nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

conditional eurobonds and the eurozone sovereign debt crisis this paper proposes that all new euro area sovereign borrowing be in the form of jointly guaranteed eurobonds to avoid classic moral hazard problems and to insure the guarantors against default each country would pay a risk premium conditional on economic fundamentals to a joint debt management agency this suggests that these bonds be called euro insurance bonds while the sovereign debt markets have taken increasing account of the economic fundamentals the signal to noise ratio has been weakened by huge market volatility so undercutting incentives for appropriate reforms and obscuring economic realities for voters this paper uses an econometric model to show that competitiveness public and private debt to gdp and the fall out from housing market crises are the most relevant economic fundamentals formula based risk spreads based on these fundamentals would provide clear incentives for governments to be more oriented towards economic reforms to promote long run growth than mere fiscal contraction putting more weight on incentives that come from risk spreads than on fiscal centralization and the associated heavy bureaucratic procedures would promote the principle of subsidiarity to which member states subscribe the paper compares euro insurance bonds incorporating these risk spreads with other policy proposals copyright 2013 oxford university press

bank loan portfolios and the monetary transmission mechanism abstract we study the portfolio behavior of bank loans following a monetary tightening and find that real estate and consumer loans sharply decrease while commercial and industrial c i loans increase these responses are compared with responses following non monetary shocks which also reduce output but keep interest rates roughly unchanged during such a non monetary downturn c i loans sharply decrease while real estate and consumer loans show no substantial response these responses together with the responses of relevant lending rates are hard to reconcile with a decline in the supply of c i bank loans during a monetary downturn as stressed by the bank lending channel several arguments are presented explaining why the supply of c i loans may actually increase after a monetary contraction

should a carbon tax be differentiated across sectors abstract if some but not all countries are cooperating to reduce co2 emissions one could make the following argument a high carbon tax for carbon intensive tradeable sectors in the cooperating countries will reduce the production of goods from these sectors and therefore co2 emissions in the cooperating countries however this will to a large extent be counteracted by increased production of such goods in the countries that have no climate policy and since it is only total co2 emissions from all countries that are relevant for the climate there is no point in a policy that simply relocates co2 emissions from the cooperating countries to the countries that have no climate policy according to this line of reasoning carbon intensive tradeable sectors should thus face a lower carbon tax than other sectors of the economy this paper shows that a carbon tax should not be differentiated across sectors in the economy provided one can use import and export tariffs on all traded goods it is also shown that such a differentiation of carbon taxes is optimal for the cooperating countries if they are prevented from using tariffs on the traded goods however informational or political factors constraining the use of tariffs are likely also to constrain the possibility of differentiating carbon taxes between sectors

assessing monetary policies in the eurozone u s u k and japan new evidence from the post crisis period abstractthe global financial crisis of 2007 changed the way central banks implement monetary policies this article examines the transmission of both conventional and unconventional monetary polici

from conventional to unconventional monetary policies the failure of the market maker of last resort this paper analyses the new role of market maker of last resort openly assumed by central banks since the 2008 financial crisis revealed the increasing impact of noninterest income activities on banks balance sheets a brief review of the distinction between conventional and unconventional monetary policies shows that the inflexion point from lender of last resort to market maker of last resort is given by the extension of central bank intervention to other markets than the bank reserves markets herein it is explained how the market maker of last resort role is as counterproductive as its predecessor in putting the economy back on track we show that the main problem of both conventional and unconventional monetary policies is that they distort price signals particularly asset prices in their attempt to reignite economic growth instead of correcting cyclical fluctuations the policies of the market maker of last resort prevent the cyclical divergences between financial and goods sectors from readjusting

a monetary policy strategy in good and bad times lessons from the recent past we evaluate the ecb s monetary policy strategy against some of the underlying economic features of the eurozone in normal times and during the financial crisis we show that in the years preceding the crisis the ecb s emphasis on monetary indicators and deliberate avoidance of excessive activism were justified by the underlying macroeconomic conditions that the ecb faced in the eurozone and contributed to avoid more volatile patterns of inflation and economic activity after the collapse of financial intermediation in late 2008 the strategy of the ecb was to adopt several non standard policy measures according to our quantitative evaluation of the impact of the main non standard policies decided in october 2008 and in may 2009 which notably did not include entering commitments regarding the future path of the policy rate such measures have significantly contributed to preserving price stability and forestalling a more disruptive collapse of the macroeconomy stephan fahr roberto motto massimo rostagno frank smets and oreste tristani

the cross country implications of alternative climate policies abstract because of worldwide growing concerns about global climate change great interest has been expressed in the potential of alternative climate policies to reduce global carbon emissions in this paper we compare cross country implications of alternative climate policies including unilateral and multilateral climate policies our main findings are as follows firstly there are large differences in cross country effects of alternative unilateral climate policies when the same given carbon emission reductions are achieved in each abating country respectively meanwhile cross border externalities undermine efficiency of unilateral climate policies secondly there are significant differences in cross country implications of alternative multilateral climate policies when the same global emission reductions are allocated in several different ways among abating countries thirdly it is difficult to reach a stable global climate treaty since any abating country has the incentive to argue for small carbon emission reductions finally multilateral climate policies can reduce the negative impacts of cross border externalities but cannot cure all cross border externalities looking ahead it will be a great policy challenge for the world to reduce carbon emissions in a cost effective way

