The Relationship Between Price Stability and Financial Stability: Evidence From Major Emerging Economies

We examine the relationship between price stability and financial stability for major emerging economies using a Markov regime-switching model. Empirical results suggest that monetary policy is consistent with the Taylor rule in all countries except for India and all countries followed both low and high inflation targeting monetary policy regimes. Low inflation targeting regime seems to be more persistent and has higher duration than high inflation targeting regimes except for Indonesia and South Africa. All countries seem to have had financial stability concerns when they formulated their monetary policy as the coefficient of the financial stress index is statistically significant at least in one regime. Overall the results suggest that Taylor rule-based monetary policies have been implemented to various degrees in major emerging economies to achieve economic stability, price stability, and financial stability.     

金融冲击、货币政策与宏观审慎政策—基于动态随机一般均衡模型的分析

通过建立包含房地产市场金融冲击的NK-DSGE模型,考察了我国货币政策与宏观审慎政策的效果。通过比较不同政策机制下金融冲击的脉冲响应函数可以发现,宏观审慎政策的引入缓和了金融冲击的效应,并且可以同时实现稳定物价和稳定金融系统的目的。社会福利分析的结果表明：(1)金融冲击下,仅对产出缺口和通胀做出反应的政策具有最低的社会福利水平;(2)如果货币政策考虑信贷市场,并同时使用反周期性宏观审慎政策,那么社会福利将得到明显的提高。这意味着金融冲击下,政府应该积极行使对信贷市场做出反应的货币政策以及反周期性宏观审慎政策相结合的政策机制。当前,在房地产市场整体不景气的背景下,我国政府积极利用金融冲击对房地产市场进行调控。因此,采用对信贷市场做出反应的货币政策以及反周期性宏观审慎政策将具有相对较好的政策效果。     

基于金融稳定目标的规则型货币政策研究

随着货币政策与金融稳定之间联系的不断深化，中央银行理应在防范金融市场系统性风险中发挥重要的作用。文章首先构建我国金融稳定指数，并将其加入线性货币政策规则，研究结果表明，中央银行在调整名义利率时的确对金融稳定状况有所关注，相比于传统泰勒规则，纳入金融稳定指数的泰勒规则中通胀系数与产出缺口系数均有显著改善，其能够更好地拟合中央银行的实际政策操作。随后，为了进一步考察货币当局对名义利率调整的动态变化特征，文章通过TVP-SV-VAR模型对拓展的时变参数泰勒规则进行了再估计。研究发现，随着经济周期和金融形势的更迭，中央银行也会不断动态调整其政策目标。其中，货币政策对通货膨胀的调控不存在明显的惰性区域，控制通胀始终是中央银行工作的重心。其次，中央银行存在规避经济收缩的偏好，在经济下行时期其对货币政策的调整会向产出缺口倾斜。最后，为了抑制金融机构的过度风险承担，货币当局在本次金融危机之后显著增强了对于金融稳定的关注。     

Capital Flows,Financial Intermediation and Macroprudential Policies

This paper develops an open-economy DSGE model with an optimizing banking sector to assess the role of capital flows, macro-financial linkages, and macroprudential policies. The key result is that macroprudential measures can usefully complement monetary policy. Countercyclical macroprudential polices can help reduce macroeconomic volatility and enhance welfare. The results also demonstrate the importance of capital flows and financial stability for business cycle fluctuations as well as the role of supply side financial accelerator effects in the amplification and propagation of shocks.     

