The interplay between liquidity regulation,monetary policy implementation and financial stability

I outline a simple framework for thinking through how the Basel III liquidity regulations – in particular, the Liquidity Coverage Ratio (LCR) – will impact short-term interest rates and the process of monetary policy implementation. This framework suggests that a regulatory premium may arise in some market interest rates, creating a new wedge in the monetary transmission mechanism. I discuss ways in which a central bank could react to this new wedge, highlighting what may be a fundamental tension between implementing monetary policy effectively and using liquidity regulation to promote financial stability.     

The extensive margin and monetary policy

The creation of new firms, referred to as the extensive margin, is a significant but overlooked dimension of monetary policy. A monetary VAR documents that monetary policy has significant effects on firm creation. An analytically tractable model combining sticky prices and firm entry shows that entry alters the transmission of monetary policy innovations, acting much like a type of investment in more standard models. Monetary policy rules that offset the uncertainty of productivity shocks can raise the mean level of entry and thereby welfare, suggesting a new motivation for stabilization policy.     

Optimal sustainable monetary policy

In recent monetary policy literature, optimal commitment policy and its variant from a timeless perspective have been studied with emphasis on welfare gains from policy commitment. These policies, however, involve a time-consistency problem called a stabilization bias in forward-looking models. We analyze Chari and Kehoe's [1990. Sustainable plans. Journal of Political Economy 98, 783-802] sustainable equilibrium and examine optimal sustainable policy, i.e. a policymaker's strategy in the best sustainable equilibrium. This paper shows that such a policy becomes consistent with the optimal commitment policy in sufficiently later periods. It also shows that whether the optimal sustainable policy can attain the Ramsey equilibrium outcome depends on the magnitude of shocks hitting the model economy. Moreover, the paper finds a sustainable policy that attains higher social welfare than discretionary policy does.     

Unconditionally optimal monetary policy

We develop a simple and intuitive approach for analytically deriving unconditionally optimal (UO) policies, a topic of enduring interest in optimal monetary policy analysis. The approach can be employed in both general linear-quadratic problems and in the underlying non-linear environments. A detailed example is provided using a canonical New Keynesian framework.     

The impact of monetary policy on asset prices

Estimating the response of asset prices to changes in monetary policy is complicated by the endogeneity of policy decisions and the fact that both interest rates and asset prices react to numerous other variables. This paper develops a new estimator that is based on the heteroskedasticity that exists in high-frequency data. We show that the response of asset prices to changes in monetary policy can be identified based on the increase in the variance of policy shocks that occurs on days of FOMC meetings and of the Chairman's semi-annual monetary policy testimony to Congress. The identification approach employed requires a much weaker set of assumptions than needed under the “event-study” approach that is typically used in this context. The results indicate that an increase in short-term interest rates results in a decline in stock prices and in an upward shift in the yield curve that becomes smaller at longer maturities. The findings also suggest that the event-study estimates contain biases that make the estimated effects on stock prices appear too small and those on Treasury yields too large.     

对当前货币政策的一些思考

在当前世界生产分工呈现新格局,我国贸易巨额顺差格局没有发生重大变化,以及我国汇率政策将继续坚持渐变战略的情况下,货币调控问题越来越突出,这将是目前及以后一个较长时期内宏观调控诸问题中的主要难点.在今后一个可预期的时期内,通常意义上的紧缩政策应该是央行货币政策的主要倾向,但"此紧缩"不完全等同于"彼紧缩".过去采取紧缩手段的惟一目的,是针对过热的实体经济,而目前采取的紧缩手段,尽管也有针对实体经济偏热进行预防的目的,但更多则是针对实体经济增长合理对应的货币需求之外,外贸和外汇储备双过高增长引发的过多供应货币进行对冲.     

The discrete and differential impact of monetary policy

This study exploits a unique feature of the Australian monetary policy environment to determine whether economic recovery can be stimulated via central bank communications. This study finds that unexpected monetary policy announcements and communications have a significant and comparable impact on the value and volatility of the Australian foreign exchange market, suggesting that they can be used interchangeably to stimulate economic recovery. However, further analysis reveals that the state of the economy influences this impact. Specifically, during poor economic states, monetary policy actions speak louder than words, an adage that in this context provides actionable information for central bank regulators.     

