Monetary and Fiscal Policy Interactions in the Euro Area

The problem of monetary and fiscal policy interactions is an important issue for the euro area, since the individual member states of the EMU are responsible for their fiscal policies but monetary policy is pursued by a single monetary authority, the ECB. This paper is concerned with empirical evidence on monetary and fiscal policy interactions in the euro area. We first explore fiscal regimes with a VAR model and find empirical evidence that a non-Ricardian fiscal policy has been pursued in both France and Germany. As an example, we then study how one member state of the EMU, namely, Italy, is responding to the common monetary policy with its fiscal policy and find that Italian fiscal policy seemed to be counteractive to the common monetary policy between 1979 and 1998. In order to study monetary and fiscal policy interactions in a more general way, we explore time-varying interactions by estimating a State-Space model with Markov-switching for some Euro-area countries. There appear to be some regime changes in monetary and fiscal policy interactions in France and Germany, but the interactions between the two policies are not strong. Moreover, the two policies have not been accommodative but counteractive to each other. Finally we explore forward-looking behavior in policy interactions and find that expectations do not seem to have played an important role in the policy designs.     

企业行为约束下技术创新所得税激励政策效应研究

技术创新所得税激励政策效应的发挥不但取决于政策本身的制度设计,还取决于企业投资行为对税收政策的敏感性。技术创新所得税激励政策作为制度驱动,既受到企业自身行为的约束,又与企业内部研发驱动机制相互作用。在企业行为理论框架下,运用随机效应模型,以2009—2013年中国Ａ股上市公司数据为样本,对企业行为约束下中国技术创新所得税激励政策效应进行了理论分析和实证检验。结果发现,税收优惠政策形成的税收补贴通过转化为企业内部资源、降低研发投资风险,使得企业内部驱动机制对研发支出的积极作用增强;所得税激励政策本身并未对企业技术创新活动产生显著的激励作用。     

The Bundesbank's Inflation Policy and Asymmetric Behavior of the German Term Structure

The paper analyzes the influence of the Bundesbank's inflation targeting policy on the behavior of the spread between long‐term and short‐term German interest rates. The term spread is considered to be a key indicator of future inflation and economic activity. The application of a momentum threshold autoregressive cointegration model enables the authors to study the adjustment process of the spread toward equilibrium in greater detail than heretofore possible, and permits relaxation of the linear and symmetric adjustment assumption underlying conventional cointegration and error correction investigations on the expectations hypothesis. The empirical findings are consistent with the hypothesized asymmetric adjustment behavior of the spread and can be explained by the Bundesbank's inflation targeting policy during the period from 1975 to 1998.     

Unemployment Responses to 'Skill-biased' Technology Shocks: the Role of Labour Market Policy

Do skill-biased shocks that increase the spread of labour productivities, interacting with different policy regimes, explain the rise in unemployment in Europe relative to the United States in the 1980s and 1990s? The hypothesis is an implication of a version of the Mortensen and Pissarides (1994) model of equilibrium unemployment which allows for worker heterogeneity. A calibrated version of the model implies that a similar unemployment increase would have occurred in the United States over this period, given changes in relative productivity by education implied by observed wage changes, had unemployment compensation and employment protection policies been at European levels.     

A “penalty” discount rate,bank behavior,and price and output stability

The purpose of this paper is to provide an evaluation of the implications of the adoption of a penalty rate discount window policy for bank behavior and for price and output stability. A basic model of the banking firm is used to show that adoption of a penalty rate policy alters the sensitivity of bank portfolio demands to changes in the open market rate, to which the penalty discount rate is deterministically related. In the context of a macroeconomic model that takes into account this interaction of discount window policy and bank behavior, it is demonstrated that adoption of a penalty rate policy generally would have ambiguous implications for the variability of real output and the price level.     

The role of vaccine effectiveness on individual vaccination decisions and welfare

This paper examines a theoretical model designed to characterize a static, individual vaccination decision environment. I identify and characterize both equilibrium and socially optimal vaccination behavior and determine how this behavior changes as the effectiveness of the vaccine changes. I also evaluate the individual and social welfare implications of a change in vaccine effectiveness. I find that under certain conditions, an increase in vaccine effectiveness can decrease the number of agents vaccinating in equilibrium due to the positive external effects of vaccination. Notably, it is also possible for individual and total welfare to decrease. This is an undesirable, and perhaps unexpected, consequence of better vaccines. Fortunately, welfare at the social optimum always increases as vaccine effectiveness increases. However, equilibrium behavior often falls short of the social optimum due to the positive externalities created by vaccinating.     

Capital mobility and the effectiveness of fiscal policy in open economies

This paper uses a dynamic general equilibrium two-country optimizing ‘new-open economy macroeconomics’ model to analyze the consequences of international capital mobility for the effectiveness of fiscal policy. Conventional wisdom suggests that higher capital mobility diminishes the effectiveness of fiscal policy. The model laid out in this paper provides an example that a higher degree of capital mobility can also increase the effectiveness of fiscal policy. This tends to be the case if the stance of monetary policy can be described by means of a simple monetary policy rule.     

