Payments systems and monetary policy

A dynamic spatial model is constructed where there is a role for money and for centralized payments arrangements, and where there are aggregate fluctuations driven by fluctuations in aggregate productivity. With decentralized monetary exchange and no centralized payments arrangements, there is price level indeterminacy, and the equilibrium allocation is inefficient. A private clearinghouse arrangement improves efficiency but produces a real indeterminacy. The pricing of daylight overdrafts is irrelevant for the equilibrium allocation. Efficiency is achieved with a zero nominal interest rate on overnight central bank lending, or through private overnight interbank lending.     

Another Example of a Credit System that Co-Exists with Money

We study an economy in which exchange occurs pairwise, there is no commitment, and anonymous agents choose between random monetary trade or deterministic credit trade. To accomplish the latter, agents can exploit a costly technology that allows limited record-keeping, and enforcement. An equilibrium with money and credit is shown to exist if the cost of using the technology is sufficiently small. Anonymity, record-keeping, and enforcement limitations also permit some incidence of default, in equilibrium.     

Monetary Policy and Asset Prices: A Mechanism Design Approach

We investigate the effects of monetary policy on asset prices in economies where assets are traded periodically in bilateral meetings. The trading mechanism is designed to maximize social welfare taking as given the frictions in the environment and monetary policy. We show that asset price “bubbles” emerge in a constrained‐efficient monetary equilibrium only if liquidity is abundant and the first‐best allocation is implementable. In contrast, if liquidity is scarce, assets are priced at their fundamental value in any constrained‐efficient monetary equilibrium, in which case an increase in inflation has no effect on asset prices, but it reduces output and welfare.     

管理浮动汇率制下的动态干预边界——基于我国1994～2005年数据的测算

本文基于从1994年1季度到2005年2季度的数据,运用一个多方程结构模型,对2005年3季度后的人民币均衡汇率和干预边界进行了测算。结果显示,2005年7月以后人民币仍存在一定的升值动力,期间货币当局的干预倾向与以前相比并没有发生实质性变化,过于频繁的干预并不利于汇率的长远稳定。从而指出管理浮动汇率制下的汇市干预必须以综合考虑基本经济因素和干预倾向而准确测算现实均衡汇率为基础,动态地把握干预边界,以使市场汇率不过分偏离均衡汇率,应逐渐降低干预频率,增大汇率的基本经济因素弹性,根据市场汇率波动情况灵活地进行双向干预操作。     

Exchange rate regimes, banking and the non-tradable sector

This paper presents a small-open-economy, two-good version of the Diamond and Dybvig model with cash constraints to analyze the implications on banking of different exchange rate regimes and monetary policies. I show that fixed exchange rates with a Central Bank providing liquidity in local currency imply Pareto efficiency, with conditions for a run equilibrium stronger than in the literature. In a flexible exchange rate regime, multiple equilibria may not be eliminated. In particular, for very a expansive monetary policy there exists an equilibrium where a fraction of patient consumers purchases dollars in the interim period, which constitutes a partial currency run. A dollarized banking system without international short-run credit may also implement the efficient allocation under certain conditions.     

The dynamic relationship between the federal funds rate and the Treasury bill rate: An empirical investigation

This article examines the dynamic relationship between two key US money market interest rates––the federal funds rate (FF) and the 3-month Treasury bill rate. Using daily data over the period from 1974 to 1999, we find a long-run relationship between these two rates that is remarkably stable across monetary policy regimes of interest rate and monetary aggregate targeting. Employing a nonlinear asymmetric vector equilibrium correction model, which is novel in this context, we find that most of the adjustment toward the long-run equilibrium occurs through the FF. In turn, there is strong evidence for the existence of significant asymmetries and nonlinearities in interest rate dynamics that have implications for the conventional view of interest rate behavior.     

The effect of monetary variability on welfare in a simple macroeconomic model

In many rational expectations macro-models monetary variability reduces welfare. This note provides a counterexample based on an extension of the ‘discretionary equilibrium’ of Barro and Gordon (1983) to an economy with endogenous wage indexing. Greater monetary variability leads to greater wage indexing. This lowers the authority's perceived return to discretionary monetary policy and thereby lowers the equilibrium rate of inflation. The implication is that, over a certain interval, monetary variability may increase welfare.     

