estimation of a taiwan monetary reaction function with time varying parameters this paper employs a nonlinear kalman filter to examine the time varying responses of taiwan s monetary policy in the presence of a limited dependent variable the kalman filtered parameters reveal that the responses are not constant but change over time furthermore a counter cyclical reaction function is identified and a stronger than usual discretionary policy during the recessions is found

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

investment and interest rate policy abstract the paper s theorems reverse two standard results of new keynesian economics simply by appending endogenous investment to a benchmark imperfect competition sticky price model our results are a a passive interest rate rule where the monetary authority responds to inflation by lowering the real interest rate implies local equilibrium uniqueness whereas an active rule does not generate a locally unique equilibrium b a temporary exogenous increase in the nominal interest rate causes a temporary increase in output and investment extensions of the benchmark model including generalized preferences and alternative interest rate rules are also examined journal of economic literature classification numbers e12 e31 e52

sticky prices and volatile output abstract we examine the effect of introducing a specific type of price stickiness into a stochastic growth model subject to a cash in advance constraint as in previous studies we find the introduction of price rigidities provides a substantial source of monetary non neutrality which contributes significantly to output volatility we show that the introduction of this form of sticky prices improves the model s performance at explaining inflation but worsens it for output the most dramatic failure of the model is the extremely high frequency fluctuations in output that it generates sticky prices not only fail to produce persistent business cycle fluctuations but they generate extreme volatility at very high frequencies

dynamic forecasts of qualitative variables a qual var model of u s recessions this article presents a new qual var model for incorporating information from qualitative and or discrete variables in vector autoregressions with a qual var it is possible to create dynamic forecasts of the qualitative variable using standard var projections previous forecasting methods for qualitative variables in contrast produce only static forecasts i apply the qual var to forecasting the 2001 business recession out of sample and to analyzing the romer and romer narrative measure of monetary policy contractions as an endogenous variable in a var out of sample the model predicts the timing of the 2001 recession quite well relative to the recession probabilities put forth at the time by professional forecasters qual vars which include information about the qualitative variable can also enhance the quality of density forecasts of the other variables in the system

in defense of base drift the federal reserve has been criticized for allowing the base from which it calculates its target growth paths for the monetary aggregatesto drift from year to year in response to past deviations from target drift in the base implies that target misses permanently affect the levels of the monetary aggregates using a simple theoretical model this paper shows that the optimal degree of base drift consistent withprice stability depends on the importance of permanent versus transitory income and velocity disturbances neither zero base drift nor complete base drift are likely to be compatible with price stability copyright 1986 by american economic association

product market competition and the industry price cost markup fluctuations abstract we examine the role played by imperfect competition in the response of markups to energy price and monetary changes we find i for concentrated industries markups increase with monetary expansion and decrease when energy prices increase the elasticity with respect to energy prices is greater than monetary changes ii for low concentration industries markups are virtually unaffected by monetary changes and the energy price elasticities are statistically insignificant iii markups are procyclical over the industry specific cycle and iv increased import competition lowers markups only in the concentrated industries the energy price increases decreases during the 1970s 1980s may have been a key factor contributing to the narrowing widening of the markup gap between high and low concentration industries we provide evidence that procyclical markups in concentrated industries are not being driven by differences in the degree of labor hoarding between low and high concentration industries

money new keynesian macroeconomics and the business cycle abstract we show in this paper that the typical modern business cycle cannot be reduced to the real business cycles archetype a monopolistic competition model with price adjustment costs affected by technological and monetary shocks better mimics the economic fluctuations in two countries with very different cyclical properties namely france and the united states in our model monetary shocks are necessary to reproduce the standard deviation of output the money output correlation the labour productivity worked hours relative standard deviation the labour productivity worked hours correlation and the mark up output correlation with two independent shocks one real more specifically defined than the solow residual and one nominal the model gives an answer to some empirical puzzles which were left unexplained by traditional rbc models

determinacy and identification with taylor rules the new keynesian taylor rule theory of inflation determination relies on explosive dynamics by raising interest rates in response to inflation the fed induces ever larger inflation unless inflation jumps to one particular value on each date however economics does not rule out explosive inflation so inflation remains indeterminate attempts to fix this problem assume that the government will choose to blow up the economy if alternative equilibria emerge by following policies we usually consider impossible the taylor rule is not identified without unrealistic assumptions thus taylor rule regressions do not show that the fed moved from passive to active policy in 1980

