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Search Results: 1 - 10 of 8671 matches for " monetary policy "
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The Case for an M2 Growth Rate of 10%  [PDF]
William Carlson, Conway Lackman
Modern Economy (ME) , 2013, DOI: 10.4236/me.2013.43021
Abstract:

The recovery from the 2008-2009 recession has been much slower than the average recovery since the 1924 recession. As analysts who believe that the St. Louis model created by Leonall Andersen and Jerry Jordan still has relevance we believe that the slow rate of M2 growth since 2Q2009 is a major reason why GDP growth has been so slow. At the 9th Annual Missouri Economics Conference on March 27, 2009 we presented a paper, “Interwar Hoarding, Liquidity Traps, and the 2008 Solvency Trap” in which we recommended that the Federal Reserve attempt to maintain a 10% growth rate for M2 (or a growth rate of 6.80% on an inflation adjusted basis similar to the 1960, 1970, 1982 recoveries) with the hope that the plan would lead to a real GDP growth rate of 7% with an inflation rate of 3%.The title of that paper indicates two other factors hindering both M2 and GDP growth. Bank hoarding of excess reserves far in excess of ratios seen in the 1930s put the US into a liquidity trap. But in 2008 this was not an ordinary trap. We tried to coin the term “solvency trap” to indicate our belief that, using mark to market accounting, the financial system was insolvent. As Reinhart and Rogoff have noted, recoveries from financial crises tend to be slower than those from ordinary recessions. Analyses of each downturn since 1922 are conducted along with what has happened after the economy bottomed in 2Q09 including money supply analysis. Three years have passed. We continue to believe our original recommendation was correct.

The Behavior of the Components of M3 in the Euro Area: 1999-2014  [PDF]
Carlos Pateiro- Rodríguez, Esther Barros- Campello, Laura Varela Candamio, Carlos Pateiro- López
Open Journal of Business and Management (OJBM) , 2016, DOI: 10.4236/ojbm.2016.44062
Abstract: In this paper, the evolution of the various components of the broad monetary aggregate M3 at which the ECB attaches leading indicator properties of inflation expectations in the euro area is studied. During the fifteen years that the ECB defines and executes the stability-oriented monetary policy, M3 has not followed the developments that initially would be compatible with the inflation target announced. For its part, the components of the aggregate, in terms of their participation in it, have followed different paths. In this paper, an analysis of stationarity and cointegration of the series is done. The causes of such behavior in the light of the evolution of prices, interest rates and economic growth are searched, using dummy variables for periods of greater instability in the financial markets. We employ the Dynamic Ordinary Least Square (DOLS) estimator, augmenting the estimated relation with lead and lag differences of the explanatory variables to control for endogeneity and serial correlation of the regressors.
Estimating the Bank of Japan's monetary policy reaction function
Yu Hsing
PSL Quarterly Review , 2004,
Abstract: Extending the Taylor rule and applying the VAR model, the author finds that the overnight call rate reacts positively to a shock to the inflation gap, the output gap, yen depreciation, stock prices, or the lagged overnight call rate. The response of the overnight call rate to exchange rates or stock prices lasts longer than the reaction to the output gap and the inflation gap. Except for the lagged overnight call rate, the inflation gap and the exchange rate are more influential than the output gap and stock prices in explaining the variance of the overnight call rate.
Does central bank independence reflect monetary commitment properly? Methodical considerations
Andreas Freytag
PSL Quarterly Review , 2001,
Abstract: Central bank independence (CBI) has attracted much attention in economics and politics in recent years. The concept is based on the political economy literature onmonetary policy. In this paper, we argue that CBI is an incomplete approximation to legal monetary commitment. We first discuss the nature and criteria ofcommitment, then show the shortcomings of the most important indices of CBI before we introduce an alternative measure of legal monetary commitment. This measure is more comprehensive and includes more aspects of commitment than the indices of CBI. A first empirical comparison of this index and a leading CBI index strengthens the argument.
The Eurosystem operational framework, use of colleteral and liquidity distribution in the euro area: towards a single interbank market?
Gianfranco A. Vento
PSL Quarterly Review , 2004,
Abstract: This paper analyses the current operational framework chosen to implement singlemonetary policy in the euro area, pointing out the effects of certain technical choices in the field of monetary policy instruments on the interbank market and bank treasuries. In particular, I examine how the tender typology adopted for main refinancing operations affects overbidding and underbidding, as well as efficiency in bank liquidity management. I then go on to analyse the technical features of unsecured interbank markets in the euro area in order to determine whether a screen-based framework leads to more efficient liquidity management than achieved in over-the-counter markets. In accordance with the averaging provision mechanism, minimum reserves during the maintenance period in Italy, where the interbankmarket is electronic-based, are taken as indicators of efficiency in this market. On the evidence of the data, it seems that Italian banks can reduce the opportunity cost of maintaining minimum reserves, also performing intertemporal arbitrages between theinterbank market and their reserve accounts. Finally, the focus comes on cross border differences in the use of collateral within the euro area in order to analyse the projects currently debated for the reform of collateral lists.
