Expectations,exchange rates and monetary theory: The case of German hyperinflation

This paper tests some of the structural coefficient restrictions on goods-price equations and foreign exchange-rate equations implied by the monetary theory of exchange rates. The data are from the German hyperinflation (1922–1923). The results of the tests broadly support the monetary theory of exchange rates and they also support the hypothesis that the foreign exchange market was efficient during this period. However, the much higher residual volatility in foreign exchange prices is not explained by the monetary theory.     

A note on the neutrality of temporary monetary disturbances

In the rational expectations analysis of Lucas and Barro, the quantity of money is subject to random shocks that are specified to be unanticipated and permanent in character. The present note provides some simple examples of alternative money supply specifications that lead to non-neutrality of perceived temporary monetary growth through the channel of expected inflation. Subsequently, the discussion demonstrates that this non-neutrality is not robust to an alternative specification of private monetary behavior, the permanent balance model. The key difference is that the initial model involves commodity supply and demand which depend on current real balances while in the subsequent model these depend on permanent balances. Some final remarks are directed to the idea that the distinction between current and permanent balances in this simple model could be linked to alternative roles of money in more detailed, optimizing analyses.     

A structural time series test of the monetary model of exchange rates under the German hyperinflation

In this paper some structural time series evidence is presented for the monetary model of exchange rates under the German hyperinflation. The results show that the money supply and the expected rate of change of the exchange rate played a dominant role in the determination of the exchange rate of the mark against the US dollar. The results also support the property of proportionality between the exchange rate and the money supply. Furthermore, evidence is found for the validity of the constituent components of the monetary model, PPP and the quantity theory.     

The European monetary system: A Note

This paper investigates the performance of the EMS since its implementationin 1979. The statistical results suggest that there has been a significant decrease in bilateral and effective exchange rates variabilities of the participating countries. The test results also point toward a narrower divergence in the development of national monetary policies across ERM countries.     

Interest rate dynamics and the term structure: A note

The Brennan and Schwartz two-factor model of the term structure is re-examined using constant-duration long-term yields in place of the fluctuating-duration consol yields, and additional stability is achieved in the empirical estimations. The model is then reformulated to examine more closely the relationship between changes in long and short rates of interest. It is found that movements in the short rate of interest are related to movements in the long rate, the spread between the long and short rates, and the prior movement in the long rate. The model is then tested for its out-of-sample predictive ability and found to possess a modest amount of predictive power.     

A note on reserve requirements and monetary control with a flexible deposit rate

This paper examines the relationship between reserve ratios and monetary control when deposit rates are flexible in the short run. For a total reserves operating target, it is shown that an increase in the deposit reserve ration may raise the variance of a monetary aggregate. Under an interest rate operating target, it is also shown that the deposit reserve ratio affects both the expected value and the variance of a monetary aggregate. These findings for the two alternative operating targets differ sharply from previous results which were based on the assumption of fixed deposit rates.     

Banking deregulation,macroeconomic dynamics and monetary policy

We assess the effects of increased bank competition on macroeconomic and lending dynamics and on the transmission of monetary policy. Applying panel local projections to state-level data, we, in a first step, investigate the dynamic effects of fiercer bank competition induced by deregulation allowing geographical expansion of banks across state borders in the 1980s and early-1990s. We allow for possible adjustments before the new laws became effective due to potential anticipation effects. Our findings suggest that these events were anticipated and that they temporarily increased economic activity as well as business and consumer lending. We also find a permanent increase in real estate lending and house prices. In a second step, we show that the impact of monetary policy on economic activity, house prices and lending tended to become stronger after interstate banking deregulation.     

Monetary policy and stock market dynamics across monetary regimes

This paper examines the dynamic linkages between monetary policy and the stock market during the three distinct monetary regimes of Burns, Volcker and Greenspan since the 1970s. Some major findings are the following. First, in the 1990s it appears that there was a disconnection between Federal Reserve actions (via the federal funds rate) and responses by the stock market. Second, the impact of inflation on the stock market did not surface as significant in the later parts of 1980s and the 1990s. And third, significant asymmetric effects of monetary policy on the stock markets were observed throughout each monetary regime but these were more pronounced during bear markets than bull markets. These results suggest that there was no consistent dynamic relationship between monetary policy and the stock market and that the nature of such dynamics was different in each of the three monetary regimes.     

A monetary model of balance of payments: The case of Venezuela

The monetary approach to the balance of payments has gained considerable appeal in the literature and is viewed as being concerned with the long run since it does not analyze the adjustment process of the balance of payments. The model developed in this paper is concerned essentially with the short-run implications of this approach and the model is applied to the case of Venezuela. The results were very encouraging for the monetary approach as the model was able to explain a great part of the fluctuations in the balance of payments of Venezuela during the period of study.     

现行国际货币体系难以承受之重：美国货币政策的量化宽松

美联储第二轮量化宽松的货币政策出台前后,国际社会争议不断。文章从量化宽松货币政策与国际货币体系的关系着手分析,指出本次国际金融危机再次暴露出现行国际货币体系内在缺陷,量化宽松货币政策有可能加剧国际金融风险,并提出了改革国际货币体系的对策建议。     

Role of monetary policy in a New Keynesian economy: a note from a laboratory experiment

This paper discusses an experimental study on the role of monetary policy within a New Keynesian macroeconomic framework. The novelty of this article is that each subject was asked to forecast both the inflation rate and output gap at the same time one period ahead, which is an improvement over the existing literature. We find that if both the expected inflation rate and expected output gap is incorporated in the monetary policy rule then inflation can be anchored and stabilized more efficiently.     

The dynamic effects of monetary policy: A structural factor model approach

A structural factor model for 112 US monthly macroeconomic series is used to study the effects of monetary policy. Monetary policy shocks are identified using a standard recursive scheme, in which the impact effects on both industrial production and prices are zero. The main findings are the following. First, the maximal effect on bilateral real exchange rates is observed on impact, so that the “delayed overshooting” puzzle disappears. Second, after a contractionary shock prices fall at all horizons, so that the price puzzle is not there. Finally, monetary policy has a sizable effect on both real and nominal variables.     

我国货币政策中介目标作用机制的实证检验与比较

在不同时期,我国采用不同的货币数量指标作为货币政策的中介目标。该研究以货币经济理论为基础,运用计量经济方法,对自1992年以来货币政策的传导机制,以1998年为分界点进行了分时段比较分析。总体而言,在1997年底以前,信贷规模是货币政策的中介目标;1998年初以后,货币供应量M2则是中介目标,同时也是货币政策的操作目标。