The impact of credit and fiscal policy under a liquidity trap

This study examines the interaction of non-conventional credit policy and fiscal policy when adverse financial conditions drive the economy to a deep contraction and conventional monetary policy becomes ineffective as the policy interest rate reaches its effective lower bound. Consistent with other studies, under counter-cyclical financial intermediation costs, credit easing policies aimed at reducing credit spread ameliorate the response of the economy and lead to a faster recovery. More importantly, I find that expansionary fiscal policy during an episode of liquidity trap is associated with a large multiplier effect that prevents an otherwise deeper and longer recession. Moreover, the large impact of expansionary fiscal policy is maintained even if credit policy is already in place.     

The policy mix in the US and EMU: Evidence from a SVAR analysis

We use a SVAR approach to the effects of fiscal and monetary policies, as well as their interactions (policy mix) for the US and the Euro Area (EMU). Overall, our results show that these two cases are different from each other. First, while in the case of the US there is evidence of Keynesian monetary policy, the same is not true in the case of the EMU. Second, considering the effects of the global economic and financial crisis, there is evidence of non-Keynesian fiscal policy in the case of the EMU (expansionary fiscal consolidation), while it does not hold in the case of the US. Third, there is evidence supporting the traditional inverse relationship between monetary policy interest rates and inflation in the case of the US, whereas in the case of the EMU there is a price puzzle (frequent in SVAR studies). Fourth, the baseline model seems to be robust in the case of the US, when considering the effects of the economic and financial crisis 2007–2009, while the opposite holds in the case of the EMU. However, in both cases, the policies seem to act as complements. Another similarity appears when analysing the relationship between public spending and taxation, where there is evidence supporting a fiscal retrenchment.     

财政货币政策、房价波动与宏观杠杆——基于信心传导机制的分析

利用市场主体信心的微观调查数据,借助仿真情景模拟下的反事实实验方法对信心能否在财政政策和货币政策调控杠杆与房价的过程中发挥作用进行实证分析,而后利用TVP-VAR模型对其内在机制展开深入探讨。研究表明,当信心被虚拟冲击抵消后,政策效果与基准结果呈现明显分化。即信心能够显著影响财政货币政策对杠杆与房价的作用效果,且经进一步实证分析得知信心正向影响于房价、负向影响于宏观杠杆。因此,政府在实施政策调控时,应注意市场预期的引导,在借助信心渠道强化房价调控政策效果的同时,也要关注信心对杠杆调控政策效果的干扰,并注意政策制定的连贯性与稳定性,以及财政货币政策的协调搭配。     

Monetary and fiscal policy under deep habits

Allowing habits to be formed at the level of individual goods – deep habits - can radically alter the fiscal policy transmission mechanism as the counter-cyclicality of mark-ups this implies can result in government spending crowding-in rather than crowding-out private consumption in the short run. We explore the robustness of this mechanism to the existence of price discrimination in the supply of goods to the public and private sectors. We then describe optimal monetary and fiscal policy in our New Keynesian economy subject to the additional externality of deep habits and explore the ability of simple policy rules to mimic fully optimal policy. We find that the presence of deep habits at empirically estimated levels can imply large externalities that significantly affect the conduct of monetary and tax policy. However, despite the rise in government spending multipliers implied by deep habits, government spending is barely used as a stabilisation tool under the optimal policy.     

Do Good Institutions Promote Countercyclical Macroeconomic Policies?

The literature has argued that developing countries are unable to adopt countercyclical monetary and fiscal policies due to financial imperfections and unfavourable political‐economy conditions. Using a world sample of up to 112 industrial and developing countries for 1984–2008, we find that the level of institutional quality plays a key role in countries’ ability and willingness to implement countercyclical macroeconomic policies. Countries with strong (weak) institutions adopt countercyclical (procyclical) macroeconomic policies, reflected in extended monetary policy and fiscal policy rules. The threshold levels of institutional quality at which policies are acyclical are found to be similar for monetary and fiscal policy.     

Ramsey policies in a small open economy with sticky prices and capital

This paper analyzes jointly optimal fiscal and monetary policies in a small open economy with capital and sticky prices. We allow for trade in consumption goods under perfect international risk-sharing. We consider balanced-budget fiscal policies where authorities use distortionary taxes on labor and capital together with monetary policy using the nominal interest rate. First, as long as a symmetric equilibrium is considered, the steady state in an open economy is isomorphic to that of a closed economy. Second, sticky prices’ allocations are almost indistinguishable from flexible prices allocations both in open and closed economies. Third, the open economy dimension delivers results that are qualitatively similar to those of a closed economy but with significant quantitative changes. Tax rates are both more volatile and more persistent to undo the distortions implied by terms of trade fluctuations.     

