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on Central Banking |
| By: | Tobias Blattner (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Marco Catenaro (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Michael Ehrmann (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Rolf Strauch (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jarkko Turunen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | Current best practice in central banking views a high level of monetary policy predictability as desirable. A clear distinction, however, has to be made between short-term and longer-term predictability. While short-term predictability can be narrowly defined as the ability of the public to anticipate monetary policy decisions correctly over short horizons, the broader, ultimately more meaningful concept of longerterm predictability also encompasses the ability of the private sector to understand the monetary policy framework of a central bank, i.e. its objectives and systematic behaviour in reacting to different circumstances and contingencies. In this broader sense, longer-term predictability is also closely related to the credibility of the central bank. This paper reviews the main conceptual issues relating to predictability, both in its short and longer-term dimensions, and discusses how a transparent monetary policy strategy can be – and indeed has been – instrumental in achieving this purpose. This latter aspect is investigated in an overview of the empirical literature, highlighting how financial markets have been increasingly able to correctly anticipate monetary policy decisions for a number of large central banks, including the ECB. The paper also reviews several possible empirical proxies for the less-explored concept of longer-term predictability, which is inherently more diffi cult to measure. JEL Classification: E52, E58, E61. |
| Keywords: | Predictability, central bank transparency, central bank communication. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20080083&r=cba |
| By: | Michael B. Devereux; Shouyong Shi |
| Abstract: | While in principle, international payments could be carried out using any currency or set of currencies, in practice, the US dollar is predominant in international trade and financial flows. The dollar acts as a `vehicle currency' in the sense that agents in non-dollar economies will generally engage in currency trade indirectly using the US dollar rather than using direct bilateral trade among their own currencies. Indirect trade is desirable when there are transactions costs of exchange. This paper constructs a dynamic general equilibrium model of a vehicle currency. We explore the nature of the efficiency gains arising from a vehicle currency, and show how this depends on the total number of currencies in existence, the size of the vehicle currency economy, and the monetary policy followed by the vehicle currency's government. We find that there can be very large welfare gains to a vehicle currency in a system of many independent currencies. But these gains are asymmetrically weighted towards the residents of the vehicle currency country. The survival of a vehicle currency places natural limits on the monetary policy of the vehicle country. |
| Keywords: | Vehicle currency; Transactions cost; Welfare gains |
| JEL: | F40 F30 E42 |
| Date: | 2008–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-315&r=cba |
| By: | Hubert Kempf (Banque de France, Paris School of Economics and Université Paris-1, Panthéon-Sorbonne; Contact address: Banque de France, 39 Croix-des-Petits-Champs, 75049 Paris Cedex 01, France.); Leopold von Thadden (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper offers a framework to study commitment and cooperation issues in games with multiple policymakers. To reconcile some puzzles in the recent literature on the nature of policy interactions among nations, we prove that games characterized by different commitment and cooperation schemes can admit the same equilibrium outcome if certain spillover effects vanish at the common solution of these games. We provide a detailed discussion of these spillovers, showing that, in general, commitment and cooperation are non-trivial issues. Yet, in linear-quadratic models with multiple policymakers commitment and cooperation schemes are shown to become irrelevant under certain assumptions. The framework is su??ciently general to cover a broad range of results from the recent literature on policy interactions as special cases, both within monetary unions and among fully sovereign nations. JEL Classification: E52, E63. |
| Keywords: | Monetary policy, Fiscal regimes. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080880&r=cba |
| By: | Frank Smets (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Matthieu Darracq Pariès (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Stéphane Adjemian (Université du Maine, Avenue Olivier Messiaen, 72085 Le Mans Cedex 9, France.) |
