Table of Contents

Qualitative Easing and Risk Transfer from Corporations to Central Banks

Roberto Moro Visconti, Università Cattolica del Sacro Cuore - Department of Business Administration
Maria Cristina Quirici, University of Pisa

Central Bank Credibility and the Expectations Channel: Evidence Based on a New Credibility Index

Grégory Levieuge, University of Orleans - Laboratoire d'économie d'Orléans, Banque de France
Yannick Lucotte, PSB Paris School of Business
Sébastien Ringuedé, University of Orleans - Laboratoire d'économie d'Orléans

Why Implicit Bank Debt Guarantees Matter: Some Empirical Evidence

Oliver Denk, Organization for Economic Co-Operation and Development (OECD)
Sebastian Schich, Organisation for Economic Co-operation and Development (OECD)
Boris Cournede, Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Inflation Persistence, Price Indexation and Optimal Simple Interest Rate Rules

Guido Ascari, University of Pavia
Nicola Branzoli, Bank of Italy


MACROECONOMICS: MONETARY & FISCAL POLICIES eJOURNAL

"Qualitative Easing and Risk Transfer from Corporations to Central Banks" Free Download
Corporate Ownership & Control, Vol. 12, issue 3, 2015, pp. 201-210

ROBERTO MORO VISCONTI, Università Cattolica del Sacro Cuore - Department of Business Administration
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MARIA CRISTINA QUIRICI, University of Pisa
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When economies face deflation and de-growth, Central Banks can only activate unconventional monetary policies.

Quantitative easing inflates the Central Bank balance sheet, printing money and adding liquidity to the system while qualitative easing modifies the asset composition. With qualitative easing, Central Banks absorb the risk, flattening the yield curve. Consequences for banks and corporate borrowers may be substantial.

Both measures increase inflation and reduce borrowing risk premiums, with an impact on company’s balance sheet, widening economic and financial margins and decreasing the real value of debt. Corporate governance implications concern credit risk pooling, as well as (de)leverage, asset substitution and duration risk.

This paper provides unprecedented analysis of the impact of ECB unconventional monetary policy on Euro-zone governance equilibriums.

"Central Bank Credibility and the Expectations Channel: Evidence Based on a New Credibility Index" Free Download

GRÉGORY LEVIEUGE, University of Orleans - Laboratoire d'économie d'Orléans, Banque de France
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YANNICK LUCOTTE, PSB Paris School of Business
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SÉBASTIEN RINGUEDÉ, University of Orleans - Laboratoire d'économie d'Orléans
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This article investigates the relationship between central bank credibility and the volatility of the key monetary policy instrument. Two main contributions are proposed. First, we propose a time-varying measure of central bank credibility based on the gap between inflation expectations and the official inflation target. While this new index addresses the main limitations of the existing indicators, it also appears particularly suited to assess the monetary experiences of a large sample of inflation-targeting emerging countries. Second, by means of EGARCH estimations, we formally prove the existence of a negative effect of credibility on the volatility of the short-term interest rate. Thus, in line with the expectations channel of monetary policy, the higher the credibility of the central bank, the lower the need to move its instruments to efficiently fulfill its objective.

"Why Implicit Bank Debt Guarantees Matter: Some Empirical Evidence" Free Download
Financial Market Trends, Vol. 2014, No. 2, 2015

OLIVER DENK, Organization for Economic Co-Operation and Development (OECD)
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SEBASTIAN SCHICH, Organisation for Economic Co-operation and Development (OECD)
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BORIS COURNEDE, Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)
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What are the economic effects of implicit bank debt guarantees and who ultimately benefits from them? This paper finds that “financial excesses? – situations where bank credit reaches levels that reduce economic growth – have been stronger in OECD countries characterised by larger values of implicit guarantees and where bank creditors have not incurred losses in bank failure resolution cases. Also, implicit bank debt guarantees benefit financial sector employees and other high-income earners in two ways, increasing income inequality. First, implicit guarantees are likely to raise financial sector pay. This is consistent with the observation of “financial sector wage premia?, or financial sector employees earning in excess of their profile in terms of age, education and other characteristics. Second, implicit guarantees are likely to result in more and cheaper bank lending. If so, well-off people tend to benefit relatively more since household credit is more unequally distributed than income.

"Inflation Persistence, Price Indexation and Optimal Simple Interest Rate Rules" Fee Download
The Manchester School, Vol. 83, pp. 1-30, 2015

GUIDO ASCARI, University of Pavia
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NICOLA BRANZOLI, Bank of Italy
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We study the properties of the optimal interest rate rule under different sources of inflation persistence. In our model, the optimal policy minimizes price dispersion, which depends on the degree of price indexation. When indexation is zero, inflation persistence depends only on the level of trend inflation, the inflation gap is purely forward?looking and the optimal policy targets inflation stability. Full indexation makes the inflation gap persistent, eliminates the effects of trend inflation and makes the optimal policy target the real interest rate. We compare our results with empirical estimates of the FED's policy in the post?WWII era.

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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)