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

the equilibrium fed funds rate and the indicator properties of term structure spreads i introduction interest rate spreads figure prominently in the economics literature as monetary policy indicators for instance while some writers have focused on the predictive power of the spread between the six month commercial paper rate and the six month treasury bill rate others have emphasized spreads between short and long term interest rates 1 this paper follows the latter tradition my analysis is motivated by the work of bernanke and blinder 1992 who compare the difference between the federal funds rate and the ten year government bond rate with other interest rate spreads and find it to be a particularly useful predictor of future economic activity the rationale for using term structure spreads as monetary policy indicators is relatively straightforward 2 when assessing the stance of monetary policy it is not just the level of the federal funds rate that matters but how it relates to some implicit notion of equilibrium interest rates this insight is not new and can be found in the seminal work of wicksell 1898 xxv who wrote that it is not a high or low rate of interest in the absolute sense which must be regarded as influencing demand the causative factor is the current rate on loans as compared with what i shall be calling the natural rate of interest the direct empirical implementation of the wicksellian insight is however obviously hampered by the fact that the natural rate of interest is not an observable variable as suggested by laurent 1988 and bernanke and blinder 1992 the slope of the term structure is often used as a proxy for the spread between a short term interest rate and its unobservable equilibrium level thus the yield curve steepens as short term interest rates are perceived to be below their equilibrium levels i follow a more direct approach to measuring the stance of monetary policy instead of using the slope of the term structure as a proxy for the gap between observed and equilibrium federal funds rates i introduce a model based method to constructing a measure of the level of the equilibrium funds rate as described below this equilibrium rate is calculated for the real sectors of the economy conditional on the observed rate of inflation thus the equilibrium rate is constructed to be independent of the inflation objectives of monetary policy and the implied difference between actual and equilibrium rates the funds rate spread constitutes my monetary policy indicator this paper provides an overview of the proposed methodology and compares the funds rate spread with traditional indicators of the monetary policy stance ii a model based measure of the spread i rely on the estimated structure of a macroeconometric model to measure the equilibrium federal funds rate the theoretical framework is the mit penn ssrc mps model which is housed at the federal reserve board this is a large scale quarterly model of the u s economy it consists of more than 100 behavioral equations about 200 identities and over 100 exogenous variables in its theoretical foundations the long run properties of the model are akin to a neoclassical growth model whereas the dynamic structure is essentially keynesian 3 the approach used in this paper is a departure from the traditional literature in at least two dimensions first i use an explicit theoretic framework to compute the equilibrium measure as opposed to the empirically based approach of using long term interest rates second by focusing on the equilibrium level of the federal funds rate i have a more direct way to gauge the stance of monetary policy the equilibria analyzed here correspond to intermediate run dynamics a time frame that seems most relevant for the conduct of monetary policy conceptually the equilibrium notion i explore is a simple one for a given position of the mps model s is block the equilibrium federal funds rate is defined as the one consistent with unemployment at its natural rate after all lags in the model have fully worked through

nominal price rigidity money supply endogeneity and business cycles abstract this paper investigates the ability of nominal price rigidity to explain the co movement of inflation with the cyclical component of output observed in the post war u s data a dynamic general equilibrium model is constructed with the introduction of monopolistic competition and nominal price rigidity in a standard real business cycle model allowing for an endogenous money supply rule it is then demonstrated that sticky price models can explain the observed associations between movements in inflation and output much better than flexible price models this result depends little on whether money supply is assumed to be endogenous or not

the objectives and priorities of monetary policy under different federal reserve chairmen this paper utilizes a monetary policy reaction function that relates policy intentions to forecasts of policy objectives estimates of this reaction function over the post accord period suggest that the burns period was unique while the martin and volcker periods were extremely similar the burns period was structurally distinct from both the martin and volcker periods further model specifications that allow for an independent influence on monetary policy from different presidential administrations also imply that there are significant differences in monetary policy under different fed chairmen copyright 1990 by ohio state university press

the role of exchange rate in inflation targeting the case of turkey the role of the exchange rates in emerging market economies that have adopted inflation targeting it is a critical and contentious issue in the relevant literature this article investigates whet

