Currency unions and trade: A post-EMU reassessment

Money, Other Assets, and Economic Activity. Consumption and investment (A.B. Abel). Why does money affect output? A survey (O.J. Blanchard). Credit rationing (D. Jaffee, J. Stiglitz). The macroeconomics of government finance (M. Haliassos, J. Tobin). Money, Inflation and Welfare. Inflation: Theory and evidence (B.T. McCallum). Costs of inflation (J. Driffill, G.E. Mizon, A.M. Ulph). The optimum quantity of money (M. Woodford). Monetary Policy. Rules versus discretion in monetary policy (S. Fischer). Targets and instruments of monetary policy (B.M. Friedman). Monetary policy in the open economy (R. Dornbusch, A. Giovannini).

Handbook of monetary economics

https://www.snb.ch/n/mmr/reference/sem_2015_07_09_pres_Banerjee_Devereux_Lombardo/source/sem_2015_07_09_pres_Banerjee_Devereux_Lombardo.n.pdf

Self-oriented monetary policy, global financial markets and excess volatility of international capital flows

It is a great pleasure to be here again in Melbourne addressing CEDA's Annual Dinner. This is the fifth time I have done so, and it is like returning to be with old friends. I usually talk about some aspect of monetary policy, and will do so again tonight, starting with something very familiar and then moving to newer territory. When we look back to fifteen or twenty years ago, the thing about monetary policy that stands out is the lack of clarity about what it was expected to achieve. That is, what should be its ultimate objective, and therefore what should it be accountable for? This lack of clarity applied both inside the Reserve Bank and outside it. I am sure some of you are familiar with the wide variety of objectives for monetary policy that were put forward at the time. As well as the familiar aims of low inflation, low unemployment and good economic growth, there were those who felt it should also be aimed at improving the balance of payments, promoting investment or limiting the growth of credit or some other monetary aggregate. Others put forward the view that it should aim to rein in the growth of asset prices. We now recognise that there are a lot of good economic arguments against having such a wide set of aims, but I will not go into those tonight. Instead, I will say a few words about accountability and independence. A government cannot be expected to allow independence to its central bank unless that bank is also accountable to it and to the wider public. That is, the central bank must be able to be judged on whether or not it has achieved its agreed objective. When there are half a dozen objectives, this becomes impossible because there is very little chance that the optimal outcome for all these variables could be achieved at the one time. If the central bank was held accountable for failing to achieve one objective, it could always defend itself by saying that its efforts were directed at one or more of the other objectives which it viewed as more important at the time. Thus, the old system failed the test of being accountable, and hence there was a reluctance to fully recognise the independence that was essential for the ultimate success of monetary policy. It is true that the Reserve Bank …

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Monetary policy and financial stability

We investigate the link between real exchange rates and sectoral total factor productivity measures for countries in the Eurozone. Real exchange rate patterns closely accord with an amended Balassa-Samuelson interpretation, both in cross-section and time series. We construct a sticky price dynamic general equilibrium model to generate a cross-section and time series of real exchange rates that can be directly compared to the data. Under the assumption of a common currency, estimates from simulated regressions are very similar to the empirical estimates for the Eurozone. Our findings contrast with previous studies that have found little relationship between productivity levels and the real exchange rate among high-income countries, but those studies have included country pairs which have a floating nominal exchange rate.

/pdf/real-exchange-rates-and-sectoral-productivity-in-the-3lfcmei1cr.pdf

Real Exchange Rates and Sectoral Productivity in the Eurozone

I develop a two-country DSGE model with global banks (nancial intermediaries in one country lend to banks in the other country). Banks are nancially constrained on how much they can borrow from households. The main goal is to obtain a framework that captures the international transmission of a nancial crisis through the balance sheet of the global banks as well as to explain the insurance mechanism of the international asset market. A negative shock to the value of the capital in one country generates a global nancial crisis through the international interbank market. Unconventional credit policies help to mitigate the eects of a

/pdf/financial-intermediation-in-a-global-environment-5c6uh7thea.pdf

Financial Intermediation in a Global Environment

I develop a two-country DSGE model with global banks (financial intermediaries in one country lend to banks in the other country). Banks are financially constrained on how much they can borrow from households. The main goal is to obtain a framework that captures the international transmission of a financial crisis through the balance sheet of the global banks, as well as to explain the insurance mechanism of the international asset market. A negative shock to the value of the capital in one country generates a global financial crisis through the international interbank market. In this model, unconventional credit policies help to mitigate the effects of a financial disruption. The policies are carried out by the policy maker of the country directly hit by the shock. Consumers of that country are better off with policy than without it, while consumers from the other country are worse off.

In a New Keynesian model with the BGG accelerator and risk shocks, we show that violations of Tinbergen's Rule and strategic interaction between economic authorities undermine the effectiveness of monetary and financial policies. Separate monetary and financial policy rules produce higher welfare than a monetary rule augmented with credit spreads. The latter yields a tight money-tight credit regime in which the interest rate responds too much to inflation and not enough to credit. Reaction curves for the policy-rule elasticities are nonlinear, which reflects shifts in these elasticities from strategic substitutes to complements. The Nash equilibrium is inferior to the Cooperative equilibrium, both are inferior to a first-best outcome, and both might produce tight money-tight credit regimes.

Tight Money-Tight Credit: Coordination Failure in the Conduct of Monetary and Financial Policies

https://www.bis.org/events/ccaconf2015apr/mexico_risky_banks.pdf

Risky banks and macro-prudential policy for emerging economies

https://www.frbsf.org/economic-research/files/S11_P1_LuisaLambertini.pdf

Victoria Nuguer

Papers

Financial Intermediation in a Global Environment

Financial Intermediation in a Global Environment

Tight Money-Tight Credit: Coordination Failure in the Conduct of Monetary and Financial Policies

Risky banks and macro-prudential policy for emerging economies

Mortgage default in an estimated model of the U.S. housing market