propensity to consume farm family disposable income from separate sources farm family disposable income is generated from farm operations off farm sources and government payments if these three income components are fungible a dollar from one source is a perfect substitute for a dollar from another source then the propensities to consume each should be the same this study examines the farm family propensity to consume from separate income sources results indicate that the propensity to consume off farm income and government payments is higher than the propensity to consume farm income

compensation and rewards for environmental services cres and efficient design of contracts in developing countries behavioral insights from a natural field experiment the use of economic incentives for biodiversity mostly compensation and reward for environmental services including payment for es has been widely supported in the past decades and became the main innovative policy tools for biodiversity conservation worldwide these policy tools are often based on the insight that rational actors perfectly weigh the costs and benefits of adopting certain behaviors and well crafted economic incentives and disincentives will lead to socially desirable development scenarios this rationalist mode of thought has provided interesting insights and results but it also misestimates the context by which real individuals come to decisions and the multitude of factors influencing development sequences in this study our goal is to examine how these policies can take advantage of some unintended behavioral reactions that might in return impact either positively or negatively general policy performances we test the effect of income s origin low effort based money vs high effort based money on spending decisions necessity vs superior goods and subsequent pro social preferences future pro environmental behavior within madagascar rural areas using a natural field experiment our results show that money obtained under low effort leads to different consumption patterns than money obtained under high efforts superior goods are more salient in the case of low effort money in parallel money obtained under low effort leads to subsequent higher pro social behavior compensation and rewards policies for ecosystem services may mobilize knowledge on behavioral biases to improve their design and foster positive spillovers on their development goals

the contingent governance of teams analysis of institutional complementarity the first purpose of this paper is to design a model of governance structure called the contingent governance which can control the free riding problem in teams in the second best manner the second is to show by a new method of comparative static analysis that the effectiveness of the contingent governance may be enhanced by complementary institutional arrangements of the imperfect labor market and bank centered financial system the paper discusses the implications of such institutional complementarity for the dynamic change of the japanese main bank system and financial system design of transitional economies copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

licensing effect in consumer choice abstract most choices in the real world follow other choices or judgments the authors show that a prior choice which activates and boosts a positive self concept subsequently licenses the choice of a more self indulgent option the authors propose that licensing can operate by committing to a virtuous act in a preceding choice which reduces negative self attributions associated with the purchase of relative luxuries five studies demonstrate the proposed licensing effect of a prior commitment to a virtuous act on subsequent choice consistent with the authors theory the preference for an indulgent option diminishes if the licensing task is attributed to an external motivation the authors also report a mediation analysis in support of their theoretical explanation that the licensing effect operates by providing a temporary boost in the relevant self concept

what to target inflation or exchange rate author affiliation shu lin shulin75 gmail comhaichun ye haichunye gmail com acknowledgment the authors would like to thank kent kimbrough and two anonymous referees for valuable comments 1 introductionone of the most important recent innovations in the conduct of monetary policy is inflation targeting in which a monetary authority makes public an estimated inflation rate or range and attempts to steer the actual inflation toward the target using monetary tools since its emergence in the early 1990s inflation targeting has certainly been gaining popularity over the last two decades by the end of 2006 27 countries among which 17 are developing countries had explicitly adopted this new monetary policy regime the emergence of inflation targeting has attracted substantial attention from both researchers and policymakers numerous studies have empirically evaluated the effects of adopting an explicit inflation targeting regime on a country s economic performance especially on inflation and growth while studies focusing on advanced industrial countries so far have yielded mixed results the evidence in developing countries seems to be more robust 1 batini kuttner and laxton 2005 goncalves and salles 2008 and lin and ye 2009 all find that inflation targeting significantly lowers inflation in developing countries where the credibility of the central bank has not yet been well established thus the credibility gain of adopting an explicit inflation targeting regime is substantial in addition capistran and ramos francia 2010 show that inflation targeting significantly lowers the dispersion of inflation expectations in developing countries two recent survey articles walsh 2009 and ball 2010 also concluded that inflation targeting has larger beneficial effects in developing countries than those in advanced industrial countries despite the success of inflation targeting in developing countries the more traditional exchange rate targeting framework still remains the dominant monetary policy regime in developing countries it is so popular that an influential study by calvo and reinhart 2002 finds an epidemic case of fear of floating in the developing world 2 furthermore similar to inflation targeting an exchange rate targeting regime especially a credibly enforced one is also viewed as an effective means to achieve price stability in developing countries because it serves as a nominal anchor by allowing a developing central bank to borrow credibility from a foreign monetary authority in a strict exchange rate targeting framework the targeting country s inflation rate should be equal to that of the country usually a low inflation rich country to which its exchange rate is pegged does an inflation targeting framework outperform an exchange rate targeting regime in achieving price stability in developing countries if so does this benefit come at a cost of slower growth these two important and policy related questions have not yet been examined in the literature a common feature of previous studies is that they all compare an inflation targeting regime with a very broad alternative namely a non inflation targeting regime while ignoring the substantial heterogeneity in the monetary policy regimes adopted by non inflation targeting countries a disadvantage of comparing inflation targeting with such a broad alternative is that the results may not be of direct use for policy choices the objective of this study therefore is to make the first attempt in the literature to conduct a direct empirical comparison of the emerging inflation targeting framework with the popular exchange rate targeting regime in developing countries in particular we compare the effects of these two monetary policy regimes on two key outcome variables inflation and economic growth our study is built upon three recent empirical works on the effects of inflation targeting in developing countries including batini kuttner and laxton 2005 goncalves and salles 2008 and lin and ye 2009 but we focus on directly comparing inflation targeting with exchange rate targeting

monetary policy signaling and movements in the term structure of interest rates this paper examines how various monetary policy signals such as repo rate changes inflation reports speeches and minutes from monetary policy meetings affect the term structure of interest rates we find that unexpected movements in the short end of the yield curve are mainly driven by unexpected changes in the repo rate however published inflation reports and speeches also have some impact on short rates speeches are found to be a more important determinant for the longer end of the term structure our conclusion is that central bank communication is an essential part of the conduct of monetary policy

the effect of inflation targeting on the behavior of expected inflation evidence from an 11 country panel abstract inflation targets were introduced in the 1990s in australia canada new zealand sweden and the united kingdom change in the behavior of expected inflation in the five targeting countries is measured in a panel that includes six non targeting countries france germany italy the netherlands japan and the united states the level of expected inflation in targeting countries falls after the announcement of targets with controls for country effects year effects ongoing inflation reduction and the business cycle neither the variability of expected inflation nor the average absolute forecast error falls after the announcement of targets with controls for the level and variability of past inflation both targeting and non targeting countries experience unexpected disinflation

the effect of inflation targets on the level of expected inflation in five countries did inflation targets reduce the level of expected inflation in australia canada new zealand sweden and the united kingdom in this note predictions of forecasts by professional forecasters are constructed for five consecutive 12 month periods after the announcement of targets these predictions use a variety of information variables known to forecasters at the time they make their forecasts the results show that after the announcement of targets predicted forecasts are less than actual forecasts in australia canada new zealand and sweden this is evidence that targets reduced the level of expected inflation no evidence of such effects is found in the united kingdom