investment interest rate policy and equilibrium stability abstract carlstrom and fuerst 2005 investment and interest rate policy a discrete time analysis journal of economic theory 123 4 20 show that in the presence of investment activity and price stickiness indeterminacy of equilibrium is induced by forward looking monetary policy that sets the interest rate in response only to future inflation in a stochastic version of their model we find that this indeterminacy problem is due to a cost channel of monetary policy whereby inflation expectations become self fulfilling and the problem can be overcome once the forward looking policy responds also to current output or contains sufficiently strong interest rate smoothing since this prevents the self fulfilling expectations we also show that when e stability is adopted as the selection criterion from multiple equilibria even the forward looking policy generates a locally unique non explosive e stable fundamental rational expectations equilibrium as long as the policy response to expected future inflation is sufficiently strong

monk mortgages in a new keynesian model abstract there has been much interest recently in the role of household long term mortgage debt in the transmission of monetary policy this paper offers a tractable framework that integrates the long term debt channel with the standard new keynesian channel providing a tool for monetary policy analysis that reflects the recent debates in the literature as there is a nontrivial role in the model for both short and long term debt it provides a laboratory to investigate the effects of monetary policy operating not only through its current short term actions but also through expected persistent changes in its stance

flexible inflation targets forex interventions and exchange rate volatility in emerging countries abstract emerging economies with inflation targets it face a dilemma between fulfilling the theoretical conditions of strict it which imply a fully flexible exchange rate or applying a flexible it which entails a de facto managed floating exchange rate with foreign exchange forex interventions to moderate exchange rate volatility using a panel data model for 37 countries we find that although it lead to higher exchange rate instability than alternative regimes forex interventions in some it countries have been more effective to lower volatility than in non it countries which may justify the use of flexible it by policymakers

words are not all created equal a new measure of ecb communication we develop a field specific dictionary to measure the stance of the european central bank ecb monetary policy dovish neutral hawkish and the state of the eurozone economy positive neutral negative through the content of ecb press conferences in contrast with traditional textual analysis we propose a novel approach using term weighting and contiguous sequence of words n grams to better capture the subtlety of central bank communication we find that quantifying ecb communication using our field specific weighted lexicon helps to explain future ecb monetary decisions when considering an augmented taylor rule regarding european stock market volatility we find that markets are more less volatile on the day following a conference with a negative positive tone about the euro area economic outlook our indicators significantly outperform a textual classification based on the loughran mcdonald or apel blix grimaldi dictionaries and a media based measure of economic policy uncertainty

budget deficits inflation risk and asset prices abstract kitchen examines how us budget deficit news affects asset prices and concludes that news of lower deficits reduces the inflation risk premium this paper constructs narrative histories of several deficit reduction laws to identify when markets learned that deficits would fall it then estimates a multi factor model that allows the inflation risk premium to vary following news of deficit reductions the results indicate that there is a large and statistically significant drop in the factor price associated with inflation following news that budget deficits would decline

learning about monetary policy rules abstract we study macroeconomic systems with forward looking private sector agents and a monetary authority that is trying to control the economy through the use of a linear policy feedback rule we use stability under recursive learning a la evans and honkapohja learning and expectations in macroeconomics princeton university press princeton new jersey 2001 as a criterion for evaluating monetary policy rules in this context we find that considering learning can alter the evaluation of alternative policy rules

narrative and var approaches to monetary policy common identification problems abstract romer and romer romer c d romer d h 1989 does monetary policy matter a new test in the spirit of friedman and schwartz in blanchard o j fischer s eds nber macroeconomics annual 1989 mit press cambridge ma pp 121 170 romer c d romer d h 1994 monetary policy matters journal of monetary economics 34 75 88 adopted a narrative approach to address the identification problems in time series models of monetary policy based on federal reserve documents the romers created a dummy variable equal to one in periods when the federal reserve contracted in response to perceived inflationary pressures this paper shows 1 the dummy variable is predictable from past macroeconomic variables reflecting the endogenous response of policy to the economy 2 unpredictable changes in the dummy do not generate dynamic responses that look like the effects of monetary policy the identification problems that plague time series models also afflict the narrative approach