climate policy and fiscal constraints do tax interactions outweigh carbon leakage climate policymaking faces twin challenges of carbon leakage and public sector revenue requirements a large literature advocates the use of carbon dioxide co2 pricing and recycling the revenues to lower distorting taxes as a way to minimize costs in this paper we explore the implications of labor tax interactions for the cost effectiveness of border adjustments and other measures to cope with leakage we find that for plausible values of labor supply elasticities the cost savings from revenue recycling are significant from 15 to 25 percent the cost savings from anti leakage measures are generally smaller but also significant particularly for small coalitions or more binding reduction targets tax interactions further enhance the cost savings from border adjustments but make other measures like rebates or exemptions less attractive

the impact of monetary policy on inequality in the uk an empirical analysis the uk has experienced a dramatic increase in earnings and income inequality over the past four decades we use detailed micro level information to construct quarterly historical measures of inequality from 1969 to 2012 we investigate whether monetary policy shocks played a role in explaining this increase in inequality we find that contractionary monetary policy shocks lead to an increase in earnings income and consumption inequality and contribute to their fluctuation the response of income and consumption at different quantiles suggests that contractionary policy has a larger negative effect on low income households and those that consume the least when compared to those at the top of the distribution our evidence also suggests that the policy of quantitative easing may have contributed to the increase in inequality over the great recession

monetary policy under the labour government the first 13 years of the mpc this paper examines the performance of monetary policy under the new framework established in 1997 up to the end of the labour government in may 2010 performance was relatively good in the years before the crisis but much weaker from 2008 the new framework largely neglected open economy issues while the treasury s emu assessment in 2003 can be interpreted in different ways the new framework may have contributed to some extent to the eruption and depth of the financial crisis from 2008 but mon etary policy eventually responded in a bold and innovative way overall the design and operation of mon etary policy were much better than in earlier periods but there is room for significant further evolution

theoretical analysis regarding a zero lower bound on nominal interest rates this paper explores several issues concerning a possible zero lower bound zlb including its theoretical rationale the magnitude of effects of low sustained inflation on real interest rates the validity of analyzing monetary policy in models with no monetary variables and the dynamic stabilizing properties of taylor rules in a zlb context the most important argument however is that if the short nominal rate is immobilized at zero there nevertheless exists a route for monetary stabilization policy to be effective via the foreign exchange market its quantitative importance is examined in a calibrated optimizing open economy model

the case for open market purchases in a liquidity trap prevalent thinking about liquidity traps suggests that the perfect substitutability of money and bonds at a zero short term nominal interest rate renders open market operations ineffective for achieving macroeconomic stabilization goals we show that even were this the case there remains a powerful argument for large scale open market operations as a fiscal policy tool as we also demonstrate however this same reasoning implies that open market operations will be beneficial for stabilization as well even when the economy is expected to remain mired in a liquidity trap for some time thus the microeconomic fiscal benefits of open market operations in a liquidity trap go hand in hand with standard macroeconomic objectives motivated by japan s recent economic experience we use a dynamic general equilibrium model to assess the welfare impact of open market operations for an economy in japan s predicament we argue japan can achieve a substantial welfare improvement through large open market purchases of domestic government debt

investigating recent trends in the u s teen birth rate we investigate trends in the u s rate of teen childbearing between 1981 and 2010 focusing specifically on the sizable decline since 1991 we focus on establishing the role of state level demographic changes economic conditions and targeted policies in driving recent aggregate trends we offer three main observations first the recent decline cannot be explained by the changing racial and ethnic composition of teens second the only targeted policies that have had a statistically discernible impact on aggregate teen birth rates are declining welfare benefits and expanded access to family planning services through medicaid but these policies can account for only 12 6 percent of the observed decline since 1991 third higher unemployment rates lead to lower teen birth rates and can account for 16 percent of the decline in teen birth rates since the great recession began

the interbank market after august 2007 what has changed and why after the onset of the financial crisis spreads between interbank interest rates on unsecured and secured deposits for the major world currencies became exceptionally large and volatile first we find that the phenomenon was mainly driven by aggregate rather than bank specific factors notably risk aversion and accounting practices by contrast funding liquidity capital shortage and central bank interventions were not important determinants second prior to august 2007 the spread was broadly insensitive to key borrower characteristics whereas afterward it became somewhat more reactive to measures of creditworthiness third conditions for big borrowers became relatively more favorable during the crisis suggesting that moral hazard risks related to the too big to fail argument have increased these results are discussed in the light of theories on the interbank market during a crisis

unilateral climate policy design efficiency and equity implications of alternative instruments to reduce carbon leakage abstract global cost effectiveness of unilateral emission abatement can be seriously hampered by carbon leakage we assess three widely discussed proposals for leakage reduction carbon motivated border tax adjustments industry exemptions from carbon regulation and output based allocation of emission allowances we find that none of these measures amounts to a magic bullet when both efficiency and equity criteria matter compared to unilateral emission pricing alone border carbon adjustments are most effective in leakage reduction and promotion of global cost effectiveness but can markedly exacerbate regional inequality exemptions and output based allocation tend to avoid distributional pitfalls but are less effective in leakage reduction and global cost savings exemptions may even decrease global cost effectiveness of unilateral emission abatement

