Download or read book Using Measures of Expectations to Identify the Effects of a Monetary Policy Shock written by Allan D. Brunner and published by . This book was released on 1996 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.

Download or read book Expectations and Economic Fluctuations written by Sylvain Leduc and published by DIANE Publishing. This book was released on 2010-10 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using survey-based measures of future U.S. economic activity, the authors study how changes in expectations, and their interaction with monetary policy, contribute to fluctuations in macroeconomic aggregates. They find that changes in expected future economic activity are a quantitatively important driver of economic fluctuations: a perception that good times are ahead typically leads to a significant rise in current measures of economic activity and inflation. Short-term interest rate rises in response to expectations of good times as monetary policy tightens. ¿Provides quantitative evidence on the importance of expectations-driven business cycles and on the role that monetary policy plays in shaping them.¿ Charts and tables.

Download or read book Expectations Anchoring and Inflation Persistence written by Mr.Rudolfs Bems and published by International Monetary Fund. This book was released on 2018-12-11 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989. We then study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates. We find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored.

Download or read book Monetary Policy Expectations and Economic Fluctuations at the Zero Lower Bound written by Rachel Doehr and published by . This book was released on 2017 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a panel of survey-based measures of future interest rates from the Survey of Professional Forecasters, we study the dynamic relationship between shocks to monetary policy expectations and fluctuations in economic activity and inflation. We propose a smallscale structured recursive vector autoregression (VAR) model to identify the macroeconomic effects of changes in expectations about monetary policy. Our results show that when interest rates are away from the zero-lower bound, a perception of higher future interest rates leads to a significant rise in current measures of inflation and a rise in economic activity. However, when interest rates approach zero, the effect on economic activity is the opposite, with significant but lagged decreases in economic activity following an upward revision to expected future interest rates. The impact of changes in expectations about monetary policy is robust when we control for other features of the transmission mechanism (e.g., long-term interest rates, quantitative easing, exchange rate movements and even oil price shocks). Our findings also show that monetary policy expectations contribute up to 34 percent to the variability of economic activity (and 24 percent on inflation) while policy rates are fixed at the zero-lower bound. This evidence points to the importance of managing monetary policy expectations (forward guidance) as a crucial policy tool for stimulating economic activity at the zero-lower bound.

Download or read book The Effects of Economic Shocks on Heterogeneous Inflation Expectations written by Yoosoon Chang and published by International Monetary Fund. This book was released on 2022-07 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we examine how economic shocks affect the distribution of household inflation expectations. We show that the dynamics of households' expected inflation distributions are driven by three distinctive functional shocks, which influence the expected inflation distribution through disagreement, level shift and ambiguity. Linking these functional shocks to economic shocks, we find that contractionary monetary shocks increase the average level of inflation expectation with anchoring effects, with a reduction in disagreement and an increase in the share of households expecting future inflation to be between 2 to 4 percent. Such anchoring effects are not observed when the high inflation periods prior to the Volcker disinflation are included. Expansionary government spending shocks have inflationary effects on both short and medium-run inflation expectations, while an increase in personal income tax shocks is inflationary for mediumrun. A surprise increase in gasoline prices increases the level of inflation expectations, but lowers the share of households with 2 percent inflation expectations.

Download or read book Innocent Bystanders Monetary Policy and Inequality in the U S written by Mr.Olivier Coibion and published by International Monetary Fund. This book was released on 2012-08-01 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effects and historical contribution of monetary policy shocks to consumption and income inequality in the United States since 1980. Contractionary monetary policy actions systematically increase inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary shocks can account for a significant component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we document the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy.

Download or read book Shocks to Inflation Expectations written by Mr. Philip Barrett and published by International Monetary Fund. This book was released on 2022-04-29 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations, estimating a semi-structural VAR where an expectation shock is identified as that which causes measured expectations to diverge from rationality. Using data for the United States, we find that a positive inflation expectations shock is deflationary and contractionary: inflation, output, and interest rates all fall. These results are inconsistent with the standard New Keynesian model, which predicts inflation and interest rate hikes. We discuss possible resolutions to this new puzzle.

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 Monetary Policy Rules written by John B. Taylor and published by University of Chicago Press. This book was released on 2007-12-01 with total page 460 pages. Available in PDF, EPUB and Kindle. Book excerpt: This timely volume presents the latest thinking on the monetary policy rules and seeks to determine just what types of rules and policy guidelines function best. A unique cooperative research effort that allowed contributors to evaluate different policy rules using their own specific approaches, this collection presents their striking findings on the potential response of interest rates to an array of variables, including alterations in the rates of inflation, unemployment, and exchange. Monetary Policy Rules illustrates that simple policy rules are more robust and more efficient than complex rules with multiple variables. A state-of-the-art appraisal of the fundamental issues facing the Federal Reserve Board and other central banks, Monetary Policy Rules is essential reading for economic analysts and policymakers alike.