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

the effect of changes in the federal funds rate target on market interest rates in the 1970s abstract this paper examines the influence of monetary policy on interest rates by estimating the effect of changes in the federal funds rate target the federal reserve s policy instrument on market interest rates in the 1970s we find that changes in the target caused large movements in short term rates and smaller but significant movements in intermediate and long term rates we hypothesize that the similarity of the reactions of three six and twelve month rates to changes in the target offers a possible explanation for the lack of support for the expectations theory from studies that have tested the theory using these rates

the monetary transmission mechanism an empirical framework this paper provides an overview of the monetary transmission mechanism describing the impact of changes in monetary policy on real gdp changes in financial market prices including long term interest rates and exchange rates are the main vehicle for the transmission of policy the framework incorporates rational expectations and policy rules it is empirical and appears to fit the facts well

inference using qualitative and quantitative information with an application to monetary policy i introduction there has been a revival of interest in the use of qualitative information in macroeconomic analysis recently an impetus for this revival is the apparent inability of modern statistical analyses that use only quantitative information to resolve significant macroeconomic controversies for example the direction of causality between money and output continues to be the subject of considerable debate the use of qualitative information in macroeconomic analysis has a long tradition mitchell 1927 and burns and mitchell 1946 use the descriptions in thorp s 1926 annals and several statistical series to identify the unobserved phase of the business cycle 1 in their chapters on the federal reserve friedman and schwartz 1963 use diaries policy records and monetary aggregates to identify the stance of monetary policy the essence of this traditional method is that it is prudent to use both qualitative and quantitative information in the process of inference because of the potential gain in confidence associated with cross verification both types of information are needed to identify the asymmetries and nonlinearities that are characteristic of business cycles policy initiatives and other economic phenomena questions concerning the interpretation of results using qualitative information however have been raised 2 a source of unease is the difficulty of assessing a researcher s distillation of the information in descriptive materials no obvious metric for evaluating the coding of a qualitative variable exists i present an alternative framework for combining qualitative and quantitative information in order to draw inferences of an unobservable variable quantitative information is an observable time series variable qualitative information is an indicator variable coded by a researcher that reflects the distillation of literary materials motivated by the traditional method i consider the case where both types of observable information are imperfect representations of an unobserved state variable an iterative algorithm that uses quantitative and qualitative information to draw inferences of the unobservable variable is constructed the algorithm produces an inference of the unobservable state variable for each sample period using the two types of information it also produces a probabilistic assessment of whether the qualitative indicator is a reliable indicator of the true unobserved state as discussed in more detail below this algorithm is closely related to those of cosslett and lee 1985 and hamilton 1989 the algorithm is applied to the problem of determining the stance of monetary policy a goal is to confront a problem that economic agents may actually face because of the secrecy surrounding the monetary policy process a description of that problem is how can observable information qualitative and quantitative be combined to infer the stance of monetary policy also can the reliability of the qualitative information or a distillation of it be measured i implement the algorithm using two prominent indicators of monetary policy the paper is organized as follows the alternative framework for using qualitative and quantitative information to draw inferences of an unobservable variable is presented in the next section the application to the problem of inferring the stance of monetary policy is presented in section iii in this section indicators of policy are introduced the model is estimated and the relationship between the dynamic conditional monetary policy inferences and an important forecaster of macroeconomic activity is explored section iv concludes ii an alternative framework for inference stochastic structure my alternative framework is based on a particular conception of the statistical model underlying the traditional method let y sub t denote a quantitative variable and i sub t denote a 0 1 qualitative variable