payments for pioneers revisiting the role of external rewards for sustainable innovation under heterogeneous motivations abstract acknowledging the diversity of preferences goals and motivations of individuals is key to promote the effectiveness of incentive based conservation interventions this paper analyses the heterogeneity of motivations to adopt silvopastoral practices a social ecological innovation for soil conservation and carbon emission reduction we use q methodology to identify smallholders views with regard to these practices in a community in the forest frontier in chiapas mexico the analysis uncovers three main perspectives self sufficient pioneers environmentally conscious followers and payment dependent conservatives we discuss these perspectives around three topics smallholders predisposition to adopt silvopastoral practices their views about needing external payments to sustain their livelihood and the diffusion of innovative sustainable practices we relate these perspectives with livelihood characteristics and with observed adoption levels under a pilot programme to promote silvopasture our findings suggest that incentives other than payments may be more appropriate for those more likely to adopt and that payments could encourage rent seeking strategies and not necessarily promote permanent behavioural change we suggest ways for designing more effective and adaptive environmental conservation programmes to foster adoption and continuation of social ecological innovations

international transmission of inflation among g 7 countries a data determined var analysis abstract we investigate the international transmission of inflation among g 7 countries using data determined vector autoregression analysis as advocated by swanson and granger swanson n granger c 1997 impulse response functions based on a causal approach to residual orthogonalization in vector autoregressions journal of the american statistical association 92 357 367 over the period 1973 2003 we find that unexpected changes in us inflation have large effects on inflation in other countries although they are not always the dominant international factor similarly shocks to some other countries also have a statistically and economically significant influence on us inflation moreover our evidence indicates that us inflation has become less vulnerable to foreign shocks since the early 1990s mainly because of the diminished influence from germany and france

why don t the poor save more evidence from health savings experiments using data from a field experiment in kenya we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health and reduce vulnerability to health shocks simply providing a safe place to keep money was sufficient to increase health savings by 66 percent adding an earmarking feature was only helpful when funds were put toward emergencies or for individuals that are frequently taxed by friends and relatives group based savings and credit schemes had very large effects

stabilizing expectations at the zero lower bound experimental evidence abstract our study demonstrates how agents expectations can interact dynamically with monetary and fiscal policy at the zero lower bound we study expectation formation near the zero lower bound using a learning to forecast laboratory experiment under alternative policy regimes in our experimental economy monetary policy targets inflation around a constant or state dependent target we find that subjects expectations significantly over react to stochastic aggregate demand shocks and historical information leading many economies to experience severe deflationary traps neither quantitatively nor qualitatively communicating the state dependent inflation targets reduce the duration or severity of economic crises introducing anticipated and persistent fiscal stimulus at the zero lower bound reduces the severity of the recessions when the recovery of fundamentals is sufficiently slow participants expectations become highly pessimistic and neither monetary nor fiscal policy are effective at stabilizing the economy

consumer response to tax rebates many households received income tax rebates in 2001 of 300 or 600 these rebates represented advance payments of the tax cut from the new 10 percent tax bracket based on a survey of a representative sample of households this paper finds that only 22 percent of households receiving the rebate would spent it instead they would either save it or use it to pay off debt this very low rate of spending represents a striking break with past behavior which would have suggested a much higher rate of spending the low spending rate implies that the tax rebate provided a very limited stimulus to aggregate demand this abstract was borrowed from another version of this item

on the international effects of inflation targeting abstract this study empirically examines the international effects of inflation targeting employing a variety of propensity score matching methods we find strong evidence that inflation targeting has significantly different impacts on exchange rate volatility and international reserves in different country groups it significantly increases real and nominal exchange rate stability and international reserves in developing countries but lowers them in industrial countries on average inflation targeting increases lowers reserves roughly by the size of 1 3 1 8 months of imports values in developing industrial countries the treatment effects on targeting countries current accounts are found to be insignificant in both country groups

inflation and inflation uncertainty in turkey this article investigates the relationship between inflation and inflation uncertainty and the impact of monetary policy on this relationship using monthly turkish inflation data over january 1984 to october 2005 the results from various types of garch m models indicate that higher inflation rates lead to greater inflation uncertainty on the other hand the effect of inflation uncertainty on inflation is found to be negative due to stabilization motives dominating the opportunistic incentives of monetary authorities we find strong evidence to support the view that inflation oriented monetary policy has power to reduce the inflation persistence and eliminate uncertainty

does inflation targeting affect the dispersion of inflation expectations in this paper we examine the effect of having an inflation targeting framework on the dispersion of inflation forecasts from professional forecasters we use a panel data set of 25 countries including 14 inflation targeters with 16 years of monthly information we find that the dispersion of long run inflation expectations is smaller in targeting regimes after controlling for country specific effects time specific effects the level and the variance of inflation disinflation periods and global inflation on average the full effect is not observed until the third year after implementation of inflation targeting when we differentiate between developed and developing countries the dispersion of inflation expectations after inflation targeting is smaller and statistically significant only in developing countries

valuation on the frontier calibrating actual and hypothetical statements of value the lack of robust evidence showing that hypothetical behavior directly maps into real actions remains a major concern for proponents of stated preference nonmarket valuation techniques this article explores a new statistical approach to link actual and hypothetical statements using willingness topay field data on individual bids from sealed bid auctions for a 350 baseball card our results are quite promising estimating a stochastic frontier regression model that makes use of data that any contingent valuation survey would obtain we derive a bid function that is not statistically different from the bid function obtained from subjects in an actual auction if other data can be calibrated similarly this method holds significant promise since an appropriate calibration scheme ex ante or ex post can be invaluable to the policy maker that desires more accurate estimates of use and nonuse values for nonmarket goods and services benefit cost analysis remains the dominant paradigm used throughout the public sector yet a recurring issue in properly estimating the total benefits of nonmarket goods and services is whether hypothetical statements map into real behavior some recently published studies provide evidence that suggests important differences exist between responses from real and hypothetical valuation questions 1 this observation triggered a search for an ex ante and ex post procedure to correct the systematic bias between intentions and actions in valuation exercises recent technology using ex ante procedures has produced some strong evidence that hypothetical bias can be overcome by using a cheap talk scheme see e g cummings and taylor list ex post calibration has also shown some signs of promise as work due to blackburn harrison

when and how much to talk credibility and flexibility in monetary policy with private information abstract this paper analyzes the role of noisy or imprecise announcements in mitigating the basic credibility problem in monetary policy based on a model where the monetary authority s private information gives rise to an unavoidable trade off between flexibility and credibility the analysis finds that noisy announcements can serve as a meaningful form of communication to make that trade off more favorable however such talk is not cheap the analysis predicts that those central banks who can speak more precisely are those who are less likely to speak at all

