AN INTERNATIONAL COMPARISON OF EXPERIENCES WITH MONETARY TARGETING: A REACTION FUNCTION APPROACH

Monetary targets have been instituted in major countries for nearly a decade. There has been a rather wide variety of experience with them, both in the control procedures and in the success with which targets have been achieved. This paper presents results of a reaction function investigation into the extent to which elements of discretionary monetary policy remained even under targeting. Generally, targets probably were successful in focusing central bank attention on the long run. But a conclusion here is that distinguishable elements of discretion (as opposed to rule), evidenced by movements in targeted aggregates themselves, were present for several countries, including the United States.     

Inflation Targeting and Inflation Persistence

This paper argues that the adoption of an inflation target reduces the persistence of inflation.We develop the theoretical literature on inflation persistence by introducing a Taylor Rule for monetary policy into a model of persistence and showing that inflation targets reduce inflation persistence.We investigate changes in the time series properties of inflation in seven countries that introduced inflation targets in the late 1980s or early 1990s.We find that the persistence of inflation is greatly reduced or eliminated following the introduction of inflation targets.     

美联储量化宽松政策对全球资产价格的非平衡溢出效应

本文采用全局向量自回归模型分析了美联储QE对采用不同货币政策框架、汇率制度和资本流动管理制度国家和地区的不同影响。“货币政策钉住货币供应量+宽松钉住汇率制度+资本账户可兑换”的国家其货币政策应兼顾本国物价水平稳定，同时加强宏观审慎政策对资产价格的逆周期调节，避免出现实体经济紧缩而金融繁荣的现象。“货币政策钉住通货膨胀+浮动汇率+资本账户可兑换”的国家应强化宏观审慎政策对资产价格的调节以应对金融资产泡沫。     

Transmission of monetary policy in times of high household debt

This paper explores whether the degree of household indebtedness can affect the effectiveness of monetary policy. We take an interacted panel VAR approach, using a panel of 23 countries, thereby obtaining several interesting findings, such as the responses of consumption and investment to monetary shocks are stronger in high levels of household debt. Furthermore, such responses become larger in a contractionary monetary policy stance rather than in an expansionary one, which suggests that monetary policy shocks have asymmetric effects. We have also found that monetary policy has a relatively larger impact in countries with higher share of adjustable-rate loans. Finally, we have found that when a country is in a high-debt state and in a contractionary policy stance, monetary policy is more powerful in countries with a higher share of adjustable-rate loans. We conjecture that these findings support the presence of a cash-flow channel with respect to the transmission of monetary policy in a high household debt state.     

The Stability of the Demand for Money in Monetary Unions: Some Empirical Evidence from WAEMU

Previous studies of the stability of the demand for money have been largely conducted in the context of individual countries. To the extent that these countries have control over their monetary policies, such an approach is well justified. However, for monetary unions, where the control over monetary policy is usually vested in a central or outside authority, it is more appropriate to examine the stability of the money demand for the union as a collective entity. This paper follows this approach with respect to a West African monetary union, the WAEMU, whose monetary policies are largely dictated by the French authorities. Using cointegration theory and CUSUM stability tests, we find evidence that the demand for broad money is stable in this union. Given the empirical results, the paper draws inferences regarding their implications for the formulation of optimal monetary policy for the WAEMU.     

The effects of public deficits on money growth in the European Union

The impact of government debt on the money supply has been studied for different countries, with an emphasis on developing countries and the U.S. This topic becomes especially interesting in European Union countries that have high public deficits and low inflation rates. It is also very relevant in the monetary union, with a European central bank controlling monetary policy and introducing monetary measures for all the member countries. The main goal of this paper is to analyze if there is any relationship between public deficits and monetary growth in the European Union. The conclusions presented in the previous literature are ambiguous. Some studies concluded that there is little evidence that government debt influences money in some of the member countries.     

Monetary Policy in the Aftermath of Currency Crises: The Case of Asia

The paper evaluates monetary policy and its relationship with the exchange rate in the five Asian crisis countries. The findings are compared with previous currency crises in recent history. It is found that there is no evidence of overly tight monetary policy in the Asian crisis countries in 1997 and early 1998. There is also no evidence that high interest rates led to weaker exchange rates. The usual tradeoff between inflation and output when raising interest rates suggested the need for a softer monetary policy in the crisis countries to combat recession. However, in some countries, corporate balance sheet considerations suggested the need to reverse overly depreciated currencies through firmer monetary policy.     