the credit channel of monetary policy transmission evidence from stock returns christophre georges this paper offers a novel test of the credit view of the monetary policy transmission mechanism using stock market returns we identify fed policy shocks using newspaper accounts and track daily stock prices immediately following the shocks if the credit channel is important then firms that are dependent on bank credit and internal funds should receive a relatively greater benefit loss from a fed easing tightening than firms with access to nonbank credit at favorable terms we identify ten policy shocks during the expansion of 1993 94 and the credit crunch period of the 1990 91 recession and find little evidence supportive of an operative credit channel jel e5 i introduction recently there has been renewed interest in the mechanism by which monetary policy innovations are transmitted into changes in aggregate output according to the traditional money view monetary policy influences market interest rates inducing changes in interest sensitive spending and consequently changes in output by assumption there is no distinction between financial assets and thus bank loans and internal funds are of no special interest in contrast the credit view e g bernanke and blinder 1988 assumes that bank loans are special due to information asymmetries some businesses are dependent on banks for loanable funds a withdrawal of reserves by the fed causes the supply of bank loans to fall and bank dependent businesses consequently reduce their spending a broader version of this view e g gertler and gilchrist 1993 bernanke and gertler 1995 claims that credit market imperfections contribute to the propagation of monetary policy shocks without working exclusively through the su pply of bank loans tight monetary policy may for example cause a deterioration of borrowers net worth thereby increasing external finance premia in either case this transmission mechanism operates through firms that are credit constrained in the sense that nonbank credit is an imperfect substitute for internal funds and bank loans empirical evidence on the transmission mechanism has been mixed see bernanke and blinder 1992 ramey 1993 kashyap et al 1993 gertler and gilchrist 1993 1994 christiano et al 1996 oliner and rudebusch 1995 1996 kashyap and stein 2000 two fundamental problems make direct tests of the credit view difficult the difficulty of identifying exogenous monetary policy shocks and the difficulty of identifying the relationship between these shocks and subsequent real activity this article offers a novel empirical test of the credit view using stock market returns if the credit channel is important then firms that are credit constrained should receive a relatively greater benefit loss from a fed easing tightening than firms with access to nonbank credit at favorable terms this relative benefit loss should be reflected in the behavior of stock prices immediately following news of the fed policy change we therefore identify changes in market expectations of fed policy calculate abnormal returns the deviations of the actual returns from the returns predicted by an asset pricing model for individual securities immediately following these innovations and test for systematic relationships between these abnormal returns and indicators of credit constraints at the firm level this approach is more indirect than others in the literature but has the advantage of mitigating the two identification problems noted above first the policy shocks that we use are changes in stock market expectations of fed policy we can identify these closely using daily accounts in the business press 1 second because the stock market reacts quickly to changes in expectations of future profitability we observe near contemporaneous responses of stock prices to policy shocks regardless of when in the future profits are expected to be altered

deposit interest rate ceilings as credit supply shifters bank level evidence on the effects of regulation q abstract how did deposit interest rate ceilings an important feature of the u s regulatory regime until the mid 1980s affect individual banks lending and the transmission of monetary policy to credit i estimate the effect of deposit rate ceilings inscribed in regulation q on commercial banks credit growth using a historical bank level data set starting in 1959 banks credit growth contracted sharply when legally fixed deposit rate ceilings were binding interaction terms with monetary policy suggest that the policy impact on bank level credit growth was non linear and significantly larger when rate ceilings were in place bank size and capitalization mitigate these effects at the bank level short term interest rates exceeding the legally fixed deposit rate ceilings identify policy induced credit supply shifts that disappeared with deposit rate deregulation and thus weakened the bank lending channel substantially since the early 1980s

the own price of money and a new channel of monetary transmission traditionally the effects of monetary policy actions on output are thought to be transmitted via monetary or credit channels real business cycle theory by contrast highlights the role of real price changes as a source of revisions in spending and production decisions motivated by the desire to focus on the effects of price changes in the monetary transmission mechanism this paper incorporates a direct measure of the real own price of money into an estimated vector autoregression and a calibrated real business cycle model consistent with the rbc view of the monetary transmission mechanism both approaches reveal that movements in the own price of money are strongly related to movements in output

production growth and business cycles ii new directions abstract this paper outlines new directions for investigations of real business cycle models consideration of stochastic growth of exogenous and endogenous forms analysis of suboptimal outcomes arising due to externalities of distorting taxes and implications of labor market heterogeneity

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

monetary policy preferences of individual fomc members a content analysis of the memoranda of discussion the memoranda of discussion provide detailed records of federal open market committee fomc meeting deliberations procedures are developed for coding the textual data in the memoranda and assessing the reliability of those codings the codings are then used in the estimation of parameters of individual fomc members reaction functions data from the 1970 to 1976 period are employed in the estimation in the future similar methods could be used to analyze newly released transcripts of fomc meetings held after 1976

on the mechanics of new keynesian models abstract the monetary transmission mechanism in new keynesian models is put to scrutiny we show that contrary to the conventional view the transmission mechanism does not operate through the real interest rate channel instead equilibrium inflation is approximately determined as in a flexible price model output is then pinned down by the new keynesian phillips curve the real rate only reflects the feasibility to keep consumption smooth when income changes contractionary monetary policy shocks reducing output and inflation are consistent with an increase decline or no change in the real rate consistency with the real rate channel is observational not structural

rhetoric and action what are central banks doing before elections central bank rhetoric need not always be followed bycorresponding measures in a number of regressions coveringgermany japan and the u s we examine differences in rhetoricand actual behavior before elections using a standard pbcmodel our results indicate that these three central bankshave not been influenced by electoral consideration in thepolicies they implement but the case of the german bundesbankindicates that it may be helpful to distinguish betweenrhetoric and action

