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Author: Man Chiu Wong
Publisher:
ISBN: 9780493708430
Category : Macroeconomics
Languages : en
Pages : 338
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Book Description
Author: Man Chiu Wong
Publisher:
ISBN: 9780493708430
Category : Macroeconomics
Languages : en
Pages : 338
Get Book Here
Book Description
Author: Jiao Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This thesis investigates monetary policy within the New Keynesian framework in dynamic macroeconomics. It includes three original research papers. The first paper examines the rules and transmission mechanisms of monetary policy in one of the fast growing economies in the 21st century, China, by extending a standard New Keynesian dynamic stochastic general equilibrium model with financial frictions and investment-specific shocks in order to capture some of the Chinese characteristics and applying a Bayesian estimation strategy to real-time data. It offers a new way of empirically examining the rule of China's monetary policy and indicates a structural break of the neutral technology development that may have caused the slowing down of GDP growth since 2010. The second paper revisits optimal monetary policy in open economies, in particular, focusing on the noncooperative policy game under local currency pricing in a theoretical two-country dynamic stochastic general equilibrium model. Quadratic loss functions of noncooperative policy makers and welfare gains from cooperation are obtained in the paper. The results show that noncooperative policy makers face extra trade-offs regarding stabilizing the real marginal costs induced by deviations from the law of one price under local currency pricing. As a result of the increased number of stabilizing objectives, welfare gains from cooperation emerge even when two countries face only technology shocks, which usually leads to equivalence between cooperation and noncooperation. Still, gains from cooperation are not large, implying that frictions other than nominal rigidities are necessary to strongly recommend cooperation as an important policy framework to increase global welfare. The third paper focuses on the noncooperative policy game specified by choice of policy instrument for implementing optimal monetary policy in a two-country open economy model similar to the one in the second paper. It examines four options of policy instruments including the producer price index inflation rate, the consumer price index inflation rate, the import price inflation rate and the nominal interest rate. It shows that choosing different policy instruments generally leads to different equilibria and, in particular, choosing the nominal interest rate results in equilibrium indeterminacy. In addition, the welfare ranking of these policy instruments depends on a country's degree of openness which is measured as the weight assigned to imported goods in the consumers' utility function. In less open countries, domestically produced goods carry a relatively higher weight in the consumers' utility function. For these less open countries, choosing the producer price index inflation rate induces a larger welfare cost from noncooperation than choosing the consumer price index inflation rate would. Choosing the consumer price index inflation rate in turn causes a larger welfare cost than choosing the import price inflation rate. Conversely, the reverse is true when countries are more open. This result sheds light on the important role that policy instrument choice plays in determining the equilibrium outcomes, to which policy makers should pay special attention when implementing optimal monetary policy under noncooperation.
Author: Gabriela Best
Publisher:
ISBN: 9781124115863
Category :
Languages : en
Pages : 133
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My dissertation is composed by three chapters that study monetary policy, international economics, and adaptive learning. The first and third chapters estimate New Keynesian DSGE models in order to examine the fear of floating phenomenon pervasive in emerging markets and the causes of the Great Inflation in the U.S. The first chapter estimates a small open economy model for the period after the 1994 crisis in Mexico. I find that the estimation of a Taylor rule for setting nominal interest rates favors a consistent response to the short-run nominal exchange rate post 1994. These results provide evidence that Mexico suffers from fear of floating. The second and the third chapters of my dissertation contribute to the studies of the implications of adaptive learning in monetary policy. The second chapter evaluates the desirability of policy rules that respond to wage inflation in a model with staggered price and wage setting in the context of determinacy and stability under adaptive learning. I find that, when the central bank responds to wage and price inflation and to the output gap a Taylor principle for wage and price inflation arises, but it is not necessarily related to stability under learning dynamics The third chapter proposed two potential channels through which monetary policy played a role in the Great Inflation. One approach holds that monetary policymakers during the 1970s preferred stabilizing output while post 1979 they preferred inflation stabilization. An alternative explanation contends that the Federal Reserve held misperceptions about the structure of the economy. The Great Inflation analysis incorporates policymakers that are learning adaptively and in that fashion, they form erroneous beliefs about the structure of the economy. The empirical results conclude that both channels are necessary to illustrate the role played by monetary policy in propagating and ending the Great Inflation. My dissertation results support Sargent's (1999) view that adaptive learning is a relevant mechanism affecting inflation policy.
