Author: Margaux MacDonald Publisher: International Monetary Fund ISBN: 1484331796 Category : Business & Economics Languages : en Pages : 70
Book Description
This paper investigates the effects of unconventional monetary policy in a small open economy. Using recently proposed shadow interest rates to capture unconventional monetary policy at the zero lower bound (ZLB) we estimate a Bayesian structural vector autoregressive model for Canada - a useful case where foreign shocks can be proxied by U.S. variables alone. We find that, during the ZLB period, Canadian unconventional monetary policy increased output (measured by industrial production) by 0.013 percent per month on average while US unconventional monetary policy raised Canadian output by 0.127 percent per month on average. Our results demonstrate the effectiveness of domestic unconventional monetary policy and the strong positive spillover effects that foreign unconventional monetary policies can have in a small open economy.
Author: Naoyuki Yoshino Publisher: Oxford University Press, USA ISBN: 0198838107 Category : Business & Economics Languages : en Pages : 345
Book Description
Barely two decades after the Asian financial crisis Asia was suddenly confronted with multiple challenges originating outside the region: the 2008 global financial crisis, the European debt crisis, and finally developed economies' implementation of unconventional monetary policies. The implementation of quantitative easing, ultra-low interest rate policies, and negative interest rate policies by a number of large central banks has given rise to concerns over financial stability and international capital flows. Macroeconomic Shocks and Unconventional Monetary Policy: Impacts on Emerging Markets explains how shocks stemming from the global financial crisis have affected macroeconomic and financial stability in emerging Asia. Macroeconomic Shocks and Unconventional Monetary Policy: Impacts on Emerging Markets brings together the most up-to-date knowledge impacts of recent macroeconomic shocks on Asia's real economy; the spillover effects of macroeconomic shocks on financial markets and flows in Asia; and key challenges for monetary, exchange rate, trade and macro prudential policies of developing Asian economies. It is authored by experts in the field of international macroeconomics from leading academic institutions, central banks, and international organizations including the International Monetary Fund, the Bank for International Settlement, and the Asian Development Bank Institute.
Author: Cobus Cornelis Vermeulen Publisher: ISBN: Category : Languages : en Pages :
Book Description
Following the Global Financial Crisis of 2007 { 2010, central banks around the world were forced into unprecedented policy interventions to stabilise asset markets and prevent the global nancial system from collapsing. Because interest rates around the world were at historical lows, \conventional" interest rate policy was not an option. Central banks, led by the US Federal Reserve, resorted to \unconventional" monetary policies, rst to stabilise markets during the height of the crisis, and then to support the economic recovery thereafter. The distinguishing characteristic of these unconventional policies was that they involved direct intervention by central banks in long-term xed income markets, such as government bonds and agency debt. This thesis considers the theoretical channels through which central bank purchases of long-term securities could impact (i) bond yields, (ii) other domestic asset markets, and (iii) spillovers to foreign countries. The theory is then tested and evaluated against the empirical evidence. Based on the empirical results, a simple closed-economy DSGE model is constructed. The model captures and illustrates the transmission from central bank asset purchase shocks to the aggregate economy. The asset purchase shock is subsequently converted to an endogenous balance sheet rule. Simulations show that combining this unconventional (balance sheet) rule with a conventional (short-term interest rate) rule yields a superior policy mix than under the conventional rule alone. Finally, the closed-economy model is extended to an open-economy framework, within which a similar balance sheet rule is evaluated in the context of international capital ows. Again, the combination of the balance sheet and interest rate policy is found to yield a superior outcome than interest rate policy alone. The contribution of this thesis is twofold. It contributes to the understanding of the impact of central bank interventions in xed income markets on long-term yields, as well as the externalities and spillovers to other asset markets. Furthermore, this thesis develops a robust and versatile framework, which is intuitively easy to grasp, within which various aspects of central bank balance sheet policy could be investigated. This thesis' main conclusion is that unconventional monetary policy could complement conventional policy under normal market conditions, and that unconventional policy need not be restricted to crisis times only.
Author: Martin Feldstein Publisher: University of Chicago Press ISBN: 0226241807 Category : Business & Economics Languages : en Pages : 500
Book Description
Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.
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: 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: Ambrogio Cesa-Bianchi Publisher: International Monetary Fund ISBN: 1484346033 Category : Business & Economics Languages : en Pages : 43
Book Description
In this paper we first compare house price cycles in advanced and emerging economies using a new quarterly house price data set covering the period 1990-2012. We find that house prices in emerging economies grow faster, are more volatile, less persistent and less synchronized across countries than in advanced economies. We also find that they correlate with capital flows more closely than in advanced economies. We then condition the analysis on an exogenous change to a particular component of capital flows. We find that a global liquidity shock, identified by aggregating bank-to-bank cross border flows and by using the external instrumental variable approach of Stock and Watson (2012) and Mertens and Ravn (2013), has a much stronger impact on house prices and consumption in emerging markets than in advanced economies. In our empirical model, holding house prices or the exchange rate constant in response to this shock tends to dampen its effects on consumption in emerging economies.
Author: Margaux MacDonald
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Author: Naoyuki Yoshino
Author: Cobus Cornelis Vermeulen
Author: Martin Feldstein
Author: Ben S. Bernanke
Author: Yang Zhang
Author: Charles T. Carlstrom
Author: Ambrogio Cesa-Bianchi