On the deflationary effect of government's indexed bonds

We consider government intervention in the capital market by selling indexed bonds and buying non-indexed bonds of equal value. If the profits or losses of this operation are transmitted to the public which takes this into consideration then the government's intervention may have no effect on the economy. Insofar as the assumptions of the model permit real effects of the foregoing policy the impact on the economy tends to be deflationary. In analyzing this tendency a distinction is made between the case where the government intervenes in an existing market and the case where it creates a new market for indexed bonds.     

公开市场操作对债券市场的影响研究

选取2007年1月1日~2014年2月28日为研究区间,观察央行公开市场操作对债券市场的影响,用以判断该货币政策手段所产生的效果。研究发现,在全样本中,无论是放松还是收紧银根的操作,对债券市场的影响均只表现在个别市场,而且影响滞后、较弱。单独研究长期品种操作的结果发现,央行公开市场紧缩操作对债券市场的影响显著,方向与预期一致;而公开市场放松操作在债券市场几乎没有反应,说明没有通过债券市场的传导产生政策效果。     

Quantitative Easing in the 1930s

During the 1934–39 recovery from the U.S. Great Depression, overnight interest rates were usually at a lower bound. Meanwhile, American monetary authorities followed policies related to today's debates on quantitative easing: they tried to stabilize yields on Treasury bonds with open market operations; they created rapid growth in high‐powered money; and they allowed transitory factors to affect high‐powered money. Effects of these policies on bond yields reveal a portfolio effect of short‐duration asset supply on term premiums. This portfolio effect helps explain why high‐powered money growth was associated with recovery of real activity over 1934–39.     

Convergence of Real Capital Market Interest Rates—Evidence from Inflation Indexed Bonds

This paper investigates the convergence of long‐term ex ante real interest rates (RIRs) obtained from Canadian, French, UK, and U.S. inflation indexed government bonds. In contrast to previous research, our evidence suggests full convergence in the long run and, hence, capital market integration. For the same sample period, global convergence is rejected for RIRs measured in conventional terms. From these results, we conclude that previous tests of the long‐run real interest rate parity might have suffered from weak measurement of real capital market interest rates.     

Effects of sterilising a balance of payments surplus on domestic yields—A formal analysis

This paper examines the effects of sterilising a surplus, using open market operations, on the level and structure of interest rates. The framework adopted is a portfolio balance model of the financial sector. The paper begins by assuming residents hold assets in only three forms—domestic money, domestic bonds, and foreign assets. Initially, the surplus emerges in one of three ways—the foreign interest rate falls, there is an exogenous inflow, or there is an ongoing current account surplus. The analysis is then extended to the case where there is some direct real investment. Finally, the model is refined to allow residents to hold four assets, including new equities.     

当前我国证券公司反洗钱问题研究

洗钱犯罪是目前国际社会普遍关注的焦点.我国证券市场股票开户非实名制为洗钱活动留下了方便之门,洗钱手法五花八门.反洗钱任重道远,但只要加强法制建设,对症下药、有的放矢,一定能开创反洗钱工作的新局面.     

Wealth effects of open market operations and optimal monetary policy

Equilibrium models of the business cycle such as those developed by Lucas (1973) and Barro (1976), Barro (1980) are often used to analyze the effects of monetary disturbances on the economy. These models typically view monetary injections as arising through lump-sum transfer payments that are independent of an agent's holdings of money. This paper examines the effects caused by misperceptions about money for the more realistic case when money is injected through open market operations. The major result is that unperceived open market operations have a negative wealth effect.     

Monetary randomness and investment

This paper develops a neoclassical model in which the behavior of the money supply affects investment by affecting the real distribution of asset returns. Investment depends on wealthholders' demand for capital. A stochastic money growth rule influences portfolio choice by affecting the distribution of the inflation rate. The variance of inflation matters to wealthholders because of the existence of assets with returns that are not indexed to changes in the price level: money and bonds which are contracted in nominal terms. In a rational expectations environment, asset demands will thus be sensitive to the distribution of the money growth rate. Our principle conclusion is that an increase in the variance of the money growth rate lowers investment, which complements Tobin's (1965) result that an increase in the mean stimulates capital accumulation. The paper also represents a step toward incorporating an asset market into a macroeconomic model in a manner which takes account of Lucas' (1976) criticism of econometric policy evaluation. All variables in the model, including asset return distributions, are functions of technology, preferences and the money supply rule. Further, expectations are rational.     