Author: Mehdi El Herradi
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This doctoral thesis contributes to the empirical analysis of the distributional effects of monetary policies and the macroeconomic implications of rising inequality. The monetary policy measures implemented in the advanced economies following the 2008 financial crisis have raised several concerns regarding their potential side effects on the income and wealth distributions. In addition, the context of growing inequality since the 1980s raises questions about its consequences on credit dynamics and macroeconomic stability. The first and second chapters of this thesis examine the distributional implications of monetary policy and inflation on top incomes from a historical perspective. The third and fourth chapters focus on understanding the impact of rising inequality on credit expansions and household debt, both at the macro level and from a granular perspective.
Author: Mallory Yeromonahos
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Yu She
Publisher:
ISBN:
Category :
Languages : en
Pages : 150
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My thesis contains three chapters which focus heavily on the macroeconomic policies. The first chapter focuses on the effectiveness of monetary policy on firms with different financial constraints. The second chapter addresses on how would the optimal tax policy change the evolution of inequality. The third chapter emphasizes on how to provide a proxy means testing from a welfare perspective to a transfer program. In the first chapter, I study the role of financial constraints in the effects of monetary policy on firm investments. I construct a quarterly textual measure of financial constraints from SEC filings using a deep learning model. It improves the prediction accuracy as compared to a Naive Bayes method by capturing the context information, such as grammatical structure and order of words. Firms classified as highly constrained are younger, smaller, have a higher liquidity ratio and higher leverage ratio. However, popular proxies of financial constraints often do not move monotonically with the level of financial constraints. Particularly for the liquidity ratio, it is high for both the least constrained firms, which have ample of cash, and the most constrained firms, which hoard cash due to precautionary saving motives and the high marginal cost of external capital. Using the constructed measure of financial constraints, the investments of financially constrained firms are persistently less responsive to monetary policy shocks due to high marginal cost of external funds. This implies that monetary policy might be less effective during crisis time due to a larger fraction of constrained firms. My results reconcile previous empirical findings and argue that the seemingly contrary conclusions are, to some extent, consistent with each other. In the second chapter, it intends to address on the question: how would the optimal taxes change the evolution of wealth inequality? This paper studies this question quantitatively under a standard incomplete market heterogeneous agent model. The benchmark model captures the wealth distribution and its evolution from 1967-2010. Optimal tax policy exercise considers an once-and-for-all tax reform at 1967 accounting for the time varying economic environment and transition dynamics. With a utilitarian social planner, the optimal linear comprehensive income tax leads to a higher level inequality in wealth where top 10\% and top 1\% gain at least 5\% more wealth shares at 2010 compared to benchmark. The optimal tax under a parameterized nonlinear tax function implies a highly progressive tax system which is also highly redistributive compared to the benchmark model. The wealth inequality in this case is increasing from 1960s to mid 1990s and then start to decline to its 1960s level or even lower. At 2010, top 10\% remains roughly their wealth holdings at their 1967 level while top 1\%, 0.1\% and 0.01\% wealth holding even decrease on average about 2\% compared to their low level at year 1967. In the last chapter, I propose a new proxy means testing method with minimizing welfare loss as the target instead of traditional targets such as minimizing consumption loss. In a simple economy with a utilitarian social planner, the welfare approach is equivalent to a weighted logistic regression with inverse consumption as weights. As a result, it focuses mainly on the exclusion error where poor are identified as non-poor and less weights on the inclusion error where non-poor are identified as poor. Using the socio-economic survey data in India in 2011, I compare the targeting performance of the welfare approach to other standard approaches in PMT. It shows that the welfare approach enjoys a lower exclusion error rate by sacrificing the inclusion error rate and does not out-perform the traditional method. It does, on the other hand, provide a welfare foundation for the poverty weighted least square method.
