Symbiosis of monetary and fiscal policies in a monetary union

We consider the interaction between the monetary policy in a monetary union, and the separate fiscal policies of the member countries. We use a Barro–Gordon-type model extended to many countries and fiscal policies. Each country’s fiscal policies inflict externalities on other countries, and the common monetary policy has its time-consistency problem. But if the two types of policymakers agree about the ideal levels of output and inflation, then this ideal is attained despite disagreements about the weights of the objectives, despite ex post monetary accommodation to fiscal profligacy, without fiscal coordination, without monetary commitment, and for any order of moves.     

Optimal monetary and fiscal policy in a currency union

We lay out a tractable model for the analysis of optimal monetary and fiscal policy in a currency union. The monetary authority sets a common interest rate for the union, whereas fiscal policy is implemented at the country level, through the choice of government spending. In the presence of country-specific shocks and nominal rigidities, the policy mix that is optimal from the viewpoint of the union as a whole requires that inflation be stabilized at the union level by the common central bank, whereas fiscal policy has a country-specific stabilization role, one beyond the efficient provision of public goods.     

Monetary and fiscal policy interactions in a micro-founded model of a monetary union

This paper analyzes in detail the mechanisms behind fiscal stabilization policy and the role of policy commitment in a micro-founded New-Keynesian model of a two-country monetary union, which is hit by supply shocks. We also explore the determinants of the gains from fiscal stabilization. While monetary policy with identical union members is concerned with stabilizing the union-wide economy, fiscal policy aims at stabilizing inflation differences and the terms of trade. Besides exploring optimal policies, we also consider monetary and fiscal rules. We study these rules both under coordination and non-coordination by the fiscal authorities.     

Monetary Policy and Financial Inclusion in Sub-Sahara Africa: A Panel VAR Approach

ABSTRACT

This article investigates the dynamic and bi-causal link between monetary policy and financial inclusion in sub-Saharan Africa using a panel VAR framework. The researcher obtained data from World Development Indicators (WDI) spanning from 1990 to 2014 for 48 sub-Saharan African economies. The findings suggest that a bi-causal relationship exists between monetary policy and financial inclusion. Specifically, it is evident that monetary policy affects financial inclusion, and financial inclusion is also influenced by monetary policy. The policy implication of this study is that the effectiveness of monetary policy depends on financial inclusion. Hence, the efforts of governments in sub-Saharan African countries should aim at policies that enhance financial inclusion for effective implementation of monetary policy. Also, promoting financial inclusion will require governments in sub-Saharan Africa to reduce their monetary policy rates.     

Monetary policy, foreign exchange intervention, and the exchange rate in a unifying framework

The structural VAR model is developed to jointly analyze the effects of foreign exchange intervention and (money or interest rate setting) conventional monetary policy on the exchange rate, the two types of policy reactions to the exchange rate, and interactions between the two types of policies. First, many interactions among the two types of policies and the exchange rate are found, which suggests that a joint analysis is important. Second, foreign exchange intervention has substantial effects on the exchange rate, reacts to the exchange rate significantly (to stabilize the exchange rate), and signals future conventional monetary policy stance changes (to back up the intervention). This suggests the importance of modeling foreign exchange intervention explicitly in the study of monetary policy and exchange rate behaviors. Many other interesting results on the interactions among the two types of policies and the exchange rate are also documented.     

Monetary policy in developing countries: lessons from Kenya

We estimate and then simulate a model of Kenyan economic development from 1965 to 1997 with two objectives in mind. The first is to demonstrate the degree of volatility of cyclical shocks that developing countries experience and to calculate the domestic nominal adjustments required by these shocks under both irrevocably fixed and free exchange rates.A comparison of these counterfactual nominal adjustments identifies the short-run implications for an economy of the choice of exchange rate regime. The second objective is to provide an estimate of the consequences for the economic development of Kenya of the lack of a coherent monetary order (excessive domestic credit expansion and overvalued exchange rate) throughout most of the period since 1965.A neoclassical convergence growth model based on Barro and Sala-i-Martin (1992) is employed and calibrated to represent the long-run growth path of real GDP in Kenya. A short-run four-sector CGE model is constructed that allows for cyclical movements of real GDP about the convergence growth path. The cyclical model focuses on the adjustment of the relative price of non-traded goods that is required to ensure short-run equilibrium in the non-traded goods sector. Given that terms of trade shocks dominated the macro environment of Kenya over the sample period, we find that a free exchange rate regime would have insulated the economy to a greater degree than an irrevocably fixed regime. In the growth decomposition exercise, we estimate that the two largest (and negative) influences on Kenyan economic growth were the decline in the external terms of trade from 100 in 1965 to an average of 79.5 over the 32-year time period, and the overvalued Kenyan shilling represented by a premium on the parallel market for foreign exchange. Overall, we estimate that the overvalued exchange rate reduced economic growth by an average of 0.47 per cent per annum over the 32 years.     

