Table of Contents

Financial Crises and Optimal Unconventional Policies in International Business Cycles

Shifu Jiang, University of Surrey

Monetary Policy and Efficiency in Real Sector

Salman Ali Najafov, Azerbaijan State University of Economics (UNEC)

Central Banks: Evolution and Innovation in Historical Perspective

Michael D. Bordo, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)
Pierre L. Siklos, Wilfrid Laurier University - School of Business & Economics

Macro-Economic Analysis of Global Economic Recession 2007- 2009 and Policy Measures that Enabled Recovery of US Economy

Manvinder Singh, KIIT University
S. N. Mishra, KIIT University
Biswajit Das, KIIT University

Fiscal Consolidations in a Low Inflation Environment: Pay Cuts Versus Lost Jobs

Guilherme A. Bandeira, Banco de España
Evi Pappa, European University Institute, Autonomous University of Barcelona - MOVE (Markets, Organizations and Votes in Economics), Barcelona Graduate School of Economics (Barcelona GSE)
Rana Sajedi, Bank of England
Eugenia Vella, Athens University of Economics and Business

Doomed to Disappear? The Surprising Return of Cash Across Time and Across Countries

Clemens Jobst, Oesterreichische Nationalbank (OeNB), Centre for Economic Policy Research (CEPR)
Helmut Stix, Oesterreichische Nationalbank - Economic Studies Division


MACROECONOMICS: MONETARY & FISCAL POLICIES eJOURNAL

"Financial Crises and Optimal Unconventional Policies in International Business Cycles" Free Download

SHIFU JIANG, University of Surrey
Email:

I study the Ramsey problem for three unconventional policies in a two-country model with occasionally binding financial constraints. Lending to banks is the most efficient policy because of a smaller crowding out effect on private funds. If financed by government debt or a lump-sum tax, the optimal policy begins with a strong response and exits slowly. If financed by a labour tax, the unconventional policy is only used passively. A lack of international policy cooperation does not necessarily reduce welfare. A simple feedback rule that responds to gaps in asset prices mimics the optimal policy very well.

"Monetary Policy and Efficiency in Real Sector" Free Download

SALMAN ALI NAJAFOV, Azerbaijan State University of Economics (UNEC)
Email:

Most of central banks are responsible for single inflation goal, some central banks (for example FRS) fulfill dual mandate of maximum employment and price stability. Paper argues that the best way to promote sustainable economic growth and at the same time to contribute to low inflation and full employment is to promote the increase in efficiency in real sector. Paper suggests that the tool by which monetary policy can affect efficiency in real sector is interest rate. In particular, in order to promote the increase in efficiency in real sector, monetary policy should provide the equality of interest rate and rate of profit in real sector. Paper also argues that monetary system based on trade finance loan is more conducive to growth in efficiency than monetary system based on money loans.

"Central Banks: Evolution and Innovation in Historical Perspective" Fee Download
NBER Working Paper No. w23847

MICHAEL D. BORDO, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)
Email:
PIERRE L. SIKLOS, Wilfrid Laurier University - School of Business & Economics
Email:

Central banks have evolved for close to four centuries. This paper argues that for two centuries central banks caught up to the strategies followed by the leading central banks of the era; the Bank of England in the eighteenth and nineteenth centuries and the Federal Reserve in the twentieth century. It also argues that, by the late 20th century, small open economies were more prone to adopt a new policy regime when the old one no longer served its purpose whereas large, less open, and systemically important economies were more reluctant to embrace new approaches to monetary policy. Our study blends the quantitative with narrative explanations of the evolution of central banks. We begin by providing an overview of the evolution of monetary policy regimes taking note of the changing role of financial stability over time. We then provide some background to an analysis that aims, via econometric means, to quantify the similarities and idiosyncrasies of the ten central banks and the extent to which they represent a network of sorts where, in effect, some central banks learn from others.

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

"Macro-Economic Analysis of Global Economic Recession 2007- 2009 and Policy Measures that Enabled Recovery of US Economy" Free Download

MANVINDER SINGH, KIIT University
Email:
S. N. MISHRA, KIIT University
BISWAJIT DAS, KIIT University
Email:

