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500 entries found on 25 pages. starting on record 41 ending on 60

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Title: Macroeconomic modelling of monetary policy
Abstract
This paper proposes a new paradigm for the analysis of monetary policy. From an econometric point of view this new approach is just as easy to implement as reduced form analysis, but is robust to the Lucas critique. It requires no explicit prior theory and yet it encompasses all standard DSGE models. After introducing this new paradigm I study US monetary policy and look at the nature and the effect of monetary policy, discuss the transmission mechanism and the policy rule implied by the data, and perform counterfactual policy analysis. [Matt Klaeffling]
Author: Klaeffling, Matt
Series Title: Working paper series / European Central Bank ; 257
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Monetary PolicyRational expectationsMonetary transmissionUnited StatesVAR modelTime series analysisEconometric Model
Subject: Currency. Monetary policy
Countries Scheme: USA
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Title: Bond market inflation expectations and longer-term trends in broad monetary growth and inflation in industrial
countries, 1880 - 2001
Abstract
'Bond Market Inflation Expectation and Longer-term Trends in Broad Monetary Growth and Inflation in Industrial Countries, 1880-2001' by William G. Dewald, Professor of Economics Emeritus, Ohio State University and Former Director of Research, Federal Reserve Bank of St. Louis. Annual data for thirteen countries revealed three long up trends and down trends in inflation that were matched by growth rates in M2 and nominal GDP but not real GDP in each country and cross-country averages. Inflationary expectations as estimated by bond rates less real growth trends indicated little inflation expectation until the 1960s. Central banks had credibility to keep inflation low even during wartime. It was lost as inflation rose in the 1970s and regained only as inflation fell subsequently. Although relationships with annual data were not as reliable as with ten-year averages, annual inflation was significantly related to annual M2 growth and inflationary expectations which should not be ignored in central bank decision making. [William G. Dewald]
Author: Dewald, William G.
Series Title: Working paper series / European Central Bank ; 253
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Money stockIndustrialized countriesInflation expectationsBond MarketComparisonEconomic Growth
Subject: Economic and growth policiesEconomic development. Economic growthMoney. Financing
Countries Scheme: Global Resources
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Title: Interpolation and backdating with a large information set
Abstract
Existing methods for data interpolation or backdating are either univariate or based on a very limited number of series, due to data and computing constraints that were binding until the recent past. Nowadays large datasets are readily available, and models with hundreds of parameters are fastly estimated. We model these large datasets with a factor model, and develop an interpolation method that exploits the estimated factors as an effcient summary of all the available information. The method is compared with existing standard approaches from a theoretical point of view, by means of Monte Carlo simulations, and also when applied to actual macroeconomic series. The results indicate that our method is more robust to model misspeciffication, although traditional multivariate methods also work well while univariate approaches are systematically outperformed. When interpolated series are subsequently used in econometric analyses, biases can emerge, depending on the type of interpolation but again be reduced with multivariate approaches, including factor-based ones. [Elena Angelini ; Jérôme Henry ; Massimiliano Marcellino]
Author: Angelini, Elena | Henry, Jérôme | Marcellino, Massimiliano
Series Title: Working paper series / European Central Bank ; 252
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Estimation theoryTheoryState space model
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Title: Consumption, habit persistence, imperfect information and the lifetime budget constraint
Abstract
Based on the households' utility maximisation, a closed form approximation of the consumption function is derived and the deep parameters of the consumption function are estimated using aggregate euro area data. The novel element in our approach is the parameterisation of the information content regarding future income changes. In addition to the information regarding time series properties of the historical development of labour income, consumers have also period-specific information on future income realisations. Estimation results support the hypothesis that, although front-loaded, consumers have a lot of information on future income changes, but that also lagged consumption, through habit formation, plays an important role. [Alpo Willman]
Author: Willman, Alpo
Series Title: Working paper series / European Central Bank ; 251
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: EU countriesSelf-interestIncomeAggregate consumption functionLife cycleMicroeconomic consumption functionWealth effect
Subject: Economic conditions. Economic structure
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Title: Persistence, the transmission mechanism and robust monetary policy
Abstract