macroeconomics and the term structure this paper provides an overview of the analysis of the term structure of interest rates with a special emphasis on recent developments at the intersection of macroeconomics and finance the topic is important to investors and also to policymakers who wish to extract macroeconomic expectations from longer term interest rates and take actions to influence those rates the simplest model of the term structure is the expectations hypothesis which posits that long term interest rates are expectations of future aver age short term rates in this paper we show that many features of the configuration of interest rates are puzzling from the perspective of the expectations hypothesis we review models that explain these anomalies using time varying risk premia although the quest for the fundamental macroeconomic explanations of these risk premia is ongoing inflation uncertainty seems to play a large role finally while modern finance theory prices bonds and other assets in a single unified framework we also consider an earlier approach based on segmented markets market segmentation seems important to understand the term structure of interest rates during the recent financial crisis jel e31 e43 e52 e58

the effect of federal debt management policy on corporate bond and equity yields in theory federal debt management policy potentially plays an important role in determining treasury and private security yields however empirical studies have been unable to detect any significant effects from federal debt management in large part the insignificance of relative asset supply effects associated with federal debt management policy may result from the use of unrestricted reduced form models of interest rate determination using a disaggregated structural model of the markets for corporate bonds equities and four distinct maturity classes of treasury securities federal debt management policy is found to affect treasury and private security yields significantly furthermore the yields on corporate bonds and equities are influenced disproportionately

quantitative easing a sceptical survey evaluation of quantitative easing qe is difficult as it is only used in response to severe and unusual economic difficulties despite this we argue that two main conclusions can be drawn from a sceptical reading of the evidence first large scale asset purchases reduce government bond rates especially at the longer end of the yield curve however this effect may be temporary and is small if bond rates are already low while initial waves of qe are more effective than subsequent programs second qe appears to have been effective in late 2008 and 2009 preventing even larger declines in output and inflation than were experienced we argue that the literature is limited relying on similar methodologies and largely originating in central banks exploration of alternative approaches to qe would be useful in widening an evidence base that is currently too narrow

monetary policy and bank lending in the euro area is there a stock market channel or an interest rate channel abstract in this paper i compare a traditional demand oriented model of bank lending with its focus on short term interest rates in the money market to a non traditional capital budgeting model of bank lending based on movements in share valuations for the euro area using non nested hypothesis tests omitted variables tests and granger causality tests i reject the traditional demand oriented model of bank lending and fail to reject the capital budgeting model of bank lending for monetary financial institutions mfi s in the euro area even though europe is a bank based financial system it appears the stock market plays a key role in the lending decisions and allocation of resources in europe one possible policy implication of this research is that the central bank should try and stabilize stock prices in order to achieve their goal of stabilizing bank lending and the economy

short and long interest rate targets can both short and long term interest rates be targeted independently can the target of the term structure help solve the problem of multiplicity of equilibria that occurs when only the short rate is targeted both questions are addressed and the answer is yes to both

the ecb s non standard monetary policy measures the role of institutional factors and financial structure this paper aims to make two contributions to review the ecb s non standard monetary policy measures in response to the financial and sovereign debt crisis against the background of the institutional framework and financial structure of the euro area and to interpret this response from a flow of funds perspective the paper highlights how the ecb s non standard measures are motivated differently from quantitative easing policies as a complement to standard interest rate decisions rather than a substitute they aim at supporting their effective transmission to the economy rather than at delivering additional monetary stimulus directly the flow of funds analysis proposes an interpretation of central banks crisis response as reflecting their capacity to act as the ultimate sector that can take on leverage when other sectors are under pressure to deleverage it also provides examples for tracing the impact of non standard measures across different sectors and markets copyright 2012 oxford university press

has the ecb s monetary policy prompted companies to invest or pay dividends abstractthis paper focuses on the influence of the european central bank s ecb monetary policies on non financial firms it sheds light on non financial firms decisions regarding leverage and on how the ecb s conventional and unconventional policies may have affected them the paper also examines how these policies influenced non financial firms decisions on capital allocation primarily capital spending and shareholder distribution for example dividends and share repurchases we use an exhaustive and unique dataset comprised of income statements and balance sheets of leading non financial firms operating in the european economic and monetary union emu the main results suggest that ecb s monetary policies have encouraged firms to raise their debt burden especially after the global recession of 2008 finally the ecb s policies especially after 2011 also seem to have led non financial firms to allocate more resources not just to capital spending but to shareholder distribution as well

is there an effect of incremental welfare benefits on fertility behavior a look at the family cap this analysis exploits the variation across states in the timing of policy implementation to determine if family cap policies lead to a reduction in births to women aged 15 to 34 vital statistics birth data for the years 1989 to 1998 offer no such evidence the data reject a decline in births of more than one percent the finding is robust to multiple specification checks the data also reject large declines in higher order births among demographic groups with high welfare participation rates

the interest rate pass through in the euro area during the sovereign debt crisis abstract we investigate the pass through of monetary policy to bank lending rates in the euro area during the sovereign debt crisis in comparison to the pre crisis period we make the following contributions first we use a factor augmented vector autoregression which allows us to assess the responses of a large number of country specific interest rates and spreads second we analyze the effects of monetary policy on the components of the interest rate pass through which reflect banks funding risk including sovereign risk and markups charged by banks over funding costs third we not only consider conventional but also unconventional monetary policy we find that while the transmission of conventional monetary policy to bank lending rates has not changed with the crisis the composition of the pass through has changed specifically expansionary conventional monetary policy lowered sovereign risk in peripheral countries and longer term bank funding risk in peripheral and core countries during the crisis but has been unable to lower banks markups this was not or not as much the case prior to the crisis unconventional monetary policy helped decreasing lending rates mainly due to large shocks rather than a strong propagation