The aim of this research paper is to attempt to understand the ‘Trilema’ which has confounded the economists on how to handle the three parameters like output, interest rates and currency effectively, to achieve the optimum level for a given economy, and even to drive an economy from recession to recovery. The authors used the US economic recession (2007-2009) event as a starting point and looked at policy interventions, both fiscal and monetary. They envisaged as to how the three chosen parameters played out over time, and what economic models can explain the basis of both the policy intervention and recovery. Our exploratory work is to understand the economic policy parameters that are critical to manage; yet which has been complicated by the US’s most open economy, to which the basic ISLM models could not support. The team finally found that the Mundell-Fleming model does make sense for open economy like US. The researchers analysed the data from US economy to see if the model is able to justify the data coming out from US from 2006-2016, when many policy interventions were taking place. The team focussed on the causes of this recession; because it was important to understand the variables underneath which caused the crisis in the first place. Another factor explored was the causes of the crisis, which to illustrate how money market was stretched by excess credit creation and excessive risk taking by the commercial banks in the post repeal of Glass–Steagall's Act in 1999. It also led to the phenomenal growth in the derivatives market and rapid integration of global capital markets across the world. This research paper also goes back to the fundamental question, as to if the monetary policy is more effective or fiscal policy is more effective? Or both need to be played in recovery. Was there even a role of fiscal policy and in what form was it deployed in US economic recovery? Finally the authors confirm that forex market equilibrium co-exist together with goods and money market equilibrium for open economies as that of US. It believed that currency markets are very important and important policy decisions should look at the long term impact on the currency stability; in the lens of competiveness of economy in the global market place.

"Fiscal Consolidations in a Low Inflation Environment: Pay Cuts Versus Lost Jobs" Fee Download
CEPR Discussion Paper No. DP12310

GUILHERME A. BANDEIRA, Banco de España
Email:
EVI PAPPA, European University Institute, Autonomous University of Barcelona - MOVE (Markets, Organizations and Votes in Economics), Barcelona Graduate School of Economics (Barcelona GSE)
Email:
RANA SAJEDI, Bank of England
Email:
EUGENIA VELLA, Athens University of Economics and Business
Email:

We construct a model of a monetary union to study fiscal consolidation in the Periphery of the Euro area, through cuts in public sector wages or hiring when the nominal interest rate is constrained at its lower bound. Consolidation induces a positive wealth effect that increases demand, as well as a reallocation of workers towards the private sector, which together boost private activity. However, in a low inflation environment, demand is suppressed and the private sector is not able to absorb the additional workers. Comparing the two instruments, cuts in public hiring increase unemployment persistently in this environment, while wage cuts can reduce it. Regions with higher mobility of labor between the two sectors are able to consolidate more effectively. Price flexibility is also key at the zero lower bound: for a higher degree of price rigidity in the Periphery, consolidation becomes harder to achieve. Consolidations can be self-defeating when the public good is productive.

"Doomed to Disappear? The Surprising Return of Cash Across Time and Across Countries" Fee Download
CEPR Discussion Paper No. DP12327

CLEMENS JOBST, Oesterreichische Nationalbank (OeNB), Centre for Economic Policy Research (CEPR)
Email:
HELMUT STIX, Oesterreichische Nationalbank - Economic Studies Division
Email:

The circulation of cash has increased in many economies over the past decade. To understand this development we provide evidence from two perspectives. First, we analyze long time series from the late 19th century to 2015 for several economies. Second, we collect evidence from 70 economies from 2001 to 2014. The descriptive account provides two main findings: (i) Recent increases for the euro, the US dollar and the Swiss franc are strong if seen over a 100 year horizon, (ii) increases can be observed in the majority of the 72 economies over the period from 2001 to 2014. Panel money demand models show that interest rates or GDP can only partially explain the increases in cash demand. The size of the shadow economy is not found to be an important factor for this period. We find that cash demand has evolved in line with a standard money demand model in economies with no record of financial crises. For economies that had a financial crisis in 2008, we find an increase in cash demand, on average. However, an "unexplained" increase is also obtained for wealthier economies that did not have a financial crisis in 2007/08 but before. We conjecture that the level shift in cash demand is related to increased uncertainty.

^top

About this eJournal

This eJournal distributes working and accepted paper abstracts of empirical and theoretical papers on different aspects of monetary and fiscal policies. The topics in this eJournal include E1 and E6 from Section E of the classification system of the JEL.

Submissions

To submit your research to SSRN, sign in to the SSRN User HeadQuarters, click the My Papers link on left menu and then the Start New Submission button at top of page.

Distribution Services

If your organization is interested in increasing readership for its research by starting a Research Paper Series, or sponsoring a Subject Matter eJournal, please email: RPS@SSRN.com

Distributed by

Economics Research Network (ERN), a division of Social Science Electronic Publishing (SSEP) and Social Science Research Network (SSRN)

Directors

MACROECONOMICS EJOURNALS

MICHAEL C. JENSEN
SSRN, Harvard Business School, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI), Harvard University - Accounting & Control Unit
Email: mjensen@hbs.edu

Please contact us at the above addresses with your comments, questions or suggestions for ERN-Sub.

Advisory Board

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 (deceased), National Bureau of Economic Research (NBER) (deceased)

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)