货币与财政政策后续效应评估:40次银行危机样本

以20世纪80年代以来40次重要的系统性银行危机为基础,对金融危机后的货币政策和财政政策选择进行实证评价。实证结果表明,"适度扩张"的货币政策和财政政策能产生相对较优的经济效果,应成为金融危机后的主要政策选择,但由于两种政策刺激或稳定经济的效力都集中体现在短期,为避免持续和大规模货币扩张和财政赤字带来的负面影响,一旦危机消退、经济企稳回升,之前作为"反危机工具"出现的扩张性货币和财政政策就应该逐步淡出。     

Loan-to-value policy in a bubble-creation economy

This paper provides a theoretical analysis of macroprudential policy in the form of loan-to-value (LTV) restrictions in a bubble-creation economy. Such policy measures have been used intensively in Asia to deal with credit and property price boom-bust cycles while the effectiveness remains unclear, especially the country-specific cases. We find that the effect on investment and size of bubbles depends on the degree of financial development. Specifically, restrictive LTV policies tend to be more effective in dampening asset-price bubbles in economies that have a high degree of financial depth. High (low) financial depth implies that bubbles originally crowd out (in) investment, so that implementation of LTV policies causes bubbles to decrease (remain unchanged). These might explain some mixed empirical results of LTV policy on dampening asset-price growth.     

【学界视点】价格稳定与金融稳定相关性研究——基于中国2002-2015年数据实证研究

基于中国2002-2015年3月的月度经济金融数据,作者利用简单相关性、VAR模型、ADCC-GARCH模型对价格稳定和金融稳定关系进行了研究。实证结果表明,价格稳定并不能保证金融稳定,二者并不存在稳定的相关性。同时,作者还研究了数量型和价格型货币政策对二者关系的影响,结果表明：货币政策对二者关系影响微弱,单独依靠货币政策很难同时实现价格稳定和金融稳定的双重目标。最后,本文选取了股票市场和房地产市场数据进行了稳健性检验,进一步论证本文观点。本文的研究结论有助于更深入理解二者关系,进一步强调了货币政策和宏观审慎政策协调的重要性,为决策部门制定合适的政策、促进宏观经济金融体系的良好运转提供了理论依据。     

Mix of Fiscal and Monetary Policy Rules and Inflation Dynamics in China

The present paper examines the role of the mix of fiscal and monetary policy rules in determining inflation dynamics using fiscal and monetary policy reaction functions and Markov‐switching vector autoregression methods based on quarterly data in the period 1992–2007. Our results show that fiscal and monetary policies in China can be adequately described using some simple rules, and that significant regime shifts took place around 1998. Fiscal policy tended to be active and countercyclical in the pre‐1998 period, then switched to be passive and more countercyclical, whereas monetary policy was characterized as passive and procyclical in the pre‐1998 period, and switched to be active and countercyclical afterwards. The mix of fiscal and monetary policy rules can explain inflation dynamics better than the monetary policy rule alone. Therefore, price stability requires not only appropriate monetary policy but also appropriate fiscal policy.     

Leaning against the wind: Macroprudential policy in Asia

In recent years, many countries have adopted macroprudential measures to safeguard financial stability, in particular to deal with the credit and asset price cycles driven by global capital flows. Using a newly constructed database on macroprudential instruments and capital flow measures in 13 Asian economies and 33 economies in other regions for the period 2000–2013, the paper formulates various macroprudential policy indices, aggregating sub-indices on key instruments. Asian economies appear to have made greater use of macroprudential tools, especially housing-related measures, than their counterparts in other regions. The effects of macroprudential policy are assessed through an event study, cross-country macro panel regressions, and bank-level micro panel regressions. The analysis suggests that housing-related macroprudential instruments-particularly loan-to-value ratio caps and housing tax measures—have helped curb housing price growth, credit growth, and bank leverage in Asia.     

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     

The case for price level or inflation targeting—What happened to monetary policy effectiveness during the Japanese disinflation?

This paper examines whether price level or inflation targeting would have been appropriate policy choices for Japan during its disinflation and deflation period. We employ Markov switching and structural vector autoregressions, together with structural IS equations, to investigate monetary policy effectiveness during the Japanese disinflation. We find evidence of regime switching in the mid-1990s in a model including the nominal policy interest rate. When monetary policy shocks are identified by using the McCallum rule for monetary base, a monetary expansion is found to have a statistically significant impact on prices. Moreover, a lower real ex ante interest rate can still stimulate the economy despite the zero lower bound on nominal interest rates.     