the effect of family planning programs on the fertility of welfare recipients evidence from medicaid claims this paper explores the effectiveness of family planning fp services subsidized by the medicaid program in lowering the fertility of female welfare recipients previous studies used single equation estimates and produced conflicting and sometimes confounding results thus this study employed a bivariate probit model to estimate the effect of contraceptive acceptance on the individuals probability of giving birth without the bias that may result from single equation estimates a unique data set created from maryland medicaid claims records was also used results suggest that medicaid fp programs are much more effective at lowering fertility than indicated by previous studies using single equation estimates

the unintended effects of place based programs fertility and health effects of urban empowerment zones abstract whether place based welfare programs affect fertility and health outcomes is an understudied question i estimate the health impacts of the empowerment zone ez program a federal program that gave sizeable grants and tax breaks to certain high poverty census tracts in selected cities using difference in differences methods i find that the ez program decreased fertility rates by 11 percent and improved birth outcomes compositional changes in fertility likely cannot explain changes in infant health recent research on the later life impacts of low birth weight suggest that the health impacts of this program may have substantial long term benefits

on stock market illiquidity and real time gdp growth this study examines whether stock market illiquidity forecasts real uk gdp growth using data over the period 1989q1 2012q2 apart from standard linear model specifications we also utilize non linear models which allow for regime switching behavior in terms of a liquid versus an illiquid market regime and over the phases of the business cycle our findings support a statistically significant negative relationship between stock market illiquidity and future uk gdp growth over and above the usual control variables this relationship is found to be stronger during periods of highly illiquid market conditions and weak economic growth our out of sample forecasting analysis indicates that a regime switching model of illiquid versus liquid market conditions predicts uk growth better than any other model actually this model is the only one to significantly outperform the gdp growth forecasts published in the bank of england s inflation report

international transmission channels of u s quantitative easing evidence from canada en reaction a la grande recession la reserve federale americaine a reduit son taux directeur a sa valeur plancher afin d accentuer la detente monetaire la banque centrale americaine a par la suite mis en oeuvre des achats massifs d actifs ce qui a eu pour effet de quadrupler la taille de son bilan

international effects of a compression of euro area yield curves abstract in this paper we use a bayesian global vector autoregressive model to analyze the macroeconomic effects of a flattening of euro area yield curves our findings indicate positive effects on real activity and prices both within the euro area as well as in neighboring economies spillovers transmit through an exchange rate channel and a broad financial channel we complement our analysis by conducting a portfolio optimization exercise our results show that multi step ahead forecasts conditional on the euro area yield curve shock improve sharpe ratios relative to other investment strategies

un conventional policy and the effective lower bound abstract we study the optimal combination of interest rate policy and unconventional monetary policy in a model where agency costs generate a spread between deposit and lending rates we show that credit policy can be a powerful substitute for interest rate policy in the face of shocks that negatively affect bank monitoring efficiency unconventional measures insulate the real economy from further deterioration in financial conditions and it may be optimal for the central bank not to cut rates to zero thus credit policy lowers the likelihood of hitting the zero bound constraint reductions in the policy rates without non standard measures are sub optimal as they force savers to inefficiently change their intertemporal consumption patterns

the effectiveness of quantitative easing new evidence on private investment abstractthis paper examines the effect of federal reserve s large scale purchases of securities on private investment we find tentative evidence that quantitative easing qe stimulated the level of aggregate investment through the interest rate channel by narrowing corporate bond spread in particular the fed s purchases of mortgage backed securities were found to have a statistically significant effect on aggregate private investment moreover using a garch model we find that qe has led to a reduction in the volatility of private investment this finding remains robust with a qe dummy variable as an alternative measure of the unconventional monetary policy the study also indicates how different aspects of qe influence private investment and its volatility

assessing the economy wide effects of quantitative easing this article examines the macroeconomic impact of the first round of quantitative easing qe by the bank of england we attempt to quantify the effects of these purchases by focusing on the impact of lower long term interest rates on the wider economy we use three different models to estimate the impact of qe on output and inflation a large bayesian vector autoregression var a change point structural var and a time varying parameter var our estimates suggest that qe may have had a peak effect on the level of real gdp of around and a peak effect on annual cpi inflation of about points

monetary policy in exceptional times this paper describes the way in which the european central bank ecb the federal reserve and the bank of england conducted monetary policy since the beginning of the financial crisis in august 2007 we argue that both quantitative easing and the other non standard measures introduced by central banks that changed the composition of the asset side of their balance sheets so called qualitative easing acted mainly through their effects on interest rates and in particular on money market spreads rather than solely through quantity effects in terms of the money supply we perform a quantitative exercise on the euro area which estimates the effect of the reduction of these spreads to the broader economy michele lenza huw pill and lucrezia reichlin

the effectiveness of unconventional monetary policy announcements in the euro area an event and econometric study abstract we use daily data on government bond yields and market based inflation expectations to measure the announcement effects of unconventional monetary policy announcements in the euro area focusing on their impact on ex ante real interest rates we find evidence of statistically significant effects of several announcements on real interest rates at maturities of two five and ten years that operate partly through nominal interest rates and partly by raising inflation expectations announcements that exceeded market expectations significantly reduced nominal and real interest rates while announcements that disappointed expectations had the opposite effect

a non standard monetary policy shock the ecb s 3 year ltros and the shift in credit supply abstract we study the macroeconomic effects of the 3 year long term refinancing operations ltros introduced by the ecb in december 2011 with the aim of reducing the obstacles to credit supply through the mitigation of liquidity and funding risks in the euro area banking system therefore we interpret the measure as a credit supply shock which is identified both recursively and with sign restriction methods using the euro area bank lending survey bls the size of the shock due to the ltros is computed using both the april 2012 bls and the special ad hoc questions on the ltros conducted in february 2012 the counterfactual exercises suggest that the 3 year ltros lifted prospects for real gdp and loan provision to non financial corporations and increased goods prices over the next two to three years thereby avoiding a major credit crunch