In this paper we first explore the impact of nominal and real persistence on the transmission process of various shocks in an estimated DSGE model of euro area. We then analyse its impact on optimal monetary policy and investigate the performance of various monetary policies when the policy maker is uncertain about the degree of nominal and real persistence. [Ignazio Angeloni ; Günter Coenen ; Frank Smets]
Author: Angeloni, Ignazio | Coenen, Günter | Smets, Frank
Series Title: Working paper series / European Central Bank ; 250
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: EU countriesEuropean Economic and Monetary UnionMonetary PolicyTheoryMonetary transmission
Subject: Currency. Monetary policy
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Title: Trade advantages and specialisation dynamics in acceding countries
Abstract
The paper analyses the evolution of the trade specialisation pattern in the ten countries which will join the EU in 2004, by studying the dynamics of their comparative advantages over the period 1993-2000. The study finds that, although some countries are still broadly relying on natural resources, most of them enjoy significant comparative advantages in many manufactured goods. Moreover, in spite of large technological gaps inherited from the long period of centrally planned economy, some were able to specialise in 'high tech' products. Finally, most countries recorded large specialisation improvements in items for which the world demand expanded at the fastest rate over the Nineties; in particular, Estonia, Hungary, Malta and Slovenia showed an overall positive comparative advantage in the set of the most demanded products. [Andrea Zaghini]
Author: Zaghini, Andrea
Series Title: Working paper series / European Central Bank ; 249
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: EU enlargementInternational division of labourComparative advantageMaltaNortheast EuropeEastern EuropeCyprus
Countries Scheme: Eastern Europe. General Resources
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Title: Exchange rates and fundamentals
Abstract
Standard economic models hold that exchange rates are influenced by fundamental variables such as relative money supplies, outputs, inflation rates and interest rates. Nonetheless, it has been well documented that such variables little help predict changes in floating exchange rates - that is, exchange rates follow a random walk. We show that the data do exhibit a related link suggested by standard models - that the exchange rate helps predict fundamentals. We also show analytically that in a rational expectations present value model, an asset price manifests near random walk behavior if fundamentals are I(1) and the factor for discounting future fundamentals is near one. We suggest that this may apply to exchange rates. [Charles Engel ; Kenneth David West]
Author: Engel, Charles | West, Kenneth David
Series Title: Working paper series / European Central Bank ; 248
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: G-7 countriesMoney supplyMonetary PolicyAggregate ProductionInflation rateMacroeconomic effectRandom walkRational expectations
TheoryExchange rateInterest Rate
Subject: Economic and growth policiesCurrency. Monetary policy
Countries Scheme: Global Resources
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Title: Forecasting euro area inflation
Title (other): does aggregating forecasts by HICP component improve forecast accuracy?
Abstract
Monitoring and forecasting price developments in the euro area is essential in the light of the second pillar of the ECB's monetary policy strategy. This study analyses whether the forecasting accuracy of forecasting aggregate euro area inflation can be improved by aggregating forecasts of subindices of the Harmonized Index of Consumer Prices (HICP) as opposed to forecasting the aggregate HICP directly. The analysis includes univariate and multivariate linear time series models and distinguishes between different forecast horizons, HICP components and inflation measures. Various model selection procedures are employed to select models for the aggregate and the disaggregate components. The results indicate that aggregating forecasts by component does not necessarily help forecast year-on-year inflation twelve months ahead. [Kirstin Hubrich]
Author: Hubrich, Kirstin
Series Title: Working paper series / European Central Bank ; 247
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: EU countriesEuropean Economic and Monetary UnionInflationConsumer price indexPrice stabilityForecastTime series analysis
Subject: Economic and growth policiesCurrency. Monetary policy
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Title: Public finances and long-term growth in Europe
Title (other): evidence from a panel data analysis
Abstract
In Lisbon the European Council proclaimed a European growth strategy. It considers an average economic 'growth rate of around 3 percent as a realistic prospect for the coming years' and assigns public finances an important role in the process of achieving this goal. This paper addresses the question whether we can find empirical evidence for European countries that public finance reform affects trend growth. Focusing on time series patterns, we investigate whether there have been persistent shifts or trends in economic growth and fiscal variables over the last 40 years. In addition, we estimate a distributed lag model, which 1) indicates that government consumption and transfers negatively affect growth rates of GDP per capita over the business cycle, while public investment has a positive impact, and 2) provides robust evidence that distortionary taxation affects growth in the medium-term through its impact on the accumulation of private physical capital. [Diego Romero De Ávila ; Rolf Strauch]
