Monetary Policy,Expectations and Commitment*

Commitment in monetary policy leads to equilibria that are superior to those from optimal discretionary policies. A number of interest‐rate reaction functions and instrument rules have been proposed to implement or approximate commitment policy. We assess these rules in terms of whether they lead to a rational expectations equilibrium that is both locally determinate and stable under adaptive learning by private agents. A reaction function that appropriately depends explicitly on private sector expectations performs particularly well on both counts.     

Exchange Rates and Monetary Policy

This paper looks at the relation between exchange rates and monetary policy. It focuses in particular on the role of the exchange rate of the euro in the context of the ECB's monetary policy strategy. The objective of monetary policy is to maintain price stability. The euro area is a large and relatively closed economy. Therefore, the exchange rate of the euro is not an intermediate target nor is it an objective. Nevertheless, the ECB's stability–oriented monetary policy strategy does not neglect the exchange rate of the euro. Clearly, exchange rate developments are taken into account both when looking at the transmission mechanism of monetary policy and when assessing the current economic situation and prospects for the euro area.     

Inflation Expectations and Monetary Policy Surprises*

We estimate monetary policy surprises for European consumers over time, based on monetary policy changes that were unanticipated according to consumers’ stated beliefs. We find that such monetary policy surprises have the opposite impact on inflation expectations from the impact found when assuming that consumers are well informed. Relaxing the latter assumption by focusing on consumers’ stated beliefs, unanticipated increases in the interest rate raise inflation expectations before the 2008 financial crisis. This is consistent with imperfect information theoretical settings where interest rate hikes are interpreted as positive news about the state of the economy by consumers who know that policymakers have relatively more information.     

Forward Rates,Interest Rates,and Expectations Under Alternative Exchange Rate Regimes*

A model comprising spot and forward foreign exchange markets and a domestic credit market is used to examine the trade-off between volatility in the nominal exchange rate and domestic interest rate. It also shows how a slowly crawling spot rate can raise interest rate volatility and the amplitude of reserve flows. Finally, the paper extends a finding by Driskill and McCafferty that the exchange rate effects of external shocks are differently affected by the responsiveness of speculation to expected profits; high responsiveness makes the spot exchange rate more sensitive to foreign financial shocks but less sensitive to trade balance shocks.     

人民币汇率波动与货币政策调控难度

文章采用动态随机一般均衡（DSGE）模型研究了中国货币政策实施时不能忽略的人民币汇率波动特征。文章构建了人民币汇率波动与中国货币政策及其宏观经济系统影响机制的理论模型,并在模型参数校准的基础上进行了政策模拟。研究结果表明,较大的人民币汇率波动会在一定程度上减弱中国货币政策的调控效果,但是对每个变量冲击响应的影响程度有所不同。较大的人民币汇率波动将显著干扰货币政策对宏观经济需求的调控,人民币汇率升值波动幅度较大时,货币政策对需求变量的调控作用会减弱,但不会影响相关需求变量在不同时点的冲击响应走势特征。较大的汇率波动会减弱利率上行对出口的负面影响,有利于缓解货币政策对出口的负面冲击,但会导致贸易条件（出口价格和进口价格的比值）进一步恶化。     

The Effect of Monetary Policy on Exchange Rates during Currency Crises: the Role of Debt,Institutions, and Financial Openness*

This paper empirically examines the effect of monetary policy on exchange rates during currency crises. We find strong evidence that raising the interest rate: (i) has larger adverse balance sheet effects and is therefore less effective in countries with high domestic corporate short‐term debt; (ii) is more credible and therefore more effective in countries with high‐quality institutions; (iii) is more credible and therefore more effective in countries with high external debt; and (iv) is less effective in countries with high capital account openness. Our results support the idea that the effect of monetary policy depends on its impact on fundamentals, as well as its credibility, as suggested in the recent theoretical literature.     