Does tax policy affect credit spreads? Evidence from the US and UK

This paper studies how exogenous tax changes affect credit market conditions in the US and UK. Using both structural VAR and structural factor-augmented VAR (FAVAR) model, we find that tax-policy shocks have significant effects on the credit spread. Specifically, the credit spread responds first positively and then negatively to an exogenous tax increase in the two countries. Moreover, the impulse responses of the credit spread to tax-policy shocks do not always accord well with the impulse responses of the output. This indicates that there are channels of tax policy transmission to the credit spread other than through its impact on the business cycle.     

A decomposition of the predictive content of the term structure for output growth in Canada

The purpose of this study is to identify the underlying economic disturbances that drive the predictive content of the term structure for future output growth and those that may distort its information content. The study uses a structural vector autoregressive (VAR) model of a small and open economy for Canada that takes into account its relationship with financial markets in the USA and that Canada is a relatively large exporter of commodities. The model is used to decompose the sources of the variation of the slope of the yield curve and the correlation between the term spread and output growth. Monetary policy disturbances in both Canada and the USA, as well as short-term interest rates, are found to trigger excessive volatility in short-term rates and the term spread that do not contribute to the predictive content of the term spread for future output growth at horizons relevant for monetary policy analysis. However, innovations in output growth, inflation and other macroeconomic variables do not distort the forecast power of the term spread. Unlike the evidence for the USA, disturbances in nominal long-term yields are found to contribute about the same amount to the predictive content of the term spread as unexpected movements in monetary policy.     

How important is the credit channel in the transmission of monetary policy in Mexico?

This article empirically examines the importance of the credit channel of monetary policy in Mexico for the period 2004–2013. We estimate a vector autoregressive (VAR) model to analyse the effects of a monetary policy shock on real output, and we also use a threshold VAR model to investigate asymmetric effects of contractionary and expansionary policies. The empirical results suggest that a contractionary monetary policy results in a fall in the supply of loans together with an increase in the spread between the lending and deposit rate. To the extent that some borrowers are dependent on bank loans for credit, the reduced supply of loans amplifies the effects of monetary policy on output associated with the traditional interest rate channel. Our results also suggest that the importance of the credit channel is larger for contractionary shocks than for expansionary shocks.     

Speculative behavior in a housing market: Boom and bust

We study a housing market with household buyers, speculative investors and property developers in a Walrasian scenario. We show that in addition to the factors that affect the real demand of household buyers and the development cost of property developers, investors' speculative behavior is an important factor explaining housing price evolution and dynamics. In particular, investors' extrapolative expectations may drive the housing price to persistently deviate from its benchmark value and even to explode. In contrast, investors' mean-reverting strategy can balance out the position of trend extrapolators, which may stabilize an otherwise explosive housing market. Moreover, the evolutionary process of housing prices driven by investors' speculative behavior is path-dependent in the sense that different initial market conditions may result in different price paths, which corresponds to the localization property empirically documented in the real housing market. In addition, within the stylized model, we provide some policy implications through analyzing the limitation and effectiveness of policy adjustments via down payment and development cost, and find that the decrease of development cost is a better measure to adjust the housing market when it booms or busts.     

中国货币政策的有效性问题——基于政策时间不一致性的分析

本文对政策时间不一致性理论模型加以修正以分析中国货币政策的有效性问题。结果表明,中国货币政策的有效性与政策的可信性之间密切相关,随着货币政策可信性的提高,其有效性也相应提高。因此,实行有规则、透明度高、连贯性强的货币政策,对于提高政策有效性具有重要作用。     

An interest-rate-spread-based measure of Turkish monetary policy

A coherent method to measure the effectiveness of a monetary policy improves the monetary authority’s management capacity and renders the possibility of applying sound policies prior to and during a crisis. The trend in employing complicated and ambiguity-bearing unconventional monetary tools in the aftermath of the 2008 crisis has increased the value of such a method. The aim of this article is to introduce a coherent and consistent monetary policy evaluation method for Turkey. Accordingly, we suggest that innovations in the spread between overnight interest rates and Treasury auction interest rates are informative for exchange rate, output, and prices. Empirical evidence for this identification reveals that positive innovation in spread (implying a tight monetary policy measure) decreases output temporarily, permanently decreases prices, and appreciates local currency. This result is also robust to alternative specifications.     