sticky price models and durable goods the inclusion of a durable goods sector in sticky price models has strong and unexpected implications even if most prices are flexible a small durable goods sector with sticky prices may be sufficient to make aggregate output react to monetary policy as though most prices were sticky in contrast flexibly priced durables with sufficiently long service lives can undo the implications of standard sticky price models in a limiting case flexibly priced durables cause monetary policy to have no effect on aggregate output our analysis suggests that durable goods prices are the most relevant data for calibrating price rigidity jel e21 e23 e31 e52

identification weak instruments and statistical inference in econometrics we discuss statistical inference problems associated with identification and testability in econometrics we consider inference in non parametric models and weakly identified structural models weak instruments we point out that many ill defined statistical problems such as non testable hypotheses occur in these areas and are typically associated with asymptotic approximations in non parametric models such problems include testing moments and inference under heteroscedasticity or serial dependence of unknown form for weakly identified structural models difficulties are typically associated with improper pivots and we review recent developments aimed at proposing more reliable procedures including alternative proposed statistics bounds projection split sampling conditioning monte carlo tests jel classification c1 c12 c14 c15 c3 c5 identification instruments faibles et inference statistique en econometrie nous analysons les problemes d inference associes a l identification et a la testabilite en econometrie nous considerons l inference dans les modeles non parametriques et les modeles structurels faiblement identifies instruments faibles nous remarquons que beaucoup de problemes mal poses tels que des hypotheses non testables apparaissent dans ces domaines et que ceux ci sont typiquement associes a l emploi d approximations asymptotiques dans les modeles non parametriques de tels problemes incluent les tests sur les moments et l inference sous heteroscedasticite ou dependance serielle de forme non specifiee dans les modeles structurels faiblement identifies ces difficultes sont habituellement associees a l emploi de fonctions pivotales impropres et nous presentons un survol des methodes recentes ayant pour objectif d obtenir des procedures plus fiables ce qui comprend les differentes statistiques proposees l emploi de bornes la subdivision d echantillon les techniques de projection le conditionnement et les tests de monte carlo

macroeconomic modeling for monetary policy evaluation we describe some of the main features of the recent vintage macroeconomic models used for monetary policy evaluation we point to some of the key differences with respect to the earlier generation of macro models and highlight the insights for policy that these new frameworks have to offer our discussion emphasizes two key aspects of the new models the significant role of expectations of future policy actions in the monetary transmission mechanism and the importance for the central bank of tracking of the flexible price equilibrium values of the natural levels of output and the real interest rate we argue that both features have important implications for the conduct of monetary policy

asymmetric monetary effects on interest rates across monetary policy stances this paper provides new evidence that the interest rates response to a money supply shock varies across the state of the monetary policy stance the state is assigned to one of the tight neutral and loose regimes based on an estimated policy stance index the results of threshold vector autoregression analysis imply that pure liquidity and expected inflation effects vary across regimes with agents reactions to policy the results exhibit a persistent dominating liquidity effect under the neutral and loose regimes but a reversed liquidity effect after a short lag under the tight regime

inflation targeting supported by managed exchange rate we compare on a welfare loss basis possible inflation targeting regimes supported by different exchange rate rules for model parametrization we estimate a forward looking monetary policy rule for trukey when variable inflation targets are taken into consideration as opposed to the fixed targets used in prior research that use data from developed countries forward looking taylor rules provide a reasonable description of central bank behaviour in turkey by applying a calibration based on estimated parameters we compare the loss functions under flexible inflation targeting and strict inflation targeting while taking into consideration the supporting regimes namely a flexible exchange rate and a managed floating exchange rate we find that the welfare loss function caused by four simultaneous shocks namely a foreign interest rate shock a monetary policy shock a foreign output shock and a domestic output shock is minimized under the flexible inflation targeting regime supported by a managed float

