Fiscal stabilisation and monetary integration in Europe: A short-run analysis

Summary An adverse supply shock hits a two-country Mundell-Fleming world and causes unemployment and a higher cost of living. The optimal budgetary policies under non-cooperative and under international policy coordination are then contrasted under a regime of floating exchange rates, a regime of managed exchange rates with hegemony (such as the EMS), and a symmetric regime of fixed exchange rates (such as the EMU). The welfare loss depends on unemployment, real wage income and budgetary imbalance. Attention is also paid to the effects of indexation of wages on the cost of living and of interactions between Europe and the US. The results shed some light on the short-run stabilisation aspects of the proposals of the Delors Committee for economic and monetary union in Europe.This paper was presented at the conference on European Economic Integration: Towards 1992, organised by the NBER and the CEPR, August 3-4 1989, Cambridge, MA. The author is grateful for the useful comments of the participants and thanks the managing editor and an anonymous referee for helpful comments on earlier versions of this paper. This paper was written as part of a SPES project on Macroeconomic Policy and Monetary Integration in Europe, supported by grants from the Commission of European Communities (no. 0016-NL (A)), whose help is gratefully acknowledged. I also wish to acknowledge financial support from the CEPR research programme in International Macroeconomics, supported by grants from the Ford Foundation (no. 890-0404) and the Alfred P. Sloan Foundation (no. 88-4-23).     

Monetary analysis and the global financial cycle: An Asian central bank perspective

Emerging Asia has seen a transformation of its monetary policy environment over the past two decades. By far, the most relevant change has been the maturing of its financial systems and the growing relevance of the global financial cycle: financial inclusion has spread, financial markets have deepened and financial globalisation has linked domestic markets closer to international markets. One consequence of the maturing of the financial systems has been the weakening of the traditional case for the monetarist view of the roles of monetary aggregates in the conduct of monetary policy. In addition, the maturing of the financial systems has elevated concerns of financial stability, as both a source of shocks and a responsibility of central banks. These developments have been further complicated by monetary policy spillovers from the advanced economies. All this points to the need to consider alternatives to conventional inflation targeting frameworks. This paper lays out a policy framework based on a multi-pillar monetary policy approach as a potentially attractive alternative for EM Asia. The three pillars are based on economic, financial and exchange rate stability, respectively. This framework not only offers an alternative conceptual framework but also implies institutional reforms to ensure central banks take a longer term perspective when setting policy.     

中央银行与商业银行的博弈分析

近期为了抑制我国经济中出现的通货膨胀势头发展，使经济稳定运行，国家采取了一系列的财政货币政策，但是这些政策都收效甚微，有时甚至出现了逆经济政策意向而动的现象。例如中央银行在发出对某些过热行业进行贷款限制的信号时，商业银行出现了逆经济政策而动的现象，对于正在审批中的贷款项目，快速审批发放，甚至出现了对这些行业或者产业贷款加速营销的现象。这种现象对经济运行的调控十分不利，但是商业银行普遍存在这种现象。     

建立国家结算银行,形成永久性金融风险防范体系

一、金融风险与货币流通本身有密切关系 金融危机与金融风险的产生，人们已总结出很多原因，但却忽视了一个很深层次的原因，即货币流通本身的原因。 自从货币制度产生以来，企业之间的商品交易要进行货币资金的支付，货币资金的支付方式有两种：一是直接的现金支付，二……     

Political consensus, uncertain preferences, and central bank independence

Models where monetary policy is delegated to an independentcentral bank using contracts or targets usually assume thatthe preferences of the principal and the agent are known withcertainty. However, if there is no consensus in society aboutthe relative costs of inflation and output stabilisation, thedelegation solution may not produce a better outcome for themedian voter than discretion This paper examines the robustnessof the institutional solutions to the credibility problem withuncertain preferences We also examine the related issue of whetherpolitical parties have an interest in moving towards centralbank independence     

Fiscal deficits, public debt, and government solvency: Evidence from OECD countries

