Table of Contents

Systemic Risk: A New Trade-Off for Monetary Policy?

Stefan Laseen, Sveriges Riksbank - Monetary Policy Department
Andreas Pescatori, International Monetary Fund (IMF)
Jarkko Turunen, International Monetary Fund

Revisiting the Impacts of Oil Price Increases on Monetary Policy Implementation in the Largest Oil Importers

Nurtac Yildirim, Istanbul University - Faculty of Economics
Oguzhan Ozcelebi, Istanbul University - Faculty of Economics
Seval Oral Ozkan, Istanbul University - Faculty of Economics

Fiscal or Monetary Dominance in a Small, Open Economy with Fixed Exchange Rate – The Case of the Republic of Macedonia

Borce Mihail Trenovski, Ss. Cyril and Methodius University - Faculty of Economics
Biljana Tashevska, Ss. Cyril and Methodius University - Faculty of Economics

Monetary Policy with Asset-Backed Money

David Andolfatto, Simon Fraser University (SFU) - Department of Economics
Aleksander Berentsen, University of Basel - Economics Department, CESifo (Center for Economic Studies and Ifo Institute)
Christopher J. Waller, University of Notre Dame - Department of Economics

The Greek Referendum: An Alternative Approach

Emmanouil Mavrozacharakis, University of Crete, Department of Political Science, Students
Stylianos Ioannis Tzagkarakis, University of Crete, Department of Political Science

The Measurement of Wealth: Recessions, Sustainability and Inequality

Joseph E. Stiglitz, Columbia Business School - Finance and Economics, National Bureau of Economic Research (NBER)


MACROECONOMICS: MONETARY & FISCAL POLICIES eJOURNAL

"Systemic Risk: A New Trade-Off for Monetary Policy?" Free Download
IMF Working Paper No. 15/142

STEFAN LASEEN, Sveriges Riksbank - Monetary Policy Department
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ANDREAS PESCATORI, International Monetary Fund (IMF)
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JARKKO TURUNEN, International Monetary Fund
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We introduce time-varying systemic risk in an otherwise standard New-Keynesian model to study whether a simple leaning-against-the-wind policy can reduce systemic risk and improve welfare. We find that an unexpected increase in policy rates reduces output, inflation, and asset prices without fundamentally mitigating financial risks. We also find that while a systematic monetary policy reaction can improve welfare, it is too simplistic: (1) it is highly sensitive to parameters of the model and (2) is detrimental in the presence of falling asset prices. Macroprudential policy, similar to a countercyclical capital requirement, is more robust and leads to higher welfare gains.

"Revisiting the Impacts of Oil Price Increases on Monetary Policy Implementation in the Largest Oil Importers" Free Download
Zbornik radova Ekonomskog fakulteta u Rijeci, Ä?asopis za ekonomsku teoriju i praksu - Proceedings of Rijeka Faculty of Economics, Journal of Economics and Business, Vol. 33, No. 1, 2015, pp. 11-35

NURTAC YILDIRIM, Istanbul University - Faculty of Economics
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OGUZHAN OZCELEBI, Istanbul University - Faculty of Economics
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SEVAL ORAL OZKAN, Istanbul University - Faculty of Economics
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The aim of this paper is to test the impacts of oil price increases on monetary policy implementation in the largest oil importers. For that purpose, we estimate structural vector error correction (SVEC) models to show the impacts of oil price increases on industrial production, consumer prices and immediate interest rates which are the elements of Taylor rule for the four largest oil importers (the USA, the EU, China and Japan). Our results indicate that oil price increases transmit to output and inflation and lead to fluctuations in industrial production, consumer prices and immediate interest rates which in turn influence the monetary policy stance in the following periods. The basic conclusion of research is that the channels through which oil prices affect output, inflation and interest rates should be identified by the monetary policy authorities of the USA, the EU, China and Japan. We also emphasize the importance of the determination of the optimal monetary policy framework to eliminate the negative consequences of oil price increases.