Author: De Ávila, Diego Romero | Strauch, Rolf
Series Title: Working paper series / European Central Bank ; 246
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: EU countriesFiscal PolicyGrowth policyTime series analysisPublic Finance
Subject: Economic and growth policiesTaxation. Fiscal policy
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Title: Money and payments
Title (other): a modern perspective
Abstract
The role of money in society has been a controversial topic in economic theory over many years. Particular attention has been devoted to the analysis whether there should be competition in the supply of money, or whether this is best left to a governmental agency. This paper reviews the theoretical literature on these issues. It also gives an overview over some episodes of free banking where banks could issue currency themselves. Finally, we highlight several aspects in which today we have competition between issuers of money, namely in the international context, with electronic money, and in large value payments systems. [Cornelia Holthausen ; Cyril Monnet]
Author: Holthausen, Cornelia | Monnet, Cyril
Series Title: Working paper series / European Central Bank ; 245
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: History of Economic ThoughtElectronic moneyFree bankingMoney supplyMonetary TheoryTheoryPayments
Subject: Currency. Monetary policy
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Title: How does the ECB allot liquidity in its weekly main refinancing operations?
Title (other): A look at the empirical evidence
Abstract
This paper provides a simple weekly model of the regular supply of liquidity in the euro area, with a view to understanding the functioning of the euro area money market. The main result of the analysis is that liquidity has normally been provided by the ECB in a neutral and smooth manner, but also that there has been some attempt, albeit very limited, to correct deviations of the overnight rate from the main refinancing rate. Moreover the paper finds that liquidity has affected the overnight interest rate to a significant extend only after the last main refinancing operation of the maintenance period, when it is not possible for the ECB to adjust liquidity imbalances except by making recourse to fine-tuning operations. [Steen Ejerskov, Clara Martin Moss and Livio Stracca]
Author: Ejerskov, Steen | Moss, Clara Martin | Stracca, Livio
Series Title: The European Central Bank - Working papers review
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Bank liquidityEU countriesMonetary PolicyLiquidity effectMartingaleCentral BankEUEuropean Central Bank
monetary policyliquidity
Subject: Currency. Monetary policy
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Title: Pass-through of external shocks to euro area inflation
Abstract
This paper investigates the pass-through of external shocks, i.e. oil price shocks, exchange rate shocks, and non-oil import price shocks to euro area in?ation at different stages of distribution (import prices, producer prices and consumer prices). The analysis is based on a VAR model that includes the distribution chain of pricing. According to our results the pass-through is largest and fastest for non-oil import price shocks, followed by exchange rate shocks and oil price shocks. The size and the speed of the pass-through of these shocks decline along the distribution chain. External shocks explain a large fraction of the variance in all price indices. They seem to have contributed largely to in?ation in the euro area since the start of the European Monetary Union. The results on the size and the speed of the passthrough in the euro area appeared to be robust over time and different identi?cation schemes. [Elke Hahn]
Author: Hahn, Elke
Series Title: Working paper series / European Central Bank ; 243
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Trade priceEU countriesEuropean Economic and Monetary UnionExchange rate pass-throughShock
Subject: Currency. Monetary policy
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Title: Public sector efficiency
Title (other): an international comparison
Abstract
We compute public sector performance (PSP) and efficiency (PSE) indicators, comprising a composite and seven sub-indicators, for 23 industrialised countries. The first four sub-indicators are 'opportunity' indicators that take into account administrative, education and health outcomes and the quality of public infrastructure and that support the rule of law and a level playing-field in a market economy. Three other indicators reflect the standard 'Musgravian' tasks for government: allocation, distribution, and stabilisation. The input and output efficiency of public sectors across countries is then measured via a non-parametric production frontier technique. [António Afonso, Ludger Schuknecht and Vito Tanzi]
Author: Afonso, António | Schuknecht, Ludger | Tanzi, Vito
Series Title: Working paper series / European Central Bank ; 242
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: EU countriesOECD countriesComparisonPublic Expenditure
Subject: Public finance. Taxation
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Title: Maintaining price stability under free-floating
Title (other): a fearless way out of the corner?
