A New EU Member Country on the Road to the Euro Area: Monetary and Fiscal Policies for Slovenia

Slovenia was the first of the ten new EU member states to enter the Euro Area on January 1, 2007. It was an explicit objective of Slovenian policy-makers to introduce the euro as early as possible. Slovenia was participating in the exchange rate mechanism ERM-II since June 2004. This paper analyses whether the choice of participating in the ERM-II soon after EU accession was the best strategy in terms of the macroeconomic performance. It is shown that a better overall economic performance could have been achieved under a crawling peg regime allowing a depreciation of the Slovenian tolar (SIT) before introducing the euro in 2007. The worst policy results are obtained when the exchange rate is totally fixed at an early stage of EMU integration. The labor market performance can be significantly improved by cutting income taxes and social security contribution rates.      

Monetary policy and EMU enlargement: Issues regarding ERM II and adoption of the euro in Estonia

The aim of the paper is to give an overview of the issues related to Estonia's entry into ERM II. For that purpose the article describes the official position of the Estonian authorities regarding entry into ERM II and the adoption of the euro, explains the rationale for early entry into ERM II, and presents the reasons for maintaining the currency board arrangement until full membership in EMU. Also, the challenges of the adoption of the euro are discussed. The article concludes that early entry into ERM II is appropriate as the perceived costs—short-term costs of fiscal consolidation and the cost of giving up independent monetary policy and flexible exchange rates as stabilization tools—are practically non-existent in Estonia. The paper argues that the high level of exchange rate stability and nominal convergence, relatively high flexibility of the economy, and integration with the euro area support the rationale for maintaining the currency board arrangement and adopting the euro early.     

Monetary policy towards E(M)U accession: A central banker's view

This paper gives a brief overview of the main economic issues related to the forthcoming integration of the new EU member countries into the euro area. Subsequently, it will discuss in more detail three broad issues concerning the monetary side of EU enlargement. First addressed is the timing of euro area enlargement and monetary policy regimes in the run up to the EMU. The next focus is on the ERM II as an interim step towards the euro area. Third, the author expresses his views on the future of the ECB and the euro area, which the Czech Republic will have an opportunity to co-determine after its entry. The paper is based on the author's Distinguished Address, as well as the symposium's panel discussion on the topic at the International Atlantic Economic Conference in Vienna, 14 March 2003.     

Central Bank Autonomy,the Exchange Rate Constraint and Inflation: The Case of Italy, 1970–1992

This paper analyzes the determinants of inflation in Italy over the period 1970–1992. Particular emphasis is placed on the role of central bank independence in influencing monetary growth, and on the role of monetary growth and of the Exchange rate Mechanism (ERM) in affecting inflation. In the 1970s and early 1980s, when the Bank of Italy lacked independence and the ERM was still not credible, monetary growth was highly unstable and was the main determinant of Italian inflation, although oil price and tax shocks also played a role. After the March 1983 general exchange rate realignment and the French U-turn, the ERM became more credible and monetary growth stopped being a significant determinant of inflation; instead, the German inflation became the main variable influencing Italian inflation.     

Vanishing of China's Twin Surpluses and Its Policy Implications

This paper argues that the twin surpluses in China's balance of payments will disappear in the future as a result of external and internal structural changes. China's current account surplus will diminish as a result of the decline in the goods trade surplus, the expanding service trade deficit and negative investment income. China's capital account might shift from surplus to deficit as a result of shrinking net direct investment inflows and more volatile short‐term capital flows. When the twin surpluses no longer exist, the normalization of the US treasury bond yields will be sped up, terminating the one‐way appreciation of the RMB exchange rate; the People's Bank of China's pressure to sterilize inflows will be alleviated, and new problems for the People's Bank of China's monetary operation will emerge; new financial vulnerabilities for the Chinese economy will arise. Finally, the present paper provides some policy suggestions for the Chinese Government to deal with the declining twin surpluses.     

Monetary Policy Implementation in Japan: What They Say versus What They Do

Since the 1970s, many central banks – including the Bank of England, the Bank of France, the Bank of Korea and the Bank of Japan – have announced that they have ceased direct credit controls. Researchers have tended to accept 'what they say', without gathering empirical evidence on 'what they do'. The Bank of Japan announced that it was abandoning direct credit controls in 1982. Since then, the monetary policy literature on Japan has focussed on formal policy tools, such as interest rates. This paper presents empirical research on the actual implementation of monetary policy by the Japanese central bank. The emphasis is on the period in the mid- to late-1980s when monetary policy was stimulatory and real-estate-related lending expanded rapidly, and the period in the early 1990s, when asset prices fell, resulting in the subsequent banking crisis and recession. The paper first briefly surveys the literature. Empirical research is then presented in three parts. Secondary sources are accessed to gain information on the mechanism of monetary policy conduct. New field work is then presented, which uses primary sources to probe the details of monetary policy implementation. Finally, econometric evidence is gathered to test various hypotheses concerning monetary policy procedures. The research successfully establishes the details and nature of the Bank of Japan's monetary policy implementation during the 1980s and early 1990s. The findings suggest the need for a modification of the generally prevailing view, as well as the need for further research on the actual implementation of monetary policy in other countries.     