| Abstract: | The objective of this paper is to examine the main features of optimal monetary policy cooperation within a micro-founded macroeconometric framework. First, using Bayesian techniques, we estimate a two-country dynamic stochastic general equilibrium (DSGE) model for the United States (US) and the euro area (EA). The main features of the new open economy macroeconomics (NOEM) are embodied in our framework: in particular, imperfect exchange rate pass-through and incomplete financial markets internationally. Each country model incorporates the wide range of nominal and real frictions found in the closed-economy literature: staggered price and wage settings, variable capital utilization and fixed costs in production. Then, using the estimated parameters and disturbances, we study the properties of the optimal monetary policy cooperation through welfare analysis, impulse responses and variance decompositions. JEL Classification: E4, E5, F4. |
| Keywords: | DSGE models, Optimal monetary policy, New open economy macroeconomics, Bayesian estimation. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080884&r=cba |
| By: | Roger Guesnerie |
| Abstract: | The "eductive" viewpoint provides a theoretically sophisticated analysis as well as an intuitively plausible shortcut to the study of expectational coordination in economic models. From the review of expectational criteria in a class of dynamical models of macroeconomic theory, the paper shows how such an "eductive" viewpoint completes and deepens rather than contradicts standard analysis. It however argues that the "eductive" approach, when correctly implemented, challenges the conditions of learning in infinite-horizon models with infinitely-lived agents. In particular, in a simple monetary model adopting such a framework, Taylor rules may be stabilizing, in the demanding sense under scrutiny, but only within a small window for the reaction coefficient. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-24&r=cba |
| By: | Kevin X.D. Huang (Department of Economics, Vanderbilt University); Zheng Liu (Department of Economics, Emory University); Tao Zha (Federal Reserve Bank of Atlanta) |
| Abstract: | This study explores theoretical and macroeconomic implications of the self-confirming equilibrium in a standard growth model. When rational expectations are replaced by adaptive expectations, we prove that the self-confirming equilibrium is the same as the steady state rational expectations equilibrium, but that dynamics around the steady state are substantially different between the two equilibria. We show that, in contrast to \citet{nWilliams03}, the differences are driven mainly by the lack of the wealth effect and the strengthening of the intertemporal substitution effect, not by escapes. As a result, adaptive expectations substantially alter the amplification and propagation mechanisms and allow technology shocks to exert much more impact on macroeconomic variables than do rational expectations. |
| Keywords: | Self confirming equilibrium, amplification, labor market dynamics, wealth and substitution effects, hump-shaped responses <br><br> |
| JEL: | E32 E37 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0807&r=cba |
| By: | Maximo Camacho (Universidad de Murcia); Gabriel Perez-Quiros (Banco de España) |
| Abstract: | We propose a model to compute short-term forecasts of the Euro area GDP growth in real-time. To allow for forecast evaluation, we construct a real-time data set that changes for each vintage date and includes the exact information that was available at the time of each forecast. In this context, we provide examples that show how data revisions and data availability affect point forecasts and forecast uncertainty. |
| Keywords: | business cycles, output growth, time series |
| JEL: | E32 C22 E27 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0807&r=cba |
| By: | Spencer, Christopher; Harris, Mark; Brooks, Robert |
| Abstract: | Even in the face of a continuously changing economic environment, interest rates often remain unadjusted for long periods. When rates are moved, the norm is for a series of small unidirectional discrete basis-point changes. To explain these phenomena we suggest a two-equation system combining a “long-run” equation explaining a binary decision to change or not change the interest-rate, and a “shortrun” one based on a simple monetary policy rule. We account for unobserved heterogeneity in both equations, applying the model to unique unit-record level data on the voting preferences of Bank of England Monetary Policy Committee (MPC) members. |
| Keywords: | Interest rates; voting; discrete data; ordered models; inflated outcomes; monetary policy committee |
| JEL: | E5 C2 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8509&r=cba |
| By: | Amstad, Marlene (Swiss National Bank); Fischer, Andreas (CEPR) |
