Table of Contents

Real Interest Rates, Imbalances and the Curse of Regional Safe Asset Providers at the Zero Lower Bound

Pierre-Olivier Gourinchas, University of California, Berkeley - Department of Economics, National Bureau of Economic Research (NBER), Centre for Economic Policy Research (CEPR)
Hélène Rey, London Business School, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER)

Extending the Determinants of Dollarization in Sub-Saharan Africa: The Role of Easy Access to Foreign Exchange Earnings

Ibrahim D. Raheem, University of Kent, Canterbury - Department of Economics
Simplice A. Asongu, African Governance and Development Institute

Risk Aversion, Uncertainty, and Monetary Policy in Unconventional Environments

Jaehoon Hahn, Yonsei University - Yonsei University School of Business
Woonwook Jang, Yonsei University
Seongjin Kim, Yonsei University - Yonsei University School of Business

Fiscal Policy: As a Stabilization Tool for Discretionary and Non Discretionary Policies

Anita Tyagi, MJP Rohilkhand University, Bareilly, India.

Did Quantitative Easing Only Inflate Stock Prices? Macroeconomic Evidence from the US and UK

Mirco Balatti, Henley Business School - ICMA Centre
Chris Brooks, University of Reading - ICMA Centre
Michael P. Clements, University of Reading - Henley Business School
Konstantina Kappou, University of Reading - ICMA Centre


MACROECONOMICS: MONETARY & FISCAL POLICIES eJOURNAL

"Real Interest Rates, Imbalances and the Curse of Regional Safe Asset Providers at the Zero Lower Bound" Fee Download
NBER Working Paper No. w22618

PIERRE-OLIVIER GOURINCHAS, University of California, Berkeley - Department of Economics, National Bureau of Economic Research (NBER), Centre for Economic Policy Research (CEPR)
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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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The current environment is characterized by low real rates and by policy rates close to or at their lower bound in all major financial areas. We analyze these unusual economic conditions from a historical perspective and draw some implications for external imbalances, safe asset demand and the process of external adjustment. First, we decompose the fluctuations in the world consumption wealth ratio over long period of times and show that they anticipate movements of the real rate of interest. Second, our estimates suggest that the world real rate of interest is likely to remain low or negative for an extended period of time. In this context, we argue that there is a renewed Triffin dilemma where safe asset providers face a trade-off in terms of external exposure and real appreciation of their currency. This tradeoff is particularly acute for smaller economies. This is the ‘curse of the regional safe asset provider.’ We discuss how this ‘curse’ is playing out for two prominent regional safe asset providers: core EMU and Switzerland.

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

"Extending the Determinants of Dollarization in Sub-Saharan Africa: The Role of Easy Access to Foreign Exchange Earnings" Free Download
African Governance and Development Institute WP/16/033

IBRAHIM D. RAHEEM, University of Kent, Canterbury - Department of Economics
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SIMPLICE A. ASONGU, African Governance and Development Institute
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This study argues that the ease at which economic agents have access to foreign earnings would influence/increase the level of dollarization in the economy. The three sources of foreign currency earnings are financial integration, trade openness and natural resource rent. As such, we extend the determinants of dollarization to capture these variables. A dataset of 26 countries in sub-Saharan Africa (SSA) for the period 2001-2012 was built. Based on Tobit regression, we found that all the proxies of foreign currency earning, with the exception of natural resource rent, are significant contributors to the increasing rate of dollarization. Specifically, it was found that trade openness and financial liberalization are positive determinants of dollarization, while natural resource rent serves as drag to the dollarization process. These results remain valid to three robustness tests. Policy implications and suggestions for future research were proposed.

"Risk Aversion, Uncertainty, and Monetary Policy in Unconventional Environments" Free Download

JAEHOON HAHN, Yonsei University - Yonsei University School of Business
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WOONWOOK JANG, Yonsei University
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SEONGJIN KIM, Yonsei University - Yonsei University School of Business
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Using traditional monetary policy measures, Bekaert et al. (2013) show that a lax monetary policy decreases both risk aversion and uncertainty and that positive shocks to risk aversion and uncertainty induce monetary policy changes. We extend their analysis for the pre-crisis period to the post-crisis period using recently developed monetary policy measures that take unconventional environments into consideration. Empirical findings show that the results of Bekaert et al. (2013) persist for the post-crisis period only when such monetary policy measures are applied.

"Fiscal Policy: As a Stabilization Tool for Discretionary and Non Discretionary Policies" Free Download
International Journal of Economics, Commerce and Research (IJECR), Vol. 6, Issue 3, June 2016

ANITA TYAGI, MJP Rohilkhand University, Bareilly, India.
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“A decade ago there was widespread agreement that fiscal policy should avoid countercyclical discretionary actions and instead should focus on the automatic stabilizers and on longer term fiscal reforms that positively affect economic growth and provide appropriate government services, including infrastructure and national defense. The current debates about the fiscal stimulus of 2008 in USA point towards the fact that the consensus no longer holds? John B. Taylor (2008).

"Did Quantitative Easing Only Inflate Stock Prices? Macroeconomic Evidence from the US and UK" Free Download

MIRCO BALATTI, Henley Business School - ICMA Centre
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CHRIS BROOKS, University of Reading - ICMA Centre
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MICHAEL P. CLEMENTS, University of Reading - Henley Business School
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KONSTANTINA KAPPOU, University of Reading - ICMA Centre
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This paper considers the impact of US and UK Quantitative Easing (QE) on their respective
economies with a particular focus on the stock market, production and price levels. We conduct an
empirical quantitative exercise based on a novel six-variable VAR model, which combines macroeconomic and forward-looking financial variables and uses a 'pure' measure of QE. The results suggest a positive response of equity prices, and a 'V' shaped reaction of volatility and the bid-ask spread to the monetary stimulus. Output and inflation, in contrast with some previous studies, show an insignificant impact providing evidence of the limitations of the central bank's programmes. We attribute the variation to this difference in our modelling approach, which includes stock market variables, and we conclude that its presence is of critical importance in the assessment of unconventional monetary policy. Economically, we argue that the reason for the negligible economic stimulus of QE is that the money injected funded financial asset price growth more than real projects.

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Macroeconomics: Monetary & Fiscal Policies eJournal

OLIVIER J. BLANCHARD
National Bureau of Economic Research (NBER), Peter G. Peterson Institute for International Economics

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)