Revisiting The Monetary Transmission Mechanism Through An Industry Level Differential Approach
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Revisiting The Monetary Transmission Mechanism Through An Industry Level Differential Approach
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Author : Sangyup Choi
language : en
Publisher: International Monetary Fund
Release Date : 2022-01-28
Revisiting The Monetary Transmission Mechanism Through An Industry Level Differential Approach written by Sangyup Choi and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-01-28 with Business & Economics categories.
By combining industry-level data on output and prices with monetary policy rates for a panel of 88 countries, this paper analyzes how the effects of monetary policy vary with certain industry characteristics. Next to being interesting in their own right, our results are informative on the importance of various transmission mechanisms (as they are expected to vary systematically with the included characteristics). Rather than relying on standard monetary policy shock identification, we overcome the endogeneity problem by taking a differential approach (interacting our monetary policy measure with industry-level characteristics). Our results suggest that monetary contractions reduce output by more in industries featuring assets that are more difficult to collateralize (as predicted by the balance sheet channel) and in industries more reliant on international trade (as predicted by the exchange rate channel). Consistent with the financial accelerator mechanism, we find that the balance sheet channel becomes stronger during bad times. At the same time, we do not find evidence supporting the traditional interest rate channel of monetary policy; the same goes for the cost channel.
Var Meets Dsge
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Author : Bin Grace Li
language : en
Publisher: International Monetary Fund
Release Date : 2016-04-11
Var Meets Dsge written by Bin Grace Li and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-04-11 with Business & Economics categories.
VAR methods suggest that the monetary transmission mechanism may be weak and unreliable in low-income countries (LICs). But are structural VARs identified via short-run restrictions capable of detecting a transmission mechanism when one exists, under research conditions typical of these countries? Using small DSGEs as data-generating processes, we assess the impact on VAR-based inference of short data samples, measurement error, high-frequency supply shocks, and other features of the LIC environment. The impact of these features on finite-sample bias appears to be relatively modest when identification is valid—a strong caveat, especially in LICs. However, many of these features undermine the precision of estimated impulse responses to monetary policy shocks, and cumulatively they suggest that “insignificant” results can be expected even when the underlying transmission mechanism is strong.
Monetary Policy Transmission Heterogeneity Cross Country Evidence
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Author : Mr. Pragyan Deb
language : en
Publisher: International Monetary Fund
Release Date : 2023-10-17
Monetary Policy Transmission Heterogeneity Cross Country Evidence written by Mr. Pragyan Deb and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-10-17 with Business & Economics categories.
This paper revisits the transmission of monetary policy by constructing a novel dataset of monetary policy shocks for an unbalanced sample of 33 advanced and emerging market economies during the period 1991Q2-2023Q2. Our findings reveal that tightening monetary policy swiftly and negatively impacts economic activity, but the effects on inflation and inflation expectations takes time to fully materialize. Notably, there exist significant heterogeneities in the transmission of monetary policy across countries and time, depending on structural characteristics and cyclical conditions. Across countries, monetary policy is more effective in countries with flexible exchange rate regime, more developed financial systems, and credible monetary policy frameworks. In addition, we find that monetary policy transmission is stronger when uncertainty is low, financial conditions are tight and monetary policy is coordinated with fiscal policy—that is, when the stances move in the same direction.
Monetary Policy Transmission In Emerging Markets And Developing Economies
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Author : Mr.Luis Brandao-Marques
language : en
Publisher: International Monetary Fund
Release Date : 2020-02-21
Monetary Policy Transmission In Emerging Markets And Developing Economies written by Mr.Luis Brandao-Marques and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-02-21 with Business & Economics categories.
Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.
Monetary Policy And Balance Sheets
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Author : Ms.Deniz Igan
language : en
Publisher: International Monetary Fund
Release Date : 2013-07-03
Monetary Policy And Balance Sheets written by Ms.Deniz Igan and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-07-03 with Business & Economics categories.
This paper evaluates the strength of the balance sheet channel in the U.S. monetary policy transmission mechanism over the past three decades. Using a Factor-Augmented Vector Autoregression model on an expanded data set, including sectoral balance sheet variables, we show that the balance sheets of various economic agents act as important links in the monetary policy transmission mechanism. Balance sheets of financial intermediaries, such as commercial banks, asset-backed-security issuers and, to a lesser extent, security brokers and dealers, shrink in response to monetary tightening, while money market fund assets grow. The balance sheet effects are comparable in magnitude to the traditional interest rate channel. However, their economic significance in the run-up to the recent financial crisis was small. Large increases in interest rates would have been needed to avert a rapid rise of house prices and an unsustainable expansion of mortgage credit, suggesting an important role for macroprudential policies.