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

on the information content of asymmetric fomc policy statements evidence from a taylor rule perspective i introduction since 1983 the federal open market committee fomc has included in its policy directives a statement indicating conditional expectations about the future although the specific language used to communicate expectations has evolved over the years the bias statement has persistently been interpreted as an indicator of the likely direction of future changes in the committee s federal funds rate target and has therefore been carefully monitored by fed watchers and other financial market participants as the fomc has enhanced its efforts to communicate its policy intentions to the public in recent years the contemporary version of the bias statement has been subject to considerable discussion and scrutiny from 2000 through 2002 the fomc s postmeeting press releases included a statement referring to the balance of risks in the foreseeable future paralleling the federal reserve s dual objectives of price stability and maximum sustainable economic growth the statements took the form of stating that the concerns of fomc members about prospective economic developments are tilted toward either inflation pressures or economic weakness in 2003 the committee expanded this balance of risks language further to identify separate risk assessments for both inflation and real economic activity when it was adopted the language of the balance of risks statement was intended to be more general than the previous statements of policy bias to avoid giving the impression that the statements directly signaled impending changes in the funds rate target nevertheless as was the case with the earlier language the balance of risks statement has tended to be interpreted as indicating likely future policy moves in this article i examine the question of whether such an interpretation might be warranted as an empirical matter in particular i examine the information content of asymmetric policy statements for predicting future fomc policy actions using monthly dummy variables to indicate the prevailing direction of policy asymmetry over a sample period of 1984 2002 the time series approach facilitates the use of a monthly data set for conditioning the information content of the bias statement on macroeconomic variables thought to be of importance to policy makers in particular i use inflation and output data to estimate a baseline taylor rule specification for policy and test whether the bias statement provides any additional information for forecasting changes in the fomc s federal funds rate target the evidence presented here shows that the statements of policy asymmetry do indeed convey information that is useful for forecasting changes in the funds rate target the information content in the bias statement has been a statistically significant factor for predicting changes in the funds rate target over the sample period even after controlling for responses to policy variables in the taylor rule equation in light of this finding i estimate an alternative specification in which the variables representing asymmetry are interacted with the parameters of the estimated taylor rule equation from this perspective statements of policy bias are associated with a greater or lesser degree of responsiveness to inflation and output data during the sample period considered here variation in the committee s responses to inflation data has evidently been the predominant factor for explaining the predictive power of asymmetric policy statements this is particularly true for the first half of the sample period in which the fomc was actively pursuing a policy of disinflation ii the asymmetric policy statement and its interpretation a brief history from 1983 until 1997 statements of an asymmetric bias were included in the fomc policy directive as a note that greater reserve restraint or lesser reserve restraint either would or might be acceptable during the intermeeting period depending on emerging economic circumstances

how do exchange rates co move a study on the currencies of five inflation targeting countries abstract this paper does three things first it explores the type of asymmetry in exchange rate correlation for five inflation targeting countries we show their currencies co move more closely with the currencies of some influential foreign countries during joint appreciations than joint depreciations against a world currency second it establishes empirically the linkage between interest rate differentials and exchange rate correlation we find evidence that both widening and narrowing interest rate differentials will reduce the correlation third it proposes a new version of the asymmetric dynamic conditional correlation model the model proves to be capable of providing great insight into the two issues investigated

is the central bank s publication of economic forecasts influential abstract we examine how a central bank s economic forecasts affect forecasts by professional forecasters and vice versa results show that while central bank forecasts are not significantly influenced by those of professional forecasters the latter are however notably affected by the former

the role of central bank transparency for guiding private sector forecasts central banks have become remarkably more transparent over the last few decades in this paper we study the effects of this evolution focusing on whether enhanced central bank transparency lowers dispersion among professional forecasters of key economic variables we use a large set of proxies for central bank transparency in 12 advanced economies we find evidence for a sizeable effect e g by announcing a quantified inflation objective or by publishing inflation and output forecasts however there are decreasing marginal effects to increases in transparency and the disagreement among the expectations of the general public is not affected this suggests that there are possible limits to transparency

inflation targeting and relative price variability what difference does inflation targeting make author affiliation chi young choi cychoi uta eduyoung se kim acknowledgment the authors are grateful to coeditor kent kimbrough and two anonymous referees for constructive comments that helped to improve this article the authors also wish to thank steve cecchetti kang liu shin ichi nishiyama margie tieslau taka tsuruga and the seminar participants at the academia sinica national chung cheng university national sun yat sen university national taiwan university texas tech university and the university of texas at arlington for helpful comments and vikas kakkar for providing cpi data for hong kong any remaining errors are the authors 1 introductionvariability in relative prices is known to be a major channel through which inflation can induce welfare costs by impeding an efficient allocation of resources in the economy consequently substantial effort has been devoted in the literature to examining the link between relative price variability rpv and aggregate inflation although much of the existing theoretical and empirical literature points to a positive monotonic relationship newer contributions suggest that the relationship between inflation and rpv is more complicated particularly in terms of its sensitivity to the inflation regime 1the primary purpose of this study is to investigate whether the connection between inflation and rpv is influenced in an important way by the monetary policy framework chosen by a central bank specifically this article focuses on exploring whether the adoption of an inflation targeting it framework exerts any significant impact on rpv as measured by the standard deviations of sectoral inflation rates relative to the aggregate rate since it was first implemented in new zealand more than two decades ago the popularity of it has spread with some twenty five countries worldwide implementing the framework to date freedman and laxton 2009 the literature is now replete with studies pointing to reductions in both the level and the volatility of inflation in countries that have adopted it e g mishkin and schmidt hebbel 2007 2 while studies of the impact of it on aggregate inflation performance are plentiful little attention has been paid to the impact of it on rpv the question of whether and indeed how it affects rpv is an important one for several reasons first exploring the potential connection between it and rpv is a worthwhile exercise given the popularity of it as a monetary framework and the centrality of rpv to the current generation of macromodels the importance of rpv is recognized in standard new keynesian dynamic stochastic general equilibrium dsge models where the variance of relative prices is viewed as a useful summary statistic as noted by amano ambler and rebei 2007 for example in dsge models the optimal rate of target inflation and the optimal variability of inflation relative to output depend on the quantitative effects of price dispersion on macroeconomic equilibrium second answering the question helps us identify the driving force behind the change in rpv distinguishing between it adoption itself and its subsequent impact on inflation if the relationship is monotonically positive as is often believed in the literature one should expect that it adoption would bring about a decline in rpv in the same way as it has led to a decline in inflation if the relationship is more complex however the effect of it adoption on reducing rpv may hinge on the change in inflation regimes after it adoption third our answer to the question also sheds additional light on the empirical evidence for the relative effectiveness of it across different stages of development while there is strong evidence that developing countries benefit more from it than industrial countries in combating inflation and its volatility e g petursson 2004 lin and ye 2009 we are aware of no empirical research that has assessed this issue with respect to rpv

