Oil Shocks and the Zero Bound on Nominal Interest Rates PDF Download
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Author: Martin Bodenstein
Publisher: DIANE Publishing
ISBN: 1437980503
Category : Reference
Languages : en
Pages : 47
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Book Description
Beginning in 2009, in many advanced economies, policy rates reached their zero lower bound (ZLB). Almost at the same time, oil prices started rising again. The authors analyze how the ZLB affects the propagation of oil shocks. As these shocks move inflation and output in opposite directions, their effects on economic activity are cushioned when monetary policy is constrained. The burst of inflation from an oil price increase lowers real interest rates at the ZLB and stimulates theinterest-sensitive component of GDP, offsetting the usual contractionary effects. In fact, if the increase in oil prices is gradual, the persistent rise in inflation can cause a GDP expansion. Illus. This is a print on demand report.
Author: Martin Bodenstein
Publisher: DIANE Publishing
ISBN: 1437980503
Category : Reference
Languages : en
Pages : 47
Get Book
Book Description
Beginning in 2009, in many advanced economies, policy rates reached their zero lower bound (ZLB). Almost at the same time, oil prices started rising again. The authors analyze how the ZLB affects the propagation of oil shocks. As these shocks move inflation and output in opposite directions, their effects on economic activity are cushioned when monetary policy is constrained. The burst of inflation from an oil price increase lowers real interest rates at the ZLB and stimulates theinterest-sensitive component of GDP, offsetting the usual contractionary effects. In fact, if the increase in oil prices is gradual, the persistent rise in inflation can cause a GDP expansion. Illus. This is a print on demand report.
Author: Martin Bodenstein
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 49
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Book Description
Author: Jordi Galí
Publisher: University of Chicago Press
ISBN: 0226278875
Category : Business & Economics
Languages : en
Pages : 663
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Book Description
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.
Author: Jean-Marc Natal
Publisher: DIANE Publishing
ISBN: 1437933858
Category : Business & Economics
Languages : en
Pages : 59
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Book Description
How should monetary authorities react to an oil price shock? A trade-off between stabilizing inflation and the welfare relevant output gap arises in a distorted economy once one recognizes: (1) that oil (energy) cannot be easily substituted by other factors in the short-run; (2) that there is no fiscal transfer available to policymakers to neutralize the steady-state distortion due to monopolistic competition; and (3) that increases in oil prices also directly affect consumption by raising the price of fuel, heating oil, and other energy sources. The author derives an interest rate feedback rule that mimics the optimal plan in all relevant dimensions but that depends only on observables, namely core inflation, oil price inflation, and the growth rate of output. Illus.
Author: Martin Bodenstein
Publisher:
ISBN:
Category : Equilibrium (Economics)
Languages : en
Pages : 60
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Book Description
In a two-country DSGE model, the effects of foreign demand shocks on the home country are greatly amplified if the home economy is constrained by the zero lower bound for policy interest rates. This result applies even to countries that are relatively closed to trade such as the United States. The duration of the liquidity trap is determined endogenously. Adverse foreign shocks can extend the duration of the liquidity trap, implying more contractionary effects for the home country; conversely, large positive shocks can prompt an early exit, implying effects that are closer to those when the zero bound constraint is not binding.
Author: Robert Amano
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Athanasios Orphanides
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 70
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Book Description
Author: Hao Chang
Publisher:
ISBN:
Category :
Languages : en
Pages : 85
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Book Description
Why did the correlation between oil prices and 10-year TIPS Break-even Inflation, a measure of long-term inflation compensation, increase dramatically after the financial crisis? Using a shadow-rate no-arbitrage term structure model, we demonstrate that this is because when nominal interest rates bind at the zero lower bound (ZLB), investors doubt the effectiveness of monetary policy to control deflation. As a result, investors adjust their long-term inflation expectations more rapidly after negative oil price changes and pay higher premiums to hedge long-run deflation risks. We explain these findings by a stylized dynamic stochastic general equilibrium model including oil supply shocks, oil demand shocks, and a Taylor rule with the ZLB constraint.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The Federal Reserve Bank of Richmond presents the full text of an article entitled "Staggered Price Setting and the Zero Bound on Nominal Interest Rates," by Alexander L. Wolman. The article was published in the Fall 1998 issue of "Economic Quarterly." Wolman discusses the implementation of monetary policy with nominal interest rates by the Federal Reserve. The interest rates tend to be low when inflation is low. Low nominal interest rates promote efficient money holdings.
Author: Ben S. Bernanke
Publisher: www.bnpublishing.com
ISBN: 9781607961055
Category :
Languages : en
Pages : 0
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Book Description
The success over the years in reducing inflation and, consequently, the average level of nominal interest rates has increased the likelihood that the nominal policy interest rate may become constrained by the zero lower bound. When that happens, a central bank can no longer stimulate aggregate demand by further interest-rate reductions and must rely on "non-standard" policy alternatives. To assess the potential effectiveness of such policies, we analyze the behavior of selected asset prices over short periods surrounding central bank statements or other types of financial or economic news and estimate "noarbitrage" models of the term structure for the United States and Japan. There is some evidence that central bank communications can help to shape public expectations of future policy actions and that asset purchases in large volume by a central bank would be able to affect the price or yield of the targeted asset.
