Download or read book Monetary Policy Transmission in Emerging Markets and Developing Economies written by Mr.Luis Brandao-Marques and published by International Monetary Fund. This book was released on 2020-02-21 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Market Power and Monetary Policy Transmission written by Mr. Romain A Duval and published by International Monetary Fund. This book was released on 2021-07-09 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that firms’ market power dampens the response of their output to monetary policy shocks, using firm-level data for the United States and a large cross-country firm-level dataset for 14 advanced economies. The estimated impact of a firm’s markup on its response to a monetary policy shock is large enough to materially affect monetary policy transmission. We also find some evidence that the role of markup in monetary policy transmission, while independent from other channels, is greater for firms whose characteristics — notably size and age — are likely to be associated with greater financial constraints. We rationalize these findings through a simple partial equilibrium model in which borrowing constraints amplify disproportionately low-markup firms’ responses to changes in interest rates.

Download or read book Asset Prices and Monetary Policy written by John Y. Campbell and published by University of Chicago Press. This book was released on 2008-11-15 with total page 444 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Monetary Policy Transmission Through Commodity Prices written by Jorge Miranda-Pinto and published by International Monetary Fund. This book was released on 2023-10-10 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Monetary policy influences inflation dynamics by exerting impact on a diverse array of commodity prices. At high frequencies, we show that a 10 basis points increase in US monetary policy rate reduces commodity prices between 0.5% and 2.5%, after 18 to 24 business days. Beyond the dollar appreciation channel, the effects are larger for highly storable and industrial commodities, consistent with the cost of carry and the expected demand channel. We then study the quantitative importance of the commodity-price channel of monetary policy on domestic and international inflation at longer horizons (6-36 months). The results indicate that the response of commodity prices—oil, base metals, and food prices—to monetary policy accounts for 47% of the total effect of US monetary policy on US headline inflation, and 57% of the effect of US monetary policy on other countries’ headline inflation. The commodity price channel on core inflation is smaller and mainly driven by base metal prices. Finally, the commodity-price channel of ECB monetary policy is smaller, and it mainly operates through its effect on energy prices.

Download or read book Monetary Policy A Market Price Approach written by Manuel H. Johnson and published by Praeger. This book was released on 1996-10-21 with total page 342 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the first comprehensive presentation of how monetary policymakers can use market prices to produce price stability. Drs. Johnson and Keleher show why other, conventional methods have failed and why market prices are superior guides for setting monetary policy. Their book presents the rationale, history, and philosophy underlying their approach; offers three forms of empirical research evidence to support it; and then presents special methods to use market prices as policy setting guides. Important and challenging reading for monetary policymakers and economists, bankers, financial analysts, and professional investors, as well as their colleagues in the academic community with similar interests. Substantial changes involving revolutions in telecommunications and information processing, financial deregulation, and the global integration of financial markets have altered the environment in which central banks operate. This altered environment has undermined various conventional approaches to monetary policy. This book presents an alternative market price approach to monetary policy. The approach is easily adapted to the above-cited change: it adopts a price stabilization policy goal and uses key market prices from the commodity, foreign exchange, and bond markets as guides to policy. Commodity prices, foreign exchange rates, and bond yields represent proxies for the exchange rate between domestic money and (1) commodities, (2) foreign monies, and (3) future money (bonds), respectively. These market prices are assessed in conjunction with one another to yield policy guidance to the monetary authority. This book describes how this approach is carried out in practice. Empirical evidence support the approach from three perspectives. First, empirical support exists for each of the individual market price indicators examined in isolation. Second, market price indicators provided accurate signals for monetary policymakers during the post-Bretton Wood era. Had this market price approach been used by policymakers, the performance of the macroeconomy during this period likely would have been improved. Third, at least one historical episode demonstrates that when the approach was employed, economic performance was impressive, and price stability was, in fact, achieved.

Download or read book Commodity Prices and Markets written by Takatoshi Ito and published by University of Chicago Press. This book was released on 2011-03 with total page 346 pages. Available in PDF, EPUB and Kindle. Book excerpt: Fluctuations of commodity prices, most notably of oil, capture considerable attention and have been tied to important economic effects. This book advances our understanding of the consequences of these fluctuations, providing both general analysis and a particular focus on the countries of the Pacific Rim.

Download or read book Commodity Price Movements and Banking Crises written by Mr.Markus Eberhardt and published by International Monetary Fund. This book was released on 2018-07-06 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop an empirical model to predict banking crises in a sample of 60 low-income countries (LICs) over the 1981-2015 period. Given the recent emergence of financial sector stress associated with low commodity prices in several LICs, we assign price movements in primary commodities a key role in our model. Accounting for changes in commodity prices significantly increases the predictive power of the model. The commodity price effect is economically substantial and robust to the inclusion of a wide array of potential drivers of banking crises. We confirm that net capital inflows increase the likelihood of a crisis; however, in contrast to recent findings for advanced and emerging economies, credit growth and capital flow surges play no significant role in predicting banking crises in LICs.

Download or read book World Food Prices and Monetary Policy written by Roberto Chang and published by International Monetary Fund. This book was released on 2010-07-01 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: The large swings in world food prices in recent years renew interest in the question of how monetary policy in small open economies should react to such imported price shocks. We examine this issue in a canonical open economy setting with sticky prices and where food plays a distinctive role in utility. We show how world food price shocks affect natural output and other aggregates, and derive a second order approximation to welfare. Numerical calibrations show broad CPI targeting to be welfare-superior to alternative policy rules once the variance of food price shocks is sufficiently large as in real world data.

