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.     

Real effects of anticipated and unanticipated money: Some problems of estimation and hypothesis testing

The paper addresses two issues that arise in estimation and testing of the real effects of anticipated and unanticipated money. First it is shown that identification of the effects of unanticipated (or unperceived) monetary growth on real output is possible only if the a priori restriction is imposed that monetary growth does not depend on unanticipated (or unperceived) output. Second, the existing empirical work of Barro and others does not allow for three known channels through which money can affect real variables. These are (1) past and present anticipations of future monetary growth (the inflation tax channel), (2) expectations of monetary growth in a given period conditioned at various preceding dates (the Fischer-Phelps-Taylor effect) and (3) past and present revisions in forecasts of future monetary growth. The presence of the first of these would mean that alternative open-loop monetary growth rules have real effects. The presence of the other two implies that monetary feedback rules can have real effects. Omission of the first channel can lead to biased estimates of the effects of past anticipated monetary growth. Potentially serious observational equivalence problems are associated with the other two.     

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.     

Monetary Policy Implementation: Making Better and More Consistent Use of the Federal Reserve's Balance Sheet

Since December 2015, the Federal Reserve has operated a new “floor system” in which it brings about desired changes in its targeted federal funds rate by managing the interest rate it pays on bank reserves and other short‐term liabilities. The design of this new system reflects the tendency of Fed officials to view monetary policy as affecting the economy through Keynesian” interest rate channels. From this Keynesian perspective, policy actions that change the size of the balance sheet are seen as tools for influencing credit market conditions that operate in addition to and independently of the Fed's monetary policy stance. The alternative monetarist framework proposed by the author views monetary policy and its effects as operating through the interaction between money supply and demand. Use of this framework makes clear that, even under a floor system, monetary policy actions designed to affect the aggregate price level and the rate of inflation must be accompanied sooner or later by traditional open market operations that have implications for the size and composition of the Fed's balance sheet. Use of the monetarist framework also underscores the likelihood that the Fed, by paying interest on reserves, has unknowingly contributed to the restrictiveness of its own monetary policies since the financial crisis, a period during which inflation has run consistently below target. More generally, the monetarist framework downplays the importance of the zero lower interest rate bound and suggests that monetary policy could be conducted more effectively by adopting and adhering to a consistent, rule‐like manner during good times and bad.     

公开市场操作与利率期限结构行为——基于混频数据信息的研究视角

在混频数据信息环境中,精准识别公开市场操作(央行政策利率)和国债收益率曲线(基准利率体系)之间的关联机制至关重要,其影响了货币政策期限结构传导的有效性。本文在混频Nelson-Siegel(N-S)利率期限结构模型框架下,引入央行政策利率,揭示公开市场操作与利率期限结构(水平、斜率、曲度)因子之间的作用机制。实证结果表明:混频数据信息条件下,引入的公开市场操作信息显著改进国债收益率曲线的拟合效果;斜率因子冲击对公开市场操作具有显著的正向影响,而利率期限结构因子对政策调控的反应不敏感。进一步研究表明,2015年以来,公开市场操作对斜率因子的影响逐渐扩大,政策利率向国债收益率曲线的传导效率得到显著提高,我国现代货币政策框架日益健全。     

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。     

Rational expectations and the effectiveness of monetary policy with special reference to the Barro-Fischer model

Monetary policy is sometimes alleged to be ineffective when the rational-expectations hypothesis is imposed on macroeconomic models. Barro and Fischer (1976) once presented in this journal a simple macroeconomic model in order to explain such a claim. However, their conclusion depends on a specific rule employed for the future course of money supply. It is shown that their model embodies an important factor which generally renders monetary policies effective, rational expectations notwithstanding. It is suggested that this property also holds in more general macroeconomic frameworks.     

The implementation of SNB monetary policy

We use a regime-switching approach to model the implementation of SNB monetary policy. The regime-switching technique is crucial for assessing the flexibility inherent in the SNB’s monetary policy strategy. The empirical findings support the idea that repo operations are instrumental in smoothing the implementation of monetary policy in normal times, while changes in the official operational target, accompanied by the accommodating use of repo operations, produce the intended effects in periods of distress. Another significant contribution also comes from some new measures designed to improve liquidity in the Swiss franc money market during the financial crisis of 2007–2008.     

A note on the neutrality of temporary monetary disturbances

In the rational expectations analysis of Lucas and Barro, the quantity of money is subject to random shocks that are specified to be unanticipated and permanent in character. The present note provides some simple examples of alternative money supply specifications that lead to non-neutrality of perceived temporary monetary growth through the channel of expected inflation. Subsequently, the discussion demonstrates that this non-neutrality is not robust to an alternative specification of private monetary behavior, the permanent balance model. The key difference is that the initial model involves commodity supply and demand which depend on current real balances while in the subsequent model these depend on permanent balances. Some final remarks are directed to the idea that the distinction between current and permanent balances in this simple model could be linked to alternative roles of money in more detailed, optimizing analyses.     