货币政策工具与中介目标选择:基于法定准备金操作的研究

利率和货币量哪个更适合作为货币政策中介目标是一个很有争议的问题,目前许多文献对这个问题的研究并不涉及货币政策工具与利率以及货币量之间的关系。这样的研究实际上隐含了一个前提,即货币政策工具和利率以及货币量之间存在明确的、稳定的关系,从而保证利率目标或者货币量是可控的。基于法定准备金操作的研究表明,法定准备金操作和货币量之间存在确定的关系,而和利率之间的关系是不确定的。导致利率和法定准备金操作关系不确定的主要原因,则是IS曲线斜率正负性的不确定性;同时,对现阶段中国IS曲线斜率稳定性的实证研究表明,其斜率正负性是不稳定的。因此,利率不适合作为货币政策中介目标。     

Inflation targeting in Latin America: Empirical analysis using GARCH models

This paper studies inflation dynamics in eight Latin American countries, some of which have adopted formal inflation targets (IT) as their monetary policy frameworks. We analyze the possible benefits associated with IT, not only in terms of inflation level and volatility, but also regarding other nonlinear characteristics of these series, such as volatility persistence or the fulfillment of the Friedman hypothesis. To describe inflation dynamics we use an unobserved components model, where each component can follow a GARCH type process. Once we estimate the model, the main findings of the empirical exercise confirm the favorable performance of IT.     

现行国际货币体系的不公正性与发展中国家的策略

现行国际货币体系的基本特征是储备货币多元化和以浮动汇率制为主流的汇率制度选择自由化，发展中国家似乎摆脱了原有的布雷顿森林体系和纪律和约束。但实际上，在现行国际货币体系下，发展中国家在储备货币依赖、江率制度选择、国际收支调节和抑制国际投资本冲击等方面均受到不利的影响（甚至是伤害）。本文首先论述了现行国际货币体系对发展中国家不公正性的表现，然后深入分析了其根源，最后提出了发展中国家应采取的若干策略。     

Reverse Causality in Global and Intra‐European Imbalances

The paper discusses global current account imbalances in the context of an asymmetric world monetary system. It identifies the USA and Germany as center countries with rising/high current account deficits (USA) and surpluses (Germany). These are matched by current account surpluses of countries stabilizing their exchange rates against the dollar (dollar periphery) and current account deficits of countries stabilizing their exchange rates against the euro or members of the euro area (euro periphery). The paper finds that changes of world current account positions are closely linked to the monetary policy decision patterns both in the centers and peripheries. Whereas in the centers current account positions are affected by monetary policies, in the peripheries exchange rate stabilization cum sterilization matters. In specific, monetary expansion in the USA as well as exchange rate stabilization and sterilization policies in the dollar periphery are found to have contributed to global imbalances.     

The prospects of a monetary union in East Asia

This paper assesses the empirical desirability of the East Asian economies to form a monetary union. The Structural Vector Autoregression (VAR) method is employed to assess the nature of macroeconomic disturbances among the East Asian countries, as a preliminary guide in identifying potential candidates for forming an Optimum Currency Area (OCA). In comparison with European countries, East Asia has less symmetric underlying structural shocks but the speed of adjustment to shocks is much faster. The empirical results suggest that there exists a scope among some small sub-regions, comprising mainly of ASEAN countries, for potential monetary integration. The finding of an increased symmetry of shocks among countries after the Asian Financial crisis indicates that the regional policy-coordinating effort after the crisis has put the region on the right track if monetary union is a desired goal.     

MONETARY POLICY ACTIVISM UNDER MANAGED-FLOATING EXCHANGE RATES: A CROSS-COUNTRY COMPARISON

This paper assesses the degree and pattern of monetary policy activism in the United States, Canada, West Germany, the United Kingdom, and Japan during the recent period in which managed-floating exchange rates prevailed. Floating exchange rates enhance the potency of a discretionary monetary policy. Yet central banks in these countries shifted toward less discretionary monetary targeting during the late 1970s in response to rising inflationary pressures and expectations. But whether such targeting actually reduced policy activism is unclear since targets were expressed in wide ranges and often were missed. Following 1981, at least three of these countries–the United States, Canada, and the United Kingdom–reverted to an avowedly more discretionary pattern of response to changes in real demand pressures, interest rates, and exchange rates. Since mid-1986, Germany, the United Kingdom, and Japan–and, to a lesser extent, Canada–have intervened heavily in the foreign exchange market and so have greatly increased their official dollar holdings. Moreover, through August 1987, the effects of this intervention on these countries' domestic money supplies apparently have been sterilized only partially.     

资产价格与货币政策

随着资本市场的发展和金融资产存量的增加 ,资产价格的波动对货币政策提出了诸多挑战。本文讨论了资产价格与货币政策目标的关系 ;资产价格在货币政策传导过程中对消费、投资和金融体系的影响 ;以及货币政策操作中有关资产价格的争论 ;最后提出了这一研究领域中存在的问题     