Monetary policy games,financial instability and incomplete information

In the aftermath of the recent global financial crisis, monetary authorities, while pursuing traditional objectives, such as the control of inflation, are also eager to promote financial stability. In this paper, we model the strategic interaction of the central bank and the financial sector and explore a simple monetary policy game with perceived substantial risks to financial stability, where the central bank can be of two types, one pursuing strict inflation-targeting and the other concerned with affecting the expectations formed by the financial sector participants; however, the financial sector is unsure which, due to incomplete information. The conclusion is that for small shocks to inflation there is a pooling equilibrium, whereas for larger shocks there is separation. In the latter case, the central bank that has an explicit financial stability concern is willing to exercise more muted control to inflation in order to reinforce the safety of the financial sector.     

Real exchange rate persistence and monetary policy rules

The objective of this paper is to analyze the effects of alternative monetary rules on real exchange rate persistence. Using a two-country stochastic dynamic general equilibrium with nominal price stickiness and local currency pricing, we will show how the persistence of purchasing power parity deviations can be related to a monetary theory of these deviations. When monetary policy lean against the wind, there is no relationship of proportionality between the time during which prices remain sticky and the persistence of the response of the real exchange rate: in this case high nominal price rigidity is not sufficient, per se, in generating any persistence following a monetary shock. Moreover, we emphasize the role of interest rates smoothing policies and relative price stickiness within countries in understanding the relationship between the real exchange rate and monetary shocks. With reasonable parameters values, a wide range of monetary policy rules can generate real exchange rate autocorrelations around the ones observed in the data.     

Optimal fiduciary monetary systems

In a fiduciary monetary system, there is a social agreement to quote prices and denominate financial instruments in terms of a specific paper liability of the government. What are the best terms for this paper instrument? I investigate a system where the terms involve not only paying market interest rate on the monetary instrument, as proposed by many economists earlier, but also indexing the returns to the price level. The result is a homeostatic monetary system with a highly stable price level in the face of shifts in money demand and other disturbing influences. The paper examines the performance of the new fiduciary standard in equilibrium and disequilibrium models.     

含有货币变量的宏观经济模型简析

现代宏观经济分析中,一般均衡框架是必不可少的重要因素。但是传统的一般均衡模型通常缺乏实际经济运行过程中一种不可或缺的因素———货币。所以,在传统的均衡或者非均衡模型中引入货币变量,并且判断和分析货币变量及货币政策的作用机制,就成为了货币经济学面对的一个挑战。通过对Tobin货币模型、货币内在效用模型和现金在先模型的分析表明,货币在经济中应该起到的确切作用和所承担的功能,尚未完全被清楚地认识,这为货币政策传导机制和作用机制过程中存在的不确定性留有大量理论探索的余地。     

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。     

Social norms and money

In an economy where there is no double coincidence of wants and without public record-keeping of past transactions, money is usually seen as the only mechanism that can support exchange. In this paper we show that, as long as the population is finite and agents are sufficiently patient, a social norm establishing gift-exchange can substitute for money. However, for a given discount factor, population growth eventually leads to the breakdown of the social norm. Additionally, increases in the degree of specialization in the economy can also undermine the social norm. By contrast, monetary equilibrium exists independent of the population size. We conclude that money is essential as a medium of exchange when the population is large.     

金融开放条件下利率改革和汇率改革的协同效应分析

在金融开放条件下,汇率、利率与套利资本流动存在着内在联系,我国在进行汇率制度改革、货币政策改革与金融市场改革时,应注意三者协调发展和整体平衡,寻求利率政策与汇率政策之间的最佳政策组合,发挥利率改革和汇率改革的协同效应。为发挥金融改革协同效应,必须注重货币政策工具改革之间协调与配合,增强利率汇率的联动机制,积极推进与利率市场化相协调的汇率市场化形成机制,从而推动货币内外均衡进程。     

Realized and Optimal Monetary Policy Rules in an Estimated Markov‐Switching DSGE Model of the United Kingdom

This paper investigates underlying changes in the UK economy over the past 35 years using a small open economy dynamic stochastic general equilibrium model. Using Bayesian analysis, we find UK monetary policy, nominal price rigidity and exogenous shocks, are all subject to regime shifts. A model incorporating these changes is used to estimate the realized monetary policy and derive the optimal monetary policy rule for the United Kingdom. This allows us to assess the effectiveness of the realized policy in terms of stabilizing economic fluctuations, and, in turn, provide an indication of whether there is room for the monetary authorities to further improve their policies.     