我国股票市场和房地产市场对货币流速的影响

探讨股市和房市对货币流速的效应是对货币流速影响因素进行实证研究的一个方向。实证结果表明,我国股市、房市变量与狭义货币流速、广义货币流速均存在长期均衡关系,且与货币流速负相关,狭义货币流速主要受股市影响,广义货币流速主要受房市影响。股市和房市导致货币流速下降的原因,有助于解释我国的一些经济现象,同时也提醒我们应进一步规范股市和房市的发展,央行制定货币政策时应该考虑股市和房市对货币需求的影响,要采取预防性货币政策,保持经济与金融的稳健运行。     

The essentiality of money in environments with centralized trade

Lagos and Wright (2005) introduced an influential model of monetary exchange in which trade alternates between centralized and decentralized markets and money is essential. A limitation of their model and of the literature that follows is that they do not provide a microfoundation for the process of exchange in the centralized market. In this paper, we show that how one models exchange in the centralized market matters for the essentiality of money by describing the centralized market as a strategic market game and studying conditions under which money is essential.     

The impact of unconventional monetary policy on the market for collateral: The case of the French bond market

We consider the channel consisting in transferring the credit risk associated with refinancing operations between financial institutions to market participants. In particular, we analyze liquidity and volatility premia on the French government debt securities market, since these assets are used as collateral both in the open market operations of the ECB and on the interbank market. In our time-varying transition probability Markov-switching (TVTP-MS) model, we highlight the existence of two regimes. In one of them, which we refer to as the conventional regime, monetary policy neutrality is verified; in the other, which we dub the unconventional regime, monetary policy operations lead to volatility and liquidity premia on the collateral market. The existence of these conventional and unconventional regimes highlights some asymmetries in the conduct of monetary policy.     

Money and stock prices: Market efficiency and the lag in effect of monetary policy

This paper examines stock market efficiency with respect to money supply data by testing (1) regression models of stock returns on monetary variables and (2) trading rules based on money supply data. The evidence indicates no meaningful lag in the effect of monetary policy on the stock market and that no profitable security trading rules using past values of the money supply exist. Therefore this evidence is consistent with the efficient market model. Current security returns incorporate all information contained in past money supply data and, in addition, appear to anticipate future changes in the money supply. A number of previous studies have concluded that lags exist and can be used in profitable trading rules. Analysis of these studies demonstrates that for a variety of reasons the evidence in these past studies does not sustain such conclusions.     

Monetary policy and distribution

A segmented markets model of monetary policy is constructed, in which a novel feature is goods market segmentation, and its relationship to conventional asset market segmentation. The implications of the model for the response of prices, interest rates, consumption, labor supply, and output to monetary policy are determined. As well, optimal monetary policy is studied, as are the costs of inflation. The model features persistent nonneutralities of money, relative price effects of increases in the money supply, persistent liquidity effects, and a negative Fisher effect from a money supply increase. A Friedman rule is in general suboptimal.     

Medium-Term Money Neutrality and the Effective Lower Bound

Conventional wisdom suggests that medium-term money neutrality imposes strong limitations on the effects of monetary policy. The point of this paper is that models with medium- and long-term money neutrality are prone to generate nonexistence of equilibria at the effective lower bound (ELB) on interest rates. Nonexistence is suggestive of sharp output contractions—so-called contractionary black holes—at the ELB. Paradoxically, the case for expansionary monetary policy at the ELB is even stronger in models that feature near money neutrality. The results highlight the benefits of a monetary policy regime in which the central bank temporarily overshoots its inflation target once confronted by the ELB.     

Stochastic inflation and government provision of indexed bonds

This paper examines the consequences of using indexed bonds as one of the government financing instruments, along with money and taxes. It is shown that open market operations between money and indexed bonds do not matter in a real sense despite their different risk characteristics. Increasing the share of indexed bonds in the government portfolio increases the volatility and the conditional mean of real rates of return on money. When provided by means other than open market operations, indexed bonds can affect the allocation of resources, but these reallocations cannot be Pareto-improving.     

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。     

Deficits,money and inflation

This paper examines the interrelationships between monetary and fiscal policy. Specifically, it seeks to determine whether Government budget deficits influence monetary growth. Using a money supply model originally developed by Barro, we find that deficits have had a significant impact on the growth of the U.S. money supply throughout most of the period since 1961. Such a relationship need not always hold. It depends on whether government deficits place upward pressure on interest rates and whether the central bank monetizes the debt in an effort to stabilize interest rates.