This paper discusses different empirical tests of public sector solvency and applies them to a sample of 18 OECD countries. Under the maintained hypothesis that the government solvency constraint needs to be imposed, these tests develop from the idea of verifying whether the intertemporal budget constraint of the public sector would be satisfied (a) if the fiscal and financial policy in the sample had been pursued indefinitely and (b) if the relevant macro and structural features of the economy were stable over time. If solvency is not supported by the empirical evidence, a change either in the policy or in the relevant macro and structural variables (growth, inflation, interest rates, demographic factors) must occur at some point in the future. Among the G-7 countries, public sector solvency seems a serious issue in Italy, whereas it does not appear to be a problem in Germany and Japan. The evidence for the United States is mixed. Problems of sustainability of the current path of fiscal policies are also present in Belgium, Ireland, The Netherlands, and Greece.     

Fiscal capacity and commercial bank lending under COVID-19

We investigate the implications of government indebtedness for the efficacy of expansionary government spending in encouraging commercial bank lending growth during the COVID-19 pandemic. Our sample is a large cross-section of over 3000 banks from 71 countries. To address the likely endogeneity of government assistance, we instrument for extra-normal spending using disparities in pre-existing national political characteristics. Our results indicate that bank lending did respond to fiscal capacity, as higher public debt going into the crisis weakened the expansionary effects of higher spending on bank lending at economically and statistically significant levels. Moreover, this sensitivity was higher among weaker banks, suggesting sensitivity to the perceived implications of spending for government assistance going forward. We also found greater sensitivity in high-income economies and for small and medium-sized banks. Our results are robust to a variety of robustness tests, including perturbations in specification, sample, and estimation methodology.     

Fiscal policy in monetary unions: Implications for Europe

This paper analyzes how the feasible mix of government expenditure and financing arrangements may change with the establishment of a monetary union such as that planned by members of the European Community. We find that a monetary union reduces the feasible divergence across countries in their present discounted levels of fiscal spending. Wide differences across countries in their present and future time patterns of spending are still possible, however. Examination of the empirical evidence suggests that the movement toward greater exchange rate fixity associated with the EMS and participation in quasi monetary unions havenot been accompanied by significant fiscal convergence. The experience of member states of several existing monetary unions, however, suggests that a more effective constraint to budgetary discipline arises within full-fledged unions in operation over long periods, even in the absence of binding central rules on government deficit and debt positions.     

Disinflation costs, accelerating inflation gains, and central bank independence

Disinflation Costs, Accelerating Inflation Gains, and Central Bank Independence. - This paper considers the impact of central bank independence on both the costs of disinflation and the gains of accelerating inflation. For this purpose, sacrifice ratios for disinflation episodes and benefice ratios for accelerating inflation episodes are constructed by using a new method. The ratios are calculated for 19 industrial countries over the period 1960–1992. The results indicate that central bank independence only matters during disinflation episodes: Sacrifice ratio and output loss are higher, the more independent the central bank is; whereas during accelerating inflation episodes, central bank independence has no influence on either the benefice ratio or the output gain.     

Financial integration and innovation in Europe

The creation of an internal market for financial services by the European Union, along with technological changes in communications and data management, will have a strong impact on banking and financial markets in Europe. This paper presents a selective review of discussions concerning the resulting processes of adjustment and their outcomes. Topics covered include effects on cost efficiency, competition production and trade patterns, and the dynamics of financial regulation in the open, integrated economy.     

Heterogeneous private sector information,central bank disclosure,and stabilization policy

Conventional wisdom has it that a central bank that uses an informational advantage to undertake active policy intervention can do as well, at least so far as real outcomes are concerned, by making its information publicly available and abstaining from stabilization. This notion is examined using a framework incorporating heterogeneous private sector information concerning aggregate demand shocks. An activist regime, in which the central bank exploits its own information to engage in stabilization, is found to be unambiguously superior to a noninterventionist regime, where the central bank maintains a constant setting of policy but publicly discloses its own information.     