Evolutionary Economics,Rational Expectations,and Monetary Policy

Wealth disparity is a critical factor in the perpetuation of blackwhite disparity in the United States. Intergenerational wealth transfers are the major determinant of household wealth formation. A program of reparations would acknowledge past and continued injustice, redress such injustices, and provide closure. Radical institutional analysis benefits this policy discussion in at least three areas: explaining the re-creation of discrimination; indicating the role of wealth disparity; and identifying the funding source for reparations. For centuries the economic surplus has enhanced white wealth relative to black wealth. A program of reparations suggests directing the surplus toward funding black-white equality.     

关于公众预期与货币政策的反思

公众预期与货币政策的关系问题一直是宏观经济学中令人感到;困惑的热点问题.本文力图对经典理论的基本前提进行深入的研讨,强调由于理性预期模型在前提假设方面的简单化,才使得理论与现实时常存在差异,并以此为基础进一步探析货币政策效应与公众预期的关系,最后结合中国实际进行实证分析.     

Fiscal Policy, Monetary Policy and the Exchange Rate

Domestic fiscal and monetary policy settings can influence the strength of the Australia dollar in a number of different ways.     

Fiscal Policy,Expectations, and Exchange-Rate Dynamics*

This paper uses the sticky-price monetary model to analyze the effects of fiscal policy on the exchange rate under alternative assumptions about exchange-rate expectations. the use of different expectations mechanisms-specifically the perfect-foresight model and the popular models tested by Frankel and Froot: regressive, adaptive, and distributed-lag-is based on recent empirical evidence suggesting that exchange-rate expectations may not be rational. the most surprising finding in the paper is that with adaptive and distributed-lag expectations, fiscal expansion has no initial impact on the exchange rate, and the same may be true for regressive expectations.     

Managed Exchange Rates*

Managed exchange rates have become a tool of macroeconomic stabilization policy. Much of the previous emphasis on parametrically chosen exchange rate regimes has missed the advantages of a strategy of a variable target exchange rate when the central bank tries to maintain equilibrium output in the face of various shocks to the economy. Based on a standard IS-LM-AS macromodel, optimal combinations of exchange rate and money supply changes are found that insulate the economy against all stipulated shocks. However, these combinations vary from one shock to another; therefore recognition signals are necessary. Continuous information on some variables allows the central bank to identify shocks if they can be guaranteed to occur individually, but not otherwise. As a second-best strategy, ‘defensively managed exchange rates’ appear suitable. The paper also discusses some side effects and other practical difficulties of a managed exchange rate as an automatic stabilizer.     

Fiscal Policy and Exchange Rates

This paper examines the dynamics of the nominal exchange rate and fiscal deficits in a continuous time optimizing general equilibrium model with OLG. It is shown that alternative financing modes of budget deficits imply different patterns of adjustment along the transitional path towards the steady-state equilibrium. In particular, the respect of public solvency without money financing is not sufficient to avoid the depreciation of the exchange rate in the long-run after a fiscal expansion. In addition, money and tax financing generate opposite intergenerational reallocation of wealth.     

Exchange Rates and Monetary Policy in Central Europe - A Survey of Some Issues

MOCT-MOST: Economic Policy in Transitional Economies -     

Monetary Policy and Capital Inflow*

Capital inflow has been depicted in the model developed by Pentti Kouri and Michael Porter as being determined exclusively by monetary forces, with GNP entering the equation through its impact on the demand for money. If this is correct, disaggregation of GNP should have little effect on the estimates of response parameters in the model. It is found that replacing GNP by investment and non-investment spending has a significant effect on the estimates, suggesting that capital inflows have direct purposes which are not well represented in a purely monetary model. An attempt is made to construct a money policy equation as the second part of a simultaneous system depicting the interplay of monetary policy and capital inflow. In spite of claims to the contrary, it is found that simultaneous estimation gives results which differ considerably from those of single-equation methods.     

Exchange Rates, Market Structure, Prices and Imports*

Eighteen months after sizable declines in the US and Australian dollars in 1985, the trade accounts of both countries showed little improvement In some markets import prices failed to decline as expected Was this due to normal lags, or are there markets where exchange rate responses are limited? This paper analyzes the impact of firm behaviour and market structure on the sensitivity of import markets to exchange rate changes.