for better or for worse empirical evidence of moral licensing in a behavioral energy conservation campaign isolated environmental campaigns focusing on defined target behaviors are rolled out to millions of households every year yet it is still unclear whether these programs trigger cross domain adoption of additional environment friendly behaviors positive spillover or reduced engagement elsewhere a thorough evaluation of the real net performance of these programs is lacking this paper investigates whether positive or perverse side effects dominate by exemplifying the impact of a water conservation campaign on electricity consumption the study draws on daily water 10 780 data points and weekly electricity 1386 data points consumption data of 154 apartments in a controlled field experiment at a multifamily residence the results show that residents who received weekly feedback on their water consumption lowered their water use 6 0 on average but at the same time increased their electricity consumption by 5 6 compared with control subjects income effects can be excluded while follow up research is needed on the precise mechanism of the psychological process at work the findings are consistent with the concept of moral licensing which can more than offset the benefits of focused energy efficiency campaigns at least in the short term we advocate the adoption of a more comprehensive view in environmental program design evaluation in order to quantify and mitigate these unintended effects

investigating inflation persistence across monetary regimes under inflation targeting estimates of the indexation parameter in hybrid new keynesian phillips curves are either equal to zero or very low in the united kingdom canada sweden and new zealand analogous results hold for the euro area under the european monetary union and for switzerland under the new monetary regime under stable regimes with clearly defined nominal anchors inflation appears to be purely forward looking these results question the notion that the intrinsic inflation persistence found in post wwii u s data is structural in the sense of lucas carnegie rochester conference series on public policy 1 1976 19 46 and suggest that hardwiring inflation persistence in macroeconomic models is potentially misleading

incentives for cooperation the effects of institutional controls on common pool resource extraction in cambodia cooperation among humans is highly dependent on social and institutional conditions with individual incentives playing a key role in determining the level of cooperation achieved understanding the conditions under which cooperation can emerge has important implications for the design of resource management and wildlife conservation interventions incentive based conservation approaches are being widely implemented yet very few studies test the role of incentives in promoting cooperation in relevant developing country contexts using a common pool resource game in four villages in cambodia we investigated how the level of within group cooperation varies under different institutional arrangements including opportunities for social approval external enforcement of rules and individual and collective incentive payments our results demonstrate the significance of self organisation the ability to devise monitor and enforce a set of rules among resource users treatments which promoted self organisation had the greatest effect in reducing individual extraction achieved the greatest efficiencies and had the strongest interaction with group decision making in reducing extraction the effects of these treatments carried over to reduce extraction in subsequent treatments irrespective of their institutional arrangements these results suggest that policies designed to incentivise certain behaviour in local stakeholder groups may be more successful if they create opportunities for local decision making

on the long term effectiveness of exchange rate communication and interventions abstract exchange rate communication has come to play an increasingly important role as a policy tool for monetary authorities over the past decade the paper assesses the strategies and the long term effectiveness of communication as well as actual interventions the empirical results for the g3 economies indicate that communication has not only exhibited a significant contemporaneous effect on exchange rates but also has moved forward exchange rates up to a horizon of 6 months in the desired direction moreover communication is found to reduce exchange rate volatility and uncertainty whereas actual interventions tend to raise it overall this underlines a key difference between these two policy tools and suggests that communication tends to be a fairly effective policy tool over the medium term

have increases in federal reserve transparency improved private sector interest rate forecasts yes this paper shows that since the late 1980s u s financial markets and private sector forecasters have become 1 better able to forecast the federal funds rate at horizons out to several months 2 less surprised by federal reserve announcements 3 more certain of their interest rate forecasts ex ante as measured by interest rate options and 4 less diverse in the cross sectional variety of their interest rate forecasts we also present evidence that strongly suggests increases in federal reserve transparency played a role for example private sector forecasts of gdp and inflation have not experienced similar improvements over the same period indicating that the improvement in interest rate forecasts has been special

monetary policy rules based on real time data this paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules using taylor s rule as an example i demonstrate that real time policy recommendations differ considerably from those obtained with ex post revised data further estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the federal reserve in real time these results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules

monetary transmission mechanism in central and eastern europe surveying the surveyable this paper surveys recent advances in empirical studies of the monetary transmission mechanism mtm with special attention to central and eastern europe cee our results indicate that the strength of the exchange rate pass through substantially declined over time mainly due to a fall in inflation rates and to some extent due to the so called composition effect the asset price channel is weak and is likely to remain weak because of shallow stock and private bond markets and because of low stock and bond holdings of domestic household house prices may become an exception with higher levels mortgage lending and with high owner occupancy ratios while the credit channel could be a powerful channel of monetary transmission as new funds raised on capital markets are close to zero in cee it is actually not as both commercial banks and non financial corporations can escape domestic monetary conditions by borrowing from their foreign mother companies the moderately good news is however that those banks and firms are influenced by monetary policy in the euro area because their parent institutions are themselves subjected to the credit channel in the euro area

inflation uncertainty and interest rates is the fisher relation universal this paper tests the validity of the fisher hypothesis which establishes a positive relation between interest rates and expected inflation for the g7 countries and 45 developing economies for this purpose we estimate a version of the garch specification of the hypothesis for all countries included in the sample we also test the augmented fisher relation by including the inflation uncertainty in the equation the simple fisher relation holds in all g7 countries but in only 23 developing countries there is a positive and statistically significant relationship between interest rates and inflation uncertainty for six of the g7 and 18 of the developing countries and this relationship is negative for seven developing countries

what caused the early millennium slowdown evidence based on vector autoregressions this paper uses a simple var for the usa and euro area to analyse the underlying shocks of the early millennium slowdown i e supply demand monetary policy and oil price shocks the results of two identification strategies are compared one is based on traditional zero restrictions and as an alternative an identification scheme based on more recent sign restrictions is proposed the main conclusion is that the recent slowdown is caused by a combination of several shocks negative aggregate supply and aggregate spending shocks the increase of oil prices in 1999 and restrictive monetary policy in 2000 these shocks are more pronounced in the usa than the euro area the results are somewhat different depending on the identification strategy it is illustrated that traditional zero restrictions can have an influence on the estimated impact of certain shocks copyright 2005 john wiley sons ltd

is the mpc s voting record informative about future uk monetary policy it is shown that the voting record of the monetary policy committee of the bank of england helps predict future policy rate changes this result is robust to the inclusion of market participants expectations as measured by the slope of the term structure of money market rates and interest rate futures moreover expectations seem to adjust to the information contained in the voting record which suggests that publishing the minutes of mpc meetings increases the transparency of monetary policy

inflation targeting an indirect approach to assess the direct impact it is quite difficult to assess the benefits of inflation targeting it since its immediate effect will be on inflation expectations an unobserved variable due to lack of comprehensive data on inflation expectations most studies so far concentrated on the impact of it either on observable variables like output unemployment and inflation or compared post it surveys of itcountries with nonit countries in our study we focus on a yet unanswered question i e how the expectations change with the adoption of it we suggest that heterogeneous inflation expectations lead to long memory in actual inflation and it if successful should decrease this persistence by concentrating the public s expectations toward the announced target empirical results confirm our hypothesis with a reduction in inflation memory after the adoption of it in almost all eight developed countries in our sample

