Monetary Policy Alternatives at the Zero Bound
Monetary Policy Alternatives at the Zero Bound

Author: Ben S. Bernanke

Publisher: www.bnpublishing.com

Published: 2009-03

Total Pages: 0

ISBN-13: 9781607961055

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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.

Negative Interest Rate Policy (NIRP)
Negative Interest Rate Policy (NIRP)

Author: Andreas Jobst

Publisher: International Monetary Fund

Published: 2016-08-10

Total Pages: 48

ISBN-13: 1475524471

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More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.

A Macroeconomic Approach to the Term Premium
A Macroeconomic Approach to the Term Premium

Author: Emanuel Kopp

Publisher: International Monetary Fund

Published: 2018-06-15

Total Pages: 22

ISBN-13: 1484363671

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In recent years, term premia have been very low and sometimes even negative. Now, with the United States economy growing above potential, inflationary pressures are on the rise. Term premia are very sensitive to the expected future path of growth, inflation, and monetary policy, and an inflation surprise could require monetary policy to tighten faster than anticipated, inducing to a sudden decompression of term and other risk premia, thus tightening financial conditions. This paper proposes a semi-structural dynamic term structure model augmented with macroeconomic factors to include cyclical dynamics with a focus on medium- to long-run forecasts. Our results clearly show that a macroeconomic approach is warranted: While term premium estimates are in line with those from other studies, we provide (i) plausible, stable estimates of expected long-term interest rates and (ii) forecasts of short- and long-term interest rates as well as cyclical macroeconomic variables that are stunningly close to those generated from large-scale macroeconomic models.

Negative Interest Rates
Negative Interest Rates

Author: Luís Brandão Marques

Publisher: International Monetary Fund

Published: 2021-03-03

Total Pages: 84

ISBN-13: 1513570080

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This paper focuses on negative interest rate policies and covers a broad range of its effects, with a detailed discussion of findings in the academic literature and of broader country experiences.

Monetary Policy Rules
Monetary Policy Rules

Author: John B. Taylor

Publisher: University of Chicago Press

Published: 2007-12-01

Total Pages: 460

ISBN-13: 0226791262

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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.

Estimating and Interpreting Forward Interest Rates
Estimating and Interpreting Forward Interest Rates

Author: Mr.Lars E. O. Svensson

Publisher: International Monetary Fund

Published: 1994-09-01

Total Pages: 76

ISBN-13: 1451853750

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The use of forward interest rates as a monetary policy indicator is demonstrated, using Sweden 1992-1994 as an example. The forward rates are interpreted as indicating market expectations of the time-path of future interest rates, future inflation rates, and future currency depreciation rates. They separate market expectations for the short-, medium-, and long-term more easily than the standard yield curve. Forward rates are estimated with an extended and more flexible version of Nelson and Siegel’s functional form.

Macroeconomic Linkage
Macroeconomic Linkage

Author: Takatoshi Ito

Publisher: University of Chicago Press

Published: 2009-02-15

Total Pages: 414

ISBN-13: 0226386996

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This volume explores East Asia's macroeconomic experience in the 1980s and the economic impact of East Asia's growth on the rest of the world. The authors explore the causes of capital flows, changes in trade balances, and exchange rate fluctuations in East Asia and their effects on other countries. These fourteen papers are organized around four themes: the overall determinants of growth and trading relations in the East Asian region; monetary policies in relation to capital controls and capital accounts; the impact of exchange rate behavior on industrial structure; and the potential for greater regional integration. The contributors examine interactions among exchange rate movements, trade balances, and capital flows; how government monetary policy affects capital flows; the effect of exchange rates on industrial structure, inventories, and prices; and the extent of regional integration in East Asia.

Topics in Structural VAR Econometrics
Topics in Structural VAR Econometrics

Author: Carlo Giannini

Publisher: Springer Science & Business Media

Published: 2013-11-11

Total Pages: 144

ISBN-13: 3662027577

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1. Introduction 1 2. Identification Analysis and F.I.M.L. Estimation for the K-Mode1 10 3. Identification Analysis and F.I.ML. Estimation for the C-Model 23 4. Identification Analysis and F.I.M.L. Estimation for the AB-Model 32 5. Impulse Response Analysis and Forecast Error Variance Decomposition in SVAR Modeling 44 5 .a Impulse Response Analysis 44 5.b Variance Decomposition (by Antonio Lanzarotti) 51 6. Long-run A-priori Information. Deterministic Components. Cointegration 58 6.a Long-run A-priori Information 58 6.b Deterministic Components 62 6.c Cointegration 65 7. The Working of an AB-Model 71 Annex 1: The Notions ofReduced Form and Structure in Structural VAR Modeling 83 Annex 2: Some Considerations on the Semantics, Choice and Management of the K, C and AB-Models 87 Appendix A 93 Appendix B 96 Appendix C (by Antonio Lanzarotti and Mario Seghelini) 99 Appendix D (by Antonio Lanzarotti and Mario Seghelini) 109 References 128 Foreword In recent years a growing interest in the structural VAR approach (SVAR) has followed the path-breaking works by Blanchard and Watson (1986), Bemanke (1986) and Sims (1986), especially in U.S. applied macroeconometric literature. The approach can be used in two different, partially overlapping directions: the interpretation ofbusiness cycle fluctuations of a small number of significantmacroeconomic variables and the identification of the effects of different policies.

Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data
Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data

Author: Margherita Bottero

Publisher: International Monetary Fund

Published: 2019-02-28

Total Pages: 59

ISBN-13: 1498300855

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We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.