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

do central bank liquidity facilities affect interbank lending rates in response to the global financial crisis that started in august 2007 central banks provided extraordinary amounts of liquidity to the financial system to investigate the effect of central bank liquidity facilities on term interbank lending rates near the start of the crisis we estimate a six factor arbitrage free model of u s treasury yields financial corporate bond yields and term interbank rates this model can account for fluctuations in the term structure of credit and liquidity spreads observed in the data a significant shift in model estimates after the announcement of the liquidity facilities suggests that these central bank actions did help lower the liquidity premium in term interbank rates

central banking in the credit turmoil an assessment of federal reserve practice abstract central banking is understood in terms of the fiscal features of monetary credit and interest on reserves policies monetary policy expanding reserves by buying treasuries transfers all revenue from money creation directly to the fiscal authorities credit policy selling treasuries to fund loans or acquire non treasury securities is debt financed fiscal policy interest on reserves frees monetary policy to fund credit policy independently of interest rate policy an ambiguous boundary of responsibilities between the fed and the fiscal authorities contributed to economic collapse in fall 2008 accord principles are proposed to clarify fed credit policy powers and secure its independence on monetary and interest rate policy the fed needs more surplus capital from the fiscal authorities to be fully flexible against both inflation and deflation at the zero interest bound

the impact of monetary policy on corporate bonds under regime shifts abstract we study the effects of a conventional monetary expansion quantitative easing and the maturity extension program on corporate bond yields using impulse response functions obtained from flexible models with regimes using a three state markov switching model with time homogeneous vector autoregressive var coefficients that emerges from a systematic model specification search we find that unconventional policies may have been generally expected to decrease both corporate yields and spreads however even though the sign of the responses is the one desired by policymakers the size of the estimated effects depends on the assumptions regarding the decline in long term treasury yields caused by unconventional policies on which considerable uncertainty remains further tests based on yield spreads and a variable that measures inflation expectations show that in the crisis regime unconventional monetary policies do not produce any perverse effects on expected inflation these results prove robust to adopting a framework that allows var coefficients to break to imposing coefficient restrictions that increase parsimony and to a range of different ordering schemes that identify shocks in alternative ways

liquidity provision as a monetary policy tool the ecb s non standard measures after the financial crisis abstract we study the macroeconomic consequences of the money market tensions associated with the financial crisis in the euro area in a structural var we identify a liquidity shock rooted in the interbank market and use its impulse response functions to calibrate key parameters of a smets and wouters 2003 closed economy model augmented with a banking sector a la gertler and kiyotaki 2010 we highlight two main results first an identified liquidity shock causes a sizable and persistent fall in investment the shock can account for one third of the observed large fall in euro area aggregate investment in 2008 09 second the liquidity injected in the market by the ecb played an important role in attenuating the macroeconomic impact of the shock according to our counterfactual simulations based on the structural model in the absence of ecb liquidity injections interbank spreads would have been at least 200 basis points higher and their adverse impact on investment would have been more than twice as severe

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

output based allocation of emissions permits for mitigating tax and trade interactions the allocation of tradable emissions permits has important efficiency as well as distributional effects when tax and trade distortions are taken into account we compare different rules for allocating carbon allowances within sectors lumpsum grandfathering output based allocation oba auctioning and among sectors historical emissions or value added shares the output subsidies implicit in oba mitigate tax interactions unlike grand fathering oba with sectoral distributions based on value added is similar to revenue recycling with auctioning oba based on historical emissions supports heavier polluters more effectively counter acting carbon leakage but at higher welfare costs less energy intensive sectors are also sensitive to allocation rules

subsidized contraception fertility and sexual behavior abstract we examine the impact of recent state level medicaid policy changes that expanded eligibility for family planning services to higher income women and to medicaid clients whose benefits would expire otherwise we show that the income based policy change reduced overall births to non teens by about 2 and to teens by over 4 estimates suggest a decline of 9 among newly eligible women the reduction in fertility appears to have been accomplished via greater use of contraception our calculations indicate that allowing higher income women to receive federally funded family planning cost on the order of 6 800 for each averted birth

the ecb and the interbank market this paper analyses the impact on the macroeconomy of the ecb s non standard monetary policy implemented in the aftermath of the collapse of lehman brothers in the fall of 2008 we study in particular the effect of the expansion of the intermediation of transactions across central bank balance sheets as dysfunctional financial markets seize up which we regard as a key channel of transmission for non standard monetary policy measures our approach is similar to lenza et al 2009 but we introduce the important innovation of distinguishing between private intermediation of interbank transactions in the money market and central bank intermediation of bank to bank transactions across the eurosystem balance sheet we do this by exploiting data drawn from the aggregate monetary and financial institutions mfi balance sheet which allows us to construct a new measure of the policy shock represented by the ecb s increasing role as a financial intermediary we find that bank loans to households and in particular to non financial corporations are higher than would have been the case without the ecb s intervention in turn the ecb s support has a significant impact on economic activity two and a half years after the failure of lehman brothers the level of industrial production is estimated to be 2 higher and the unemployment rate 0 6 percentage points lower than would have been the case in the absence of the ecb s non standard monetary policy measures

