Download or read book Unconventional Fiscal Policy in Times of High Inflation written by Mai Dao and published by International Monetary Fund. This book was released on 2023-09 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: The surge in energy prices in 2022 has been a defining factor behind the increase in euro area inflation. We assess the impact of “unconventional fiscal policy,” defined as the set of fiscal measures, possibly expansionary, motivated by a desire to mute the effects of the increase in energy prices and to lower inflation. Overall, we find that these unconventional measures reduced euro area inflation by 1 to 2 percentage points in 2022 and may avoid an undershoot later on. When nonlinearities in the Phillips curve are taken into account, the net effect is to reduce inflation by about 0.5 percentage points in 2021-24, and keep it nearer to its target. About one-third to one-half of the reduction in 2022 reflects the direct effects of the measures on headline inflation, with much of the remainder reflecting the lower pass-through to core inflation. The fiscal measures were deficit-financed but had limited effects on raising inflation by stimulating demand and instead modestly helped to stabilize longer-term inflation expectations. Looking ahead, the prospective decline in inflation in the euro area is partly due to fortunate circumstances, with energy prices falling from their 2022 peaks and their pass-through effects fading, and with less economic overheating than in economies such as the United States. Implementing similar measures in the face of a more persistent increase in energy prices, or in a more overheated economy, would have caused a more persistent rise in core inflation.
Download or read book Unconventional Fiscal Policy written by Francesco D'Acunto and published by . This book was released on 2018 with total page 5 pages. Available in PDF, EPUB and Kindle. Book excerpt: Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We provide preliminary evidence for the effectiveness of such policies using changes in value-added tax (VAT) and household survey data for Poland. We find households increased their inflation expectations and willingness to purchase durables before the increase in VAT. Future research has to ensure income, wealth effects, or intratemporal substitution channels cannot explain these results and ideally exploit exogenous variation in VAT in a fixed nominal interest rate environment.
Download or read book Unconventional Fiscal Policy Inflation Expectations and Consumption Expenditure written by Francesco D'Acunto and published by . This book was released on 2016 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: Unconventional fiscal policies incentivize households to accelerate consumption by generating future consumer price ination, and offer an alternative to unconventional monetary policy (Correia et al. (2013)). We use a natural experiment to study the causal effect of unconventional fiscal policies on consumption expenditure via the inflation-expectations channel. The German administration unexpectedly announced in November 2005 a three-percentage-point increase in value-added tax (VAT) effective in 2007. This shock increased German households' inflation expectations during 2006, as well as actual inflation in 2007. Matched households in other European countries serve as counterfactuals in a difference-in-differences identification design. German households' willingness to purchase durable goods increased by 34% after the shock, compared to matched foreign households. Income or wealth effects do not appear to drive these results, and we do not find evidence of intratemporal substitution from non-durable to durable consumption.
Download or read book Unconventional Fiscal Policy at the Zero Bound written by Isabel Correia and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use inefficient policies such as wasteful public spending or future commitments to inflate. We conclude that in the New Keynesian model, the zero bound on nominal interest rates is not a relevant constraint on both fiscal and monetary policy.
Download or read book The Effect of Unconventional Fiscal Policy on Consumption Expenditure written by Francesco D'Acunto and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. We exploit a natural experiment for an empirical test of the effectiveness of unconventional fiscal policy. To comply with European Union law, the German government announced in November 2005 an unexpected 3-percentage-point increase in value-added tax (VAT), effective in 2007. The shock increased individual households' inflation expectations during 2006 and actual inflation in 2007. Germans' willingness to purchase durables increased by 34 % after the shock, compared to before and to matched households in other European countries not exposed to the VAT shock.
Download or read book Unconventional Fiscal Policy in HANK written by Hannah Seidl and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that in a New Keynesian model with household heterogeneity, fiscal policy can be a perfect substitute for monetary policy: three simple conditions for consumption taxes, labor taxes, and the government debt level are sufficient to induce the same consumption and labor supply of each household and, thus, the same allocation as interest rate policies. When monetary policy is constrained by a binding lower bound, a currency union, or an exchange rate peg, fiscal policy can therefore replicate any allocation that hypothetically unconstrained monetary policy would generate.
Download or read book Unconventional Monetary Policies Recent Experiences and Prospects written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2013-04-18 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper addresses three questions about unconventional monetary policies. First, what policies were tried, and with what objectives? Second, were policies effective? And third, what role might these policies continue to play in the future?
Download or read book Do Household Finances Constrain Unconventional Fiscal Policy written by Scott Ross Baker and published by . This book was released on 2018 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: When the zero lower bound on nominal interest rate binds, monetary policy makers may lack traditional tools to stimulate aggregate demand. We investigate whether "unconventional" fiscal policy, in the form of pre-announced consumption tax changes, has the potential to meaningfully shift durables purchases intertemporally and how it is affected by consumer credit. In particular, we test whether car sales react in anticipation of future sales tax changes, leveraging 57 pre-announced changes in state sales tax rates from 1999-2017. We find evidence for substantial tax elasticities, with car sales rising by over 8% in the month before a 1% increase in the sales tax rate. Responses are heterogeneous across households and sensitive to supply of credit. Consumers with high credit risk scores are most able to pull purchases forward. At the same time, other effects such as customer composition and attention lead to an even larger tax elasticity during recessions, despite these credit frictions. We discuss policy implications and the likely magnitudes of tax changes necessary for any substantive long-term responses.
