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Author: Tao Wu
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Tao Wu
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Mr.Roberto Perrelli
Publisher: International Monetary Fund
ISBN: 1484385217
Category : Business & Economics
Languages : en
Pages : 32
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Book Description
Emerging markets have experienced a sizeable decline in their neutral real interest rates until recently. In this paper we try to identify the main factors that contributed to it, with a focus on Brazil. We estimate an interval for Brazil’s time-varying neutral rate based on a range of structural and econometric models. We assess the implications of incorrectly estimating a time-varying neutral rate using a small structural model with a simple monetary policy instrument rule. We find that policy prescriptions are very different when facing uncertainty of neutral rate and of output gap. Our result contrasts sharply with Orphanides (2002), suggesting that the best response to neutral rate uncertainty is to ensure policy remains highly sensitive to inflation and output variations.
Author: Mr.Andrea Pescatori
Publisher: International Monetary Fund
ISBN: 1513508385
Category : Business & Economics
Languages : en
Pages : 22
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We use a semi structural model to estimate neutral rates in the United States. Our Bayesian estimation incorporates prior information on the output gap and potential output (based on a production function approach) and accounts for unconventional monetary policies at the ZLB by using estimates of “shadow” policy rates. We find that our approach provides more plausible results than standard maximum likelihood estimates for the unobserved variables in the model. Results show a significant trend decline in the neutral real rate over time, driven only in part by a decline in potential growth whereas other factors (including excess global savings) matter. Neutral rates likely turned negative during the Global Financial Crisis and are expected to increase only gradually looking forward.
Author: Mr.Vadim Khramov
Publisher: International Monetary Fund
ISBN: 1475591225
Category : Business & Economics
Languages : en
Pages : 27
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Book Description
This paper sheds light on a narrow but crucial question in finance: What should be the parameters of a model of the short-term real interest rate? Although models for the nominal interest rate are well studied and estimated, dynamics of the real interest rate are rarely explored. Simple ad hoc processes for the short-term real interest rate are usually assumed as building blocks for more sophisticated models. In this paper, parameters of the real interest rate model are estimated in the broad class of single-factor interest rate diffusion processes on U.S. monthly data. It is shown that the elasticity of interest rate volatility—the relationship between the volatility of changes in the interest rate and its level—plays a crucial role in explaining real interest rate dynamics. The empirical estimates of the elasticity of the real interest rate volatility are found to be about 0.5, much lower than that of the nominal interest rate. These estimates show that the square root process, as in the Cox-Ingersoll-Ross model, provides a good characterization of the short-term real interest rate process.
Author: Olivier Basdevant
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages : 36
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Author: Todd E. Clark
Publisher:
ISBN:
Category :
Languages : en
Pages : 64
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We use a range of simple models and 22 years of real-time data vintages for the U.S. to.
Author: Ali Alichi
Publisher: International Monetary Fund
ISBN: 1484366328
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
Estimates of potential output and the neutral short-term interest rate play important roles in policy making. However, such estimates are associated with significant uncertainty and subject to significant revisions. This paper extends the structural multivariate filter methodology by adding a monetary policy block, which allows estimating the neutral rate of interest for the U.S. economy. The addition of the monetary policy block further improves the reliability of the structural multivariate filter.
Author: Todd E. Clark
Publisher:
ISBN: 9783865580269
Category :
Languages : en
Pages : 55
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Book Description
Author: Peter J. N. Sinclair
Publisher: Routledge
ISBN: 1135179778
Category : Business & Economics
Languages : en
Pages : 402
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Book Description
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.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1451952570
Category : Business & Economics
Languages : en
Pages : 28
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Book Description
The paper considers the merits of rules and discretion for monetary policy when the structure of the macroeconomic model and the probability distributions of disturbances are not well defined. It is argued that when it is costly to delay policy reactions to seldom-experienced shocks until formal algorithmic learning has been accomplished, and when time consistency problems are significant, a mixed strategy that combines a simple verifiable rule with discretion is attractive. The paper also discusses mechanisms for mitigating credibility problems and emphasizes that arguments against various types of simple rules lose their force under a mixed strategy.
