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Author: Yang Zhang Publisher: ISBN: Category : Monetary policy Languages : en Pages :
Book Description
In the first chapter zImpact of Quantitative Easing at the Zero Lower Bound (with J. Dorich, R. Mendes)y, we introduce imperfect asset substitution and segmented asset markets, along the lines of Andres et al. (2004), in an otherwise standard small open-economy model with nominal rigidities. We estimate the model using Canadian data. We use the model to provide a quantitative assessment of the macroeconomic impact of quantitative easing (QE) when the policy rate is at its effective lower bound. In the second chapter zImpact of Forward Guidance at the Zero Lower Boundy, I consider alternative monetary policy rules under commitment in a calibrated three-equation New Keynesian model and examine the extent to which forward guidance helps to mitigate the negative real impact of the zero lower bound. The simulation results suggest that the conditional statement policy prolongs the zero lower bound duration for an additional 4 quarters and reverses half of the decline in inflation associated with the lower bound. It even generates a period of overshooting in inflation three quarters after the initial negative demand shock. Alternatively, the effect of price-level targeting as a forward guidance policy at the zero lower bound is slightly different. In the third chapter zImpact of Quantitative Easing on Household Deleveragingy, I extend the DSGE model in the first chapter with some financial frictions to explore the effects of QE on asset prices and household balance sheet. There are two effects of QE on aggregate output originated from the model. First, QE leads to a decline in term premium, which increases current consumption relative to future consumption. Second, it leads to a lower loan to collateral value ratio and a decline in external finance premium. Favorable financing condition encourages further accumulation of household debt at cheaper rates, in turn, leads to an immediate higher household debt to income ratio. In the consideration of the future withdrawal of any stimulus provided from QE, this would pose greater challenges as it implies much intensive household deleveraging process. I provide some sensitivity analysis around key parameters of the model.
Author: Yang Zhang Publisher: ISBN: Category : Monetary policy Languages : en Pages :
Book Description
In the first chapter zImpact of Quantitative Easing at the Zero Lower Bound (with J. Dorich, R. Mendes)y, we introduce imperfect asset substitution and segmented asset markets, along the lines of Andres et al. (2004), in an otherwise standard small open-economy model with nominal rigidities. We estimate the model using Canadian data. We use the model to provide a quantitative assessment of the macroeconomic impact of quantitative easing (QE) when the policy rate is at its effective lower bound. In the second chapter zImpact of Forward Guidance at the Zero Lower Boundy, I consider alternative monetary policy rules under commitment in a calibrated three-equation New Keynesian model and examine the extent to which forward guidance helps to mitigate the negative real impact of the zero lower bound. The simulation results suggest that the conditional statement policy prolongs the zero lower bound duration for an additional 4 quarters and reverses half of the decline in inflation associated with the lower bound. It even generates a period of overshooting in inflation three quarters after the initial negative demand shock. Alternatively, the effect of price-level targeting as a forward guidance policy at the zero lower bound is slightly different. In the third chapter zImpact of Quantitative Easing on Household Deleveragingy, I extend the DSGE model in the first chapter with some financial frictions to explore the effects of QE on asset prices and household balance sheet. There are two effects of QE on aggregate output originated from the model. First, QE leads to a decline in term premium, which increases current consumption relative to future consumption. Second, it leads to a lower loan to collateral value ratio and a decline in external finance premium. Favorable financing condition encourages further accumulation of household debt at cheaper rates, in turn, leads to an immediate higher household debt to income ratio. In the consideration of the future withdrawal of any stimulus provided from QE, this would pose greater challenges as it implies much intensive household deleveraging process. I provide some sensitivity analysis around key parameters of the model.