Impacts of Monetary, Fiscal and Exchange Rate Policies on Output in China: A Var Approach

Applying the VAR model and using the interest rate as a monetary policy variable, we find that in the long run, output in China responds negatively to a shock to the interest rate, the real exchange rate, government debt, or the inflation rate, and it reacts positively to a shock to government deficits or lagged own output. When real M2 is chosen as a monetary policy variable, long-term output in China responds positively to a shock to real M2 or lagged own output, and it reacts negatively to a shock to the real exchange rate, government debt, or government deficits. Its response to a shock to the inflation rate is negative when government debt is used and is positive when government deficits are considered. In the short run, fiscal policy is more important than monetary policy in three out of four cases. In the long run, monetary policy is more influential than fiscal policy in three out of four cases. Therefore, the government may consider conducting monetary and fiscal policies differently in the short run and long run. The government needs to be cautious in pursuing deficit spending as its long-term impacts depend on the monetary variable employed. The policy of maintaining a relatively stable exchange rate is appropriate as the depreciation of the Yuan may hurt the economy in the short run.JEL Classifications: E5, F4, H6     

我国货币财政政策存在区域效应的实证分析

货币财政政策是现代国家干预经济的两个最重要的宏观调控政策，关于它们的研究文献数不胜数，但是长期以来一直没有对两政策实施后的区域效应给予足够的重视。本文结合目前我国东中西三大经济地带的经济发展已经存在明显差距的现实，通过两地区的简约化模型对1978-2004年间我国货币政策与财政政策在东部和中西部两个样本地区的作用进行了实证分析，结果表明，我国货币财政政策确实存在区域不对称效应，特别是货币政策，具有明显的区域影响差异。     

财政政策与货币政策相对有效性研究

本文从实证的角度 ,对我国财政政策和货币政策的相对有效性进行了研究。运用协整分析方法并通过邹氏检验 ,对整个数据期间进行了制度检验。结果显示1980年以前平均来说 ,财政政策比货币政策有效 ,而其后平均来说货币政策比财政政策有效。这一结论与我国建国以来宏观经济调控政策选择的基本情况相吻合 ,为对宏观调控的政策选择提供了有力的支持。     

Dealing with a liquidity trap when government debt matters: Optimal time-consistent monetary and fiscal policy

How does the need to preserve government debt sustainability affect the optimal monetary and fiscal policy response to a liquidity trap? To provide an answer, we employ a small stochastic New Keynesian model with a zero bound on nominal interest rates and characterize optimal time-consistent stabilization policies. We focus on two policy tools, the short-term nominal interest rate and debt-financed government spending. The optimal policy response to a liquidity trap critically depends on the prevailing debt burden. While the optimal amount of government spending is decreasing in the level of outstanding government debt, future monetary policy is becoming more accommodative, triggering a change in private sector expectations that helps to dampen the fall in output and inflation at the outset of the liquidity trap.     

Fiscal policy and asset markets: A semiparametric analysis

Using a flexible semiparametric varying coefficient model specification, this paper examines the role of fiscal policy on the US asset markets (stocks, corporate and treasury bonds). We consider two possible roles of fiscal deficits (or surpluses): as a separate direct information variable and as a (indirect) conditioning information variable indicating binding constraints on monetary policy actions. The results show that the impact of monetary policy on the stock market varies, depending on fiscal expansion or contraction. The impact of fiscal policy on corporate and treasury bond yields follow similar patterns as in the equity market. The results are consistent with the notion of strong interdependence between monetary and fiscal policies.     

Fiscal Policy in the New Open Economy Macroeconomics and Prospects for Fiscal Policy Coordination

Abstract.  This paper reviews the literature on the effects of fiscal policy in new open economy macroeconomics (NOEM) models, complementing it with additional results that attempt to clarify the importance of the exchange rate regime (fixed or flexible) and of the type of policy (balanced budget or debt‐financed). Fixed exchange rates only seem to postpone the costs from the short to the long run, but the type of policy is crucial in determining the welfare impact of fiscal expansions. The paper also reviews the recent literature on fiscal policy coordination and shows that there is already some evidence that the gains from coordination in this area can be potentially large but draw attention to the need for reflecting more on the role of fiscal policy as a stabilization tool and on possible interactions between fiscal and monetary policy.     

Stabilizing expectations at the zero lower bound: Experimental evidence

Our study demonstrates how agents’ expectations can interact dynamically with monetary and fiscal policy at the zero lower bound. We study expectation formation near the zero lower bound using a learning-to-forecast laboratory experiment under alternative policy regimes. In our experimental economy, monetary policy targets inflation around a constant or state-dependent target. We find that subjects’ expectations significantly over-react to stochastic aggregate demand shocks and historical information, leading many economies to experience severe deflationary traps. Neither quantitatively nor qualitatively communicating the state-dependent inflation targets reduce the duration or severity of economic crises. Introducing anticipated and persistent fiscal stimulus at the zero lower bound reduces the severity of the recessions. When the recovery of fundamentals is sufficiently slow, participants’ expectations become highly pessimistic and neither monetary nor fiscal policy are effective at stabilizing the economy.     