Welfare Economics with Intransitive Revealed Preferences: A Theory of the Endowment Effect

Economists use the standard rational model to predict behavior after a policy change and to determine the policy's welfare implications. Recent experimental observations are casting doubt on the predictive accuracy of the standard model, but the more realistic behavioral alternatives often provide a poor basis for making normative evaluations. This paper suggests that we can still predict behavior and measure welfare within the same model. We show that optimizing agents with standard preferences will in some cases behave as if they are subject to an endowment effect. Even so, we may still be able to uncover information about their preferences.     

Asymmetric behavior of Australia's Big-4 banks in the mortgage market

This paper presents an alternative framework for modeling the behavior of banks in setting lending and/or saving rates. In a short-run dynamic model, we correct for deviations from the long-run path using three feedback coefficients capturing different disequilibria. This enables us to test for both amount and adjustment asymmetries by considering the size and direction of any deviations. We use this model to examine the relationship between the official cash rate (set by the Reserve Bank of Australia as a monetary policy tool) and the standard variable mortgage rates of Australian Big-4 banks using weekly data from 2001 to 2012. The evidence indicates both types of asymmetries along with synchronized rate-setting behavior. Overall, the banks immediately pass on 120% of any rate rise, but only 85% of any rate cut. Further, when mortgage rates are substantially above the equilibrium path, we find no significant attempt to lower rates, but faster adjustment when rates are below equilibrium values. This finding has important implications for the RBA's monetary policy transmission mechanism and the effectiveness of the expansionary versus contractionary policy.     

消费者情绪对通货膨胀影响的理论分析

本文基于消费者行为理论和行为经济学理论,构建了一个两期的经济模型,并通过数值模拟的方法,分别研究了消费者在不同情况下的消费者情绪与物价变动和消费的关系。结果表明:消费者情绪会影响物价和消费的波动;消费者情绪会对货币政策的效果产生影响;在制定利率政策时要考虑到居民的消费习惯;在经济周期的不同阶段,消费者情绪对物价的影响不同;在消费者异质的情况下,国家的收入分配政策会影响国家调控物价的效果。     

The effect of China's driving restrictions on air pollution: The role of a policy announcement without a stated expiration

Driving restrictions keep cars off the street largely on the basis of the last digit of the license plate number. This paper evaluates how different driving restriction policies affected the air quality of the 17 cities in Henan, one of China’s most populous provinces, from 2017 to 2019. I offer a novel way to categorize driving restrictions by making a distinction between cities that announced driving restrictions without a stated expiration and other cities that announced driving restrictions with a stated expiration. I provide some suggestive evidence on the exogeneity of timing, and using two-way fixed effects, I find significant heterogeneity in policy effectiveness. The policy reduced particulate matter concentration in cities that announced driving restrictions without a stated expiration, but had no effect in cities that announced driving restrictions with a stated expiration. To explain this difference, I build a model, which implies that driving restrictions announced without a stated expiration can induce people to pay a high fixed cost in exchange for a low transit time and not to choose non-compliance, two behavioral changes with the potential to further reduce air pollution. Thus, managing the duration of a policy and people’s expectations of its duration can matter crucially for the policy’s effectiveness.     

Endogenous Money Supply and the Business Cycle

This paper documents changes in the cyclical behavior of nominal data series that appear after 1979:Q3 when the Federal Reserve implemented a policy to lower the inflation rate. Such changes were not apparent in real variables. A business cycle model with impulses to technology and a role for money is used to show how alternative money supply rules are expected to affect observed business cycle facts. In this model, changes in the money supply rules have almost no effect on the cyclical behavior of real variables, yet have a significant impact on the cyclical nature of nominal variables.Journal of Economic LiteratureClassification Numbers: E32, E42, E50.     

Trade policy & lobbying effectiveness: Theory and evidence for India

How do we understand differences in effectiveness in lobbying for trade policy? To explain lobbying effectiveness, I introduce a new measure into Grossman and Helpman's (1994, American Economic Review 84: 833–850) model of protection-for-sale (PFS). Differences in effectiveness are explained on the basis that some groups make a better case for protection by sending a signal regarding information they possess and that is considered by policy makers before setting trade policies. I begin by estimating a standard PFS model for India using a measure of political organization, a common approach in the empirical literature on PFS. To overcome the need to define such a binary political organization variable, I then use panel data to estimate the new measure of relative lobbying effectiveness. For the most effective sectors, a high output to import ratio translates into higher trade protection; for the least effective sectors, higher output to import ratio translates into lower trade protection. Examining some of the political economy influences on lobbying effectiveness, I find that producing similar goods reduces the positive effect of geographical proximity on effectiveness. Hence, within a sector, firms in close proximity and producing similar goods compete to lobby rather than cooperating or free-riding.     

天津市住房市场的有效性测度研究

根据资本市场有效性理论,运用单位根检验、方差比检验、VAR模型和Granger因果检验等方法对天津市住房市场的有效性进行了实证测度,得出了天津市各区住房市场均未达到时间弱有效性和空间弱有效性的结论,并据此给出了提高住房市场有效性的政策建议。