The ‘trilemma’ hypothesis and policy implications for Fiji

This paper examines the trilemma constraint for Fiji; that is, we investigate how trilemma policy variables were used to address policy trade‐offs among the three objectives of exchange rate stability, monetary autonomy, and financial openness. Fiji makes an interesting case because of its policy orientation towards a stable exchange rate and adequate foreign reserves. Our results suggest that the trilemma constraint is binding for Fiji and policy priority is given to exchange rate stability and monetary policy independence, while less emphasis is placed on financial market openness. We also find that the actual policy levels do not deviate substantially from optimal levels, which evidences that Fiji's policy management has been efficient under the trilemma constraint. Finally, we also study the effects of various trilemma policy combinations and foreign reserve holdings on output growth and inflation.     

Financial Market Turmoil： Implications for Monetary Policy Transmission in China

The recent financial market turmoil has initiated another search for insightful understanding of the interactions between the financial market and monetary policy. This paper explores these interactions in terms of the transmission mechanism of monetary policy in China. We argue that evolving financial development, enhanced by the expansion of the financial market, has altered the conventional channel for monetary transmission in China. Analyzing marked changes in the financial landscape and taking into account policy regime shifts in China, the paper provides clear evidence showing that the financial market has become a new and important channel for transmission of monetary policy in China.     

Can We Still Lean Against the Wind?

In an overlapping generations model without financial frictions, Gali (Am Econ Rev 104(3):721–752, 2014) observed that a ‘leaning against the wind’ monetary policy is likely to aggravate the fluctuations in the bubble. He found that optimal monetary policy in such an economy must strike a balance between stabilization of the bubble and stabilization of aggregate demand. This paper extends Gali (Am Econ Rev 104(3):721–752, 2014)’s model by introducing various financial frictions in the bubbly economy with a Samuelson 2-period overlapping agents and examine how ‘leaning against the wind’ macro-prudential policies like capital adequacy affect the size and volatility of bubble, inflation and aggregate demand. While the results of the model with financial frictions vindicate Gali (Am Econ Rev 104(3):721–752, 2014) that a leaning against the wind monetary policy generates a larger volatility in the bubble than a policy of benign neglect, the paper finds that minimisation of bubble volatility requires an active macro-prudential policy. It is also observed that stronger interest rate response of monetary policy to the bubble necessitates a stronger macroprudential response possibly to absorb the excess volatility generated by the monetary policy. However, the paper also finds that tightening macroprudential policy parameter beyond a threshold value may encourage banks to take more risks and increase credit supply, aggravating the bubble in the process. With respect to macroprudential policy, there is no conflict between stabilization of current aggregate demand and stabilization of future aggregate demand and both call for a strong macroprudential response, at least until the macroprudential parameter attains the threshold value, although the conflict between the two objectives persists with respect to monetary policy as in Gali (Am Econ Rev 104(3):721–752, 2014). Empirical verification of the provisioning cost channel through structural vector autoregression confirm that a positive provisions shock can contract asset bubbles by restricting credit, output and a delayed marginal response of interest rate spreads.     

Effects of Monetary Policy during Financial Market Crises and Regime Changes: An Empirical Evaluation Using a Nonlinear Vector Autoregression Model

Using monthly data for Korea, this study examines nonlinear effects of monetary policy in association with financial market distress. The study uses a nonlinear vector autoregression model and finds that monetary policy becomes ineffective for addressing huge demand contractions in times of financial market turmoil or severe economic downturn, implying a structural change from a non‐Keynesian to a Keynesian regime, such as a liquidity trap. Monetary contractions have stronger output effects than monetary expansions, particularly in times of financial distress. We found no evidence in favor of asymmetric effects of monetary shocks of different sizes. Finally, we also found financial shocks to have stronger effects on the real economy in times of financial distress than in normal times. The results have important policy implications for periods of financial turmoil or economic crisis.     