Enterprise Risk Management Program Quality: Determinants,Value Relevance,and the Financial Crisis

This paper investigates factors associated with high‐quality Enterprise Risk Management (ERM) programs in financial services firms, and whether ERM quality enhances performance and signals credibility to the financial markets. ERM, developed with the assistance of the accounting profession, provides a framework and plan to integrate management of all sources of risk. Challenged by measurement difficulties common to research on management control systems, prior ERM studies present mixed findings. Using ERM quality ratings of financial companies by Standard & Poor's, we find that higher ERM quality is associated with greater complexity, less resource constraint, and better corporate governance. Controlling for such characteristics, we find that higher ERM quality is associated with improved accounting performance. Results show a market reaction to signals of enhanced management control from initial ERM quality ratings and rating revisions, and a stronger response to earnings surprises for firms with higher ERM quality. Focusing on the recent global financial crisis, our analysis suggests that there is no relation between ERM quality and market performance prior to and during the market collapse. However, returns of higher ERM quality companies are higher during the market rebound. Overall, results reveal that firm performance and value are enhanced by high‐quality controls that integrate risk management efforts across the firm, enabling better oversight of managers' risk‐taking behavior and aligning that behavior with the strategic direction of the company.     

Progress report on the new history of the Reserve Bank of New Zealand

Work began in 2001 on a new official history of the RBNZ, focusing on the period since publication of Gary Hawke's study of the Bank in 1973. This paper discusses the arrangements under which the current project is managed, explains the significance of the RBNZ for central banking, and indicates the challenges facing the historians. A brief outline is given of the planned contents of each chapter. It is hoped that the book arising from this project will be of value to those interested in central banking and monetary policy as well as in the recent history of New Zealand. Over the years, a number of leading central banks, including the Bank of England, the Reserve Bank of Australia, and the Deutsche Bundesbank, have commissioned institutional histories. The present research project on the history of the Reserve Bank of New Zealand (RBNZ or the 'Bank') falls within this tradition.     

Assessment of the RF Central Bank’s monetary policy efficiency during the financial crisis

The efficiency of the Bank of Russia’s monetary policy is evaluated in the paper using econometric modeling. The character and impact degree of the used monetary policy instruments on its targets are defined, and conclusions on different actions of the above-mentioned instruments during the crisis and precrisis periods are made.     

Inflation convergence in the EMS: Some additional evidence. A comment

Conclusions As in Caporale and Pittis, this paper finds significant evidence supporting the hypothesis of long-run equilibrium relationships between inflation rates in countries which participate in the ERM. However, the results differ in several important respects. First, the evidence rejects a dynamic specification in terms of inflation differentials against Germany and in at least one important case, Table 5, it is clear that imposing this restriction may lead to invalid inferences on the role of the ERM as a mechanism to achieve inflation convergence. Second, on the issue of German leadership the results given in Tables 4 and 5 suggest that the German inflation rate cannot be considered weakly exogenous. Rather it shares a long-run relationship with inflation in both ERM and non-ERM economies and responds to deviations from these equilibria. Finally, as these results also hold for a sample period twice the length of that used by Caporale and Pittis they cast considerable doubt on their assertion that cointegrating relationships are unlikely to be detected when “the dynamic process of convergence is still going on”.     

The Effects of Monetary Policy in the Euro Area

This paper presents evidence on the monetary transmission processin the euro area, based on macroeconomic data and on micro dataon banks. According to the estimations of macro vector autoregressionand macroeconometric models, a monetary policy tightening significantlyreduces output and—after a time lag—also prices.The effect on output is temporary, while that on prices is permanent.Clear patterns of significant asymmetries in the monetary policyeffects across countries do not emerge. The estimations basedon micro data on banks show that the main factor that determinesthe average bank's response to monetary policy is its degreeof liquidity: the lower its share of liquid assets in totalassets, the more strongly does a bank reduce its lending inresponse to a monetary tightening. Bank size does not emergeas an important factor for a bank's reaction to monetary policy.These results hold for virtually all member countries of theEuropean Monetary Union, despite the differences in their bankingsystems.     

当前我国亟待提高货币政策传导机制的有效性

货币政策传导机制是否通畅关系到中央银行能否实现货币政策的最终目标,我国货币政策传导机制不畅是人民银行最终实现其政策意图和增强货币政策有效性必须面对的问题.文章介绍了西方经典的货币政策传导理论和我国货币政策传导非有效性的现实,对我国货币政策传导机制的发展和传导途径作了深入的分析,提出了完善我国货币政策传导机制和提高货币政策有效性的对策.     