central bank communication and monetary policy a survey of theory and evidence over the last two decades communication has become an increasingly important aspect of monetary policy these real world developments have spawned a huge new scholarly literature on central bank communication mostly empirical and almost all of it written in this decade we survey this ever growing literature the evidence suggests that communication can be an important and powerful part of the central bank s toolkit since it has the ability to move financial markets to enhance the predictability of monetary policy decisions and potentially to help achieve central banks macroeconomic objectives however the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy

communication by central bank committee members different strategies same effectiveness the paper assesses the communication strategies of the federal reserve the bank of england and the european central bank and their effectiveness we find that the effectiveness of communication is not independent from the decision making process the paper shows that the federal reserve has been pursuing a highly individualistic communication strategy amid a collegial approach to decision making while the bank of england is using a collegial communication strategy and highly individualistic decision making the european central bank ecb has chosen a collegial approach both in its communication and in its decision making assessing these strategies we find that predictability of policy decisions and the responsiveness of financial markets to communication are equally good for the federal reserve and the ecb this suggests that there may not be a single best approach to designing a central bank communication strategy

talking heads the effects of ecb statements on the euro dollar exchange rate abstract this paper studies the reaction of the conditional mean and volatility of the euro dollar exchange rate to statements by european central bank and national central bank officials we focus on comments on monetary policy and the external value of the euro we find that the bundesbank has dominated the news coverage we conclude that ecb statements have mainly influenced conditional volatility in some cases there are effects of statements on the conditional mean of the euro dollar exchange rate efforts to talk up the euro have generally not been successful there is also evidence of asymmetric reactions to news

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

socio productive models in france an empirical dynamic overview 1992 2004 the authors assess the evolution of french workplaces over the periods 1992 1993 1998 1999 and 2004 2005 within the framework of socio productive organizational models using french employment re

regional influences on fomc voting patterns this paper looks at the monetary policy decisions of the u s federal reserve and asks whether observed voting patterns have been driven entirely by national concerns or whether regional factors have also played a role we find that fed policymakers take into account developments in regional unemployment when casting votes on monetary policy these results are robust to different specifications of the voting equation this research is relevant for the fed and it may also be relevant for europe s fledgling central bank in frankfurt in light of regional differences within the euro area

canadian inflation targeting this paper examines the intellectual environment in canada that led to the adoption of inflation targets starting in 1991 reviews some of the canadian contributions to the vast literature on inflation targeting and presents evidence in support of the view that the implementation of inflation targeting in canada has been particularly successful when compared with the experiences of other inflation targeting countries and the us

direct conservation payments in the brazilian amazon scope and equity implications abstract this article looks into the scope and equity implications of applying payments for environmental services pes as a redd implementation mechanism in the brazilian amazon we establish a set of economic and institutional preconditions for pes to become a feasible and cost effective conservation mechanism we proceed with a macro scale spatial analysis and overlay of opportunity costs deforestation patterns carbon services and land tenure in order to assess where these conditions hold we then screen how the benefits of potential pes schemes might be distributed across different socioeconomic groups of service providers in different land tenure categories our economic quantitative analysis though sensitive to documented assumptions suggests that under current carbon prices the economic preconditions are in place to pay for avoided deforestation in over half of threatened forests over the next decade unfortunately the same optimism does not apply to institutional preconditions land grabbing insecure tenure overlapping claims and lacking information on private tenure constitute real medium term impediments to pes if payments were to accrue to current landholders regardless of current tenure insecurities large landowners who account for about 80 of all deforestation would reap the highest benefits though per capita benefits other tenure categories are also high schemes that closely align payments with opportunity costs are preferable for cost effectiveness and not necessarily more inequitable in outcomes essentially pes systems cannot substitute command and control measures the former depend on the latter for basic governance systems to secure effective rights of exclusion which land stewards essentially need in order to become reliable service providers

between the labor process and the state the changing face of factory regimes under advanced capitalism the paper develops the concept of politics of production through a double critique first of recent literature on the organization of work for ignoring the political and ideological regimes in production and second of recent theories of the state for failing to root its interventions in the requirements of capitalist development the paper distinguishes three types of production politics despotic hegemonic and hegemonic despotic the focus is on national variations of hegemonic regimes the empirical basis of the analysis is a comparison of two workshops one in manchester england and the other in chicago with similar work organizations and situated in similar market contexts state supportfor those not employed and state regulation of factory regimes explain the distinctive production politics not only in britain and the united states but also in japan and sweden the different national configurations of state intervention are themselves framed by the combined and uneven development of capitalism on a world scale finally consideration is given to the character of the contemporary period in which there emerges a new form of production politics hegemonic despotism founded on the mobility of capital

the campfire programme in zimbabwe payments for wildlife services abstract payments for environmental services pes have been distinguished from the more common integrated conservation and development projects on the grounds that pes are direct more cost effective less complex institutionally and therefore more likely to produce the desired results both kinds of schemes aim to achieve similar conservation outcomes however and generally function in analogous social political and economic environments given the relative novelty of pes what lessons can be learnt and applied from earlier initiatives in this paper we describe the evolution over the first 12 years 1989 2001 of zimbabwe s communal areas management programme for indigenous resources campfire a community based natural resource management programme in which rural district councils on behalf of communities on communal land are granted the authority to market access to wildlife in their district to safari operators these in turn sell hunting and photographic safaris to mostly foreign sport hunters and eco tourists the district councils pay the communities a dividend according to an agreed formula in practice there have been some underpayments and frequent delays during 1989 2001 campfire generated over us 20 million of transfers to the participating communities 89 of which came from sport hunting the scale of benefits varied greatly across districts wards and households twelve of the 37 districts with authority to market wildlife produced 97 of all campfire revenues reflecting the variability in wildlife resources and local institutional arrangements the programme has been widely emulated in southern and eastern africa we suggest five main lessons for emerging pes schemes community level commercial transactions can seldom be pursued in isolation non differentiated payments weaken incentives start up costs can be high and may need to be underwritten competitive bidding can allow service providers to hold on to rents and schemes must be flexible and adaptive

productivity growth transparency and monetary policy abstract this study examines whether central bank transparency about views of future productivity growth contributes to stabilizing macroeconomic fluctuations in a standard new keynesian model the central bank and private agents make their subjective estimates on the persistence of productivity growth in this situation if private agents believe that the central bank s projections include forecast errors on future productivity growth these beliefs can destabilize private agents own expectations because the central bank s forecast errors may lead to policy mistakes in the future consequently central bank transparency does not necessarily stabilize the variations of the output gap and inflation rate the central bank should respond strongly to the inflation rate if the impact of transparency is uncertain

does inflation targeting anchor long run inflation expectations evidence from the u s uk and sweden we investigate the extent to which inflation expectations have been more firmly anchored in the united kingdom a country with an explicit inflation target than in the united states a country with no such target using the difference between far ahead forward rates on nominal and inflation indexed bonds as a measure of compensation for expected inflation and inflation risk at long horizons we show that far ahead forward inflation compensation in the u s exhibits substantial volatility especially at low frequencies and displays a highly significant degree of sensitivity to economic news similar patterns are evident in the uk prior to 1997 when the bank of england was not independent but have been strikingly absent since the bank of england gained independence in 1997 our findings are further supported by comparisons of dispersion in longer run inflation expectations of professional forecasters and by evidence from sweden another inflation targeting country with a relatively long history of inflation indexed bonds our results support the view that an explicit and credible inflation target helps to anchor the private sector s views regarding the distribution of long run inflation outcomes jel e31 e52 e58

