Stephen Wright

Bio: Stephen Wright is an academic researcher from University of Cambridge. The author has contributed to research in topics: Monetary policy & Inflation. The author has an hindex of 3, co-authored 5 publications receiving 44 citations.

Equilibrium real exchange rates

Abstract: This paper analyzes the role of the real exchange rate in macroeconomic equilibrium. The supply-side equilibrium exchange rate, that level of the real exchange rate at which (relative) inflation is constant, is derived from a simple macro-model and related to the standard "NAIRU" model. The stabilizing role of monetary policy in adjustment towards the supply-side equilibrium exchange rate is analyzed both before and after entry to the exchange rate mechanism of the European Monetar System. Resolution of the conflict between supply-side and external equilibrium produces a stricter definition of the fundamental equilibrium exchange rate of J. Williamson. Copyright 1992 by Blackwell Publishers Ltd and The Victoria University of Manchester

Financial intermediation services indirectly measured: estimates for france and the u.k. based on the approach adopted in the 1993 sna

Abstract: The 1993 SNA proposes a revised treatment of the output of financial intermediaries which treats intermediation services in part as a component of final demand, so that GDP is higher than the 1968 SNA suggests. In this paper we present the results of attempts to estimate FISIM (Financial Intermediation Services Indirectly Measured) for France and the U.K. The French study uses a reference rate calculated to ensure that no imputation is made with respect to own funds, while the U.K. study relies on a market interest rate. Both studies present an allocation of intermediation services by industry as well as by category of demand. The adjustments to GDP are of similar magnitudes in both countries.

How to make money in the bond market: international evidence of inefficiency and what it suggests about the way markets view monetary policy

Abstract: M. C. Jensen (1978) describes a market as efficient if it is impossible to make economic profits by trading on the basis of available information. On this criterion, the bond markets of the United States, the United Kingdom, and Germany are all inefficient. Trading rules that switch between bonds and cash on the basis of recursive econometric forecasts of bond price changes are shown to earn rates of return higher than bonds, and comparable to the return on equities, with lower volatility of returns than either. Underlying this inefficiency is an apparent tendency to understate the stabilizing impact of monetary policy. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

EXPLOSIVE FEATURES OF TWO TEXTBOOK MACRO MODELS Some Simple Resolutions of the Fuhrer-Moore Puzzle

Abstract: Fuhrer and Moore (1995) show that combining a simple monetary policy reaction function, which they attribute to Wicksell, with a backwardlooking Phillips Curve, generates explosive behaviour. The same feature is evident if the textbook LM Curve is used instead. Whilst Fuhrer and Moore propose a resolution based on assumed forward-looking behaviour in the real economy, this resolution does not appear robust. An alternative is to reexamine the LM Curve itself. A “Taylor Rule” will stabilise inflation rates, but at the expense of abandoning a price level target. However, it is shown that a simple hybrid “Taylor-LM-Curve” produces stability in both. Empirical estimates suggest that the “Taylor Rule” does well at explaining the Bundesbank’s behaviour, and hence the stability of German inflation; but for the United States a hybrid function does better.

The Econometrics of Macroeconomic Modelling

Abstract: 1. Introduction 2. Methodological issues of large scale macromodels 3. The Norwegian main-course model 4. The Phillips curve 5. Wage bargaining and price setting 6. Wage-price dynamics 7. The New Keynesian Phillips Curve 8. Money and inflation 9. Transmission channels and model properties 10. Evaluation of monetary policy rules 11. Forecasting using econometric models 12. Appendices

Consumer over‐indebtedness in the EU: measurement and characteristics

Abstract: Purpose – This paper seeks to measure and characterise the extent of consumer over‐indebtedness among the European Union (EU) member states.Design/methodology/approach – The study evaluates alternative measures of over‐indebtedness on the basis of the permanent‐income/life‐cycle theories of consumption behaviour and adopts a subjective approach in identifying over‐indebted households on the basis of European household survey data. It then investigates the main characteristics of over‐indebted households.Findings – The empirical results reveal that over‐indebtedness was a significant problem across EU member states in the mid‐1990s. Moreover, an inverse relationship emerged between the extent of the over‐indebtedness problem and the extent of consumer borrowing across EU countries.Research limitations/implications – Anecdotal evidence seemed to suggest that some main factors behind over‐indebtedness could be “market failure” on the credit market, the existence of liquidity constraints and lack of access to...

How robust are estimates of equilibrium real exchange rates: the case of china

Abstract: . Assessments of a country's real exchange rate relative to its ‘equilibrium’ value as suggested by ‘fundamental’ determinants have received increasing attention. Using China as an example, the present paper illustrates models commonly used to derive equilibrium real exchange rate estimates. The large variance in the estimates raises serious questions about the robustness of these results. The basic conclusion is that, at least for China, small changes in model specifications, explanatory variable definitions, and time periods used in estimation can lead to very substantial differences in equilibrium real exchange rate estimates. Therefore, such estimates should be treated with great caution.

The Econometrics of Macroeconomic Modelling

Abstract: Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-stationarity, and poor forecasting properties. By the start of the 1990s, the status of macroeconometric models had declined markedly, and had fallen completely out of, and with, academic economics. Nevertheless, unlike the dinosaurs to which they often have been likened, macroeconometric models have never completely disappeared from the scene. This book describes how and why the discipline of macroeconometric modelling continues to play a role for economic policymaking by adapting to changing demands, in response, for instance, to new policy regimes like inflation targeting. Model builders have adopted new insights from economic theory and taken advantage of the methodological and conceptual advances within time series econometrics over the last twenty years. The modelling of wages and prices takes a central part in the book as the authors interpret and evaluate the last forty years of international research experience in the light of the Norwegian 'main course' model of inflation in a small open economy. The preferred model is a dynamic model of incomplete competition, which is evaluated against alternatives as diverse as the Phillips curve, Nickell-Layard wage curves, the New Keynesian Phillips curve, and monetary inflation models on data from the Euro area, the UK, and Norway. The wage price core model is built into a small econometric model for Norway to analyse the transmission mechanism and to evaluate monetary policy rules. The final chapter explores the main sources of forecast failure likely to occur in a practical modelling situation, using the large-scale nodel RIMINI and the inflation models of earlier chapters as case studies.

The productivity of the banking sector: integrating financial and production approaches to measuring financial service output

Abstract: Measurement of output for services in general, and for financial services in particular, is a challenge. In the context of the national accounts, there is a significant component of financial services output for which payment is made implicitly through the spread between the asset interest earned and liability interest paid by financial institutions. Although it is reasonably clear that the total value of output of financial institutions includes the net interest income on financial asset and liability products (such as loans and deposits for banks) plus explicit service charges, there are unsettled issues concerning the correct allocation of the net interest component across business (intermediate consumers) versus households, government, and the rest of the world (final consumers). Recent revisions in national accounting rules for banking, together with the developments since the late 1970s in the microeconomic theory of financial firms and of household consumption of financial asset services (Diewert 1974, Barnett 1978, Donovan 1978, Hancock 1985) represent important developments in our understanding of the economics of and measurement possibilities for the banking sector. Central to, and an important contribuLtion of, this last line of literature has been the characterization of the prices of individual service products in terms of the Barnett (1978)-Donovan (1978) user cost of money. These user cost prices are simple functions of items, such as interest rates, that can be measured in financial market transactions. The principal practical economic measurement issues these developments have illuminated are twofold: