Will the Sarb always Succeed in Fighting Inflation with Contractionary Policy?

The conventional view is that a monetary policy shock has both supply‐side and demand‐side effects, at least in the short run. Barth and Ramey show that the supply‐side effect of a monetary policy shock may be greater than the demand‐side effect. We argue that it is crucial for monetary authorities to understand whether an increase in expected future inflation is due to supply shocks or demand shocks before applying contractionary policy to forestall inflation. We estimate a standard New Keynesian dynamic stochastic general equilibrium model with the cost channel of monetary policy for the South African economy to show that whether the South African Reserve Bank should apply contractionary policy to fight inflation depends critically on the nature of the disturbance. If an increase in expected future inflation is mainly due to supply shocks, the South African Reserve Bank should not apply contractionary policy to fight inflation, as this would lead to a persistent increase in inflation and a greater loss in output. Our estimation results also show that with a moderate level of cost‐channel effect and nominal rigidities, a New Keynesian dynamic stochastic general equilibrium model with the cost channel of monetary policy is able to mimic the price puzzle produced by an estimated vector autoregressive model.     

The macroeconomic effects of monetary policy: Evidence from Japan

This study examines the macroeconomic effects of monetary policy in Japan. We apply the new identification strategy proposed by Bu et al. (2021) to the Japanese case and estimate monetary policy shocks that bridge periods of conventional and unconventional monetary policymaking. We show the macroeconomic effects of monetary policy; a contractionary monetary policy shock significantly decreases output and inflation rates even under the effective lower bound. However, because the shorter-term and longer-term nominal interest rates are already close to zero, the magnitude of monetary policy shocks on the macroeconomic variables is modest.     

Monetary Policy and the Diversification–Profitability Linkage in Banking: Evidences from Emerging Market Economies

In previous studies, the stance of monetary policy is proven to associate with banking profitability or activities. This paper provides empirical evidence aiming at the influence of monetary policy, including stances of expansionary and contractionary monetary policies, on the relationship between banks' income diversification and their profitabilities in emerging market economies. We find the significant evidence that expansionary monetary policies can raise banks' diversification efforts, whereas contractionary monetary policies weaken the efforts of banking diversification, for which our most robustness tests support these findings. There are some relevant implications and suggestions for bank managers and policymakers.     

Monetary Policy Uncertainty and Inflation: The Role of Central Bank Accountability

We analyse the issue of central bank accountability with the aid of a simple monetary policy game with uncertainty about the agent's inflation stabilisation preferences. We find that there may be an important economic role for accountability in addition to its political function of making the central bank answerable to voters through its accountability to the executive. The model suggests that for countries with relatively little central bank independence, or perhaps a poor inflationary track record, significant reductions in inflation can be achieved by lowering monetary policy uncertainty. These reductions are much smaller for inflation-averse central banks, when monetary policy uncertainty is reduced by the same absolute amount. Thus, the effectiveness of accountability – as a means of lowering both inflation and inflation uncertainty – is higher the lower the degree of central bank conservativeness.     

The political economy of the Exchange Rate Mechanism

The apparent tendency of ERM countries other than Germany to experience high real exchange rates and to subsidize manufacturing is explained by a rational expectations model in which there is optimally asymmetric policy reaction to good and bad times—devaluation in bad, no revaluation in good. The resulting expected depreciation (at all times) causes inflation in normal and good times to be less than expected inflation, raising real wages and the real exchange rate, and creating pressures for subsidy of the traded sector.     

Impact of monetary policy on exchange market pressure: The case of Nepal

This paper uses a monetary model of exchange market pressure to examine the impact of monetary policy on the Nepalese exchange rate. Using a recently developed estimation technique, impulse indicator saturation, along with general-to-specific modeling, we find that a contractionary monetary policy results in easing of pressure on the exchange rate. The robustness of the results is confirmed using misspecification tests.     

The Argentine stabilization plan of December 20th

In this paper an analytical model is developed to incorporate the essential characteristics of the stabilization plan implemented in Argentina in January 1979. The model is based upon a set of simplifying assumptions that only approximate the complexity of the real world. It is assumed that the expectations of inflation and the degree of excess demand or supply in the non-traded goods market are the main intermediate determinants of the rate of inflation in that market, the rate of change of prices of traded goods being determined by the external inflation together with the rate of devaluation. Treating thus the external rate of inflation as exogenous, the only instrument available for influencing the rate of inflation in the long run is the rate of devaluation. Since the model assumes a fixed exchange rate regime, the money supply is endogenous and hence unsuitable as an instrument of economic policy.     