Download or read book Unconventional Monetary Policy and the Federal Reserve written by Payton E. Dawson and published by Nova Science Publishers. This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The "Great Recession" and the ensuing weak recovery have led the Federal Reserve (Fed) to re-evaluate its monetary policy. Since December 2008, overnight interest rates have been near zero; at this "zero bound," they cannot be lowered further to stimulate the economy. As a result, the Fed has taken unprecedented policy steps to try to fulfil its statutory mandate of maximum employment and price stability. Congress has oversight responsibilities for ensuring that the Fed's actions are consistent with its mandate. This book analyses the economic effects of these programs, the current economic context in which these policies have been adopted, policy alternatives that the Fed has not pursued to date and their potential effects, potential legislative options for restricting the Fed's pursuit of unconventional monetary policy, and issues surrounding the eventual "exit strategy" from unconventional policy.
Download or read book Managing Households Expectations with Unconventional Policies written by Francesco D'Acunto and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: With a binding effective lower bound on interest rates and large government deficits, conventional policies are unviable and policymakers resort to unconventional policies, which target households' expectations directly. Using unique micro data and a difference-in-differences strategy, we assess the effectiveness of unconventional fiscal policy and forward guidance, both of which aim to stimulate consumption via raising households' inflation expectations. All households' inflation expectations and spending plans react to unconventional fiscal policy. Instead, households, contrary to experts, do not react to forward guidance. We argue that policies aiming to affect households directly are ineffective if (non-expert) households do not understand them.
Download or read book Global Impact and Challenges of Unconventional Monetary Policies Background Paper written by International Monetary Fund. Strategy, Policy, & Review Department and published by International Monetary Fund. This book was released on 2013-03-09 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides case studies of 13 of the largest non-UMP countries. The case studies begin with an overview of recent macro-economic developments as well as capital flow patterns during the crisis up to the first U.S. tapering announcement in May 2013. Country experiences with capital inflows are judged along five dimensions: (i) the size of capital inflows, (ii) policies used to manage inflows, (iii) external stability, measured by exchange rate overvaluation and current account deficits relative to fundamentals,2 (iv) asset price and credit market reactions, and (v) financial sector stability. Case studies mostly draw on published IMF Staff Reports for each country, as well as the 2013 Pilot External Stability Report (IMF 2013d).
Download or read book Coordination of Monetary and Fiscal Policies written by International Monetary Fund and published by International Monetary Fund. This book was released on 1998-03-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.
Download or read book Financial Crisis US Unconventional Monetary Policy and International Spillovers written by Qianying Chen and published by International Monetary Fund. This book was released on 2015-04-29 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of the US quantitative easing (QE) on both the emerging and advanced economies, estimating a global vector error-correction model (GVECM) and conducting counterfactual analyses. We focus on the effects of reductions in the US term and corporate spreads. First, US QE measures reducing the US corporate spread appear to be more important than lowering the US term spread. Second, US QE measures might have prevented episodes of prolonged recession and deflation in the advanced economies. Third, the estimated effects on the emerging economies have been diverse but often larger than those recorded in the US and other advanced economies. The heterogeneous effects from US QE measures indicate unevenly distributed benefits and costs.
Download or read book Direct and Spillover Effects of Unconventional Monetary and Exchange Rate Policies written by Mr.Joseph E. Gagnon and published by International Monetary Fund. This book was released on 2017-03-13 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the effects of unconventional monetary and exchange rate policies. We find that official foreign asset purchases have large effects on current accounts that diminish as capital mobility rises and spill over to financially integrated countries. There is an additional effect through the stock of central bank assets. Domestic asset purchases have an effect on current accounts only when capital mobility is low. We also find that rising US bond yields drive foreign yields, stock prices and depreciations, but less so on days of policy announcements. We develop a theoretical model that is broadly consistent with our results.
Download or read book Twenty Years of Unconventional Monetary Policies Lessons and Way Forward for the Bank of Japan written by Mr.Niklas J Westelius and published by INTERNATIONAL MONETARY FUND. This book was released on 2020-11-08 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Bank of Japan has used unconventional monetary policies to fight deflation and stabilize the financial system since the late 1990s. While the Bank of Japan’s reflation efforts have evolved over time, inflation and inflation expectations have remained stubbornly low. This paper examines the evolution of monetary policy in Japan over the past twenty years, in order to draw relevant lessons and propose ways to strengthen the Bank of Japan’s policy framework. In doing so the analysis focuses on three aspects of monetary policy: objectives and goals; policy strategies; and the communication framework. Moreover, the paper discusses coordination between monetary, fiscal, and financial policies, and how the corresponding institutional design could be strengthened.
Download or read book Macroeconomic Shocks and Unconventional Monetary Policy written by Naoyuki Yoshino and published by Oxford University Press, USA. This book was released on 2019 with total page 345 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Unconventional Monetary Policy Fiscal Side Effects and Euro Area im balances written by Michael Hachula and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