inflation targeting is it to blame for banking system instability abstract in light of the financial crisis the practice of inflation targeting it has been blamed for authorities failure to respond to the increase in financial systemic risk and to the development of asset bubbles however utilizing a rich database containing nearly 5500 commercial banks from 70 countries among which 22 are it for the period 1998 2012 this paper argues that on average inflation targeting national banking systems i are more stable ii possess sounder systemically important banks and iii are less distressed than or at least as distressed as other banks during periods of global liquidity shortages our results are robust to a series of tests such as when we compare countries with the same legal origins or control for the delegation of bank supervision responsibility to bodies other than the central bank overall we conclude that it cannot be blamed for contributing to financial fragility

can payments for environmental services help reduce poverty an exploration of the issues and the evidence to date from latin america summary this paper examines the main ways in which payments for environmental services pes might affect poverty pes may reduce poverty mainly by making payments to poor natural resource managers in upper watersheds the extent of the impact depends on how many pes participants are in fact poor on the poors ability to participate and on the amounts paid although pes programs are not designed for poverty reduction there can be important synergies when program design is well thought out and local conditions are favorable possible adverse effects can occur where property rights are insecure or if pes programs encourage less labor intensive practices 2004 elsevier ltd all rights reserved

the relation between narrative and money market indicators of monetary policy this paper studies the relation between narrative based indicators of monetary policy and widely used money market indicators of monetary policy three principal findings emerge first changes in monetary policy as measured by the narrative based policy indices are associated with persistent changes in the levels of m2 and the monetary base in contrast changes in the narrative policy indicators lead to transitory changes in short term interest rates nonborrowed reserves and the spread between the six month commercial paper rate and the three month treasury bill rate third these findings are generally robust across different narrative based policy indices

inflation targeting and output inflation tradeoffs abstract this article assesses whether the adoption of inflation targeting it helps reduce the output inflation tradeoff we address the self selection problem of it policy adoption by the endogenous switching regressions and show that the output inflation tradeoffs are significantly lower in it countries not only over the whole sample but also across the developed and developing country subsamples in addition we also find strong evidence supporting the positive selection hypothesis i e countries have higher probability of adopting it are exactly those who benefit more larger reduction of output inflation tradeoff from the implementation of it additional results reveal that economies with higher trade openness lower financial openness and less flexible exchange rate regime are associated with larger tradeoff between output and inflation but the effects are only statistically significant in the it regime

inflation targeting genuine effects or publication selection bias abstract this paper uses a meta regression analysis mra to evaluate the impact of publication selection bias as for the macroeconomic effects of inflation targeting it a popular approach to implementing monetary policy documented in the existing literature using 8 059 point estimates from 113 studies we show that a significant part of the documented positive effects of it on inflation and to some extent output growth volatility is in fact due to publication selection bias in particular results pointing to lower inflation volatility and higher real gdp growth tend to be favored by researchers as well as those pointing to statistically significant macroeconomic effects however even after controlling for these two types of biases we find it to be correlated with lower inflation and higher real gdp growth differently the evidence on the it inflation volatility relationship is found to be less clear

on the credibility of inflation targeting regimes in latin america inflation targeting has been adopted in a set of emerging economies including eight countries in latin america the success of this regime may depend critically on the credibility of the target and the expectation that the authorities will take appropriate actions if the target is breached this paper exploits a database of inflation expectations and attempts to measure whether for a set of inflation targeters in latin america expectations are well anchored a tighter anchoring of expectations is interpreted as a gain in credibility also considered are the effects on the credibility of the regime if the inflation target is breached the results indicate that while inflation expectations have not been fully anchored over the whole sample period credibility has risen but at the same time the cost of breaching the target has grown

testing the rationality of price forecasts new evidence from panel data this paper tests the rationality of individual price forecasts in a panel of professional forecasters here unlike in most previous studies rationality is not rejected the results here differ because 1 using individual forecasts avoids aggregation bias 2 comparison of forecasts to initial data avoids bias due to data revision 3 the professional forecasters have economic incentives to state their expectations accurately and 4 a new covariance matrix estimator consistent when forecast errors are correlated across individuals is used copyright 1990 by american economic association

international co movements of real and financial economic variables this study presents a first attempt at investigating whether the international co movements of real economic activity conform to the same international co movements of financial activity this study tests the international co movements of real economic activity on the one hand and financial variables such as stock returns interest rates inflation rates and risk premiums on the other hand we employ a dynamic correlation model on data from oecd countries for the period 1980 2010 our findings demonstrate that international stock markets co react in accordance with the underlying international economic forces we also document three other results first the correlation among countries with respect to real economic activity is statistically positive but the level of this correlation is lower than that of financial variables second there is a significant increase over time in the international correlation level with respect to the financial variables finally the creation of the euro monetary union

how have inflation targeting central banks responded to supply shocks abstract this paper examines how inflation targeting central banks have responded to supply shocks based on the sign restriction var approach it is found that inflation targeting central banks have become accommodative to adverse supply shocks following the adoption of inflation targeting

