Table of Contents

Real Time Monitoring of the US Inflation Expectation Process

Vasyl Golosnoy, Ruhr Universität Bochum
Jan Roestel, Christian-Albrechts-University Kiel

Detection of Implicit Fluctuation Bands in the European Union Countries

Simón Sosvilla Rivero, Complutense University of Madrid
María del Carmen Ramos-Herrera, Universidad Complutense de Madrid (UCM)

Confidence and Monetary Policy Transmission

Gabe de Bondt, European Central Bank (ECB)

Financial Flows and the International Monetary System

Evgenia Passari, London Business School
Hélène Rey, London Business School, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER)

Non-Neutrality of Open-Market Operations

Pierpaolo Benigno, New York University - Stern School of Business, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER)
Salvatore Nisticò, University of Rome I, Sapienza University of Rome


MACROECONOMICS: MONETARY & FISCAL POLICIES eJOURNAL

"Real Time Monitoring of the US Inflation Expectation Process" Free Download

VASYL GOLOSNOY, Ruhr Universität Bochum
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JAN ROESTEL, Christian-Albrechts-University Kiel
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The real time supervision of inflation expectations is an important issue for monetary policymakers, especially in presence of economic uncertainty. In this paper we propose a novel methodology for sequential monitoring of noisy and heteroscedastic market based daily proxies for short, medium and long run inflation expectations. Our empirical evidence suggests that the on-line surveillance of risk adjusted US forward breakeven inflation rates by means of the CUSUM detector appears to be helpful to extract timely signals on potential shifts in market expectations. In particular, the obtained signals indicate important turning points in market based measures of inflation expectations. These turning points also tend to materialize in lower frequency survey based measures.

"Detection of Implicit Fluctuation Bands in the European Union Countries" Free Download

SIMÓN SOSVILLA RIVERO, Complutense University of Madrid
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MAR?A DEL CARMEN RAMOS-HERRERA, Universidad Complutense de Madrid (UCM)
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This paper attempts to identify implicit exchange rate regimes for currencies of European Union member states vis-à-vis the euro. To that end, we apply three sequential procedures that consider the dynamics of exchange rates to data covering the period from 1999:01 to 2012:12 for twelve European countries. Our results indicate the presence of ± 2% and ± 1% implicit fluctuation bands in high percentages of the sample period even reach 100% in countries such as Bulgaria, Cyprus and Slovenia, among others. This paper provides new empirical evidence that strengthens the hypothesis of that the implemented policies differ from those announced by the monetary authorities, identifying the existence of de facto fixed monetary systems along large number of sub-periods for different currencies. It seems that the countries under study try to capture the benefits of their participation in the ERM-II moderating somewhat the potential problems arising from formal participation in the ERM-II.

"Confidence and Monetary Policy Transmission" Free Download

GABE DE BONDT, European Central Bank (ECB)
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Empirical results for the euro area show that an important channel through which monetary policy – measured traditionally by the short-term interest rate as well as by the Eurosystem balance sheet total – affects economic growth is the confidence of borrowers as well as of lenders. Impulse responses and variance decompositions show that this channel is most effective via the short-term interest rate. Moreover, the state of confidence significantly matters for economic growth, particularly for investment (compared to private consumption) and for industry value added (compared to services). The findings are robust across adding other transmission variables, impulse definition, and other measures of monetary policy and confidence. The importance of a “feel good? factor among lenders provides new empirical evidence in the old debate that the situation of the financial sector does matter for growth.

"Financial Flows and the International Monetary System" Fee Download
CEPR Discussion Paper No. DP10592

EVGENIA PASSARI, London Business School
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HÉLÈNE REY, London Business School, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER)
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We review the findings of the literature on the benefits of international financial flows and find that they are quantitatively elusive. We then present evidence on the existence of a global cycle in gross cross border flows, asset prices and leverage and discuss its impact on monetary policy autonomy across different exchange rate regimes. We focus in particular on the effect of US monetary policy shocks on the UK's financial conditions.

"Non-Neutrality of Open-Market Operations" Fee Download
CEPR Discussion Paper No. DP10594

PIERPAOLO BENIGNO, New York University - Stern School of Business, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER)
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SALVATORE NISTICÒ, University of Rome I, Sapienza University of Rome
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Unconventional monetary policy can have consequences for inflation and output because of income losses on central-bank balance sheet. A proposition of neutrality holds under some special monetary and fiscal policy regimes in which the treasury is ready to back central bank's losses through appropriate transfers levied as taxes on the private sector. In absence of fiscal backing, large and recurrent central bank's losses can undermine its long-run solvency and should be resolved through a prolonged increase in inflation. Small and infrequent losses are backed by future profits without any further consequences. A central bank averse to declining net worth commits to a more inflationary stance and delayed exit strategy from a liquidity trap. If fiscal policy is active, it is also desirable to reduce the duration of central bank's losses through higher inflation.

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Macroeconomics: Monetary & Fiscal Policies eJournal

OLIVIER J. BLANCHARD
International Monetary Fund (IMF), National Bureau of Economic Research (NBER)

JOHN Y. CAMPBELL
Morton L. and Carole S. Olshan Professor of Economics, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)

STEPHEN G. CECCHETTI
Professor of International Economics, Brandeis International Business School, National Bureau of Economic Research (NBER), Centre for Economic Policy Research (CEPR)

BENJAMIN M. FRIEDMAN
William Joseph Maier Professor of Economics, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)

ROBERT E. HALL
Stanford University - The Hoover Institution on War, Revolution and Peace, National Bureau of Economic Research (NBER)

ROBERT E. LUCAS
John Dewey Distinguished Service Professor, University of Chicago - Department of Economics, National Bureau of Economic Research (NBER)

BENNETT T. MCCALLUM
Professor, Carnegie Mellon University - David A. Tepper School of Business, National Bureau of Economic Research (NBER)

ALLAN H. MELTZER
University Professor of Political Economics, Carnegie Mellon University - David A. Tepper School of Business

FREDERIC S. MISHKIN
Alfred Lerner Professor of Banking and Financial Institutions, Columbia Business School - Finance and Economics, National Bureau of Economic Research (NBER)

PAUL M. ROMER
National Bureau of Economic Research (NBER)

JULIO J. ROTEMBERG
Harvard University - Business, Government and the International Economy Unit, National Bureau of Economic Research (NBER)

MATTHEW D. SHAPIRO
Professor, University of Michigan at Ann Arbor - Department of Economics, Professor, National Bureau of Economic Research (NBER)

ROBERT J. SHILLER
Yale University - Cowles Foundation, National Bureau of Economic Research (NBER), Yale University - International Center for Finance

CHRISTOPHER A. SIMS
Princeton University - Department of Economics, National Bureau of Economic Research (NBER)

JOHN B. TAYLOR
Stanford University, National Bureau of Economic Research (NBER)