Prospects for integration of financial markets in CIS countries

This article deals with macroeconomic preconditions for financial integration and strengthening the role of the ruble in the post-Soviet space. Particular attention is paid to the developmental priorities of stock markets and the interaction of the CIS exchanges. The integration of the financial infrastructure, the implementation of cross-border payments in national currencies, stock market development, and the growth of investment activity in CIS countries are important areas of integration processes and dealing with the crisis.     

Designing a central bank: Social player,monetary agent,or banking agent?

This paper reviews recent advances on the role of the central bank in the money supply process and its effects on inflation. The literature is presented according to a three-stage process, with the central bank acting first as social player, then as monetary agent, and finally as a combined monetary and banking agent.     

金融创新视角下的村镇银行发展研究

从国际上社区银行的产生与发展的历史角度,分析这种银行制度是金融创新的结果,说明金融创新对于村镇银行的生存与发展具有十分重要的意义;从制度创新、管理创新、产品和服务方式创新等方面,总结和分析我国村镇银行在金融创新方面取得的进步以及存在的不足,提出村镇银行的创新需要从观念创新入手,同时,还要加快产品设计和管理激励机制等方面的创新步伐,为村镇银行创造良好的发展环境。     

我国中央银行外汇市场干预的现状、问题及对策

本文从分析中央银行外汇市场干预的主要渠道入手,总结出我国中央银行外汇市场干预的现状及存在的主要问题,最后结合人民币汇率制度的改革,提出了完善我国中央银行外汇市场干预的若干对策建议。     

Monetary policy, central bank objectives, and social welfare with strategic wage setting

The paper examines the implications of strategic wage-settingbehaviour by an inflation-averse monopoly union for the appropriatespecification of central bank objectives. Our principal findingsare as follows. First, the optimal setting of the parametersof the central bank's objective function differ in a significantway according to the relative timing of monetary policy andwage determination. Second, the ability of the central bankto precommit to a particular setting of monetary policy doesnot confer any welfare benefits. Third, we find little supportin this context for the notion that placing monetary policyin the hands of a conservative central bank will improve socialwelfare.     

The relationship between revenue diversification and bank performance: Do financial structures and financial reforms matter?

This paper contributes to the existing literature by investigating the impact of revenue diversification on bank performance through a broad array of financial reforms, including credit controls, interest rate controls, entry barriers, banking supervision, privatization, and financial account restrictions. This analysis is the first to investigate whether financial structures (bank- or market-based systems) change the effect of diversification on individual bank performance. We use a panel dataset sample from 29 Asia-Pacific countries covering the period between 1995 and 2009, for a total of 2372 banks. Unlike the results of previous studies based on data from the U.S. and Europe, this study confirms the hypothesis of the portfolio diversification effect for the Asia-Pacific banking industry. For bank-based groups, bank performance can be improved through diversification, supporting the “bank-based view” hypothesis. Finally, under different financial systems, the relationships among revenue diversity, financial reforms, and bank performances are multidimensional.     

China,Hong Kong,and Taiwan: A quantitative assessment of real and financial integration

The status of real and financial integration of China, Hong Kong, and Taiwan is investigated using monthly data on 1-month interbank rates, exchange rates, and prices. Specifically, the degree of integration is assessed based on the empirical validity of real interest parity, uncovered interest parity, and relative purchasing power parity. There is evidence stating that these parity conditions tend to hold over longer periods, although they do not hold instantaneously. Overall, the magnitude of deviations from the parity conditions is shrinking over time. In particular, China and Hong Kong appear to have experienced significant increases in integration during the sample period. It is also found that exchange rate variability plays a major role in determining the variability of deviations from these parity conditions.     

Measuring central bank independence: a tale of subjectivity and of its consequences

The paper first scrutinises the two indices of central bankindependence (CBI) most commonly used in the empirical literature.It defines and discovers an impressive interpretation spread,a major criteria spread but a negligible weighting spread inthose indices Second, it framing the robustness of the empirical‘common knowledge’ on the benefits of CBI. It findsthat, when rankings produced by various CBI indices are regressedwith, among others, average inflation, 87 5% of die regressioncoefficients are not statistically significant Third, followingrecent theoretical developments, it suggests an alternativeapproach to the measurement of a central bank's operationalstatus.