ZONE‐TARGETING MONETARY POLICY PREFERENCES AND FINANCIAL MARKET CONDITIONS: A FLEXIBLE NON‐LINEAR POLICY REACTION FUNCTION OF THE SARB MONETARY POLICY

We estimate a flexible model of the monetary policy reaction function of the South African Reserve Bank based on a representation of the policymaker's preferences that capture asymmetries and zone‐targeting behaviours. We augment the analysis to allow for responses to financial market conditions over and above inflation and output stabilisation to address the current debate on the importance of financial asset prices in monetary policy decision making. The empirical results show that the monetary authorities' response to inflation is zone symmetric. Secondly, the monetary authorities' response to output is asymmetric with increased reaction during business cycle downturns relative to upturns. Thirdly, the monetary authorities pay close attention to the financial conditions index by placing an equal weight on financial market booms and recessions.     

美国量化宽松政策对亚太新兴市场国家的影响

量化宽松是美联储在通货紧缩下所采取的一种直接创造货币、扩大央行资产负债表规模的非传统货币政策。量化宽松将给我国等新兴市场国家造成较大的负面效果,建议采取临时性资本管制、针对性量化政策、建立区域货币离岸市场、加快经济结构转型等对策来应对。     

通胀率动态与通胀惯性度量

本文从通胀惯性的理论模型出发,构建无限状态Markov区制转移的计量模型,实现对通胀惯性的有效度量。对美国通胀惯性的实证分析,证实货币政策工具的频繁使用会付出通胀惯性的代价,暴露出其单一目标货币政策框架的缺陷。我国央行的调控也已经对市场利率形成了显著的传导作用,谨慎地使用货币政策工具,使我国的通胀惯性在被货币政策短暂影响后,得以有效恢复。这表明坚持实行多目标、多手段与宏观审慎政策相结合的调控模式,对维护经济环境稳定与长期发展的重要性。十国通胀惯性的度量结果与对比分析,进一步佐证了本文观点。     

Inflation dynamics and monetary policy transmission in Vietnam and emerging Asia

This paper provides an overview of inflation developments in Vietnam in the years following the doi moi reforms, and uses empirical analysis to answer two key questions: (i) what are the key drivers of inflation in Vietnam, and what role does monetary policy play? and (ii) why has inflation in Vietnam been persistently higher than in most other emerging market economies in the region? It focuses on understanding the monetary policy transmission mechanism in Vietnam, and in understanding the extent to which monetary policy can explain why inflation in Vietnam has been higher than in other Asian emerging markets over the past decade.     

Assessing the performance of inflation targeting in East Asian economies

This paper examines the implementation and performance of inflation targeting (IT) in four East Asian emerging market economies: Indonesia, Korea, the Philippines, and Thailand. It also examines monetary policy in Malaysia, a country that has not adopted IT. The study estimates policy reaction functions to test the links between the adoption of IT and use of a monetary policy rule. The impulse responses of prices to a monetary policy shock are also estimated to identify monetary policy impacts on prices. The findings on the monetary policies of the five economies can be summarised as follows. Korea has taken an inflation‐responsive and forward‐looking policy stance under inflation targeting, which has had an effect on the stability of prices. Indonesia and Thailand have conducted inflation‐responsive but backward‐looking policy stances, which have had no impact in terms of price stabilisation. The Philippines (which adopted IT but under a pegged exchange rate regime) and Malaysia have neither followed inflation‐responsive rules nor had policy impacts in terms of controlling inflation.     

Oil shocks and endogenous markups: results from an estimated euro area DSGE model

This paper estimates a linearised DSGE model for the euro area. The model is New Keynesian and allows for a role for oil usage and endogenous price markups. The importance of shocks to monetary policy and oil prices is estimated to have declined in the post-1990 period, in line with the higher predictability of policy and the fall in the persistence and—to a lesser extent—variability of oil disturbances. Counterfactual exercises show that oil efficiency gains would alleviate the inflationary and contractionary consequences of oil shocks, while higher wage flexibility would help ease the impact on real output at the expense of larger inflationary pressures. While we report evidence of “countercyclical” price markups, the rise in markups induced by an oil disturbance is not found to considerably amplify the inflationary and contractionary effects of the shock. The paper discusses the policy implications of our empirical results for the euro area economy.     