Fiscal policy and regional inflation in a currency union

Substantial attention has been devoted to inflation differentials within the European Monetary Union, including suggestions that inflation differentials are a policy issue for national governments. This paper investigates the ability of a region participating in a currency union to affect its inflation differential with respect to the union through fiscal policy. In a two-region general equilibrium model with traded and nontraded goods, lowering the labor income tax rate in response to positive inflation differentials succeeds in compressing inflation differentials. Such policies can lead to higher volatility of domestic inflation while leaving the volatility of real output roughly unchanged. Regional fiscal policies also have spill-over effects on the volatility of union-wide and foreign inflation in our model.     

Monetary and fiscal policy interactions in a micro-founded model of a monetary union

This paper analyzes in detail the mechanisms behind fiscal stabilization policy and the role of policy commitment in a micro-founded New-Keynesian model of a two-country monetary union, which is hit by supply shocks. We also explore the determinants of the gains from fiscal stabilization. While monetary policy with identical union members is concerned with stabilizing the union-wide economy, fiscal policy aims at stabilizing inflation differences and the terms of trade. Besides exploring optimal policies, we also consider monetary and fiscal rules. We study these rules both under coordination and non-coordination by the fiscal authorities.     

国债规模:在财政与金融之间寻求平衡

本文从财政政策和货币政策协调配合角度,探讨了国债在金融体系中的特殊地位和作用,着重分析了国债市场作为核心金融市场在提供市场流动性方面的不可替代的作用.本文的政策含义就是,为了给我国的金融市场运行创造一个良好的基础,我们的国债政策应当超越单纯财政的财政眼光.     

Fiscal policy,monetary policy and external imbalances: Cross-country evidence from Africa's three largest economies

This paper determines which of the three policy approaches: fiscal, monetary and exchange rate can better address external imbalances in the three largest African economies, Nigeria, South Africa and Egypt. To this end, use is made of the panel vector autoregressive model to assess the dynamic effects of shocks emanating from the three policy approaches. The findings of the paper indicate that unlike in many emerging and developed economies the current accounts of these three economies react to fiscal, monetary and exchange rate shocks. More particular, the results of the empirical analysis show that the appreciations of the currencies in the three economies lead to current account surpluses. This is mainly attributed to the fact that most African economies have a high propensity to import with limited productive capacity for exports.     

Optimal fiscal policy in a small open economy with limited commitment

We introduce limited commitment into a standard optimal fiscal policy model in small open economies. We consider the problem of a benevolent government that signs a risk-sharing contract with the rest of the world, and that has to choose optimally distortionary taxes on labor income, domestic debt and international transfers. Both the home country and the rest of the world may have limited commitment, which means that they can leave the contract if they find it convenient. The contract is designed so that, at any point in time, neither party has incentives to exit. We define a small open emerging economy as an economy where the limited commitment problem is active in equilibrium. Conversely, a small open developed economy is an economy in which the commitment problem is not active. Our model is able to rationalize some stylized facts about fiscal policy in emerging economies: i) the volatility of tax revenues over GDP is higher in emerging economies than in developed ones; ii) fiscal policy is procyclical in emerging economies; iii) emerging economies may “graduate” from procyclical fiscal policy and adopt countercyclical policies in the long run.     

论中国通货膨胀下的货币政策有效性

在当今社会经济通货膨胀的状态下,中央银行首先应做的就是通过制定的货币政策抑制通货膨胀。本文通过对通货膨胀的现状及原因的分析,从而进一步探究中央银行制定的货币政策种类及其效应的积极性和局限性。     

Sovereign risk and procyclical fiscal policy in emerging market economies

This study develops a dynamic stochastic general equilibrium model to account for the differences in fiscal policy stance over the business cycle between developed and emerging market countries, and, in particular, for the volatile and procyclical government consumption and transfer payment in emerging market countries. Two models with and without default option in sovereign borrowings replicate the contrasting cyclical behaviors indicating that the default option is responsible for procyclical fiscal policy. Further, augmented model with third-party bailouts, together with the stochastic trend income process, successfully predicts high volatilities of fiscal expenditures. These imply that procyclical fiscal policy, entailed by default option, may exacerbate the business cycle in emerging market countries.     

股利政策的股东财富效应:来自中国股市的经验证据

Based on the special separated equity management structure of the listed companies in China and using a sample of the listed companies with distributed dividend in 2003 and 2004, this paper tests the shareholder wealth effects of dividend policy in Chinese separated equity market. Results show that shareholders of non-circulating stock get a high return rate by cash dividends, and circulating shareholders obtain a high short-term return rate by stock dividends. Translated from Nankai Guanli Pinglun 南开管理评论 (Nankai Business Review), 2006, 9(2): 4–10     

Industrial policy,structural transformation and economic growth: Evidence from China

Industrial policy is an important means for governments to promote industrial development and accelerate economic growth. This paper mainly uses the Chinese Law and Regulation Database as the source of the relevant laws and regulations of China’s industrial policies from 2003 to 2015. On this basis, it empirically examines the impact of industrial policies on economic growth. The study finds that China’s industrial policy has significant positive effects on economic growth and that industrial structure rationalization is an important channel of industrial policy to improve economic growth. The findings are also valid under a series of robustness tests and endogenous corrections. The results of heterogeneity tests confirm that there are heterogeneous effects pertaining to industrial policy on economic growth among different subregional areas, administrative levels, industrial development stages, and industrial policy types. Overall, this paper supports the hypothesis that industrial policy has positive effects on economic growth and, accordingly, provides a basis for industrial policy implementation.     

