This paper provides a comprehensive overview of the use of the Eurosystem’s monetary policy instruments and the operational framework, from the first quarter of 2018 to the last quarter of 2019. It reviews the context of Eurosystem market operations; the design and operation of the Eurosystem’s counterparty and collateral frameworks; the fulfilment of minimum reserve requirements; participation in credit operations and recourse to standing facilities; and the conduct of outright asset purchase programmes. The paper also discusses the impact of monetary policy on the Eurosystem's balance sheet, excess liquidity and money market liquidity conditions. JEL Classification: D02, E43, E58, E65, G01
{"title":"The Use of the Eurosystem's Monetary Policy Instruments and its Monetary Policy Implementation Framework between the First Quarter of 2018 and the Fourth Quarter of 2019","authors":"J. Sylvestre, Cristina Coutinho","doi":"10.2866/864493","DOIUrl":"https://doi.org/10.2866/864493","url":null,"abstract":"This paper provides a comprehensive overview of the use of the Eurosystem’s monetary policy instruments and the operational framework, from the first quarter of 2018 to the last quarter of 2019. It reviews the context of Eurosystem market operations; the design and operation of the Eurosystem’s counterparty and collateral frameworks; the fulfilment of minimum reserve requirements; participation in credit operations and recourse to standing facilities; and the conduct of outright asset purchase programmes. The paper also discusses the impact of monetary policy on the Eurosystem's balance sheet, excess liquidity and money market liquidity conditions. JEL Classification: D02, E43, E58, E65, G01","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"136 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77456294","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-06-01DOI: 10.5709/ce.1897-9254.338
K. Munir
This paper analyzes the effectiveness of monetary policy on money and credit in Pakistan by using the data rich environment. FAVAR model is used which consists of 115 macroeconomic variable for the period 1992:01 to 2010:12. Results depict that after a positive shock in interest rate (discount rate), M0 and M1 do not show any significant response, while M2 shows an instantaneous decline and shows revival after 34 months. Credit to public sector enterprises and credit to private sector both decline after a positive shock in monetary policy but credit to private sector declines more than credit to public sector enterprises and M2. An increase in interest rate discourages private sector which leads to slowdown in the economic activities and creates pressure on prices to increase. In Pakistan, the adverse victim of monetary policy is credit to private sector, therefore policy should be tailored to consider the demands of credit by private sector. The policies should be made which provide the credit to private sector at a subsidized rate and the environment of investment should be promoted by the authorities in the country.
{"title":"Effectiveness of Monetary Policy on Money and Credit in Pakistan","authors":"K. Munir","doi":"10.5709/ce.1897-9254.338","DOIUrl":"https://doi.org/10.5709/ce.1897-9254.338","url":null,"abstract":"This paper analyzes the effectiveness of monetary policy on money and credit in Pakistan by using the data rich environment. FAVAR model is used which consists of 115 macroeconomic variable for the period 1992:01 to 2010:12. Results depict that after a positive shock in interest rate (discount rate), M0 and M1 do not show any significant response, while M2 shows an instantaneous decline and shows revival after 34 months. Credit to public sector enterprises and credit to private sector both decline after a positive shock in monetary policy but credit to private sector declines more than credit to public sector enterprises and M2. An increase in interest rate discourages private sector which leads to slowdown in the economic activities and creates pressure on prices to increase. In Pakistan, the adverse victim of monetary policy is credit to private sector, therefore policy should be tailored to consider the demands of credit by private sector. The policies should be made which provide the credit to private sector at a subsidized rate and the environment of investment should be promoted by the authorities in the country.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"155 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86299435","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Dirty money is often a by-product or a symptom of political corruption in the jurisdictions in which it originates. It can also spread corruption and erode democracy on its journey to its final destination. This typically involves multiple jurisdictions and is the reason why it is so hard to detect. Recently, a series of money laundering scandals have highlighted weaknesses in the anti-money laundering and counter-terrorist financing (AML/CFT) framework of the European Union (EU), the implementation of which remains the responsibility of Member States. The paper argues that EU’s defences against money laundering have been weakened partly reflecting a little-known erosion in the independence of Member State central banks, which are often the AML supervisors. It puts forward a number of new proposals to strengthen the governance and AML/CFT implementation in the EU.