House Prices and the Stance of Monetary Policy: The Case of Korea

Abstract

This paper is an empirical investigation on whether the Bank of Korea should respond to the housing price developments in conducting monetary policy. For that aim, we construct a small scale empirical model of the Korean economy, simulate the estimated model with a set of alternative monetary policy rules, and compare the stabilization performances of those rules. There turns out to be ample room for further stabilization of inflation and output, if the central bank shifts from the historically conducted monetary policy rule to the optimal rule. The stabilization gains under the optimal rule, however, are not attributable to additional policy indicators (such as housing price inflation) the optimal rule involves. Rather, the optimal rule improves upon the historical one because the former takes a quite different reaction scheme toward the historical policy indicators. Moreover, as long as the Bank of Korea maintains appropriate reactions to the historical policy indicators, housing price inflation does not contain much extra information for further stabilization     

International Financial Aggregation and Index Number Theory: A Chronological Half-century Empirical Overview

This paper comprises a survey of a half century of research on international monetary aggregate data. We argue that since monetary assets began yielding interest, the simple sum monetary aggregates have had no foundations in economic theory and have sequentially produced one source of misunderstanding after another. The bad data produced by simple sum aggregation have contaminated research in monetary economics, have resulted in needless “paradoxes,” and have produced decades of misunderstandings in international monetary economics research and policy. While better data, based correctly on index number theory and aggregation theory, now exist, the official central bank data most commonly used have not improved in most parts of the world. While aggregation theoretic monetary aggregates exist for internal use at the European Central Bank, the Bank of Japan, and many other central banks throughout the world, the only central banks that currently make aggregation theoretic monetary aggregates available to the public are the Bank of England and the St. Louis Federal Reserve Bank. No other area of economics has been so seriously damaged by data unrelated to valid index number and aggregation theory. In this paper we chronologically review the past research in this area and connect the data errors with the resulting policy and inference errors. Future research on monetary aggregation and policy can most advantageously focus on extensions to exchange rate risk and its implications for multilateral aggregation over monetary asset portfolios containing assets denominated in more than one currency. The relevant theory for multilateral aggregation with exchange rate risk has been derived by Barnett (J Econom 136(2):457–482, 2007) and Barnett and Wu (Ann Finance 1:35–50, 2005).

The Russian foreign exchange market: Achievements on the path to liberalization

The paper analyzes Russia’s macroeconomic conditions and main trends in its foreign exchange market under financial liberalization. Structural changes in the Russian foreign exchange market are juxtaposed with major trends and proportions in the world’s forex market such as swap and futures operations and the increased role of the single European currency in the economy and finances. In the examination of the initial results of the dual currency basket policy of the Bank of Russia, the accent is on the foreign exchange market infrastructure, i.e., exchange business, clearing and settlements, as a necessary condition for Russia’s integration into the world’s financial system.     

CAN A RULE‐BASED MONETARY POLICY FRAMEWORK WORK IN A DEVELOPING COUNTRY? THE CASE OF YEMEN

Monetary policy in Yemen is largely rudimentary and ad hoc in nature. The Central Bank of Yemen's (CBY) approach has been based on discretionary targeting of broad money without any clear target to anchor inflation expectations. This paper argues in favor of a new formal monetary policy framework for Yemen emphasizing a proactive and rule‐based approach with a greater direct focus on price stability in the context of a flexible management of the exchange rate. Although, as in many developing countries, institutional capacity is a concern, adopting a more formal framework could impel the kind of changes that are required to strengthen the ability of the CBY in achieving low and stable rates of inflation over the medium term.     

Industrial policy in eastern Europe: The case of Hungary

This paper reviews western conceptions of industrial policy and discusses how they may be applied to an economy in transition such as Hungary. At present, Hungary envisages a “moderately active” industrial policy, though in practice it will be limited by Hungary's desire to conform to EC practices as far as possible, by the need to give firms clear incentives to adapt, and by budgetary constraints. The analysis of industrial competitiveness and structural change shows that Hungary entered the 1990s as an economy in severe disequilibrium, and that industry per se will not quickly return to its pre-1990 state. One of the most difficult tasks for industrial policy, therefore, will be to manage a process of structural change that will have differential effects both across sectors and between regions. While the best industrial policy is provided by means of a stable regulatory and legal environment for business and sound macro-policy, Hungary will need more than this in the medium term to overcome inherited structural imbalances in the presence of severely imperfect markets; e.g., the financial and labor markets.     

央企全面风险管理提升公司价值了么?

风险管理的有效性一直是一个存在争议的话题。金融危机以来,此起彼伏的风险事件使得各界对这一问题的探讨更加激烈。风险管理是否能够提升公司价值?国资委在2006年开始实施的《中央企业全面风险管理指引》是否发挥了预期的效果?文章以114家开展企业风险管理项目的央企上市公司为样本,使用2006——2010年间的数据对企业风险管理的价值提升效果极其特征进行实证检验。研究发现,在金融危机这一高度不确定情境下,企业风险管理具有显著的价值提升效果,但其价值提升作用具有滞后性特点。这一结论在采取不同计量方法时依然稳健。     

基于ERM的利益相关者价值探析

企业风险管理(Enterprise Risk Management,ERM)是近年来管理界最热门的一个话题,企业要求通过一定水平的风险管理,提升风险管理的能力,创造更多的企业价值,这涉及到利益相关者群体的价值.文章以COSO、普华永道、安永等机构的分析报告为研究背景,借助德勤的调查结果,从ERM与利益相关者的价值关系出发,分析价值流失因素及原因,提出解决价值流失和创造利益相关者价值的六项对策.