政府债券、宏观效应与政策调节--基于规模和流动性双重视角的DSGE效应分析

本文基于政府债券规模和流动性的双重视角,构建动态随机一般均衡模型,通过理论分析和数值模拟,研究二者对实体经济发展和金融风险变量的影响。研究显示:政府债券规模的增加促进了投资,刺激了产出和劳动供给,但过度扩张对实体经济也带来"挤占投资"和物价上升、消费下降等负面效应,同时通过债券作为金融资产的特性向金融部门蔓延并形成金融风险集聚;政府债券流动性增强一定程度上刺激了投资,促进了物价稳定,但也存在"挤占消费"和引起经济波动等负面效应;而政府债券流动性的提升有利于缓释金融风险,对实体经济长期可持续发展有益,但流动性过高也会带来系统性金融风险集聚。本文从促进政府债券一级市场和二级市场协同发展、总量和结构合理匹配、政府债券与实体经济有机契合、政府债券流动性管理与金融供给侧密切衔接等方面提出政策建议。     

Some dynamic theory of macroeconomic policy effects on income and prices under the government budget restraint

Consider a macroeconomic model with constant capacity, an inflation adjustment process depending on excess demand, a government budget restraint, and plausible assumptions. Steady-state equilibrium paths have constant (possibly zero) inflation rates. Stability is assured if the endogenous policy variable is money, government purchase, or the tax rate; if it is government debt instability is assured (contrary to Blinder-Solow). Exogenous increases in money or government purchases raise prices in the short and long run. An open market purchase raises prices in the short run, but if money is endogenous it reduces money and prices in the long run.     

从初始经济条件看中美国库现金管理效应及中国的操作选择

当前,中国正面临着货币流动性相对过剩的问题,开展国库现金管理对从紧的货币政策可能带来冲击。一方面中国应积极借鉴国际经验开展国库现金管理,提高财政收益,减少政府筹资成本;另一方面应该根据经济条件把握好国库现金管理的进度和规模,重点关注国库现金管理对货币市场的影响,并在操作中进一步探索财政政策与货币政策的协调机制。     

Indexed bonds and revisions of inflation expectations

This paper studies the impact of revisions in inflation expectations on the prices of British inflation-indexed and conventional government bonds with a vector autoregressive model. Revisions of inflation expectations do not affect the prices of indexed bonds. The prices of conventional bonds fall with upwards revisions of inflation expectations. This suggests that indexed bonds protect investors against inflation while conventional bonds are exposed to changing monetary conditions. This is consistent with the view that indexed bonds avoid the inflation risk compensation of conventional bonds and, hence, reduce the government’s long-run borrowing costs.     

Near-money premiums,monetary policy,and the integration of money markets: Lessons from deregulation

The 1960s and 1970s witnessed rapid growth in the markets for new money market instruments, such as negotiable certificates of deposit (CDs) and Eurodollar deposits, as banks and investors sought ways around various regulations affecting funding markets. In this paper, we investigate the impacts of the deregulation and integration of the money markets. We find that the pricing and volume of negotiable CDs and Eurodollars issued were influenced by the availability of other short-term safe assets, especially Treasury bills. Banks appear to have issued these money market instruments as substitutes for other types of funding. The integration of money markets and ability of banks to raise funds using a greater variety of substitutable instruments has implications for monetary policy. We find that, when deregulation reduced money market segmentation, larger open market operations were required to produce a given change in the federal funds rate, but that the pass through of changes in the funds rate to other market rates was also greater.     

Dynamic effects of government policies in an open economy

The effects of three government policies, an increase in the provision of government services, an open market operation, and an increase in the rate of growth of government liabilities, are studied in a long-run model of a small open economy with flexible exchange rates. The government budget constraint, the degree to which government bonds are net wealth to the public, and the degree of substitutability of government services for private market purchases are all considered. The determination of the exchange rate and the adjustment of the accounts of the balance of payments to changes in government policy are explored.     