浅析影响房地产价格的三大政策因素

文章在根据近年房地产市场迅速发展的基础上,对房地产价格的影响较大的土地政策、金融政策和财税政策等三大宏观调控政策进行了深入的分析。     

Lessons from a century of FED policy: Why monetary and credit policies need rules and boundaries

Wide operational and financial independence given to monetary and credit policies subjects the Federal Reserve to incentives detrimental for macroeconomic and financial stability. The absence of a monetary policy rule created go-stop incentives that produced inefficient volatility of both inflation and unemployment during the Great Inflation. Fed credit policy has undergone massive “mission creep” since the Fed was established. Being debt-financed fiscal policy, Fed credit policy beyond ordinary temporary lending to solvent depositories creates friction with the fiscal authorities and jeopardizes the Fed׳s independence. An ambiguous boundary of expansive Fed credit policy creates expectations of Fed accommodation in financial crisis—that blunts the incentive of private entities to take protective measures beforehand (to shrink counter-party risk and reliance on short-term finance, and build up equity capital) and blunts the incentive of the fiscal authorities to prepare procedures in advance to act systematically in times of credit turmoil. These points are illustrated with reference to the 2007–09 financial crisis. Part of the problem is that the independent Fed does not have the same incentive as the 19th century Bank of England to follow Bagehot׳s Rule. The paper concludes with a set of principles to preserve a workable, sustainable division of responsibilities between the independent central bank and the fiscal authorities.     

危机后发达国家的非传统货币政策研究

次贷危机爆发以后,各国纷纷实行非传统的货币政策来刺激经济。自2009年下半年以来,随着一些国家的经济状况开始恢复,人们开始担心通货膨胀的出现,因此研究非传统货币政策何时退出就成为当前各国宏观经济保持稳定的一个重要任务。发达国家实行非传统货币政策的原因在于传统的货币政策传导机制,即从市场基准利率向短期利率和长期利率的传导受阻。因此非传统货币政策实施的目的在于降低短期利率预期和风险溢价,同时提高通胀预期,降低长期实际利率,最终起到刺激实体经济的作用。文章以美国为例,考察了美国金融指标、通胀指标和宏观经济指标,得出结论:传统的货币政策传导机制的恢复还未得到充分的确认。另外,由于欧洲债务危机的出现给全球经济复苏蒙上阴影,因此全面退出非传统货币政策尚不具备条件。但是在全球化时代,寻求大国之间退出策略的合作和协调是十分必要的。     

Coordination and non-coordination risks of monetary and macroprudential authorities: A robust welfare analysis

This study compares a central bank’s leaning against the wind approach with a mix of monetary and macroprudential policies under parameter uncertainty in an estimated DSGE model with two financial frictions. We show that uncertainty of the economic environment is an essential constituent in properly designing macroprudential policy. Although coordination between monetary and macroprudential policies minimizes the policymakers’ Bayesian risk, coordination and non-coordination risks threaten the goals of both authorities. The former describes the situation where the authorities partly resign from implementing the monetary policy objectives to stabilize macroprudential risk. The latter is when conducting a non-coordinated macroprudential policy induces higher total Bayesian risk than when only the central bank minimizes the expected total welfare loss. The robust Bayesian macroeconomic rules show that when financial shocks shrink the banks’ or entrepreneurial net worth, a contractionary macroprudential policy should be combined with an expansionary monetary policy. However, if capital adequacy ratio or risk shocks strike the economy, such a conflict in macroeconomics policy instruments disappears, thus synchronizing both policies.     

Monetary policy with interest on reserves

I analyze monetary policy with interest on reserves and a large balance sheet. I show that conventional theories do not determine inflation in this regime, so I base the analysis on the fiscal theory of the price level. I find that monetary policy can peg the nominal rate, and determine expected inflation. With sticky prices, monetary policy can also affect real interest rates and output, though higher interest rates raise output and then inflation. The conventional sign requires a coordinated fiscal–monetary policy contraction. I show how conventional new-Keynesian models also imply strong monetary–fiscal policy coordination to obtain the usual signs. I address theoretical controversies. A concluding section places our current regime in a broader historical context, and opines on how optimal fiscal and monetary policy will evolve in the new regime.     

ON THE EFFECTIVENESS OF FISCAL POLICY AS AN INSTRUMENT OF MACROECONOMIC POLICY

This paper demonstrates that fiscal policy is an effective and essential instrument of stabilisation macroeconomic policy. This is particularly so if it is co-ordinated with monetary policy, especially in the current worldwide economic situation.