One monetary policy and 18 central bankers: The European monetary policy as a game of strategic delegation

This paper employs a multi-country delegation monetary policy model and argues that a decision-making mechanism based on the median voter theorem where intensity of preferences cannot play a role does not capture important aspects of policy setting in the European Monetary Union. Replacing the median voter mechanism with a less restrictive “weighted mean mechanism”, it is shown that strategic delegation can lead to a surprising degree of central bank inflation aversion. This finding supports the “The Twin Sister Hypothesis” and the perception of the European Central Bank implementing the policy of the Bundesbank rather than a more inflationary monetary policy.     

RBA monetary policy communication: The response of Australian interest rate futures to changes in RBA monetary policy

This paper examines the Australian interest rate futures market reaction to changes in Reserve Bank of Australia (RBA) monetary policy. Having determined market expectations from 30-day Interbank futures, the study finds evidence that interest rate futures react strongly to target rate announcements across the maturity spectrum, with a stronger reaction evident in short maturity futures. Further, there is evidence of an asymmetric news effect whereby volatility reacts more strongly to bad news. Disaggregation of the market reaction into target- and path-surprise factors demonstrates that the change in market expectations of future target rates plays a significant role in explaining changes in yield, particularly for bond futures. There is strong evidence that monetary policy statements drive the path-factor, while the December 2007 modification in policy communication has improved the ability of the RBA to influence market expectations.     

The expectations theory works for monetary policy shocks

In practice, the expectations theory of the term structure is employed extensively in monetary policy analysis despite its empirical failure. This paper performs a conditional test of the theory that is directly relevant to monetary theory and policy. It finds that the theory holds quite well conditional on identified monetary policy shocks, but fails conditional on aggregate supply shocks that prompt an immediate jump in prices. It also finds that policy responses to movements in the term structure play an important role in uncovering evidence for the theory as predicted by McCallum [1994. Monetary policy and the term structure of interest rates. NBER Working Paper Series, no. 4938].     

货币政策加力从紧的理由

在国人眼里,地震带来的是无法弥补的损失和创伤;在央行眼里,地震带来的是什么？这是一个有关“是什么”的实证问题,撇开个人的感情色彩和价值判断来看,对货币政策应该是一个怎样结论？     

货币错配与货币政策

本文将总体货币错配分为两种类型即债权型货币错配和债务型货币错配,并分析了它们对一国经济与金融稳定的不同影响。对新兴市场国家以及日本的实证分析表明,严重的货币错配影响货币政策的有效性。居高不下的外汇储备意味着我国的货币错配形势已相当严峻,由此形成的货币政策困境要求货币政策重心转移,即以内部目标取代外部目标。     

当前美联储货币政策工具简介

2007年8月次贷危机爆发以来,美联储又陆续推出拍卖式融资便利（TAF）、主经纪商融券便利（TSLF）、主经纪商融资便利（PDCF）等货币政策工具向市场注入流动性。该文通过对联储货币政策操作层面较为细致的分析,详细介绍了美联储所推出的创新型货币政策工具,廓清相关事件的内在联系,并对政策背后的真实含义进行探究。     

Futures markets and monetary policy

It has recently been argued that when differentially informed agents trade with one another monetary policy can influence the distribution of output by altering the information content of prices. This paper introduces a futures market into the Barro (1980) model and shows that under certain conditions prices may aggregate information in a manner such that differentially informed agents hold identical beliefs concerning aggregate market conditions. In such cases, monetary policy will be unable to influence the distribution of output. These results then serve as a backdrop for a more general discussion of the relationship between asset prices and the role of monetary policy.     

Labor contracts and monetary policy

Fischer and others have shown that the very existence of long-term contracts can imply a stabilization role for monetary policy in models that incorporate the natural rate hypothesis and rational expectation formation. The present paper examines some of the factors that determine the length of labor contracts and how they are affected by monetary policy. It is argued that a successful stabilization policy might be expected to increase the length of contracts. The net effect of the imposition of such a policy would therefore be to dampen the amplitude of business cycles, but to make them more inertia ridden.