{"title":"Money Laundering and Central Bank Governance in the European Union","authors":"Panicos O. Demetriades, R. Vassileva","doi":"10.1093/jiel/jgaa011","DOIUrl":"https://doi.org/10.1093/jiel/jgaa011","url":null,"abstract":"\u0000 Dirty money is often a by-product or a symptom of political corruption in the jurisdictions in which it originates. It can also spread corruption and erode democracy on its journey to its final destination. This typically involves multiple jurisdictions and is the reason why it is so hard to detect. Recently, a series of money laundering scandals have highlighted weaknesses in the anti-money laundering and counter-terrorist financing (AML/CFT) framework of the European Union (EU), the implementation of which remains the responsibility of Member States. The paper argues that EU’s defences against money laundering have been weakened partly reflecting a little-known erosion in the independence of Member State central banks, which are often the AML supervisors. It puts forward a number of new proposals to strengthen the governance and AML/CFT implementation in the EU.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"290 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79450353","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The establishment of the Banking Union (BU) and of the Single Supervisory Mechanism (SSM) have pressured the EBA into an ‘existential search’ (Ferran 2016, 286) as to the value of its policy output on the side of supervision. At the same time, these developments have accentuated the ambiguities in the EBA’s internal and external setting. The first relates to the anchoring of the EBA’s executive level to national competent authorities (NCAs) and their capacity to disproportionately influence internal decision-making processes, while the second cautions about the capacity of the ECB to influence SSM-participating countries at the EBA negotiating table. In this context, arguably, the accomplishment of the EBA’s ‘existential search’ depends on its relationship with member states, with the core contention being: do member states support or disrupt the EBA's policymaking on the side of supervision? With this in mind and focusing on the internal dimension of the EBA’s relationship with member states in the BU framework, this paper first departs from Art. 16 of the EBA Regulation examining how NCAs inform the development of guidelines related to the Supervisory Review and Evaluation Process (SREP) – the backbone of the common supervisory culture. It then reflects on Art. 17 of the same regulation that spells out the authority’s supervisory enforcement powers, by analysing the course of action of national authorities in connection to the alleged breach of EU law proceedings in the Danske Bank case. The paper argues that the EBA’s relationship with member states appears supportive on the side of supervisory convergence, whilst the enforcement side reveals an adversarial dimension.
{"title":"The EBA's Relationship with Member States in the Banking Union Framework: Supportive or Disruptive?","authors":"Marta Božina Beroš","doi":"10.2139/ssrn.3615120","DOIUrl":"https://doi.org/10.2139/ssrn.3615120","url":null,"abstract":"The establishment of the Banking Union (BU) and of the Single Supervisory Mechanism (SSM) have pressured the EBA into an ‘existential search’ (Ferran 2016, 286) as to the value of its policy output on the side of supervision. At the same time, these developments have accentuated the ambiguities in the EBA’s internal and external setting. The first relates to the anchoring of the EBA’s executive level to national competent authorities (NCAs) and their capacity to disproportionately influence internal decision-making processes, while the second cautions about the capacity of the ECB to influence SSM-participating countries at the EBA negotiating table. In this context, arguably, the accomplishment of the EBA’s ‘existential search’ depends on its relationship with member states, with the core contention being: do member states support or disrupt the EBA's policymaking on the side of supervision? With this in mind and focusing on the internal dimension of the EBA’s relationship with member states in the BU framework, this paper first departs from Art. 16 of the EBA Regulation examining how NCAs inform the development of guidelines related to the Supervisory Review and Evaluation Process (SREP) – the backbone of the common supervisory culture. It then reflects on Art. 17 of the same regulation that spells out the authority’s supervisory enforcement powers, by analysing the course of action of national authorities in connection to the alleged breach of EU law proceedings in the Danske Bank case. The paper argues that the EBA’s relationship with member states appears supportive on the side of supervisory convergence, whilst the enforcement side reveals an adversarial dimension.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"25 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78971273","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
L. Schilling, Jesús Fernández-Villaverde, H. Uhlig
An account-based central bank digital currency has the potential to replace demand-deposits in private banks. In that case, the central bank invests in the real economy and takes over the role of maturity transformation to allow risk-sharing among depositors. Her function as intermediary exposes the CB to demand-liquidity or 'spending' shocks by her depositors. Since demand-deposit contracts are nominal, high aggregate spending not necessarily demands excessive liquidation of real investment by the central bank. A run on a central bank can, therefore, manifest itself either as a standard run characterized by excessive real asset liquidation (rationing) or as a run on the price level where a small supply of real goods meets a high demand. The central bank thus trades off price stability against the excessive liquidation of real goods.
