Suchergebnisse

Gonçalves, Carlos Eduardo Soares: Monetary policy independence and floating exchange rates: what does the Brazilian evidence tell us? - S. 29-35. Palley, Thomas: Escaping the dept constraint on growth: a suggested monetary policy for Brazil. - S. 36-49 Maria Rita Loureiro e Fernando Luiz Abrucio: Política e reformas fiscais no Brasil recente. - S. 50-72

This paper studies the international coordination of monetary policies in the world economy. It carefully discusses the process of policy competition and the structure of policy cooperation. As to policy competition, the focus is on monetary competition between Europe and America. Similarly, as to policy cooperation, the focus is on monetary cooperation between Europe and America. The spillover effects of monetary policy are negative. The policy targets are price stability and full employment.

Central banks around the world try to influence economic activity by altering nominal interest rates which will have an effect on the real rate. However, this is only possible as long as interest rates are above zero. The case of Japan showed that monetary policy was helpless as nominal rates approached zero. This Book starts with an overview of monetary policy with the restriction that interest rates can not fall below zero. Then optimal monetary policy in a low inflation environment is treated. This is done by using a New Keynesian model with sticky prices. Therefore the model and the necessary optimality conditions will be derived (this will be done extensively in the appendix). After deriving the optimality conditions it will be shown how optimal monetary policy will be conducted. To evaluate the outcome of monetary policy a welfare function will be derived. It will be shown how the welfare function to evaluate the outcome of monetary policy is derived from the utility function of the household. As a result it will be shown that a price level target is welfare maximizing although most central banks nowadays use an inflation target instead. Reasons for an inflation target will be shown in the discussion of the model. The second part of the book describes the inflation dynamics in the euro area to see what monetary authority shall do to prevent the economy from falling into the vicious circle of deflation. Two wage contracting models that describe inflation dynamics in the euro area reasonably well will be explained, the Fuhrer-Moore und the Taylor contracting. After showing the optimal policy it will be discussed how severe the zero bound in the euro area is and what policy alternatives are left when monetary policy is restricted. Finally the results obtained will be discussed to see the pitfalls of price level targeting. The large appendix provides the complete derivation of the model and the optimality conditions.

In this paper, we argue that the ECB's unconventional monetary policy announcements have generated significant spillover effects in Russia and Eastern Europe. The hypothesis is tested using OLS estimations of event-based regressions on monetary policy event dummies and seven financial variables in eleven East European countries including Russia. Overall, the empirical results associate the ECB's unconventional policy announcements with the appreciation of East European currencies, rising stock market indices as well as falling long-term government bond yields and lower sovereign CDS spreads in Eastern Europe and Russia. Notably, bilateral integration with the eurozone is a key determinant of the strength of spillovers, with spillovers strongest in non-euro EU countries and weakest in non-EU East European countries. Interestingly, we find differentiated strength of spillovers to Russia compared to other non-EU East European countries, which we attribute to its fixed exchange rate regime. Lastly, we test for the presence of the portfolio rebalancing and confidence transmission channels.

This paper uses a factor-augmented vector autoregressive model (FAVAR) estimated on U.S. data in order to analyze monetary transmission via private sector balance sheets, credit risk spreads and asset markets in an integrated setup and to explore the role of monetary policy in the three imbalances that were observed prior to the global financial crisis: high house price inflation, strong private debt growth and low credit risk spreads. The results suggest that (i) monetary policy shocks have a highly significant and persistent effect on house prices, real estate wealth and private sector debt as well as a strong short-lived effect on risk spreads in the money and mortgage markets; (ii) monetary policy shocks have contributed discernibly, but at a late stage to the unsustainable developments in house and credit markets that were observable between 2001 and 2006; (iii) financial shocks have influenced the path of policy rates prior to the crisis, and the feedback effects of financial shocks via lower policy rates on property and credit markets are found to have probably been considerable.

This thesis consists of three self-contained chapters that contribute to the research fields of business cycles, monetary policy, and banking regulation. All three topics are directly linked to the financial crisis of 2007 and the European debt crisis during 2012. Both crises have significant effects on the real economy, on the interplay between the fiscal and the monetary authority, and on the regulation of the banking sector. The second chapter, therefore, analyzes the reaction of the German business cycle to both crises. It investigates their effects on the real economy by conducting a business cycle decomposition and explicitly looking at the importance of foreign demand and price shocks. Both are especially interesting for Germany as this country is an export-oriented economy. The crisis led to immense foreign demand shocks and foreign prices shocks. It is, however, neither empirically nor theoretically clear which of the two effects (demand or price) dominated the impacts of the financial and European debt crisis on the German economy. Francois and Woerz (2009) stress that a drop in relative prices is a sign for a potential loss in terms of competitiveness, whereas a drop in quantities simply shows that there is less use for the goods in demand. The third chapter investigates the optimal monetary reaction to a temporarily shortsighted fiscal authority. It is characterized by its preference for financing government spending through higher debt rather than higher taxes. A problem that is explained by political uncertainty in that the politicians have a finite and time-varying horizon. This tendency to finance government spending predominantly by government debt leads to high public-debt-to-GDP ratios. During 2007, and especially during 2012, these high public-debt-to-GDP ratios cast serious doubt on the solvency of several southern European countries during the European debt crisis. A temporarily myopic fiscal authority is associated with this so-called debt bias, which can be an independent source of business cycle fluctuations (see Kumhof and Yakadina 2007). Therefore, the third chapter presents the optimal monetary policy reaction to a temporarily shortsighted fiscal authority that minimizes the distortion caused by this fiscal shortsightedness. The forth chapter investigates the recent European implementation of the Basel III regulation package. The financial crisis of 2007 was the motivation for a stricter banking regulation in Europe: The regulation aimed at reducing the overall probability and consequences of a future banking crisis similar to the crisis seen in 2007. However, the European implementation of Basel III is quite special regarding European government bonds. Banks that invest in European government bonds do not have to hold any equity against them. All bonds issued by European governments are seen as riskless assets and investments in these bonds can be fully financed by debt. Therefore, the last chapter investigates how fully debt-financed government bonds influence the optimal design of an equity requirement constraint.

We analyse the interaction between private agents' uncertainty about inflation target and the central bank's data uncertainty. In our model, private agents update their perceived inflation target and the central bank estimates unobservable economic shocks as well as the perceived inflation target. Under those two uncertainties, the learning process of both private agents and the central bank causes higher order beliefs to become relevant, and this mechanism is capable of generating high persistence and volatility of inflation even though the underlying shocks are purely transitory. We also find that the persistence and volatility become smaller as the inflation target becomes more credible, that is, the private agents' uncertainty about inflation target (and hence the bank's data uncertainty) diminishes.