Abstract
The behaviour of the exchange rate under a floating exchange rate regime for a small open economy with perfect capital mobility may appear like a managed float or even a firmer peg. We present a canonical new neo-classical synthesis open economy model where the central bank follows a strategy directed at maintaining price stability. It is shown that the behaviour of the exchange rate depends on the structure of the economy and on the nature of the relevant shocks. In the case of very open economies the exchange rate will look quasi-fixed in response to shocks stemming from the international capital markets. It is also shown that the joined endogeneity of the interest rate and the exchange rate has important implications for the empirical testing of uncovered interest rate parity. [Carsten Detken and Vítor Gaspar]
Author: Detken, Carsten | Gaspar, Vítor
Series Title: Working paper series / European Central Bank ; 241
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Flexible exchange rateMonetary targetCapital mobilitySmall open economyPrice stabilityTheoryCentral BankInterest Rate
Subject: Currency. Monetary policy
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Title: Monetary policy transmission in the euro area
Title (other): any changes after EMU?
Abstract
We examine the euro area monetary policy transmission process using post-1999 data, with two main questions in mind: has it changed after - and because of - EMU and, if so, is it becoming homogeneous across countries. Given the data limitations, we concentrate on three blocks of transmission: the banking, interest-rate and asset-market channels. We find evidence that the transmission through banks has become more potent and homogeneous across countries because of EMU. On the financial-market channels, our evidence is somewhat weaker but suggestive. The interest-rate channel appears to have changed even before EMU, and to now affect national economies in a broadly similar way. The asset-market channel (proxied by the stock-market effects of monetary policy) also seems to work rather homogeneously across national markets (no comparison with pre-EMU is available here). A positive answer to both questions raised above represents, in our view, the best working hypothesis under current knowledge. [Ignazio Angeloni and Michael Ehrmann]
Author: Angeloni, Ignazio | Ehrmann, Michael
Series Title: Working paper series / European Central Bank ; 240
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: EU countriesEuroEuropean Economic and Monetary UnionMonetary PolicyMonetary transmission
Subject: Currency. Monetary policy
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Title: Temporary shocks and unavoidable transitions to a high-unemployment regime
Abstract
This paper develops a model with multiple steady states (low tax and unemployment rate versus high tax and unemployment rate) in which equilibrium selection is not conditioned on a sunspot variable. Instead, large enough shocks initiate unavoidable transitions from one regime to the other. The predictions of this paper are consistent with the persistent increase of European unemployment rates observed during the seventies. The explanation given is that even if the unemployment rate would decrease it can only do so gradually because of matching frictions which in turn implies that the tax burden remains high and job creation remains low making the return to a low unemployment rate impossible. The paper shows that in some cases transition to the low-unemployment regime is not possible when tax rates are adjusted each period to balance the budget even though this would be possible under an alternative policy with lower tax rates and (temporary) budget de?cits. [Wouter J. Den Haan]
Author: Den Haan, Wouter J.