does money matter abstract the desire to attain personal wealth has long been regarded as the foremost motive for entrepreneurship other goals and values however may also contribute to entrepreneurial motivation thus the extent to which money matters relative to other motives is an empirical question in this study we examine the role of wealth as the motive for the decision to found new ventures three focal questions guide our research 1 does money matter more relative to other decision dimensions in deciding to start a new high technology venture 2 does money matter more to entrepreneurs compared to non entrepreneurs and 3 does money matter in absolute terms that is does a decision model that focuses solely on the motive of wealth attainment parsimoniously predict entrepreneurs start up decisions we conducted in depth interviews with 51 entrepreneurs and a control group of 28 senior managers who decided not to start ventures non entrepreneurs in the high technology industry in british columbia to address our research questions the motives we examined are wealth attainment and an aggregate of other dimensions identified by entrepreneurs and managers we considered three components of values participants ratings of the importance of various decision dimensions their rating of the salience of these dimensions and their satisfaction with prior levels of attainment on those decision dimensions we assessed beliefs as participants perceived probability of attaining their desired level of a particular decision dimension in each of three alternatives the position held at the time the venture decision was made the venture itself and the next best career alternative at that time the data were analyzed to compare entrepreneurs values and beliefs regarding wealth with an aggregate of other decision dimensions our relative hypotheses and with those of non entrepreneurs our comparative hypotheses our findings do not support the common perception that money is the only or even the most important motive for entrepreneurs decisions to start new ventures wealth attainment was significantly less important to entrepreneurs relative to an aggregate of 10 other decision dimensions and entrepreneurs did not rate wealth as any more important than did non entrepreneurs non entrepreneurs rated wealth as no more important than other motives wealth attainment was also significantly less salient to entrepreneurs decisions to venture than were other motives non entrepreneurs reported that wealth was significantly more salient to their decision against founding a venture than other dimensions in fact non entrepreneurs rated wealth attainment as significantly more salient to their decision against founding than entrepreneurs rated it for their decision to proceed with starting a high technology business a significant number of entrepreneurs started businesses even when they believed that doing so offered them a lower probability of obtaining their most desired level of wealth than did one of their other alternatives satisfaction ratings and stated beliefs also dispute classical predictions just prior to making the decision to venture the entrepreneurs in our study were as satisfied with wealth as they were with other decision dimensions the non entrepreneurs were actually more satisfied with wealth attainment than with other dimensions a comparison of the groups revealed no difference in satisfaction with wealth attainment levels entrepreneurs did believe that their chances of attaining their desired level of wealth were much greater through founding a new high technology venture than through their other alternatives this difference in beliefs however was not significantly greater than their optimistic beliefs about chances of attaining desired levels of other dimensions it was significantly higher compared to the non entrepreneurs belief difference measures for wealth in fact the entrepreneurs stated beliefs regarding the chances of attaining their desired levels of all dimensions were higher than those of the non entrepreneurs suggesting that entrepreneurs were simply more optimistic at the time of their decision than non entrepreneurs salience findings suggest that these optimistic beliefs about wealth did not motivate the founding decision alone we can distinguish those people who successfully started ventures by their regard for wealth as a less salient factor and their beliefs in higher chances of a venture producing monetary and other returns other motives such as innovation vision independence and challenge were more important and much more salient to this sample of entrepreneurs our findings have implications for practice teaching and research venture capitalists who partially base their assessment of entrepreneurs on the extent to which they are motivated to make a great deal of money may benefit from reconsideration of this criterion we have evidence of one group of high technology entrepreneurs who achieved success without placing much decision weight on attainment of personal wealth nascent entrepreneurs and those who teach entrepreneurship can use this empirical finding to argue two main points 1 not all entrepreneurs found a business for personal wealth reasons and 2 one need not be motivated by personal wealth attainment to be a successful entrepreneur similarly theoretical models that assume money is the primary motive for entrepreneurial activity require re examination future research in entrepreneurship should focus less on wealth attainment and more on other motives for the venturing decision a multiple attribute decision model may be able to more fully explain venturing decisions

is inflation targeting a good remedy to control inflation abstract since the 1990s inflation targeting it has been adopted by several central banks as a strategy for monetary policy it is expected that the adoption of this monetary regime can reduce inflation and inflation volatility this article is concerned with these issues and makes use of the propensity score matching methodology on a sample of 180 countries for the period from 1990 to 2007 for analysis the sample is split into two sets of countries advanced and developing the findings suggest that the adoption of it is an ideal monetary regime for developing economies and in addition to reducing inflation volatility can drive inflation down to internationally acceptable levels regarding advanced economies the adoption of it does not appear to represent an advantageous strategy in brief the empirical results indicate that the adoption of it is useful for countries that must enhance their credibility for the management of monetary policy

oral interventions versus actual interventions in fx markets an event study approach the article assesses whether exchange rate communication or oral intervention has been an effective policy tool for monetary authorities to influence exchange rates it employs an event study methodology that identifies intervention clusters or events for the euro dollar and the dollar yen exchange rates the article finds that both oral intervention events and actual intervention events have been highly successful over the short to medium run the article shows that the success of intervention events is related to market conditions and to the coordination among policy makers it also finds that the success of communication and actual interventions is largely unrelated to monetary policy thus suggesting that interventions primarily function through a coordination channel

policy announcements and welfare in the presence of idiosyncratic risk the public revelation of information about uncertain aggregate outcomes such as policy choices can be detrimental to social welfare by announcing informative signals on non insurable aggregate risk the policy maker distorts agents insurance incentives and increases the riskiness of the optimal allocation that is feasible in self enforceable arrangements as an application we consider a monetary authority that may reveal changes in the inflation target and document that the negative effect of distorted insurance incentives can very well dominate conventional effects in favor for the release of better information

does inflation targeting really make a difference evaluating the treatment effect of inflation targeting in seven industrial countries abstract we evaluate the treatment effect of inflation targeting in seven industrial countries that adopted this policy in the 1990s to address the self selection problem of policy adoption we make use of a variety of propensity score matching methods recently developed in the treatment effect literature our results show that inflation targeting has no significant effects on either inflation or inflation variability in these seven countries further evidence from long term nominal interest rates and income velocity of money also supports the window dressing view of inflation targeting

does inflation targeting make a difference in developing countries we evaluate the treatment effect of inflation targeting in thirteen developing countries that have adopted this policy by the end of 2004 using a variety of propensity score matching methods we show that on average inflation targeting has large and significant effects on lowering both inflation and inflation variability in these thirteen countries however the effectiveness of inflation targeting on lowering inflation is found to be quite heterogeneous the performance of a given inflation targeting regime can be affected by country characteristics such as government s fiscal position central bank s desire to limit the movements of exchange rate its willingness to meet the preconditions of policy adoption and the time length since the policy adoption

motivation crowding in environmental protection evidence from an artefactual field experiment abstract this paper examines how motivation crowding and social image affect environmental conservation decisions an artefactual field experiment conducted in bolivia is used to reproduce the trade off between individual and social benefits in natural resource use and test the effect of non monetary and non regulatory incentives on pro social behavior for environmental conservation the results show the presence of a social norm prescribing positive contribution towards environmental protection and that external incentives have heterogeneous effects on pro social behavior depending on how they influence reputation and self image the experimental results differ from those of analogous experiments conducted in the laboratory and are instead consistent with those from field experiments on common pool resource management this fact suggests caution in generalizing conclusions reached in the laboratory to different settings and populations

does government ideology matter in monetary policy a panel data analysis for oecd countries this paper examines whether government ideology has influenced monetary policy in oecd countries we use quarterly data in the 1980 1 2005 4 period and exclude emu countries our taylor rule specification focuses on the interactions of a new time variant index of central bank independence with government ideology the results show that leftist governments have somewhat lower short term nominal interest rates than rightwing governments when central bank independence is low in contrast short term nominal interest rates are higher under leftist governments when central bank independence is high the effect is more pronounced when exchange rates are flexible our findings are compatible with the view that leftist governments in an attempt to deflect blame of their traditional constituencies have pushed market oriented policies by delegating monetary policy to conservative central bankers

re evaluating the effectiveness of inflation targeting abstract this paper estimates the treatment effect of inflation targeting on macroeconomic variables using a semiparametric single index method by taking into account the model misspecification of parametric propensity scores our study uses a broader set of preconditions for inflation targeting and macroeconomic outcome variables than the existing literature the results suggest no significant difference in the inflation level and inflation volatility between targeters and non targeters after the adoption of inflation targeting we find that inflation targeting reduces sacrifice ratio and interest rate volatility in the developed economies and that it enhances fiscal discipline in both the industrial and developing countries

does foreign exchange intervention matter the portfolio effect until recently there was an unusual degree of consensus among economists that intervention by central banks in the foreign exchange market did not offer an effective or lasting instrument for affecting the exchange rate at least not independently of monetary policy this consensus was largely shared among policymakers and participants in the financial markets as well the 1982 g 7 economic summit at versailles commissioned a study of intervention known as the jurgenson report which found that the effects were small and transitory at most we think that the time is ripe for new statistical testing of the question many policymakers and foreign exchange traders believe that the intervention operations that have taken place since the plaza agreement of september 1985 have had an effect especially when operations are coordinated moreover the theoretical case against the effectiveness of intervention is not as clear as a reading of the economics literature might suggest the academic literature is predicated on the distinction between intervention operations that are sterilized and those that are allowed to affect the money supply we study the intervention operations that actually took place between 1982 and 1988 regardless of whether they were sterilized however we do begin in section i with a review of the issues involved 2 there are two possible channels through which intervention whether sterilized or not can influence the foreign exchange rate the portfolio and the expectations channels intervention can even if sterilized influence exchange rates through the portfolio channel provided foreign and domestic bonds are considered imperfect substitutes in investors portfolios intervention operations that for example increase the current relative supply of mark to dollar assets which private investors are obliged to accept into their portfolios will force a decrease in the relative price of mark assets 3 intervention can also influence exchange rates regardless of whether foreign and domestic bonds are imperfect substitutes through the expectations channel the public information that central banks are intervening in support of a currency or are planning to intervene in the future may under certain conditions cause speculators to expect an increase in the price of that currency in the future speculators react to this information by buying the currency today bringing about the change in the exchange rate today in sections ii and iii we describe the econometric problems that arise in the standard portfolio balance estimation equation we derive an alternative portfolio balance dominguez kennedy school of government harvard university 79 j f kennedy street cambridge ma 02138 frankel department of economics university of california 787 evans hall berkeley ca 94720 we thank three anonymous referees for valuable comments and suggestions julia marsh and julia lowell for research assistance and franz scholl at the bundesbank jean pierre roth at the swiss national bank and officials at the u s treasury and the board of governors of the federal reserve system for making the daily intervention data available 1many of the econometric results finding little or no effect were reported in kenneth s rogoff 1984 and dale w henderson and stephanie sampson 1983 2for authoritative statements see henderson 1984 or maurice obstfeld 1990 3the exchange rate reaction to an increase in the relative supply of outside foreign assets may be reduced if there is an increase in their expected rate of return that induces a corresponding increase in demand

monetary policy implementation and the federal funds rate this paper investigates how the implementation of monetary policy affects the dynamics and the volatility of the federal funds rate since the early 1980s the most important changes in the fed s conduct of monetary policy refer to the role of the federal funds rate target and the reserve requirement system we show that the improved communication and transparency regarding the federal funds rate target has significantly increased the fed s influence on the federal funds rate since 1994 by contrast the declining role of required reserves in the u s has contributed to higher federal funds rate volatility our results suggest that the planned introduction of remunerated reserves will further enhance the controllability of the federal funds rate

directional analysis of consumers forecasts of inflation in a small open economy evidence from south korea abstractwe evaluate the directional accuracy of consumers forecasts of inflation in predicting the movement of the actual cpi in a small open economy in order to do so we use a method developed by pesaran and timmermann 2009 based on south korean data by illustrating an application of the new market timing test we show that consumers expectations of inflation are not a useful predictor of the cpi in south korea our findings suggest that the directional accuracy of consumers 1 year ahead forecasts of inflation is not affected by the inflation targeting of the bank of korea our findings also suggest that consumers 1 year ahead forecasts of inflation are scattered away from the bank of korea s inflation target

does a bias in fomc policy directives help predict intermeeting policy changes since 1984 the fomc has issued directives indicating a bias toward easing or tightening this paper investigates the information content of these asymmetric directives for the likelihood of inter meeting changes in policy during the greenspan chairmanship if policy is measured by the change in the average daily federal funds rate after a directive is issued the results indicate that a bias predicts a significant change in the average funds rate if policy is measured qualitatively by whether the target for the federal funds rate changed a bias significantly affects the probability that the target will be changed

what is wrong with taylor rules using judgment in monetary policy through targeting rules it is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule e ither ageneral targeting rule explicit objectives for monetary policy or a specific targeting rule a criterion for the forecasts of the target variables to be fulfilled essentially the equality of the marginal rates of transformation and substitution between the target variables targeting rules allow the use of judgment and extramodel information are more robust and easier to verify than optimal instrument rules and they can nevertheless bring the economy close to the socially optimal equilibrium

testing the transparency benefits of inflation targeting evidence from private sector forecasts abstract using inflation forecast data for 11 it adoption countries it adoption is found to promote convergence in forecast errors suggesting that it enhances transparency this result which is subjected to several robustness checks and found to be robust supports morris and shin s 2002 contention that better public information is most beneficial for forecasters with bad private information however it does not support their hypothesis that better public information could make private forecasts less accurate

open mouth operations abstract this paper explains how central bank statements rather than open market operations can be used to implement monetary policy in the extreme policy instruments can be held constant and yet interest rates will evolve along the path desired by the central bank we show how the recent implementation of monetary policy in new zealand works in this way using announcement data from new zealand we find that open mouth operations lead to large changes in interest rates across all maturities and these changes cannot be explained by open market operations implications are drawn for monetary policy in other jurisdictions

announcements and credibility under inflation targeting abstract we inspect how inflation target announcements are instrumental in building central bank credibility and shaping inflation expectations investigating the role of announcements by using a time varying credibility measure we find that both the accuracy and the frequency of inflation announcements have a positive impact on how much attention the public pays to target announcements

the first year of the eurosystem inflation targeting or not this paper is a brief evaluation of the eurosystem s monetary policy regime after its first year in particular of the extent to which it is similar to inflation targeting as practiced by an increasing number of central banks i examine the eurosystem s goals framework for monetary policy decisions and communication with outsiders criteria for evaluation are whether the goals are unambiguous and appropriate whether the decision framework is efficient in collecting and processing information and reaching decisions that are appropriate relative to the goals and whether the communication is effective in motivating decisions simplifying external evaluation and thereby improving transparency and accountability i also consider whether the actual instrument setting has been appropriate given the informaion available at the times of decision

remittances household expenditure and investment in guatemala the author uses a large household data set from guatemala to analyze how the receipt of internal remittances from guatemala and international remittances from the united states affects the marginal spending behavior of households on various consumption and investment goods contrary to other studies the author finds that households receiving remittances actually spend less at the margin on consumption food and consumer goods and durables than do households receiving no remittances instead of spending on consumption households receiving remittances tend to spend more on investment goods like education health and housing the analysis shows that a large amount of remittance money goes into education at the margin households receiving internal and international remittances spend 45 and 58 percent more respectively on education than do households with no remittances these increased expenditures on education represent investment in human capital like other studies the author finds that remittance receiving households spend more at the margin on housing these increased expenditures on housing represent a type of investment for the migrant as well as a means for boosting local economic development by creating new income and employment opportunities for skilled and unskilled workers