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

monetary policy and asymmetric response in default risk abstract in this empirical study monetary tightening is found to significantly raise the default risk on baa bonds absolutely and relative to the default risk on aaa bonds monetary easing however does not have a statistically significant effect on either of these variables

investment and interest rate policy a discrete time analysis this paper analyzes the restrictions necessary to ensure that the interest rate policy rule used by the central bank does not introduce local real indeterminacy into the economy it conducts the analysis in a calvo style sticky price model a key innovation is to add investment spending to the analysis in this environment local real indeterminacy is much more likely in particular all forward looking interest rate rules are subject to real indeterminacy

inflation targeting flexible exchange rates and inflation convergence using a disaggregated level consumer price index cpi data this article compares convergence properties of regional inflation rates in a small open economy turkey between pre inflation targeting and inflation targeting periods where the latter also corresponds to a flexible exchange rate regime it is found that during the inflation targeting period turkish regional inflation rates have converged to each other in terms of cpi groups with relatively nontradable components while they have diverged from each other in terms of cpi groups with relatively tradable components since a common and sound monetary policy among the regions of a country is supposed to have a convergence effect on regional inflation rates according to the conventional wisdom the results for cpi groups with relatively tradable components require further attention and have significant policy implications especially for inflation targeting countries using flexible exchange rate regimes

regional income fluctuations common trends and common cycles this paper investigates trend and cycle dynamics in per capita income for the major u s regions during the 1956 1995 period cointegration and serial correlation common features information are used in jointly decomposing the series into trend and cycle components we find considerable differences in the volatility of regional cycles controlling for differences in volatility we find a great deal of comovement in the cyclical response for all regions but the far west possible sources underlying differences in regional cycles are explored such as the share of a region s income accounted for by manufacturing defense spending as a proportion of a region s income oil price shocks and the stance of monetary policy somewhat surprisingly we find that the share of manufacturing in a region seems to account for little of the variation in regional cycles relative to national cycles but manufacturing share differentially affects trend growth for four of the seven regions studied

private sector influences on monetary policy in the united states i examine the extent to which the federal reserve s monetary policy actions are correlated with the expressed wishes of private sector lobbying groups i update and extend work by havrilesky 1990 1993 regarding the effect of signals from the banking industry through the federal advisory council fac i also construct a new database containing statements from non financial interest groups i find that monetary policy actions are correlated with signals from non financial groups before 1979 but not after and are correlated with signals from the fac after 1979 but not before i also find that the fed s policy stance more closely matches the preferred stance of the banking industry after 1979

effects of credit and debit cards on the currency demand we analyze the effects of credit and debit cards on the currency in circulation by using gmm estimation instead of using the data obtained by surveys we use monthly data obtained by an interbank institution that keeps the statistics of all credit and debit cards usage of a small open economy turkey for the period over 2002m1 2006m10 as expected from the theory we find that an increase in the usage of credit and debit cards leads to a decrease in the currency demand moreover the usage of the debit cards has a bigger effect on the money demand compared to the usage of the credit cards we also find that the effect of credit cards is mostly through purchases and the effect of debit cards is mostly through withdrawals

monetary policy announcements and market interest rates response evidence from china abstract this paper examines the daily responses of market interest rates to three monetary policy announcements in china using the event study approach i find that the interest rate responses to announced changes in the regulated retail interest rate and the required reserve ratio are positive and significant at all maturities of interest rates but smaller at the long end of the yield curve by contrast market interest rates barely respond to the qualitative mpc announcements about the monetary policy stance these findings are robust to alternative econometric methods that correct for potential bias arising from violations of the identification assumption these findings suggest that the pbc should formulate its policy communication in a quantitative way

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

the federal reserve s response to aggregate demand and aggregate supply shocks evidence of a partisan political cycle the orthodox approach to modeling the fed s response to economic conditions is to employ a monetary policy reaction function most reaction functions are estimated by regressing a policy indicator possibly the federal funds rate or a monetary aggregate on variables that describe the state of the economy such as unemployment inflation and growth in output under certain conditions which we discuss below estimated coefficients from a reaction function provide information about the fed s monetary policy priorities moreover extending the model to include election and partisan dummy variables may provide information about the fed s response to political pressures there are two problems with interpreting the coefficients in a standard reaction function as the weights that the fed attaches to its policy objectives first the monetary policy decision may not be represented accurately by an aggregate reaction function one that models the fed as a whole because there are twelve voting members on the fomc chappell havrilesky and mcgregor 10 have recently addressed this issue by employing a disaggregated set of reaction functions the second problem with interpreting reaction function coefficients as the weights the fed places on its policy objectives is that this interpretation implicitly assumes structural stability of the underlying macroeconomy abrams froyen and waud 1 31 acknowledge this shortcoming when they state coefficients from estimated reaction functions do not provide direct information on policymaker utility functions rather than being the solution to an unconstrained optimization dependent only on policymaker preferences reaction functions are the output of a constrained maximization where the constraints are the reduced form equations that characterize