“Unfunded liabilities” and uncertain fiscal financing

A rational expectations framework is developed to study the consequences of alternative means to resolve the “unfunded liabilities” problem—unsustainable exponential growth in federal Social Security, Medicare, and Medicaid spending with no plan to finance it. Resolution requires specifying a probability distribution for how and when monetary and fiscal policies will change as the economy evolves through the 21st century. Beliefs based on that distribution determine the existence of and the nature of equilibrium. We consider policies that in expectation combine reaching a fiscal limit, some distorting taxation, modest inflation, and some reneging on the government's promised transfers. In the equilibrium, inflation-targeting monetary policy cannot successfully anchor expected inflation. Expectational effects are always present, but need not have a large impacts on inflation and interest rates in the short and medium runs.     

Banking in the theory of finance

Banks are financial intermediaries that issue deposits and use the proceeds to purchase securities. This paper argues that when banking is competitive, these portfolio management activities in principle fall under the Modigliani-Miller theorem on the irrelevance of pure financing decisions. It follows that there is no need to control the deposit creation or security purchasing activities of banks to obtain a stable general equilibrium with respect to prices and real activity. In practice, however, banks are forcibly involved in the process by which a pure nominal commodity or unit of account is made to play the role of numeraire in a monetary system. The paper examines the nature of such a nominal commodity and how, through reserve requirements, banks get involved in making it a real economic good.     

Rules,discretion and reputation in a model of monetary policy

In a discretionary regime the monetary authority can print more money and create more inflation than people expect. But, although these inflation surprises can have some benefits, they cannot arise systematically in equilibrium when people understand the policymaker's incentives and form their expectations accordingly. Because the policymaker has the power to create inflation shocks ex post, the equilibrium growth rates of money and prices turn out to be higher than otherwise. Therefore, enforced commitments (rules) for monetary behavior can improve matters. Given the repeated interaction between the policymaker and the private agents, it is possible that reputational forces can substitute for formal rules. Here, we develop an example of a reputational equilibrium where the outcomes turn out to be weighted averages of those from discretion and those from the ideal rule. In particular, the rates of inflation and monetary growth look more like those under discretion when the discount rate is high.     

一般均衡下的金融市场流动性黑洞研究

本文在一般均衡框架下建立了考虑投资者多样化程度,投机交易者比例以及宏观货币政策稳定性三因素的两期交易模型,得到了金融市场受到流动性冲击后可能出现的三种均衡状态。当流动性冲击加大时,市场在一定条件下无法找到合理的出清价格而出现大幅下跌从而引发流动性黑洞事件。研究表明:投资者越是多样化、投机交易者比例越小、宏观货币政策带来的流动性冲击越小,市场出现极端流动性黑洞的可能性就越小。     

Do the ECB and the fed really need to cooperate? Optimal monetary policy in a two-country world

A two-country model with monopolistic competition and price stickiness is employed to investigate the implications for macroeconomic stability and the welfare properties of three international policy arrangements: (a) cooperative, (b) non-cooperative and (c) monetary union. I characterize the conditions under which there is scope for policy cooperation and quantify the costs of non-cooperation and monetary union. The non-cooperative equilibrium may be suboptimal because of terms of trade spillover effects, while monetary union may be suboptimal because of the sluggishness of relative prices. Both the costs of policy competition and of a monetary union are sensitive to the values assumed for the intertemporal and international demand elasticity and the degree of openness of the economy. Independently of the calibration scenario adopted, the ECB has little to gain by coordinating with the Fed.