless, the study finds significant differencesin transparency across monetary policy frameworks. The empiricalfindings are explained using key insights distilled from thetheoretical literature. Thus, this article aims to bridge thegap between the theory and practice of monetary policy transparency.(JEL codes: E58, D82)     

The effect of the market-based monetary policy transparency index on inflation and output variability

This paper examines empirically the effectiveness of the Federal Reserve’s policy under different levels of transparency by using a dynamic and continuous market-based index proposed by Kia (2011 Kia, A. 2011. “Developing a Market-based Monetary Policy Transparency Index: Evidence from the United States.” Economic Issues 16 (2): 53–79. [Google Scholar]) on inflation volatility and output volatility. In theory, the more transparent the monetary policy, the less volatile the money market will be with fewer disturbances and thus the more stable will be the economy. First, a bivariate VAR-BEKK-GARCH(1,1) model is estimated for inflation and output variables in the US economy in order to produce conditional variances and covariance over the period October 1982 to December 2011. Second, by incorporating conditional variances and transparency in a VAR model, impulse response functions reveal that after a positive shock in the Federal Reserve’s transparency (i.e. market participants consider the Federal Reserve’s actions to be more transparent), there is a statistically significant decrease in both inflation volatility and output volatility. Our results reveal the dynamic and crucial role that a central bank’s transparency plays in retaining economic stability and assuring the forecasts concerning inflation and economic growth made by the economic units.     

产权、金融稳定政策与中央银行独立性

This paper builds a micro-behavior model of central bank and financial institutions from the perspective of property-rights. By analyzing the theoretical model and the practice, we conclude that, in the framework of the present financial stabilization policies in China, the central bank’s functions of monetary policy and financial stabilization are enslaved to financial institutions. Thus, central bank independence has been damaged because of the actual property-right relation between the central bank and the financial institutions. The policy implication is to cut off the property-right relation between the central bank and the financial institutions. __________ Translated from Caijing wenti yanjiu 财经问题研究 (Research on Finanical and Economic Issues), 2007, (6): 3–9     

进一步完善现阶段基层央行存款准备金管理的建议和探讨

法定存款准备金管理是中央银行的重要管理职责之一。现阶段,存款准备金管理的规定较为零散,缺乏对存款准备金业务流程进行系统性和明确的规定。在当前金融改革不断推进的形势下,基层人民银行在执行存款准备金管理职责过程中,出现了一些新的问题,亟须加以完善。     

Information acquisition, dissemination, and transparency of monetary policy

Abstract.  This paper examines the role of transparency in a benevolent monetary authority's policies. Each firm's payoff depends on unobservable macroeconomic conditions and firms may incur a cost to acquire private information about macroeconomic conditions. The policy authority attempts to infer the underlying macroeconomic conditions from a noisy measure of aggregate actions and makes a public announcement to inform firms of this inference. High-quality announcements provide firms the incentive not to gather private information and base actions solely on information contained in policy announcements. However, this makes the observed actions of firms less informative to the policy authority.     

Confident expectations, rational expectations and the optimal conduct of monetary policy

Under what conditions central banks can afford to deviate from announced targets without losing their reputation is analyzed. For this, the public must have something like ‘confident expectations' vis-a-vis monetary policy and central banks have to behave accordingly. The paper shows that it can be rational for the public and welfare-increasing for the society to retain ‘confident expectations' instead of switching to rational expectations, when central banks have gained long-run reputation. At the end of the paper, alternative optimal money supply rules are compared in a dynamic optimization framework. © 1998 Elsevier Science B.V. All rights reserved.     

Political influence,central bank independence and inflation in Africa: A comparative analysis

This paper develops a new de facto measure of central bank independence (CBI) based on two recent measures of the turnover rates of central bank governors introduced by Vuletin and Zhu (2011), complemented with measures of alliance with the government in power, captured by prior executive appointment, tribe proximity, and political party affiliation. Using 1980–2009 data from 13 countries from the CFA zone (a currency union) and 18 non-CFA countries, the new index is used to 1) examine whether CBI can help achieve price stability in Africa and 2) show how CBI affects African countries that are part of a monetary union. We find that higher turnover rates lead to higher inflation. Our results are robust to the decomposition of the turnover rates into premature removals and ally replacements. Furthermore, we find that for CFA zone countries, central bank autonomy has no effect on inflation and instead inflation is driven by other variables such as the fixed exchange rate regime or commodity price shocks.     