Download or read book Monetary Transmission Mechanism in the East African Community written by Mr.Hamid Reza Davoodi and published by International Monetary Fund. This book was released on 2013-02-06 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do changes in monetary policy affect inflation and output in the East African Community (EAC)? We find that (i) Monetary Transmission Mechanism (MTM) tends to be generally weak when using standard statistical inferences, but somewhat strong when using non-standard inference methods; (ii) when MTM is present, the precise transmission channels and their importance differ across countries; and (iii) reserve money and the policy rate, two frequently used instruments of monetary policy, sometimes move in directions that exert offsetting expansionary and contractionary effects on inflation—posing challenges to harmonization of monetary policies across the EAC and transition to a future East African Monetary Union. The paper offers some suggestions for strengthening the MTM in the EAC.

Download or read book Conditionality in Evolving Monetary Policy Regimes written by International Monetary Fund and published by International Monetary Fund. This book was released on 2014-05-03 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: With single-digit inflation and substantial financial deepening, developing countries are adopting more flexible and forward-looking monetary policy frameworks and ascribing a greater role to policy interest rates and inflation objectives. While some countries have adopted formal inflation targeting regimes, others have developed frameworks with greater target flexibility to accommodate changing money demand, use of policy rates to signal the monetary policy stance, and implicit inflation targets.

Download or read book Commodity Terms of Trade written by International Monetary Fund and published by International Monetary Fund. This book was released on 2009-09-01 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We compile a historical dataset covering nearly 40 years of booms and busts in the commodity terms of trade of over 150 countries. We discuss the characteristics of these events and their effects on macroeconomic performance and, in particular, compare the most recent commodity-price cycle with its historical precedents.

Download or read book Energy Transition Metals written by Lukas Boer and published by International Monetary Fund. This book was released on 2021-10-12 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: The energy transition requires substantial amounts of metals such as copper, nickel, cobalt and lithium. Are these metals a key bottleneck? We identify metal-specific demand shocks, estimate supply elasticities and pin down the price impact of the energy transition in a structural scenario analysis. Metal prices would reach historical peaks for an unprecedented, sustained period in a net-zero emissions scenario. The total value of metals production would rise more than four-fold for the period 2021 to 2040, rivaling the total value of crude oil production. Metals are a potentially important input into integrated assessments models of climate change.

Download or read book Interest and Prices written by Michael Woodford and published by Princeton University Press. This book was released on 2011-12-12 with total page 805 pages. Available in PDF, EPUB and Kindle. Book excerpt: With the collapse of the Bretton Woods system, any pretense of a connection of the world's currencies to any real commodity has been abandoned. Yet since the 1980s, most central banks have abandoned money-growth targets as practical guidelines for monetary policy as well. How then can pure "fiat" currencies be managed so as to create confidence in the stability of national units of account? Interest and Prices seeks to provide theoretical foundations for a rule-based approach to monetary policy suitable for a world of instant communications and ever more efficient financial markets. In such a world, effective monetary policy requires that central banks construct a conscious and articulate account of what they are doing. Michael Woodford reexamines the foundations of monetary economics, and shows how interest-rate policy can be used to achieve an inflation target in the absence of either commodity backing or control of a monetary aggregate. The book further shows how the tools of modern macroeconomic theory can be used to design an optimal inflation-targeting regime--one that balances stabilization goals with the pursuit of price stability in a way that is grounded in an explicit welfare analysis, and that takes account of the "New Classical" critique of traditional policy evaluation exercises. It thus argues that rule-based policymaking need not mean adherence to a rigid framework unrelated to stabilization objectives for the sake of credibility, while at the same time showing the advantages of rule-based over purely discretionary policymaking.

Download or read book International Monetary Fund Annual Report 2019 Financial Statements written by International Monetary Fund and published by International Monetary Fund. This book was released on 2019-10-04 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: The audited consolidated financial statements of the International Monetary Fund as of April 30, 2019 and 2018

Download or read book Monetary Policy and Balance Sheets written by Ms.Deniz Igan and published by International Monetary Fund. This book was released on 2013-07-03 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates the strength of the balance sheet channel in the U.S. monetary policy transmission mechanism over the past three decades. Using a Factor-Augmented Vector Autoregression model on an expanded data set, including sectoral balance sheet variables, we show that the balance sheets of various economic agents act as important links in the monetary policy transmission mechanism. Balance sheets of financial intermediaries, such as commercial banks, asset-backed-security issuers and, to a lesser extent, security brokers and dealers, shrink in response to monetary tightening, while money market fund assets grow. The balance sheet effects are comparable in magnitude to the traditional interest rate channel. However, their economic significance in the run-up to the recent financial crisis was small. Large increases in interest rates would have been needed to avert a rapid rise of house prices and an unsustainable expansion of mortgage credit, suggesting an important role for macroprudential policies.

Download or read book Monetary Transmission in Developing Countries written by Ms.Prachi Mishra and published by International Monetary Fund. This book was released on 2016-09-07 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the strength of monetary transmission in India, using a conventional structural VAR methodology. We find that a tightening of monetary policy is associated with a significant increase in bank lending rates and conventional effects on the exchange rate, though pass-through to lending rates is only partial and exchange rate effects are weak. We could find no significant effects on real output or the inflation rate. Though the message for the effectiveness of monetary transmission in India is therefore mixed, our results for India are more favorable than is often found for other developing countries.

Download or read book The Distributional Implications of the Impact of Fuel Price Increases on Inflation written by Mr. Kangni R Kpodar and published by International Monetary Fund. This book was released on 2021-11-12 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.