Download or read book Policy Expectations and Policy Effects written by Jennifer E. Roush and published by . This book was released on 2001 with total page 560 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Identifying the Effects of Monetary Policy Shocks on Exchange Rates Using High Frequency Data written by Jon Faust and published by . This book was released on 2003 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes a new approach to identifying the effects of monetary policy shocks in an international vector autoregression. Using high-frequency data on the prices of Fed Funds futures contracts, we measure the impact of the surprise component of the FOMC-day Federal Reserve policy decision on financial variables, such as the exchange rate and the foreign interest rate. We show how this information can be used to achieve identification without having to make the usual strong assumption of a recursive ordering.

Download or read book Inflation Expectations and the Transmission of Monetary Policy written by John M. Roberts and published by . This book was released on 1998 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the Dynamics of Inflation Expectations written by Sebastian Rast and published by . This book was released on 2022 with total page 173 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates the dynamics of inflation expectations with a particular focus on survey data. It aims to further the understanding of what drives inflation expectations and what are the implications of changes in inflation expectations for economic choices. The first chapter examines to what extent monetary policy moves household inflation expectations. More specifically, I study the effect of different types of monetary policy announcements on household inflation expectations based on micro data from a survey of German households. As unique feature, interviews of the survey were conducted both shortly before and after monetary policy events. This timing provides a natural experiment to identify the immediate effects of policy announcements on household inflation expectations. In contrast to most existing studies, the availability of the survey over a period of 15 years also allows me to exploit the time-series dimension to estimate how policy announcements affect household inflation expectations over the medium-term. I find that policy rate announcements lead to quick and significant adjustments in household inflation expectations with the effect peaking after half a year. Announcements about forward guidance and quantitative easing, on the other hand, have only small and delayed effects. My results suggest that monetary policy announcements can influence household expectations but further improvements in communication seem to be necessary to reach the general public more effectively. In particular, in an environment where policy rates are constrained by the effective lower bound, it may be very hard for central banks to influence household expectations. In the second chapter, joint with Evi Pappa and Alejandro Vicondoa, we focus on expectations about inflation in the medium to long run and study the implications of changes in these expectations for households' economic choices. We identify in a SVAR shocks that best explain future movements in different measures of underlying inflation at a five-year horizon and label them as news augmented shocks to underlying inflation. Independently of the measure used, such shocks raise the nominal rate and inflation persistently, while they induce mild and short-lived increases in economic activity. The extracted inflation shocks have differential distributional effects. They increase significantly and persistently the consumption of mortgagors and homeowners. Differently from the traditional monetary policy disturbances, news augmented shocks to underlying inflation induce a positive wealth effect for mortgagors and homeowners, driven by a reduction in the real mortgage payments and a persistent increase in real house prices that they induce. The third chapter, joint with Jonas Fisher and Leonardo Melosi, is also about long-run inflation expectations but in this case the focus is on professional forecasters. We use panel data from the U.S. Survey of Professional Forecasters to estimate a model of individual forecaster behavior in an environment where inflation follows a trend-cycle time series process. Our model allows us to estimate the sensitivity of forecasters' long-run expectations to incoming inflation and news about future inflation, and measure the coordination of beliefs about future inflation. We use our model of individual forecasters to study average long-run inflation expectations. Short term changes in inflation have small effects on average expectations; the sensitivity to news is over twice as large, but is still relatively small. These findings provide a partial explanation for why the anchoring and subsequent de-anchoring of average inflation expectations over 1991 to 2020 were such long-lasting episodes. Our model suggests coordination of beliefs also played a role, slowing down but not preventing the pull on average expectations from inflation running persistently below target. We apply our model to the case of a U.S. central banker setting policy in September 2021. Our results suggest the high inflation readings of mid-2021 would have to be followed by overshooting of the Fed's target generally at the high end of the Fed's Summary of Economic Projections to re-anchor long term expectations at their pre-Great Recession level.

Download or read book Bayesian Multivariate Time Series Methods for Empirical Macroeconomics written by Gary Koop and published by Now Publishers Inc. This book was released on 2010 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bayesian Multivariate Time Series Methods for Empirical Macroeconomics provides a survey of the Bayesian methods used in modern empirical macroeconomics. These models have been developed to address the fact that most questions of interest to empirical macroeconomists involve several variables and must be addressed using multivariate time series methods. Many different multivariate time series models have been used in macroeconomics, but Vector Autoregressive (VAR) models have been among the most popular. Bayesian Multivariate Time Series Methods for Empirical Macroeconomics reviews and extends the Bayesian literature on VARs, TVP-VARs and TVP-FAVARs with a focus on the practitioner. The authors go beyond simply defining each model, but specify how to use them in practice, discuss the advantages and disadvantages of each and offer tips on when and why each model can be used.

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 Policy and Macro Signals as Inputs to Inflation Expectation Formation written by Paul Hubert and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: