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Monetary Policy and the Stock Market in the Euro Area
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In this paper, the role of the stock market in the transmission mechanism in the euro area and evaluate whether price stability and financial stability are mutually consistent and complementary objectives is investigated, and four major conclusions can be drawn from their work.Abstract:
In this paper we study the role of the stock market in the transmission mechanism in the euro area and evaluate whether price stability and financial stability are mutually consistent and complementary objectives. Four major conclusions can be drawn from our work. First, stock prices and, more generally, relative asset prices seem to play an important role in the transmission mechanism in the euro area. Second, we do not find any significant, direct impact of stock prices on inflation. Third, permanent productivity shocks are the driving force of the stock market in the long-run and contribute significantly to its cyclical behaviour. Nevertheless, the bulk of cyclical dynamics in the stock market is explained by transitory shocks. Fourth, a monetary policy focused on maintaining price stability in the long-run can contribute also to stock market stability.read more
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Assessing excess liquidity in the euro area: the role of sectoral distribution of money
TL;DR: In this paper, a sectoral breakdown of money holdings shows that current excess liquidity conditions have been partly related to the acceleration of nonbank financial intermediaries' money demand, as well as to the accumulation of marketable instruments.
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Retail Bank Interest Rate Pass-through: New Evidence at the Euro Area Level
TL;DR: In this article, an error-correction model of the interest rate pass-through process based on a marginal cost pricing framework including switching and asymmetric information costs is presented, which suggests that the proportion of the passthrough of changes in market interest rates to bank deposit and lending rates within one month is at its highest around 50%.
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Günter Coenen,Volker Wieland +1 more
TL;DR: In this paper, the role of the exchange rate in conducting monetary policy in an economy with near-zero nominal interest rates was studied. But the impact of the zero bound on the effectiveness of interest rate policy in Japan in terms of stabilizing output and inflation was not analyzed.
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Is the Demand for Euro Area M3 Stable
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Competition and stability: what's special about banking?
Elena Carletti,Philipp Hartmann +1 more
TL;DR: In this paper, the relationship between competition policies and policies to preserve stability in the banking sector is examined, showing the predominance of merger review considerations for loan and deposit markets as well as the relevance of cartel considerations for payment systems.
References
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Statistical analysis of cointegration vectors
TL;DR: In this paper, the authors consider a nonstationary vector autoregressive process which is integrated of order 1, and generated by i.i.d. Gaussian errors, and derive the maximum likelihood estimator of the space of cointegration vectors and the likelihood ratio test of the hypothesis that it has a given number of dimensions.
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The Financial Accelerator in a Quantitative Business Cycle Framework
TL;DR: This article developed a dynamic general equilibrium model that is intended to help clarify the role of credit market frictions in business fluctuations, from both a qualitative and a quantitative standpoint, and the model is a synthesis of the leading approaches in the literature.
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Stochastic Trends and Economic Fluctuations
Robert G. King,Robert G. King,Robert G. King,Charles I. Plosser,Charles I. Plosser,James H. Stock,James H. Stock,Mark W. Watson,Mark W. Watson +8 more
TL;DR: The authors used a long-run restriction implied by a large class of real-business-cycle models -identifying permanent productivity shocks as shocks to the common stochastic trend in output, consumption, and investment -to provide new evidence on this question.
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Monetary Policy and Asset Price Volatility
TL;DR: In this paper, the implications of asset price volatility for the management of monetary policy are explored and it is shown that it is desirable for central banks to focus on underlying inflationary pressures.