Monetary And Currency Policy Management In Asia
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Author : Masahiro Kawai
language : en
Publisher: Edward Elgar Publishing
Release Date : 2012-01-01
Monetary And Currency Policy Management In Asia written by Masahiro Kawai and has been published by Edward Elgar Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-01-01 with Business & Economics categories.
Asian economies strengthened their monetary and currency management after the Asian financial crisis of 19971998, and came through the global financial crisis of 20072009 relatively well. Nevertheless, the recent global crisis has presented new challenges. This book develops recommendations for monetary and currency policy in Asian economies aimed at promoting macroeconomic and financial stability in an environment of global economic shocks and volatile capital flows. Monetary and Currency Policy Management in Asia draws lessons from crises and makes concrete macroeconomic policy recommendations aimed at minimizing the impacts of an economic and financial downturn, and setting the stage for an early return to sustainable growth. The focus is on short-term measures related to the cycle. The three main areas addressed are: monetary policy measures, both conventional and unconventional, to achieve both macroeconomic and financial stability; exchange rate policy and foreign exchange reserve management, including the potential for regional cooperation to stabilize currency movements; and ways to ease the constraints on policy resulting from the so-called 'impossible trinity' of fixed exchange rates, open capital accounts and independent monetary policy. This is one of the first books since the global financial crisis to specifically and comprehensively address the implications of the crisis for monetary and currency policy in emerging market economies, especially in Asia. Presenting a broad menu of policy options for financial reform and regulation, the book will be of great interest to finance experts and policymakers in the region as well as academics and researchers of financial and Asian economics as well as economic development.
The Macroeconomic Effects Of Trade Tariffs
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Author : Jesper Lindé
language : en
Publisher: International Monetary Fund
Release Date : 2017-07-07
The Macroeconomic Effects Of Trade Tariffs written by Jesper Lindé and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-07-07 with Business & Economics categories.
We study the robustness of the Lerner symmetry result in an open economy New Keynesian model with price rigidities. While the Lerner symmetry result of no real effects of a combined import tariff and export subsidy holds up approximately for a number of alternative assumptions, we obtain quantitatively important long-term deviations under complete international asset markets. Direct pass-through of tariffs and subsidies to prices and slow exchange rate adjustment can also generate significant short-term deviations from Lerner. Finally, we quantify the macroeconomic costs of a trade war and find that they can be substantial, with permanently lower income and trade volumes. However, a fully symmetric retaliation to a unilaterally imposed border adjustment tax can prevent any real or nominal effects.
Finance Growth And Inequality
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Author : Mr. Ross Levine
language : en
Publisher: International Monetary Fund
Release Date : 2021-06-11
Finance Growth And Inequality written by Mr. Ross Levine and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-06-11 with Business & Economics categories.
Finance and growth emerged as a distinct field of economics during the last three decades as economists integrated the fields of finance and economic growth and then explored the ramifications of the functioning of financial systems on economic growth, income distribution, and poverty. In this paper, I review theoretical and empirical research on the connections between the operation of the financial system and economic growth and inequality. While subject to ample qualifications, the preponderance of evidence suggests that (1) financial development—both the development of banks and stock markets—spurs economic growth and (2) better functioning financial systems foster growth primarily by improving resource allocation and technological change, not by increasing saving rates. Some research also suggests that financial development expands economic opportunities and tightens income distribution, primarily by boosting the incomes of the poor. This work implies that financial development fosters growth by expanding opportunities. Finally, and more tentatively, financial innovation—improvements in the ability of financial systems to ameliorate information and transaction costs—may be necessary for sustaining growth.
World Economic Outlook October 2013
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Author : International Monetary Fund. Research Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2013-10-08
World Economic Outlook October 2013 written by International Monetary Fund. Research Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-10-08 with Business & Economics categories.
Global growth is in low gear, and the drivers of activity are changing. These dynamics raise new policy challenges. Advanced economies are growing again but must continue financial sector repair, pursue fiscal consolidation, and spur job growth. Emerging market economies face the dual challenges of slowing growth and tighter global financial conditions. This issue of the World Economic Outlook examines the potential spillovers from these transitions and the appropriate policy responses. Chapter 3 explores how output comovements are influenced by policy and financial shocks, growth surprises, and other linkages. Chapter 4 assesses why certain emerging market economies were able to avoid the classical boom-and-bust cycle in the face of volatile capital flows during the global financial crisis.
Technology Shocks And Aggregate Fluctuations
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Author : Mr.Pau Rabanal
language : en
Publisher: International Monetary Fund
Release Date : 2004-12-01
Technology Shocks And Aggregate Fluctuations written by Mr.Pau Rabanal and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004-12-01 with Business & Economics categories.
Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.