Author: Xu Zhang Publisher: ISBN: Category : Languages : en Pages : 138
Book Description
This dissertation studies the identification of monetary policy and the effects of monetary policy on the macroeconomy. Chapter 1 provides a new methodology to identify monetary policy shock. Federal Reserve announcements contain information about both economic fundamentals and monetary policy. My paper proposes to disentangle the information effects using Federal Reserve's forecasts about the macroeconomy and constructs a new measure of monetary policy shocks. The new shock series is consistent with the traditional view. Chapter 2 investigates the effects of unconventional monetary policy when the nominal interest rate reaches the zero lower bound. There are two types of monetary policy, i.e. forward guidance and large-scale asset purchases. I identify the separate contributions of each monetary policy shock to the effects on yield curve and macroeconomy. Chapter 3 studies the effects of monetary policy on the household behavior. I look at how households with heterogeneous balance sheet composition would make their decisions in response to monetary policy interventions, and to what extent and this could affect the aggregate economy. I provide empirical analysis using household-level data, and document empirical stylized facts that can be used to evaluate different theoretical transmission channels of monetary policy.
Author: Yi Zhang Publisher: ISBN: Category : Languages : en Pages : 110
Book Description
This dissertation is a collection of three essays focusing on how to measure unconventional monetary policy and how unconventional monetary policy and the zero-lower-bound (ZLB) environment affect the macroeconomy and exchange rates. Chapter 1 shows that the widely used shadow rate is not a sufficiently informative measure of unconventional monetary policy. To better trace out monetary policy innovations and measure the corresponding macroeconomic impact, I develop a new econometric model which not only uses the shadow rate, but also employs forward guidance information contained in survey data on expected lift-off dates. After controlling for expectations about lift-off, I find post-crisis expansionary monetary policy is much more aggressive and effective than that estimated by a standard FAVAR model (Wu and Xia (2016)). Chapter 2 examines the performance of popular exchange rate forecast models against the random walk benchmark. The models are estimated in error correction and first-difference specifications, and evaluated at various forecast horizons (1 quarter, 4 quarters, 20 quarters) using differing metrics (mean squared error, direction of change, and "consistency" test). No model consistently outperforms a random walk, by a mean squared error measure, although purchasing power parity does fairly well. Moreover, along a direction-of-change dimension, certain structural models do outperform a random walk with statistical significance. While one finds that these forecasts are cointegrated with the actual values of exchange rates, the elasticity is usually different from unity. Overall, model/specification/currency combinations that work well in one period will not necessarily work well in another period. Chapter 3 converts unconventional monetary policy measures into equivalent conventional monetary policy measures --- federal funds rate surprises and expected inflation surprises --- and compares the effects of unconventional and conventional monetary policy announcements on the value of the dollar through these two channels. I find that the impact of the federal funds rate surprises on the dollar value has not changed much since the crisis began, but this channel has become irrelevant because the ZLB has eliminated all federal funds rate surprises. The impact of the expected inflation surprises, however, has weakened dramatically compared to the pre-crisis period.
Author: Wenbin Wu Publisher: ISBN: Category : Languages : en Pages : 93
Book Description
Chapter 1 contributes to the recent debate about the importance of temporary price changes for monetary policy transmission. Although sales occur very frequently, macroeconomists often filter them out because sales are not responsive to economic shocks. Using micro data underlying CPI, I demonstrate that after sales, the price index of durables goes down gradually, and that the aggregation of sales of durable goods have a significant impact on the aggregate inflation. However, sales of nondurables--the focus of previous studies--do not show these results. To study the impact of sales, I then propose a two-sector menu-cost model with the feature of sales. The model is able to match the pattern of sales and moments in the micro data. By contrast, failing to account for temporary sales in a menu-cost model would increase the output effect by 73%, and the Calvo model calibrated to the frequency of regular price changes triples the output effect. Chapter 2 examines the impact of unconventional monetary policies on the stock market when the short-term nominal interest rate is stuck at the zero lower bound. Unconventional monetary policies appear to have significant effects on stock prices and the effects differ across stocks. In agreement with existing credit channel theories, I find that firms subject to financial constraints react more strongly to unconventional monetary policy shocks (especially large-scale asset purchases) than do less constrained firms. My results imply that the credit channel is as important as the interest rate channel in the transmission of unconventional monetary policies at the zero lower bound. Chapter 3 investigates the time-varying effects of monetary policy shocks on financial markets. I show that the corporate bond market is highly responsive to monetary policy shocks throughout 2000-2012, implying a high pass-through of policy-induced movements in Treasury yields to private yields even during the zero lower bound period. While the long-term Treasury bond market is highly sensitive to monetary policy shocks throughout almost the entire sample, the short-term Treasury bond market is severely constrained by the zero lower bound. The stock market is less responsive from 2008 to 2010, but the responsiveness bounces back rapidly in 2011.