The (home) bias of European central bankers: new evidence based on speeches

Speeches are an important vehicle for central bankers to convey individual views on the preferred policy stance. In this article, we employ an automated text linguistic approach to create an indicator that measures the tone of the 1,618 speeches delivered by members of the Governing Council (GC) during the period 1999M1–2014M4. We then relate this variable to euro area and national macroeconomic forecasts. Our key findings are as follows. First, inflation and growth expectations have a positive and significant impact on the hawkishness of a speech. Second, different growth expectations across the euro area and different preferences significantly explain discrepancies across speakers. Third, the voiced preferences of presidents of the national central banks (NCBs) largely coincide with the level of independence their central banks had at the time of the Maastricht Treaty. However, in general, there are not much differences between members of the Executive Board and the NCB presidents. Fourth, we find some evidence that central bankers adjust the gist of their speeches depending on whether they talk at home or abroad and before or after a GC meeting. Finally, differences in central banker preferences are the key source of variation in their speeches before the financial crisis.     

The unit root problem: Affinities between ergodicity and stationarity,its practical contradictions for central bank policy,and some consideration of alternatives

The initial focus in this article is the problem of mismatch between policy goals and statistical analysis, based on how data is transformed and processed. This intrinsically raises ontological issues regarding the nature of an economy within which policy is made and to which statistical analysis is applied. These are of general significance to post Keynesians irrespective of the position they take on the specifics of the ergodicity debate. However, they involve some issues that overlap with some aspects of that debate. The problem as posed in this article is specific and involves a practical contradiction regarding central bank policy and the problem of unit roots. The authors then consider some additional ways in which one can go beyond common practice based on the example of Forward Guidance in the United Kingdom and a more institutional approach to post Keynesian analysis.     

Effects of monetary and government spending policy on economic inequality

Using detailed micro-level income and expenditure data, we study the effects of monetary and government spending policy shocks on income and expenditure inequality in the US from 1990 to 2018. We find that expansionary monetary and government spending policy shocks systematically decrease income, disposable income and expenditure inequality. There is evidence of time variation on the effects and monetary policy and transfer payment shocks. Various impulse responses suggest that the impacts of the policy shocks increase during and after the Great Recession. The responses of income and expenditures of households at different percentiles suggest that expansionary monetary and government spending policy have a larger positive impact on households with low income and expenditures relative to those at the top of the distribution. We do not find evidence of the significant impact of Quantitative Easing policies on income inequality, however, expenditure inequality appear to increase due to the policies.     

Empirical research on monetary policy,asset prices and inflation: an analysis based on provincial panel data in China

In this article, we investigate the dynamic correlations among monetary policy, asset prices and inflation and assess the regional effects of monetary policy in China for the period October 2007 to July 2013. We focus on the interdependencies among monetary policy and asset price fluctuations by using the Shanghai Interbank Offered Rate as the preferred variable for analysing monetary policy movement. In particular, we apply a vector autoregressive model in a panel setting, which allows researchers to examine variations over time or across individual regions. The empirical results presented herein indicate that monetary policy reacts actively to asset prices, although it is still shown to be ineffective. In addition, we find that asset prices display some regional differences in their response to an unexpected monetary policy shock.     

Bank liquidity risk and monetary policy. Empirical evidence on the impact of Basel III liquidity standards

We extend the literature on the bank lending channel in two aspects. First, rather than following the literature by analyzing the impact of banks’ liquidity (measured via their asset portfolio) on monetary policy transmission, we study the role of banks’ actual liquidity risk, as measured by the Basel III liquidity regulations. Second, we investigate the effect of complying with the Basel III liquidity standards on monetary policy transmission. We use highly detailed bank-level data from Luxembourg for the period 2003q1--2010q4. Our findings are that monetary policy transmission works its way through small banks that also have a large maturity mismatch, as measured by the Net Stable Funding Ratio. In contrast, large banks with a small maturity mismatch increase their lending following a monetary policy shock, which confirms existing results that Luxembourg’s banks are liquidity providers to the European market. Based upon in-sample predictions and upon simulated data from an optimization model that takes the banks’ business models into account, we conclude that the bank lending channel will no longer be effective once banks adhere to the new Basel III liquidity regulations.     

论新媒体传播方式对科技传播功能的影响

随着新媒体时代的到来,数字化传播技术得到了广泛的应用,科技传播的方式出现了一系列的变化,已经逐渐从传统的媒体向网络及数字化传播方式过渡。传播方式的变革必然会促进传播功能上的改变。通过对新媒体时代的传播方式的研究,可以发现新媒体时代的传播方式对科技传播的三大主流功能影响巨大,并对促进我国经济发展、公民素质提高有着重要的作用。