unconventional monetary policy the assessment the uncon ventional monetary policy measures adopted by the major central banks in the period since 2008 are discussed in this paper we highlight some important differences between quan titative easing and conventional monetary policy and then evaluate the mechanisms through which quantitative easing may propagate to financial markets and the real economy drawing on perspec tives from monetarist and new keynesian theory additional measures intended to supplement or strengthen the effects of pure quantitative easing often termed unconventional unconventional monet ary policy are also assessed in our discussion we relate the various articles in this issue to some of the key research questions posed in relation to unconventional monetary policy

children and their parents a review of fertility and causality childbearing decisions are not made in isolation they are taken in concert with decisions regarding work marriage health investments and stocks as well as many other observable and non observable considerations drawing causal inferences regarding the effect of additional children on family outcomes is complicated by these endogenous factors this paper lays out the issues involved in estimating the effect of additional child births on family outcomes and the assumptions underlying the range of estimators and methodologies proposed in the economic literature the common pitfalls of these estimators are discussed as well as their potential to bias our interpretation of the effect additional births have on children and parents both in the existing literature and in future work in the face of changing patterns of childbearing and child rearing

optimal environmental taxation in the presence of other taxes general equilibrium analyses this paper examines the optimal setting of environmental taxes in economies where other distortionary taxes are present we employ analytical and numerical models to explore the degree to which in a second best economy optimal environmental tax rates differ from the rates implied by the pigovian principle according to which the optimal tax rate equals the marginal environmental damages both models indicate contrary to what several analysts have suggested that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the pigovian principle moreover the optimal rate is lower the larger are the distortions posed by ordinary taxes numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre existing taxes this abstract was borrowed from another version of this item

the effect of ecb monetary policies on interest rates and volumes abstractthis article assesses the transmission of ecb monetary policies conventional and unconventional to both interest rates and lending volumes or bond issuance for three types of different economic agents through five different markets sovereign bonds at 6 month 5 year and 10 year horizons loans to nonfinancial corporations and housing loans to households during the financial crisis and for the four largest economies of the euro area we look at three different unconventional tools excess liquidity longer term refinancing operations and securities held for monetary policy purposes following the decomposition of the ecb s weekly financial statements we first identify series of ecb policy shocks at the euro area aggregate level by removing the systematic component of each series and controlling for announcement effects we second include these exogenous shocks in country specific structural var in which we control for credit demand the main result is that only the pass through from the ecb r

escaping from a liquidity trap and deflation the foolproof way and others existing proposals to escape from a liquidity trap and deflation including my foolproof way are discussed in the light of the optimal way to escape the optimal way involves three elements 1 an explicit central bank commitment to a higher future price level 2 a concrete action that demonstrates the central bank s commitment induces expectations of a higher future price level and jump starts the economy and 3 an exit strategy that specifies when and how to get back to normal a currency depreciation is a direct consequence of expectations of a higher future price level and hence an excellent indicator of those expectations furthermore an intentional currency depreciation and a crawling peg as in the foolproof way can implement the optimal way and in particular induce the desired expectations of a higher future price level i conclude that the foolproof way is likely to work well for japan which is in a liquidity trap now as well as for the euro area and the united states in case either would fall into a liquidity trap in the future

assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives this study quantifies the effects of persistently low interest rates near to the zero lower bound and unconventional monetary policy on pension fund risk incentives in the united states using two structural vector autoregressive var models and a counterfactual scenario analysis the results show that monetary policy shocks as identified by changes in treasury yields following changes in the central bank s target interest rates lead to a substantial increase in pension funds allocation to equity assets notably the shift from bonds to equity securities is greater during the period where the us federal reserve launched unconventional monetary policy measures additional findings show a positive correlation between pension fund risk taking low interest rates and the decline in treasury yields across both well funded and underfunded public pension plans which is thus consistent with a structural risk shifting incentive

the effects of electricity costs on firm re location decisions insights for the pollution havens hypothesis electricity costs are partly driven by environmental policy choices in this paper the effects of variations in electricity costs as measured by end user electricity prices on firm relocation decisions are investigated using a discrete choice model and a data base that has not previously been exploited to study this problem we investigate the effects of variations in electricity costs on the intensive and extensive re location decisions of european firms we find that electricity costs play a significant role in determining relocation destinations this effect is asymmetric between firms moving into and out of a country and between high and low energy intensity sectors the findings of the paper have implications for the pollution havens hypothesis since they show the extent to which the effects of climate policy on domestic electricity costs can be expected to impact on firm relocation decisions both into and out of a country

why are there large differences in performances when the same carbon emission reductions are achieved in different countries great interest has been in unilateral climate policies given present difficulty of establishing stable global coordinated agreements in this paper we investigate underlining factors explaining large differences in performances when the same carbon emission reductions are achieved in different abating countries to this end we develop a new multi country general equilibrium model incorporating six countries or world regions two goods six production inputs capital mobility energy mobility and international trade meanwhile we adopt two performance indicators with carbon leakage representing environmental efficiency and carbon emission abatement costs revealing cost effectiveness our findings are as follows firstly there are large differences in performances among these unilateral climate policies as evidenced by large differences in leakage rates and carbon emission abatement costs secondly the new global climate treaties to replace the kyoto protocol should be able to induce more carbon emission reductions in countries with low carbon emission reduction costs since such setting contributes to global cost savings finally developed countries have high carbon emission abatement costs compared with large developing countries china and india in this paper implying that there should be trade off mechanisms between efficiency and equity regarding how to allocate carbon emission reductions among countries