The effectiveness of monetary policy in China: Evidence from a Qual VAR

Analyzing monetary policy in China is not straightforward because the People's Bank of China (PBoC) implements policy by using more than one instrument. In this paper we use a Qual VAR, a conventional VAR system augmented with binary policy announcements, to extract a latent indicator of tightening and easing pressure, respectively, for China. The model acknowledges that policy announcements are endogenous and summarizes policy by a single indicator. The Qual VAR allows us to study the impact of monetary policy in terms of unexpected changes in these latent variables, which we identify using sign restrictions. We show that the transmission of monetary policy impulses to the rest of the economy is similar to the transmission process in advanced economies in terms of both output growth and inflation despite a very different monetary policy framework. We find that bank loans are not sensitive to policy changes, which implies that window guidance is still a necessary policy tool. We also find that the impact of monetary policy shocks is asymmetric in terms of asset prices, that is, the asset price reactions differ in their sensitivity to tightening shocks and easing shocks, respectively. In particular, an easing of monetary conditions boosts stock prices while a tightening shock leaves stock prices unaffected. This shows that monetary policy is not a suitable tool to stabilize asset prices, which raises implications for financial stability and macroprudential policy.     

资产价格在货币政策传导中的作用

文章对资产价格在货币政策传导中的作用进行实证研究，结果表明，我国同时存在着从中央银行到资产价格的高效传导和从资产价格到实体经济的低效传导，资产价格的波动损害了货币政策的传导效率以及金融体系的稳定性。在这种情况下，我国中央银行不应把资产价格纳入货币政策的最终目标，而应适时和适度地对资产价格作出反应。     

Monetary autonomy in selected Asian economies: The role of international reserves

With the increased financial integration of Asian countries, monetary policy takes on the additional role of maintaining the stability of the financial system along with the traditional objectives of promoting growth and employment with price stability. Given the importance and relevance of monetary policy in Asian countries, we examine monetary autonomy and its interaction with financial integration, currency regimes and international reserves for the past two decades in the following Asian countries: Thailand, Korea, Indonesia, the Philippines, and India. The empirical analysis reveals two significant and interesting findings that have policy implications. First, Thailand, Korea and Indonesia, countries that have moved towards a floating currency regime, experienced simultaneous declines in the sensitivity of their interest rates (thereby increasing monetary autonomy), while India continues to increase the sensitivity of its interest rates with a pegged exchange rate and increased financial integration. Second, in all of the studied economies, the accumulation of international reserves has contributed, to some extent, to the retention of monetary autonomy in terms of preventing the sensitivity of the interest rates from rising. We speculate that the accumulation of reserves plays the role of an anchor for monetary autonomy in emerging market economies facing a “fear of floating”.     

Rules,discretion, and international monetary and fiscal policy coordination

This paper considers the implications of international policy coordination when both monetary and fiscal policy choices are endogenous. We show that a movement from insular monetary commitment to international monetary policy coordination will, if fiscal policies are not coordinated, produce higher output and public expenditure levels at the expense of higher inflation rates. We also show that the concurrent coordination of monetary and fiscal policies raises output and inflation while lowering public expenditure relative to a regime of monetary coordination alone. We conclude that the arguments for concurrent monetary and fiscal policy coordination fail to have a clear-cut theoretical basis.     

Financial Development,Financial Structure,and the Growth Effect of Monetary Policy: International Evidence

This paper investigates how financial development and financial structure affect the growth effect of monetary policy using panel data from 49 countries over the period 1980–2014. We find robust evidence that financial development has a significantly negative impact on the growth effect of monetary policy. We also find that the growth effect of monetary policy tends to be more pronounced as the financial structure of a country becomes more market-based. These results not only add interesting new evidence to the recent literature on the growth effects of monetary policy, but also provide some important insights into the financial determinants of monetary policy effects on economic growth, which have largely been ignored in the previous literature.