{"title":"Central Bank Digital Currency: When Price and Bank Stability Collide","authors":"L. Schilling, Jesús Fernández-Villaverde, H. Uhlig","doi":"10.2139/ssrn.3606226","DOIUrl":"https://doi.org/10.2139/ssrn.3606226","url":null,"abstract":"An account-based central bank digital currency has the potential to replace demand-deposits in private banks. In that case, the central bank invests in the real economy and takes over the role of maturity transformation to allow risk-sharing among depositors. Her function as intermediary exposes the CB to demand-liquidity or 'spending' shocks by her depositors. Since demand-deposit contracts are nominal, high aggregate spending not necessarily demands excessive liquidation of real investment by the central bank. A run on a central bank can, therefore, manifest itself either as a standard run characterized by excessive real asset liquidation (rationing) or as a run on the price level where a small supply of real goods meets a high demand. The central bank thus trades off price stability against the excessive liquidation of real goods.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"16 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82973371","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop a New Monetarist model in continuous time where agents trade continuously in competitive markets and infrequently in pairwise meetings. Agents can produce and consume both in flows over time intervals and in discrete quantities at points in time. We detail the methodology to solve individual optimisation problems and characterise the full set of perfect foresight equilibria. We illustrate the role of continuous time and the tractability of our approach with three applications related to monetary policy: (i) forward guidance with policy announcements; (ii) aggregate demand management and firm entry; (iii) open market operations with partially liquid assets.
{"title":"New Monetarism in Continuous Time: Methods and Applications","authors":"Michael Choi, G. Rocheteau","doi":"10.2139/ssrn.3435889","DOIUrl":"https://doi.org/10.2139/ssrn.3435889","url":null,"abstract":"\u0000 We develop a New Monetarist model in continuous time where agents trade continuously in competitive markets and infrequently in pairwise meetings. Agents can produce and consume both in flows over time intervals and in discrete quantities at points in time. We detail the methodology to solve individual optimisation problems and characterise the full set of perfect foresight equilibria. We illustrate the role of continuous time and the tractability of our approach with three applications related to monetary policy: (i) forward guidance with policy announcements; (ii) aggregate demand management and firm entry; (iii) open market operations with partially liquid assets.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89211775","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We show that the New Keynesian Phillips Curve (NKPC) outperforms standard benchmarks in forecasting U.S. inflation once frequency-domain information is taken into account. We do so by decomposing the time series (of inflation and its predictors) into several frequency bands and forecasting separately each frequency component of inflation. The largest statistically significant forecasting gains are achieved with a model that forecasts the lowest frequency component of inflation (corresponding to cycles longer than 16 years) flexibly using information from all frequency components of the NKPC inflation predictors. Its performance is particularly good in the returning to recovery from the Great Recession.
{"title":"Forecasting Inflation with the New Keynesian Phillips Curve: Frequency Matters","authors":"M. M. Martins, Fabio Verona","doi":"10.2139/ssrn.3594397","DOIUrl":"https://doi.org/10.2139/ssrn.3594397","url":null,"abstract":"We show that the New Keynesian Phillips Curve (NKPC) outperforms standard benchmarks in forecasting U.S. inflation once frequency-domain information is taken into account. We do so by decomposing the time series (of inflation and its predictors) into several frequency bands and forecasting separately each frequency component of inflation. The largest statistically significant forecasting gains are achieved with a model that forecasts the lowest frequency component of inflation (corresponding to cycles longer than 16 years) flexibly using information from all frequency components of the NKPC inflation predictors. Its performance is particularly good in the returning to recovery from the Great Recession.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"8 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75279911","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited for helping stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus packages and earlier permanent Social Security increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business-cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers.
