Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates PDF Download

Author: Martin S. Eichenbaum
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 60

View

Book Description
This paper presents new empirical evidence on the effects of monetary policy shocks on U.S. exchange rates, both nominal and real. Three measures of monetary policy shocks are considered: orthogonalized shocks to the Federal Funds rate, the ratio of Non Borrowed to Total Reserves and the Romer and Romer (1989) index. Using data from the flexible exchange rate era, we find that expansionary shocks to U.S. monetary policy lead to sharp. persistent depreciations in U.S. nominal and real exchange rates as well as to sharp. persistent increases in the spread between various foreign and U.S. interest rates. The temporal pattern of the depreciation in U.S. nominal exchange rates following a positive monetary policy shock is inconsistent with simple overshooting models of the type considered by Dornbusch (1976). We also find that U.S. monetary policy was less volatile under fixed exchange rates than under floating exchange rates. Finally, we find less evidence that monetary policy shocks had a significant impact on U.S. real exchange rates under the Bretton Woods agreement.

Author: John Y. Campbell
Publisher: University of Chicago Press
ISBN: 0226092127
Category : Business & Economics
Languages : en
Pages : 444

View

Book Description
Economic growth, low inflation, and financial stability are among the most important goals of policy makers, and central banks such as the Federal Reserve are key institutions for achieving these goals. In Asset Prices and Monetary Policy, leading scholars and practitioners probe the interaction of central banks, asset markets, and the general economy to forge a new understanding of the challenges facing policy makers as they manage an increasingly complex economic system. The contributors examine how central bankers determine their policy prescriptions with reference to the fluctuating housing market, the balance of debt and credit, changing beliefs of investors, the level of commodity prices, and other factors. At a time when the public has never been more involved in stocks, retirement funds, and real estate investment, this insightful book will be useful to all those concerned with the current state of the economy.

Author: Mr.Luis Brandao-Marques
Publisher: International Monetary Fund
ISBN: 1513529730
Category : Business & Economics
Languages : en
Pages : 54

View

Book Description
Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.

Author: Nigar Hashimzade
Publisher: Edward Elgar Publishing
ISBN: 0857931024
Category : Business & Economics
Languages : en
Pages : 627

View

Book Description
This comprehensive Handbook presents the current state of art in the theory and methodology of macroeconomic data analysis. It is intended as a reference for graduate students and researchers interested in exploring new methodologies, but can also be employed as a graduate text. The Handbook concentrates on the most important issues, models and techniques for research in macroeconomics, and highlights the core methodologies and their empirical application in an accessible manner. Each chapter is largely self-contained, whilst the comprehensive introduction provides an overview of the key statistical concepts and methods. All of the chapters include the essential references for each topic and provide a sound guide for further reading. Topics covered include unit roots, non-linearities and structural breaks, time aggregation, forecasting, the Kalman filter, generalised method of moments, maximum likelihood and Bayesian estimation, vector autoregressive, dynamic stochastic general equilibrium and dynamic panel models. Presenting the most important models and techniques for empirical research, this Handbook will appeal to students, researchers and academics working in empirical macro and econometrics.

Author: Jordi Galí
Publisher: University of Chicago Press
ISBN: 0226278875
Category : Business & Economics
Languages : en
Pages : 663

View

Book Description
United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.

Author: John B. Taylor
Publisher: University of Chicago Press
ISBN: 0226791262
Category : Business & Economics
Languages : en
Pages : 460

View

Book Description
This timely volume presents the latest thinking on the monetary policy rules and seeks to determine just what types of rules and policy guidelines function best. A unique cooperative research effort that allowed contributors to evaluate different policy rules using their own specific approaches, this collection presents their striking findings on the potential response of interest rates to an array of variables, including alterations in the rates of inflation, unemployment, and exchange. Monetary Policy Rules illustrates that simple policy rules are more robust and more efficient than complex rules with multiple variables. A state-of-the-art appraisal of the fundamental issues facing the Federal Reserve Board and other central banks, Monetary Policy Rules is essential reading for economic analysts and policymakers alike.

Author: Camila Casas
Publisher: International Monetary Fund
ISBN: 1484330609
Category : Business & Economics
Languages : en
Pages : 62

View

Book Description
Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.

Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1498344062
Category : Business & Economics
Languages : en
Pages : 74

View

Book Description
Over the past two decades, many low- and lower-middle income countries (LLMICs) have improved control over fiscal policy, liberalized and deepened financial markets, and stabilized inflation at moderate levels. Monetary policy frameworks that have helped achieve these ends are being challenged by continued financial development and increased exposure to global capital markets. Many policymakers aspire to move beyond the basics of stability to implement monetary policy frameworks that better anchor inflation and promote macroeconomic stability and growth. Many of these LLMICs are thus considering and implementing improvements to their monetary policy frameworks. The recent successes of some LLMICs and the experiences of emerging and advanced economies, both early in their policy modernization process and following the global financial crisis, are valuable in identifying desirable features of such frameworks. This paper draws on those lessons to provide guidance on key elements of effective monetary policy frameworks for LLMICs.

Author: P. Karadeloglou
Publisher: Springer
ISBN: 0230582699
Category : Business & Economics
Languages : en
Pages : 255

View

Book Description
This book looks at the PPP persistence puzzle, and econometric aspects of exchange rate dynamics and their implications. It also explores the importance of exchange rate dynamics in the pass-through effects (PTE) and the econometric aspects of the exchange rates dynamics linked to structural shocks on different economies.

Author: Eliphas Ndou
Publisher: Palgrave Macmillan
ISBN: 9783030139315
Category : Business & Economics
Languages : en
Pages : 0

View

Book Description
This book focuses on the exchange rate pass-through (ERPT), second round effects and the inflation process in South Africa. The authors demonstrate that magnitudes of the second round effects of the exchange rate depreciation and oil price shocks depend on inflation regimes. The impact of positive oil price shocks on inflation is weakened by monetary policy credibility. Evidence shows the influence of oil price on unit labour costs and correlation between exchange rate changes and inflation has weakened. In addition, ERPT is reduced by low business and consumer confidence, high trade openness, low inflation and high exchange rate volatility which weaken real economic activity. Both monetary and fiscal policy credibility lowers the sizes of ERPT to inflation and inflation expectations. Fiscal policy via fuel levies, administered prices and public transport inflation channel impacts the responses of monetary policy to inflation shocks. The authors show that second round effects contribute very little to wage inflation following an exchange rate depreciation shock. Both lending rate and household consumption responds asymmetrical to repo rate changes. This book will appeal to policymakers, students, academics and analysts.