Series Title: Working paper series / European Central Bank ; 239
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Unemployment insuranceUnemploymentTax burdenTheory
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Title: The impact of monetary union on trade prices
Abstract
Two seemingly unconnected empirical results suggest an intriguing mechanism. First, economic integration helps harmonize prices internationally, with trade being the primary channel (Rogoff 1996, Goldberg and Knetter 1997). Second, monetary union may greatly increase the amount of trade among members (Rose 2001). Putting these together, we see that formation of a monetary union may induce changes that help harmonise inflation rates. The effect might be large if the elimination of exchange rate volatility simultaneously leads to a large increase in intra-union trade and a big increase in the speed at which price shocks are transmitted across members' goods markets. This paper investigates part of this mechanism and finds that monetary union may indeed result in faster cross-border transmission of price movements via the import and export price channel which, in turn, would tend to homogenise price movements across the member countries of a monetary union. [Robert Anderton, Richard E. Baldwin and Daria Taglioni]
Author: Anderton, Robert | Baldwin, Richard E. | Taglioni, Daria
Series Title: Working paper series / European Central Bank ; 238
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: GermanyEU countriesInternational transmission of inflationLaw of one priceMonetary union
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Title: Growth expectations, capital flows and international risk sharing
Abstract
Over the past decades, cross-border financial flows have increased in importance and have in many occasions exceeded the underlying current account positions. This phenomenon has been accompanied by an increase in the volume of international equity transactions that accentuate the role of international risk sharing as a factor for the macroeconomic response to shocks. We use a stylised two-bloc, two-period model of the global economy, with a simple stochastic productivity shock affecting only one country. Efficient global risk-sharing imply that expected productivity gains in one country will attract equity inflows in excess of those needed to finance the current account. Upward-biased expectations about prospects for the productivity gains can further increase the risk exposure of foreign shareholders. The model is calibrated to show how ex post market losses - whether due to 'normal' stock market downturn or ex ante over-optimism - are distributed and how they affect global consumption and current account positions. The results suggest that international spillover effects of stock market bubbles can contribute to business cycle synchronisation across economic areas. [Olli Castrén, Marcus Miller and Roger Stiegert]
Author: Castrén, Olli | Miller, Marcus | Stiegert, Roger
Series Title: Working paper series / European Central Bank ; 237
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Stock MarketBubblesCapital mobilityBusiness cycle transmissionRiskTheoryWorldEconomic Growth
Subject: Economic and growth policiesInternational investments. Capital movements
Countries Scheme: Global Resources
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Title: Swiss monetary policy targeting 1974 - 1996
Title (other): the role of internal policy analysis
Abstract
After the switch to a floating exchange rate in 1973, the Swiss National Bank at first adopted annual monetary targets and in the 1990s shifted to a medium-term targeting strategy. In this paper I review the SNB's internal policy analysis, an aspect of Swiss monetary targeting that has received little attention in the existing literature. I show that money played a key role in setting monetary policy and in communicating the SNB's decisions to the public. Due to the adoption of monetary targets, the SNB was able to reduce the inflation trend to low levels. However, it was less successful in preserving price stability during business-cycle expansions because the monetary targets did not call for a sufficiently preemptive policy stance. At the end of 1999, the SNB abandoned monetary targeting in favour of an approach based on inflation forecasts. [Georg Rich]
Author: Rich, Georg
Series Title: Working paper series / European Central Bank ; 236
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: Monetary PolicyMonetary targetPolicy rulesSwitzerland
Countries Scheme: Switzerland. General Resources
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Title: Volatility of interest rates in the euro area
Title (other): evidence from high frequency data
Abstract
This paper estimates the factors underlying the volatility of the euro overnight interest rate and its transmission along the euro area money market yield curve. A new multivariate unobserved components model is proposed allowing for both long-memory and stationary cyclical dynamics. Using hourly data the estimates show repetitive intradaily and monthly pattern that can be explained by the microstructure of the money market and the institutional features of the Eurosystem's operational framework for monetary policy implementation. Strong persistence is detected in all log-volatility processes and and two common long-memory factors are extracted. The first factor explains the long-memory dynamics of the shortest maturity. the second factor explains the transmission of volatility along the money market yield curve. We find evidence that most liquidity effects are cyclical, confined to the end of reserve maintenance periods, and are not transmitted along the money market yield curve. [Nuno Cassola and Claudio Morana]
Author: Cassola, Nuno | Morana, Claudio
Series Title: Working paper series / European Central Bank ; 235
Publisher: European Central Bank
Year: 2003
Language: en
Ressource: Einzelne Arbeitspapiere, Preprints
Keyword: EU countriesMoney MarketCointegrationLiquidity effectMarket microstructureVolatilityInterest Rate
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