新冠疫情全球扩散对中国开放经济和世界经济的影响

在巩固新冠肺炎疫情防控成效的同时,中国经济在努力复工复产复市。因疫情防控导致境内外交通运输联系不同程度被阻断,商品运输成本提高、交货日期延长,中间品与劳动力供应不足,中国进出口贸易和国际直接投资增长面临很大压力。中国企业复工复产受到全球价值链运行态势影响,疫情全球扩散正在引发全球范围内经济结构、财政政策、货币政策、贸易政策调整。疫情在全球范围扩散,使企业经营压力上升,造成金融恐慌并引起全球经济深度衰退的可能性增加;为抗击疫情增加财政补贴和实施宽松货币政策,增加了各国财政负担,带来全球范围内的通货膨胀压力加大;部分国家试图借口疫情防控,发动新的贸易摩擦的可能性增加。     

不同货币政策工具作用下国债收益率曲线对通货膨胀预测能力分析

本文采用2002年1月至2010年2月我国通货膨胀率月度数据,实证检验了不同货币政策工具作用下,银行间债券市场的国债收益率曲线是否有助于预测通货膨胀率。实证结果表明:当资本市场属性占主导地位时,国债收益率曲线在价格型货币政策工具作用下,对通货膨胀率的预测能力较强;当货币市场属性占主导地位时,国债收益率曲线在数量型货币政策工具作用下,对通货膨胀率的预测能力较强。本文认为造成这种现象的根源是我国银行间债券市场具有货币市场和资本市场双重属性,并且其资本市场属性呈时强时弱的变化态势,导致该市场上占主导地位的市场属性也不稳定,进而出现预测能力随货币政策工具与市场属性匹配程度而改变的情况。     

Credibility and monetary policy in a model with growth

We examine the implications for monetary policy design of includinglearning-by-doing effects in a macroeconomic model. We showthat an inflation bias arises because monetary surprises maybe exploited to maximise potential output by temporarily raisingthe rate of human capital accumulation. Our model also providesan alternative explanation for the empirical evidence linkinginflation and growth, where the causal link goes from slow growthto high inflation. Unlike traditional credibility models, aninflationary bias can persist even when the authorities do notwish to offset labour market distortions through monetary surpriseswhich undercut the median voter's income.     

Was ECB's monetary policy optimal?

Overall, the ECB managed monetary policy quite satisfactorily in the first phase of EMU. Nevertheless, this paper asks whether monetary policy could not have been improved. In the last three years, Euroland was confronted with the first external shock. Oil prices increased considerably, leading to an increase of headline inflation of over one percentage point in 2000–01. With a specific Taylor rule one can very well understand, how the ECB sets interest rates, but it turns out that monetary policy based on the estimated Taylor reaction function was rather backward than forward looking. While it reacted with a lag to the actions of the U.S. Fed, it was overly cautious by targeting total HICP inflation. Here it is strongly argued and also demonstrated with model simulations that a monetary policy oriented towards core inflation would have resulted in a much better economic performance. The business cycle downturn could have been mitigated with no additional inflation risks.     

Determinants of inflation in India

The paper attempts to identify the determinants of inflation in India in a multivariate econometric framework using quarterly data from Q1: 1996–1997 to Q3: 2013–2014. The identified determinants of domestic inflation such as crude oil prices, output gap, fiscal policy and monetary policy, and their relation with inflation is studied in a structural vector auto regression (SVAR) model. Further, the temporal changes in inflation dynamics are analyzed using a time varying parameter SVAR model with stochastic volatility. It was found that inflation dynamics in India have changed over time with various determinants showing significant time variation in the recent years, particularly after the global financial crisis.     

Problematiek rond de britse Betalingsbalans

Summary An analysis of developments prior to the devaluation of sterling in November 1967 suggests that a fundamental disequilibrium became unambiguously clear only relatively shortly before the parity actually was adjusted. The devaluation provided scope for an improvement in the balance of payments of something like $2,5 billion. A very restrictive fiscal programme was to be the main instrument to help achieve this result. The long interval between devaluation and this policy to become fully effective, combined with the failure to back it up with an adequate monetary policy seem to be the principal factors behind the disappointing performance of the U.K. balance of payments during more than a year after the devaluation. Early in 1969 fiscal policy had reached its full impact and significantly more emphasis was placed on monetary policy. Although these factors will, belatedly, contribute to the achievement of a balance of payments surplus, it is doubtful whether the original goal — a sustained surplus of at least $ 1,2 billion a year — can still be attained. In that case a long-run solution to the problem of Britain's massive short-run debts appears to be no more than the recognition of an unpleasant reality.      

Can inflation targeting regimes be effective in developing countries? The Turkish experience

This paper examines the performance of Turkey's inflation targeting (IT) experience. We find the IT regime to be an effective framework. Our judgment is based on three broad conclusions supported by empirical analyses. First, fiscal stability is an effective tool for a successful monetary policy. Second, the overnight policy of the Central Bank of Turkey rate is a significant determinant of the changes in market lending rates, which is the preliminary step in the monetary transmission mechanism. Third, recent developments on the broader issue of the effectiveness of interest rate policy in controlling inflation through aggregate demand management and through other channels are encouraging. Based on our findings, we argue that the impact of policy rate changes on economic activity and inflation have become more predictable and changed in the direction in line with theory, improving the transmission capacity of monetary policy.