External adjustment in oil exporters: The role of fiscal policy and the exchange rate

After the decline in oil prices, many oil exporters face the need to improve their external balances. Special characteristics of oil exporters make the exchange rate an ineffective instrument for this purpose and give fiscal policy a sizeable role. These conclusions are supported by regression analysis of the determinants of the current account balance and of the trade balance. The results show little or no relationship with the exchange rate and, especially for the less diversified oil exporters, a strong relationship with the fiscal balance or government spending.     

Monetary policy and long‐term interest rates: Evidence from the U.S. economy

This paper addresses the ability of central banks to affect the structure of interest rates. We assess the causal relationship between the short‐term Effective Federal Funds Rate (FF) and long‐term interest rates associated with both public and private bonds and specifically, the 10‐Year Treasury Bond (GB10Y) and the Moody's Aaa Corporate Bond (AAA). To do this, we apply Structural Vector Autoregressive models to U.S. monthly data for the 1954–2018 period. Based on results derived from impulse response functions and forecast error variance decomposition, we find: a bidirectional relationship when GB10Y is considered as the long‐term rate and a unidirectional relationship that moves from short‐ to long‐term interest rates when AAA is considered. These conclusions show that monetary policy is able to permanently affect long‐term interest rates and the central bank has a certain degree of freedom in setting the levels of the short‐term policy rate.     

宏观经济政策反思及其转型的框架设计

前几年实行的财政政策中,企业税费负担增长过快抑制投资需求与增发国债扩大投资需求相互抵消;发行国债的增速在下降,还本付息比例在上升,国债发行扩大投资的边际效用在递减;国债主要投资于短期增加就业和拉动增长的基础项目上,其增长和就业连续性较弱.而货币政策方面,降低利率和存款准备金率以及公开市场业务操作等总量性的政策,对扩大贷款,特别是对推动增长和增加就业最有用的中小企业的放款,几乎没有作用.贷存比和对中小企业的贷款持续下降和相对减少.因此,需要从行政取向国债为主的财政政策和总量性的货币政策,转向市场取向刺激社会投资的财政政策和体制及结构性的货币政策.减少税费负担,实行投资税收抵扣制,对积极为中小企业贷款的银行给予税收优惠;大力发展社会资本的中小银行,同时鼓励民间中小企业信贷担保公司的发展,放宽资产抵押、担保和信用贷款的一些政策,调整银行呆坏账准备金的使用结构,为中小企业贷款服务.如果财政政策和货币政策转型,则在未来的三四年中,失业率可以从目前的年10%-11%下降到5%-6%,国内消费增长率从目前的8.5%左右提高到年12%-13%,消费物价走出持续低迷,并且GDP每年以8%的速度再增长三到四年.     

财税形势 财税政策 财税改革（上）——面向“十一五”的若干重大财税问题盘点

由“十五”迈入“十一五”，中国财税领域面临着一系列值得探宄、亟待解决的重大问题。其中包括：财政收支规模的变化、财政风险问题的判断、税收收入的持续高速增长、预算约束机制的弱化、稳健财政政策的基本去向和新一轮税制改革。全面而系统的盘点这些重大问题，以重大问题分析透视全局图景，既可审视现实，梳理过去5年以至更长区间的财税行动轨迹。也可未雨绸缪，勾画未来5年以至更长时间的财税工作方案。     

On the efficiency of monetary policy rules with flexible prices and rational expectations

The classic Sargent–Wallace–Lucas (SWL) rational expectations-flexible price model is usually interpreted as implying “policy ineffectiveness”: systematic monetary rules cannot affect the distribution of real output. A contrary but not widely-appreciated result of Dotsey and King suggests that there exist “prospective feedback” rules (future money depending systematically on current but as yet unobserved information) which improve output distribution by means of improving agents’ ability to perceive relative prices.We show the Dotsey–King proposition in fact to be a colossal understatement: prospective feedback rules applied vigorously enough (and even “contemporaneous feedback” rules based on current interest rates, provided at least one prospective feedback is active) can in the limit drive price-perception errors to zero. This is not to say such a policy would be desirable. Feedback parameter combinations that reduce current price level misperception tend to produce high forecast error variances with respect to future prices, with attendant loss in capital market efficiency. Whatever the desirable frontier among these different social cost-producing variables, feedback parameters will in general be needed in order to get on the frontier as well as to move along it. Monetary policy clearly produces social gain even in a version of this model which contains no elements of price “friction,” inefficient use of available information, or asymmetry in information as between the government and the public.