Has government any role in money?

Recent interest in monetary reform has been sparked by the emergence of a world irredeemable paper money system. In light of this interest, we review the current validity of four ‘good reasons’ Friedman advanced in 1960 to rationalize government intervention. We conclude that the forces that produced government involvement in the past will persist. Deregulation of financial intermediaries is desirable on grounds of market efficiency, though it is an open question whether government should continue as lender of last resort. We expect that the present world fiat money standard will neither degenerate into hyperinflation nor revert to a commodity standard.     

Money Creation: Tax or Public Liquidity?

I revisit the example of non‐neutral anticipated monetary expansions used in Lucas (1995) Nobel Prize Lecture, within a broader definition of monetary policy tools, such as paying a nominal return on money or using open market operations, to show that money expansions increase output by reallocating consumption across heterogenous individuals and time periods. This result survives with noninterest‐bearing cash when the latter does not generate relevant distortions.     

Fiscal Consequences of Paying Interest on Reserves

We review the role of the central bank's balance sheet in a textbook monetary model and explore what changes if the central bank is allowed to pay interest on its liabilities. When the central bank (CB) cannot pay interest, away from the zero lower bound its (real) balance sheet is limited by the demand for money. Furthermore, if securities are not marked to market and the central bank holds its bonds to maturity, it is impossible for the CB to make losses, and it always obtains profits from being a monopoly provider of money. When the option of paying interest on liabilities is allowed, the limit on the CB's balance sheet is lifted. In this case, the CB is free to take on interest‐rate risk – for example, by buying long‐term securities and financing those purchases with short‐term debt that pays the market interest rate. This is a risky enterprise that can lead to additional profits but also to losses. To the extent that losses exceed the profits of the monopoly operations, the CB faces two options: either it is recapitalised by Treasury or it increases its monopoly profits by raising the inflation tax.     

EXPECTATIONS, SECURITY YIELDS, AND INFLATION: EX-ANTE RISK PREMIA ON UK SHARES, CORPORATE BONDS AND GILTS, 1969–1987

This paper provides estimates of monthly risk premia required by investors on shares, corporate bonds and government gilts during the period 1969–1987, based on the CAPM and using deviations between past actual returns and the model's forecast returns as inputs. Ex-ante risk premia increased dramatically during the 1970s and again on equities in the period around the October 1987 Crash. The risk premia moved closely in line with inflation in the 1970s, casting considerable doubt on the Modigliani and Cohn thesis that the fall in share prices in the middle of that decade was due to the market suffering from money illusion. When account is taken of trends in the premia and inflation timeseries, the correlation between the two disappears. This result is consistent with the findings of others that the widely observed negative correlation between share returns and inflation is a spurious one, traceable to monetary accommodation of supply-side shocks to the real economy — something which is hard to reconcile with the money illusion argument.     

Trading uncertainty and the cash-in-advance constraint

It is argued that when money and bonds are distinct and money yields a lower rate of return, the quantity of private bonds that is exchanged for money is a signal for demand in the near future. Therefore, competitive price setters who observe transactions in the capital market will find it easier to quote prices when money and bonds are distinct relative to the case in which money and bonds are perfect substitutes. In the example analyzed, imposing a cash-in-advance constraint leads to fewer price-setting mistakes and to a Pareto improvement.     

Lender of last resort: A contemporary perspective

This article re-examines the role of the central bank's lender of last resort (LLR) function in the current economic environment. It argues that the traditional role of protecting the money supply from collapse is no longer valid. LLR intervention is appropriate to offset temporary liquidity strains that are likely to depress asset prices and aggregate real income below their equilibrium levels. However, such support should be provided only rarely and through open market operations rather than the discount window.This article was started while the author was visiting the Federal Reserve Bank of Dallas. The article was improved by constructive suggestions received from Douglas Evanoff, Gillian Garcia, Robert Laurent, Gerald O'Driscoll, Anna Schwartz, and an anonymous referee.