the financial market impact of uk quantitative easing after outlining some of the monetary developments associated with quantitative easing qe we measure the impact of the uk s initial 2009 10 qe programme on bonds and other assets first we use a macro nance yield curve both to create a counterfactual path for bond yields and to estimate the impact of qe directly second we analyse the impact of individual qe operations on a range of asset prices we nd that qe signi cantly lowered government bond yields through the portfolio balance

more power to the pill the impact of contraceptive freedom on women s life cycle labor supply the release of enovid in 1960 the first birth control pill afforded u s women unprecedented freedom to plan childbearing and their careers this paper uses plausibly exogenous variation in state consent laws to evaluate the causal impact of the pill on the timing of first births and extent and intensity of women s labor force participation the results suggest that legal access to the pill before age 21 significantly reduced the likelihood of a first birth before age 22 increased the number of women in the paid labor force and raised the number of annual hours worked

a review essay on isabel sawhill s generation unbound drifting into sex and parenting without marriage and laurence steinberg s age of opportunity lessons from the new science of adolescence sawhill and steinberg approach risky behavior among youth from two different angles steinberg argues for intervention during the adolescent years to alter behavior in ways that prioritize patience and self regulation while sawhill advocates interventions that mitigate the negative effects of risky behavior both argue that disadvantaged youth suffer worse consequences as a result of risky behavior and therefore stand to gain the most from interventions while the authors develop strong arguments for adolescent interventions the existing evidence on their effectiveness is less compelling to reconcile the promise with the reality i argue that growing up in environments of significant uncertainty reduces the returns to forward thinking behavior in the daily lives of disadvantaged youths interventions to develop adolescent decision making skills so as to reduce risky behavior will not be effective if they are inconsistent with the incentives generated by a local environment that is often characterized by uncertainty

dollar illiquidity and central bank swap arrangements during the global financial crisis abstract while the global financial crisis was centered in the united states it led to a surprising appreciation in the dollar suggesting global dollar illiquidity in response the federal reserve partnered with other central banks to inject dollars into the international financial system empirical studies of the success of these efforts have yielded mixed results in part because their timing is likely to be endogenous in this paper we examine the cross sectional impact of these interventions theory consistent with dollar appreciation in the crisis suggests that their impact should be greater for countries that have greater exposure to the united states through trade and financial channels less transparent holdings of dollar assets and greater illiquidity difficulties we examine these predictions for observed cross sectional changes in cds spreads using a new proxy for innovations in perceived changes in sovereign risk based upon google search data we find robust evidence that auctions of dollar assets by foreign central banks disproportionately benefited countries that were more exposed to the united states through either trade linkages or asset exposure we obtain weaker results for differences in asset transparency or illiquidity however several of the important announcements concerning the international swap programs disproportionately benefited countries exhibiting greater asset opaqueness

the effect of child health insurance access on schooling evidence from public insurance expansions although a sizable literature analyzes the effects of public health insurance programs on short run health outcomes little prior work has examined their long term effects we examine the effects of public insurance expansions among children in the 1980s and 1990s on their future educational attainment we find that expanding health insurance coverage for low income children increases the rate of high school and college completion these estimates are robust to only using federal medicaid expansions and mostly are due to expansions that occur when the children are not newborns our results indicate that the long run benefits of public health insurance are substantial

heterogeneous transmission mechanism monetary policy and financial fragility in the eurozone the eurozone economic activity and banking sector have shown substantial fragility over the last years with remarkable country heterogeneity using detailed data on lending conditions and standards we analyse along several key dimensions of heterogeneity how financial fragility has affected the transmission mechanism of the single eurozone monetary policy the analysis shows that the monetary transmission mechanism is time varying and influenced by the financial fragility of the sovereigns banks firms and households the impact of monetary policy on aggregate output is stronger during the financial crisis especially in countries facing increased sovereign financial distress this amplification mechanism moreover operates through the credit channel both the bank lending and the non financial borrower balance sheet channels our results suggest that the bank lending channel has been to a large extent neutralized by the ecb non standard monetary policy interventions but the policy framework until the end of 2011 was insufficient to overcome credit availability problems stemming from deteriorated firm net worth and risk conditions especially for small firms in countries under stress matteo ciccarelli angela maddaloni and jose luis peydro

the effectiveness of alternative monetary policy tools in a zero lower bound environment this paper reviews alternative options for monetary policy when the shortterm interest rate is at the zero lower bound and develops new empirical estimates of the effects of the maturity structure of publicly held debt on the term structure of interest rates we use a model of risk averse arbitrageurs to develop measures of how the maturity structure of debt held by the public might affect the pricing of level slope and curvature term structure risk we find that these treasury factors historically were quite helpful for predicting both yields and excess returns over 1990 2007 the historical correlations are consistent with the claim that if in december 2006 the fed were to have sold off all its treasury holdings of less than 1 year maturity about 400 billion and use the proceeds to retire treasury debt from the long end this might have resulted in a 14 basis point drop in the 10 year rate and an 11 basis point increase in the 6 month rate we also develop a description of how the dynamic behavior of the term structure of interest rates changed after hitting the zero lower bound in 2009 our estimates imply that at the zero lower bound such a maturity swap would have the same effects as buying 400 billion in long term maturities outright with newly created reserves and could reduce the 10 year rate by 13 basis points without raising short term yields