"Fiscal or Monetary Dominance in a Small, Open Economy with Fixed Exchange Rate – The Case of the Republic of Macedonia" Free Download
Zbornik radova Ekonomskog fakulteta u Rijeci, Ä?asopis za ekonomsku teoriju i praksu - Proceedings of Rijeka Faculty of Economics, Journal of Economics and Business, Vol. 33, No. 1, 2015, pp. 125-145

BORCE MIHAIL TRENOVSKI, Ss. Cyril and Methodius University - Faculty of Economics
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BILJANA TASHEVSKA, Ss. Cyril and Methodius University - Faculty of Economics
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Taking into account the specific features of the Macedonian economy, as a small, open economy with a fixed exchange rate, the goal of this research is to contribute to the discussion of whether countries with such characteristics are under monetary or fiscal dominant regime and whether the dominance has changed over time and why. We use a recursive VAR model to determine whether budget balances in Macedonia were set exogenously and independently from public sector liabilities in the period 2000-2011. The results show that the cyclically adjusted balance of central government does not significantly respond to the public debt changes. Thus the basic conclusion is that in the analyzed period, a little attention is paid to the level of public liabilities (public debt) in setting current discretionary fiscal policy, indicating that fiscal policy can undermine the goal of monetary policy and that it dominates over monetary policy.

"Monetary Policy with Asset-Backed Money" Free Download
University of Zurich, Department of Economics, Working Paper No. 198

DAVID ANDOLFATTO, Simon Fraser University (SFU) - Department of Economics
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ALEKSANDER BERENTSEN, University of Basel - Economics Department, CESifo (Center for Economic Studies and Ifo Institute)
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CHRISTOPHER J. WALLER, University of Notre Dame - Department of Economics
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We study the use of asset-backed money in a neoclassical growth model with illiquid capital. A mechanism is delegated control of productive capital and issues claims against the revenue it earns. These claims constitute a form of asset-backed money. The mechanism determines (i) the number of claims outstanding, (ii) the dividends paid to claim holders, and (iii) the structure of redemption fees. We find that for capital-rich economies, the first-best allocation can be implemented and price stability is optimal. However, for sufficiently capital-poor economies, achieving the first-best allocation requires a strictly positive rate of inflation. In general, the minimum inflation necessary to implement the first-best allocation is above the Friedman rule and varies with capital wealth.

"The Greek Referendum: An Alternative Approach" Free Download

EMMANOUIL MAVROZACHARAKIS, University of Crete, Department of Political Science, Students
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STYLIANOS IOANNIS TZAGKARAKIS, University of Crete, Department of Political Science
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Admittedly, the balance of power within the European institutions, especially those related to financial stability and economic policy, is controlled by Germany. The German Federal Republic as the "main creditor" controls the Eurogroup, the Euro Working Group and has privileged relations with the International Monetary Fund (IMF) and the European Central Bank (ECB). Due to this fact, Wolfgang Schäuble as the exponent of the hard German economic strategy has a leading role within the European decision-making institutions. France, Italy and other countries are unsuccessfully trying to counteract and mitigate the German influence, as shown by the Greek issue.

This framework is tightly connected with the negotiating ability of any country that inconsistently attempts to reverse the status quo, modify the rules or change the terms of an agreement. The Greek government of Alexis Tsipras sufficiently experienced this suffocating experience and announced a referendum as an attempt to open the field of negotiations.

"The Measurement of Wealth: Recessions, Sustainability and Inequality" Fee Download
NBER Working Paper No. w21327

JOSEPH E. STIGLITZ, Columbia Business School - Finance and Economics, National Bureau of Economic Research (NBER)
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This paper considers two central problems in our statistical frameworks which impair the ability to use wealth to assess economic sustainability or the impacts of economic downturns. Some increases in wealth may reflect increased economic rents - in particular, land and exploitation rents - and their capitalized value, unrelated to an increase in the productive capacity of the economy. Another major problem in our wealth accounts is the “missing capital� required to explain the marked decrease in economic output, at the time of the recession and in the years following, that cannot be fully accounted for by a decrease in measured inputs. When account is taken of this missing capital, the adverse effects of austerity appear much greater than suggested by the standard national income accounts.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

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Advisory Board

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)