{"title":"Cross-Region Transfers in a Monetary Union: Evidence from the US and Some Implications","authors":"Steven Pennings","doi":"10.1596/1813-9450-9244","DOIUrl":"https://doi.org/10.1596/1813-9450-9244","url":null,"abstract":"US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited for helping stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus packages and earlier permanent Social Security increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business-cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"14 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90232790","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-05-01DOI: 10.5089/9781513536453.001.A001
Gustavo Adler, Kyun Suk Chang, Zijiao Wang
The paper documents the use of foreign exchange intervention (FXI) across countries and monetary regimes, with special attention to its use under inflation targeting (IT). We find significant differences between advanced and emerging market economies, with the former group conducting FXI limitedly and broadly symmetrically, while the use of this policy instrument in emerging market countries is pervasive and mostly asymmetric (biased towards purchasing foreign currency, even after taking into account precautionary motives). Within emerging markets, the use of FXI is common both under IT and non-IT regimes. We find no evidence of FXI being used in response to inflation developments, while there is strong evidence that FXI responds to exchange rates, indicating that IT central banks in EMDEs have dual inflation/exchange rate objectives. We also find a higher propensity to overshoot inflation targets in emerging market economies where FXI is more pervasive.
{"title":"Patterns of Foreign Exchange Intervention Under Inflation Targeting","authors":"Gustavo Adler, Kyun Suk Chang, Zijiao Wang","doi":"10.5089/9781513536453.001.A001","DOIUrl":"https://doi.org/10.5089/9781513536453.001.A001","url":null,"abstract":"The paper documents the use of foreign exchange intervention (FXI) across countries and monetary regimes, with special attention to its use under inflation targeting (IT). We find significant differences between advanced and emerging market economies, with the former group conducting FXI limitedly and broadly symmetrically, while the use of this policy instrument in emerging market countries is pervasive and mostly asymmetric (biased towards purchasing foreign currency, even after taking into account precautionary motives). Within emerging markets, the use of FXI is common both under IT and non-IT regimes. We find no evidence of FXI being used in response to inflation developments, while there is strong evidence that FXI responds to exchange rates, indicating that IT central banks in EMDEs have dual inflation/exchange rate objectives. We also find a higher propensity to overshoot inflation targets in emerging market economies where FXI is more pervasive.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"15 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82010215","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Monique Reid, Hanjo Odendaal, S. Du Plessis, P. Siklos
Inflation expectations surveys are receiving increasing attention. There is no optimal approach and often limited discussion of key characteristics of individual surveys. We use a South African dataset to argue that survey design should be given far more attention as it may undermine our ability to use the data with confidence. Users of survey data need to understand existing differences in survey design and the extent to which survey data reflect decision-making shortcuts under uncertainty as opposed to a true belief about what the public more generally really thinks expected inflation will be.
{"title":"A Note on the Impact of the Inclusion of an Anchor Number in the Inflation Expectations Survey Question","authors":"Monique Reid, Hanjo Odendaal, S. Du Plessis, P. Siklos","doi":"10.2139/ssrn.3583287","DOIUrl":"https://doi.org/10.2139/ssrn.3583287","url":null,"abstract":"Inflation expectations surveys are receiving increasing attention. There is no optimal approach and often limited discussion of key characteristics of individual surveys. We use a South African dataset to argue that survey design should be given far more attention as it may undermine our ability to use the data with confidence. Users of survey data need to understand existing differences in survey design and the extent to which survey data reflect decision-making shortcuts under uncertainty as opposed to a true belief about what the public more generally really thinks expected inflation will be.","PeriodicalId":10548,"journal":{"name":"Comparative Political Economy: Monetary Policy eJournal","volume":"66 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86074506","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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