Author: Ben S. Bernanke Publisher: www.bnpublishing.com ISBN: 9781607961055 Category : Languages : en Pages : 0
Book Description
The success over the years in reducing inflation and, consequently, the average level of nominal interest rates has increased the likelihood that the nominal policy interest rate may become constrained by the zero lower bound. When that happens, a central bank can no longer stimulate aggregate demand by further interest-rate reductions and must rely on "non-standard" policy alternatives. To assess the potential effectiveness of such policies, we analyze the behavior of selected asset prices over short periods surrounding central bank statements or other types of financial or economic news and estimate "noarbitrage" models of the term structure for the United States and Japan. There is some evidence that central bank communications can help to shape public expectations of future policy actions and that asset purchases in large volume by a central bank would be able to affect the price or yield of the targeted asset.
Author: Peter Conti-Brown Publisher: Edward Elgar Publishing ISBN: 1784719226 Category : Banks and banking, Central Languages : en Pages : 589
Book Description
Central banks occupy a unique space in their national governments and in the global economy. The study of central banking however, has too often been dominated by an abstract theoretical approach that fails to grasp central banks’ institutional nuances. This comprehensive and insightful Handbook, takes a wider angle on central banks and central banking, focusing on the institutions of central banking. By 'institutions', Peter Conti-Brown and Rosa Lastra refer to the laws, traditions, norms, and rules used to structure central bank organisations. The Research Handbook on Central Banking’s institutional approach is one of the most interdisciplinary efforts to consider its topic, and includes chapters from leading and rising central bankers, economists, lawyers, legal scholars, political scientists, historians, and others.
Author: Mr.Jaromir Benes Publisher: International Monetary Fund ISBN: 1475505523 Category : Business & Economics Languages : en Pages : 71
Book Description
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.
Author: Masahiro Kawai Publisher: Edward Elgar Publishing ISBN: 0857933353 Category : Business & Economics Languages : en Pages : 321
Book Description
Asian economies strengthened their monetary and currency management after the Asian financial crisis of 19971998, and came through the global financial crisis of 20072009 relatively well. Nevertheless, the recent global crisis has presented new challenges. This book develops recommendations for monetary and currency policy in Asian economies aimed at promoting macroeconomic and financial stability in an environment of global economic shocks and volatile capital flows. Monetary and Currency Policy Management in Asia draws lessons from crises and makes concrete macroeconomic policy recommendations aimed at minimizing the impacts of an economic and financial downturn, and setting the stage for an early return to sustainable growth. The focus is on short-term measures related to the cycle. The three main areas addressed are: monetary policy measures, both conventional and unconventional, to achieve both macroeconomic and financial stability; exchange rate policy and foreign exchange reserve management, including the potential for regional cooperation to stabilize currency movements; and ways to ease the constraints on policy resulting from the so-called 'impossible trinity' of fixed exchange rates, open capital accounts and independent monetary policy. This is one of the first books since the global financial crisis to specifically and comprehensively address the implications of the crisis for monetary and currency policy in emerging market economies, especially in Asia. Presenting a broad menu of policy options for financial reform and regulation, the book will be of great interest to finance experts and policymakers in the region as well as academics and researchers of financial and Asian economics as well as economic development.
Author: Yang Zhang
Author: Yang Zhang
Author: Xu Zhang
Author: Yi Zhang
Author: Severin Gabriel Damian Bernhard
Author: Wenbin Wu
Author: Adrian Paul
Author: Ben S. Bernanke
Author: Peter Conti-Brown
Author: Mr.Jaromir Benes
Author: Masahiro Kawai