Price Stability and the Growth Maximizing Rate of Inflation for Ghana  [PDF]
Peter Quartey
Modern Economy (ME) , 2010, DOI: 10.4236/me.2010.13021
Abstract: Monetary policy in Ghana, which is typical of many central banks, over the years, has focused on ensuring price stability or low inflation. The aim of the policy of price stability is to provide a stable environment for real sector activities to flourish. However, the outcome of the policy on real sector activities has not been subjected to any empirical investigation and this forms the focus of the study. For instance, the Central Bank has focused on single digit inflation and whether such a low rate is growth maximizing is yet to be ascertained. The study therefore investigates the revenue maximizing and the ‘growth maximizing’ rate of inflation for Ghana using data from Bank of Ghana and WDI. The study finds that economic performance is higher under low inflation era than when inflation is high. It also established the revenue maximizing rate of inflation using the Laffer curve approach is lower than the growth maximizing rate of inflation. Also, from the results, it can be deduced that the single digit inflation target set by the Central bank is not growth maximizing.
Dynamic Inconsistency and the Seignorage Paradox  [PDF]
Fernando Perera-Tallo
Theoretical Economics Letters (TEL) , 2015, DOI: 10.4236/tel.2015.56082
Abstract: Why do governments that pursue seignorage set growth rates of money that exceeds the one that maximizes it? This paper presents a Keynesian model with a government that pursues seignorage but dislikes inflation. Dynamic inconsistency problems prevent the implementation of the optimal growth rate of money and even the existence of stationary equilibrium. When stationary equilibrium exists, it is multiple and the growth rate of money is larger than the one that maximizes seignorage in some or even all equilibria.
Trends in Central Bank Transparency  [PDF]
Georgios Oikonomou, Eleftherios Spyromitros
Theoretical Economics Letters (TEL) , 2017, DOI: 10.4236/tel.2017.77142
Abstract: In this paper we have updated Central Bank Transparency Index from 2011 to 2016, following the methodology of Eijffinger and Geraats (2006) [1]. Then, we break down the index’s aspects and we analyze which are more likely to be changed through time. This, in respect to the annual data we have collected, makes clearer how the recent financial crisis has affected the Central Banks’ transparency trend and offers interesting insights for monetary policy transmission. Also, we divided the countries into developed, emerging and frontiers, as there is difference in their indexes changes, probably related to their economic and financial development.
Currency Flow in an Economy: India’s Demonetarization Event  [PDF]
Frederick Betz, Timothy R. Anderson, Aurobindh Kalathil Puthanpura
Theoretical Economics Letters (TEL) , 2018, DOI: 10.4236/tel.2018.83033
Abstract: In a previous paper, we analyzed an economic event in 2016-17 of a sudden demonetarization of India, to test the empirical validity of the Chartalist school of monetary theory. The Chartalist school had distinguished three kinds of money: Fiat, Commodity, and Managed Money. The demonetarization event provided empirical evidence for this currency distinction being significant and empirically valid, in the context of the nation of India. That sudden withdrawal of Fiat money immediately decreased the amount of Commodity money, creating an economic crisis in local Indian commerce. Managed Money (as bank accounts) was unable to fill the temporary gap in the supply of money, because a large portion of the Indian population did not have bank accounts. Also the government had not supplied a sufficient number of new Fiat money (new 500 and 2000 rupee notes) to quickly replace the withdrawn 500 and 1000 rupee notes. Our analysis showed that the policy thinking behind the demonetarization event lacked a proper understanding of valid monetary theory. In this paper, we continue the analysis of the demonetarization event by constructing a model of monetary flow in India. This model builds upon the Chartalist theory of money and may help fiscal policy makers to make sound decisions about currency and credit in a nation.
Monetary Policy, Fiscal Policy, and the Housing Bubble  [PDF]
John F. McDonald, Houston H. Stokes
Modern Economy (ME) , 2015, DOI: 10.4236/me.2015.62014
Abstract: The paper employs monthly data to test alternative hypotheses for the causes of the large increase and subsequent decline in U.S. housing prices during the 2000-2010 decade. The empirical evidence using VAR modeling is consistent with the hypothesis that Federal Reserve interest rate policy was a cause of the movements in housing prices. In addition, federal fiscal policy and interest rates on adjustable-rate mortgages are found to be associated with housing prices. On the other hand, the interest rate on standard 30-year mortgages and a measure of net capital flows from abroad were not related to housing prices. Foreclosure rates were also important. The study finds that foreclosures and housing prices interacted: more foreclosures produced lower housing prices and lower housing prices generated more foreclosures.
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