International Capital Movement and Monetary Independence in Asia

In this paper, we investigate the extent of monetary independence in a group of ten Asian countries: China, Malaysia, Japan, India, Indonesia, Philippines, Thailand, Korea, Singapore, and Hong Kong. While the traditional investigation has considered only the bivariate relationship between the home interest rate and the base rate, we employ both single-equation and vector autoregressive representations of the bivariate and the trivariate relationship including the desired (or optimal) interest rate. We find in most countries, that the ranking of monetary independence is relatively consistent across the models and methodologies although model specifications produce important differences for some countries such as Japan, Indonesia, and India. Trilemma suggests that a country cannot accomplish all three policy objectives: monetary independence, exchange rate stability, and free capital mobility. To increase monetary independence a country must choose between greater exchange rate flexibility or a lower degree of capital mobility. The fact that China and Malaysia, the two countries that are known to have imposed the strictest capital controls, consistently rank high in various scenarios while Hong Kong, which has maintained nearly the freest regime in capital markets, is lowest in monetary independence, indicates that perhaps capital controls may play a more important role than does exchange rate flexibility in securing independence in monetary policy making. On the other hand, countries that maintain greater exchange rate stability do not necessarily rank low, unless it is combined with greater capital mobility as in the case of Hong Kong.     

Eastern and Southern Africa Monetary Integration: A Structural Vector Autoregression Analysis

This paper uses VAR techniques to investigate the potential for forming monetary unions in Eastern and Southern Africa. All countries in the sample are members of various regional economic organizations. Some of the organizations have a monetary union as an immediate objective whereas others consider it as a possibility in the more distant future. Our objective is to sort out which countries are suitable candidates for a monetary union based on the synchronicity of demand and supply disturbances. Although economic shocks are not highly correlated across the entire region, we tentatively identify three sub‐regional clusters of countries that may benefit from a currency union. We find some tentative evidence that some, though not all, sub‐regions may benefit from a link to the Euro.     

The optimality of a gulf currency union: Commonalities and idiosyncrasies

A high degree of shared national elements that drive the bulk of observed output volatility between countries is generally seen as a necessary prerequisite for the formation of a successful monetary union. This is because countries in a monetary union accept a one-size-fits all, resigning regions to policies that are based on some aggregate macroeconomic target rather than a country-specific one. For this reason, the cost of monetary union membership depends on the incidence of asymmetric (nation-specific) shocks rather than symmetric, or common shocks. This criteria is examined for the Gulf Cooperation Council (GCC) countries, who reaffirmed plans for the implementation of a single currency. This paper quantifies, using structural factor models with common factor restrictions, changes in output synchronisation, the importance of common factor or idiosyncratic shocks between the regions, and the synchronisation of these shocks across the GCC as well as the implications for GCC-wide macroeconomic policy at short-to-medium term horizons. Despite current difficulties in fulfilling the convergence criteria goals to monetary union, the results show the synchronisation of output growth fluctuations between economies of the GCC to have increased over the past 25 years. This paper also finds that a fairly sizeable proportion of output fluctuations in business cycle frequencies are driven by a common component that, to some degree, reflects U.S. monetary policy and U.S. demand shocks as well as changes in crude oil prices.     

Understanding the dynamics of the macroeconomic trilemma

This paper tests the autonomy of domestic monetary policy in the context of the macroeconomic policy trilemma for a large data-set of developing and developed countries covering three different time periods characterized with different exchange rate regimes and capital controls. The existing literature uses fixed coefficient methodologies to examine monetary policy independence; whereas we show that the coefficients of interest are unstable as countries switch between different exchange rate regimes and/or capital controls over time. The contribution is in using a time-varying parameter model that better captures the effects of the heterogeneity in different exchange rate regimes and capital mobility restrictions on monetary policy independence over time, allowing a more accurate test of the macroeconomic trilemma.     

美元本位与中美货币政策的福利分配——基于新开放经济宏观经济学视角

本文从以中国为代表的外围国家出发,采用新开放经济宏观经济学动态一般均衡的方法,分析了美元本位在中美货币政策福利分配中的影响。结果表明,当外围国家采用扩张性的货币政策时,美元本位导致了汇率传递的不完全,美国作为美元本位的核心国始终能够获得正的福利增量,而外围国家的福利是否增加,受到美元本位程度、消费替代弹性和国家规模等因素的影响。其中,美元本位程度和消费替代弹性主要影响两国福利分配的总量,而国家规模的大小将直接影响两国福利分配的比例。总的来说,中国可以通过推动人民币国际化、提高出口厂商的议价能力以及加强中美国际货币政策合作来减少美元本位带来的福利损失。     

Does monetary policy credibility mitigate the fear of floating?

Based on the argument that monetary policy credibility can reduce the fear of floating, we analyze this hypothesis for a set of 47 countries (of which, 32 are developing countries, 26 are Inflation Targeting countries and 16 are Inflation Targeting developing countries). Our study is the first to empirically assess the impact of monetary policy credibility (defined as the central bank's ability to anchor inflation expectations to the target) on the central banks' reaction through the basic interest rate due to exchange rate fluctuations (fear of floating). Based on panel data methodology applied to different samples, the most important result of this paper is that monetary policy credibility is able to mitigate the fear of floating. However, this effect is weaker after the crisis. Our estimates also reveal that Inflation Targeting developing countries present stronger fear of floating, which is justified by the fear of inflation in these countries.