Author: Saiah Lee
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This dissertation consists of three independent essays in macroeconomics. They examine macroeconomic issues and their underlying mechanism. The first essay studies monetary policy from a cross-country perspective. Cross-country estimates of Taylor rules suggest that higher data uncertainty is associated with a more inertial behavior of interest rates. Data uncertainty is measured by the volatility of differences between real-time data and their revisions. Using a simple structural model with Kalman filter learning, I replicate the cross-country pattern of the inertial behavior. More inertial behavior results not because central banks gradually adjust interest rates in the face of data uncertainty, but because the central banks' inference about the true data is correlated with past interest rates. Thus, I endogenize inertial behavior of interest rates as resulting in part from the learning process. The second essay explores the pro-cyclical behavior of household and corporate credit in emerging economies. Standard consumption-investment theory predicts counter-cyclical (pro-cyclical) behavior of household (corporate) credit whereby households' consumption-smoothing and firms' investment motives are aligned. Counter to the theoretical symbiosis consistent with U.S. data, it is demonstrated that the pro-cyclical behavior of both household and corporate credit in emerging economies, rationalized by households' leveraged investing in domestic assets and followed by large responses in asset values, engenders competition between them and hinders the growth of small and medium businesses. The empirical findings suggest another way of understanding the credit cycle puzzle in emerging economies, counter-cyclical behavior of real interest rate and large consumption volatility. The third essay studies the coupling of industrial production indices of the United States and Canada using a non-linear autoregressive model. Estimation of the exponential smooth transition autoregressive (ESTAR) model in the literature is improved with an expanded set of specifications, and I identify the dynamic linkage between the United States and Canada and evaluate the forecast performance of each model. The results show the non-linear autoregressive model with bilateral trade linkage to outperform other models suggested by existing studies.
Author: John B. Taylor
Publisher: University of Chicago Press
ISBN: 0226791262
Category : Business & Economics
Languages : en
Pages : 460
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Book Description
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.
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 380
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Author: Paul Michael Kitney
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This thesis consists of three essays which explore the role of financial factors in monetary policy from a theoretical and empirical perspective. These essays address the dual policy questions of whether central banks should respond to financial factors and whether there is evidence that they respond to financial factors in setting the policy interest rate. The first essay (Chapter 2) contributes to the debate whether central banks should respond to asset prices and other financial factors in setting monetary policy, by evaluating determinacy and expectational stability of equilibria under various monetary policy rules. Financial frictions are introduced by extending the determinacy and adaptive learning methodology embodied in Bullard and Mitra (2002) and Bullard and Mitra (2002), via a Financial Accelerator [Bernanke, Gertler and Gilchrist (1999)]. A key result is that monetary policy rules responding to lagged asset prices and credit volume have less desirable determinacy and learnability characteristics than responding to current asset prices and credit spreads. The results in both Bullard and Mitra (2002) and Bullard and Mitra (2007) are robust to this modelling framework. The second essay (Chapter 3) has two objectives. The first is to discover whether there is evidence that central banks are influenced by stock prices in setting the monetary policy interest rate. The second is to examine implications of including a central bank in a long-run SVAR, modelled by placing short-run restrictions on interest rates. An SVAR model of the Australian economy, based on long-run identification in Fry, Hocking and Martin (2008) is estimated with a focus on short-run dynamics. Short-run restrictions are imposed to identify central bank behaviour. Other modifications include financial frictions and alternate nominal variable assumptions. The key finding is that there is evidence the central bank responded to portfolio shocks but this is more conclusive when macro-financial linkages or financial frictions are present. An analytical finding is that if a short-run zero restriction on nominal shocks in the policy interest rate equation is imposed then nominal shocks have no effect on long-run prices or any other long run parameters in the model. Variance decomposition analysis shows that this restriction lowers the long-run attribution of interest rates to stock price variability, among other findings. The third essay (Chapter 4) estimates a version of a New Keynesian DSGE model with financial frictions for the United States using Bayesian techniques. Various Henderson-McKibbin-Taylor style monetary policy rules are examined, which react to credit market factors. The research question is whether the central bank responds to credit market factors in setting the policy interest rate, which is investigated using posterior odds tests. There is also an inquiry as to whether there is evidence of macroeconomic stabilization, conducted using impulse response analysis and an examination of parameter posterior distributions. The core result is that over the time period tested, US Fed responded to credit spreads in setting the policy rate. The empirical results also confirm that credit spreads offer stabilization benefits and these results are robust to variations in the policy rule.