credit and liquidity in interbank rates a quadratic approach a bank that lends on the unsecured market requires compensations for facing the default risk of the borrowing bank credit risk and the risk associated to its own future funding needs liquidity risk in this paper we propose a quadratic term structure model of the spreads between unsecured and risk free interbank rates our no arbitrage econometric framework allows us to decompose the term structure of spreads into credit and liquidity components and to identify risk premia associated with each of these two risks our results suggest that over the period 2012 2013 most of the reduction in interbank spreads comes from a decrease in liquidity related risk components

the interest rate effects of government bond purchases away from the lower bound abstract i analyze the recent experience of unconventional monetary policy in sweden to study the interest rate transmission mechanisms of government bond purchases when interest rates are away from the lower bound using dynamic term structure models and event study regressions i find that government bond purchases have important portfolio balance and signaling effects the signaling channel operates mainly by lowering short rate expectations in the intermediate segment of the yield curve while the portfolio balance channel is effective in lowering longer maturity term premia in addition i find that target interest rate policy and government bond purchases operate in different segments of the yield curve this suggests that a combination of the two policies can be used to lower interest rates across the whole maturity spectrum making monetary policy more expansionary

income inequality and early nonmarital childbearing using individual level data from the united states we empirically investigate the role of lower tail income inequality in determining rates of early nonmarital childbearing among low socioeconomic status ses women we present robust evidence that young low ses women are more likely to have a nonmarital birth when they live in places with larger lower tail income inequality all else held constant we calculate that differences in the level of inequality are able to explain a sizeable share of the geographic variation in teen fertility rates we propose a model of adolescent decision making that facilitates the interpretation of our results

cross border spillover effects of unconventional monetary policies on swiss asset prices abstract unconventional monetary policies umps announced by the federal reserve the european central bank the bank of england and the bank of japan exert important spillover effects on asset prices in switzerland using a broad ump event set and a long term bond futures based measure of market anticipation we show that surprisingly expansionary umps lower swiss government and corporate bond yields induce the swiss franc to appreciate and dampen swiss equity prices four extensions provide further insights first the estimated effects are strongest for announcements by the ecb second the impact on government bonds is largest for bonds with residual maturities of 7 10 years third the impact of foreign ump shocks on exchange rates and swiss bond yields is less pronounced after the introduction of the minimum rate of 1 20 swiss franc per euro by the swiss national bank on september 6 2011 indicating that domestic monetary policy action partially affects the impact of external monetary shocks on domestic financial markets fourth the sign of spillover effects differs for positive and negative ump surprises but their strength does not

contraceptive supply and fertility outcomes evidence from ghana abstracttotal fertility rates in sub saharan africa are nearly double that of any other region in the world some argue that providing contraceptives has only a negligibly small impact on fertility i exploit exogenous temporary reductions in contraceptive supply in ghana resulting from cuts in us funding to examine impacts on pregnancy abortion and births women are unable to fully compensate for the 10 16 supply reduction using traditional methods for preventing pregnancy which increases by 10 only nonpoor women offset these unwanted pregnancies with induced abortion using separate data i find that poor women experience increases in realized fertility of 7 10

announcements of ecb unconventional programs implications for the sovereign spreads of stressed euro area countries abstract this paper studies the effects of ecb communications about unconventional monetary policy operations on the sovereign spreads of greece ireland italy portugal and spain relative to germany between 2008 and 2012 more than fifty events concerning non standard operations are identified and classified with respect to the specific ecb program the empirical results suggest that the ecb announcements about unconventional monetary policies substantially reduced long term government bond yield spreads relative to german counterparts in all countries except greece particularly among the different types of measures news about the securities markets programme strongly affected the perceived sovereign risk of the five stressed euro area countries while the announcements of the outright monetary transactions seem to have a significant impact only in italy and spain

quantitative easing and unconventional monetary policy an introduction this article assesses the impact of quantitative easing and other unconventional monetary policies followed by central banks in the wake of the financial crisis that began in 2007 we consider the implications of theoretical models for the effectiveness of asset purchases and look at the evidence from a range of empirical studies we also provide an overview of the contributions of the other articles in this feature

fiscal policy and lending relationships this paper studies how fiscal policy affects loan market conditions in the us first it conducts a structural vector autoregression analysis showing that the bank spread responds negatively to an expansionary government spending shock while lending increases second it illustrates that these results are mimicked by a dynamic stochastic general equilibrium model where the bank spread is endogenized via the inclusion of a banking sector exploiting lending relationships third it shows that lending relationships represent a friction that generates a financial accelerator effect in the transmission of the fiscal shock

the impacts of carbon pricing on coastal megacities a cge analysis of singapore abstract pricing carbon is a widely used policy instrument for climate change mitigation quantitative analysis of carbon pricing are mainly conducted at the regional and national level rarely at the city level due to data availability as a representative of coastal megacities that are vulnerable to both climate change and climate policies singapore has announced to impose carbon tax on large direct emitters as a complementary mitigation option to technical measures a city level computable general equilibrium cge model is developed to simulate potential impacts of carbon pricing on the city including paying border carbon adjustment bca on exports or introducing a domestic carbon tax different sector coverages and carbon tax revenue recycling schemes are investigated for domestic carbon tax the simulation results show that a domestic carbon tax is a more cost effective option than paying bca given an identical carbon price at s 10 t co 2 gdp total exports and household consumption would decline less and average abatement cost is much smaller in the carbon tax scenarios compared to the bca scenario in terms of absolute emissions reduction a carbon tax that covers energy manufacturing and land transport sectors would be preferred making emissions around 2 7 lower than 2010 baseline level