Download or read book Technology Shocks and Monetary Policy in an Estimated Sticky Price Model of the Euro Area written by Sanvi Avouyi-Dovi and published by . This book was released on 2005 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Cost Channel of Monetary Policy written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2003-07-01 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates the importance of the cost channel of monetary policy in a New Keynesian model of the business cycle. A model with nominal rigidities is extended by assuming that a fraction of firms need to borrow money to pay their wage bill. Hence, monetary policy tightenings increase effective unit labor costs of production, and might imply an increase in inflation. The model explains the joint dynamics of output, inflation, real wages, and interest rates, and is estimated using a Bayesian framework and data for the United States and the euro area. The main result is that cost channel effects are absent in both cases. Moreover, it is not possible to obtain a "price puzzle" type of behavior from estimated impulse responses to monetary policy shocks.

Download or read book Technology Shocks and Aggregate Fluctuations written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2004-12-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.

Download or read book International Dimensions of Monetary Policy written by Jordi Galí and published by University of Chicago Press. This book was released on 2010-03-15 with total page 663 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Money and the Natural Rate of Interest written by Javier Andrés and published by . This book was released on 2008 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the role of money in three environments: the New Keynesian model with separable utility and static money demand; a nonseparable utility variant with habit formation; and a version with adjustment costs for holding real balances. The last two variants imply forward-looking behavior of real money balances, with forecasts of future interest rates entering current portfolio decisions. We conduct a structural econometric analysis of the U.S. and euro area economies. FIML estimates confirm the forward-looking character of money demand. A consequence is that real money balances are valuable in anticipating future variations in the natural interest rate. [Resumen de autor]

Download or read book Designing a Simple Loss Function for Central Banks written by Davide Debortoli and published by International Monetary Fund. This book was released on 2017-07-21 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.

Download or read book Shocks Structures Or Monetary Policies written by Lawrence J. Christiano and published by . This book was released on 2007 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: The US Federal Reserve cut interest rates more vigorously in the recent recession than the European Central Bank did. By comparison with the Fed, the ECB followed a more measured course of action. We use an estimated dynamic general equilibrium model with financial frictions to show that comparisons based on such simple metrics as the variance of policy rates are misleading. We find that - because there is greater inertia in the ECB's policy rule - the ECB's policy actions actually had a greater stabilizing effect than did those of the Fed. As a consequence, a potentially severe recession turned out to be only a slowdown, and inflation never departed from levels consistent with the ECB's quantitative definition of price stability. Other factors that account for the different economic outcomes in the Euro Area and US include differences in shocks and differences in the degree of wage and price flexibility.

Download or read book How Loose How Tight A Measure of Monetary and Fiscal Stance for the Euro Area written by Nicoletta Batini and published by International Monetary Fund. This book was released on 2020-06-05 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper builds a model-based dynamic monetary and fiscal conditions index (DMFCI) and uses it to examine the evolution of the joint stance of monetary and fiscal policies in the euro area (EA) and in its three largest member countries over the period 2007-2018. The index is based on the relative impacts of monetary and fiscal policy on demand using actual and simulated data from rich estimated models featuring also financial intermediaries and long-term government debt. The analysis highlights a short-lived fiscal expansion in the aftermath of the Global Financial Crisis, followed by a quick tightening, with monetary policy left to be the “only game in town” after 2013. Individual countries’ DMFCIs show that national policy stances did not always mirror the evolution of the aggregate stance at the EA level, due to heterogeneity in the fiscal stance.

Download or read book Putting the New Keynesian Model to a Test written by Roland Straub and published by International Monetary Fund. This book was released on 2006-05 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, New Keynesian dynamic stochastic general equilibrium (NK DSGE) models have become increasingly popular in the academic literature and in policy analysis. However, the success of these models in reproducing the dynamic behavior of an economy following structural shocks is still disputed. This paper attempts to shed light on this issue. We use a VAR with sign restrictions that are robust to model and parameter uncertainty to estimate the effects of monetary policy, preference, government spending, investment, price markup, technology, and labor supply shocks on macroeconomic variables in the United States and the euro area. In contrast to the NK DSGE models, the empirical results indicate that technology shocks have a positive effect on hours worked, and investment and preference shocks have a positive impact on consumption and investment, respectively. While the former is in line with the predictions of Real Business Cycle models, the latter indicates the relevance of accelerator effects, as described by earlier Keynesian models. We also show that NK DSGE models might overemphasize the contribution of cost-push shocks to business cycle fluctuations while, at the same time, underestimating the importance of other shocks such as changes to technology and investment adjustment costs.

Download or read book The Transmission of Monetary Policy Shocks from the US to the Euro Area written by Stefano Neri and published by . This book was released on 2006 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Negative Interest Rate Policy NIRP written by Andreas Jobst and published by International Monetary Fund. This book was released on 2016-08-10 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.

Download or read book The Current Account and Monetary Policy in the Euro Area written by Tobias Schuler and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the factors driving current account and monetary policy developments in the euro area. We estimate an open-economy structural vector autoregression (VAR) model with zero and sign restrictions derived from a multi-country dynamic stochastic general equilibrium (DSGE) model to identify relevant shocks and analyse their impact on the current account and interest rate. Examining the VAR impulse responses for Germany, Italy and Spain we find that investment shocks and preference shocks drive the current account and interest rates in the opposite directions. By contrast, external demand shocks and productivity shocks cause both the current account balance and interest rate to move in the same direction. We also provide evidence for spillovers to the euro area from US preference shocks and US interest rate policy shocks.

Download or read book Technology Shocks and Monetary Policy written by Jordi Galí and published by . This book was released on 2002 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Monetary Policy Inflation and the Business Cycle written by Jordi Galí and published by Princeton University Press. This book was released on 2015-06-09 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts

Download or read book Background Studies for the ECB s Evaluation of Its Monetary Policy Strategy written by Otmar Issing and published by . This book was released on 2003 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Transmission of Monetary Policy and Technology Shocks in the Euro Area written by Joao Sousa and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This paper analyzes the response of a set of euro area macroeconomic variables to monetary policy and technology shocks based on structural VARs. The data set runs from 1970Q1 until 2006Q4 and includes a novel long-run series for hours worked per capita in the euro area. We find that real macroeconomic variables follow a hump-shaped response after monetary policy shocks and jump on impact after technology shocks. We also provide evidence that hours worked fall after a positive technology shock. These conclusions are robust to different sample periods and specifications of the variables

Download or read book Monetary Policy in the Euro Area written by Otmar Issing and published by Cambridge University Press. This book was released on 2001-07-26 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt: A non-technical analysis of the monetary policy strategy, institutions and operational procedures of the Eurosystem, first published in 2001.