| Abstract: | Are weekly inflation forecasts informative? Although several central banks review and discuss monetary policy issues on a bi-weekly basis, there have been few attempts by analysts to construct systematic estimates of core inflation that supports such a decision-making schedule. The timeliness of news releases and macroeconomic revisions are recognized to be an important information source in real-time estimation. We incorporate real-time information from macroeconomic releases and revisions into our weekly updates of monthly Swiss core inflation using a common factor procedure. The weekly estimates for Swiss core inflation find that it is worthwhile to update the forecast at least twice a month. |
| Keywords: | Inflation; Common Factors; Sequential Information Flow |
| JEL: | E52 E58 |
| Date: | 2008–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:snbwpa:2008_005&r=cba |
| By: | Lorenzo Cappiello (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Gianluigi Ferrucci (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper deals with two related issues: the sustainability of China’s exchange rate regime and the opening up of its capital account. The exchange rate discussion deliberately passes over the issue of the “equilibrium” value of the renminbi and its alleged undervaluation – typically at the heart of the current policy debate – and focuses instead on the domestic costs of the current regime and the potential risks to domestic financial stability in the long run. The paper argues that the renminbi exchange rate should be increasingly determined by market forces and that administrative controls should be progressively relinquished. The exchange rate is obviously linked to well-functioning and efficient capital markets, which require no barriers to capital flows. Thus, exchange rate reform has to be correctly sequenced with reform of the capital account to avoid disruptive capital flows. The paper discusses China’s twin surpluses of the current and capital accounts and attempts to identify the drivers of this “anomalous” external position. The pragmatic strategy pursued by the Chinese authorities in the aftermath of the Asian crisis encouraged FDI inflows and favoured the accumulation of a large stock of foreign exchange reserves. Combined with a relatively weak institutional setting, these factors have been important determinants of the pattern and composition of the country’s capital flows and international investment position. Finally, the paper speculates on the outlook for Chinese capital flows should barriers to capital movements be lifted. It argues that whether China continues to supply capital to the rest of the world or eventually becomes a net borrower in international capital markets – as was the case for most of its recent history – will depend on the evolution of its institutions. JEL Classification: F10, F21, F31, F32, P48. |
| Keywords: | China, exchange rate policy, international investment position, capital account liberalisation, institutions. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20080082&r=cba |
| By: | Arturo Bris; Augusto Rupérez-Micola |
| Abstract: | We study the price convergence of goods and services in the euro area in 2001-2002. To measure the degree of convergence, we compare the prices of around 220 items in 32 European cities. The width of the border is the price di¤erence attributed to the fact that the two cities are in different countries. We find that the 2001 European borders are negative, which suggests that the markets were very integrated before the euro changeover. Moreover, we do not identify an integration effect attributable to the introduction of the euro. We then explore the determinants of the European borders. We find that different languages, wealth and population differences tend to split the markets. Historical inflation, though, tends to lead to price convergence. |
| Keywords: | Euro, economic integration |
| JEL: | F15 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1086&r=cba |
| By: | Michiel van Leuvensteijn (CPB Netherlands Bureau for Economic Policy Analysis, P.O. Box 80510, 2508 GM The Hague, The Netherlands.); Christoffer Kok Sørensen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jacob A. Bikker (De Nederlandsche Bank (DNB), Supervisory Policy Division, Strategy Department, P.O. Box 98, 1000 AB Amsterdam, The Netherlands.); Adrian A.R.J.M. van Rixtel (Banco de España, International Economics and International Relations Department, Alcalá 48, 28014 Madrid, Spain.) |
| Abstract: | This paper analyses the impact of loan market competition on the interest rates applied by euro area banks to loans and deposits during the 1994-2004 period, using a novel measure of competition called the Boone indicator. We find evidence that stronger competition implies significantly lower spreads between bank and market interest rates for most loan market products. Using an error correction model(ECM) approach to measure the effect of competition on the pass-through of market rates to bank interest rates, we likewise find that banks tend to price their loans more in accordance with the market in countries where competitive pressures are stronger. Further, where loan market competition is stronger, we observe larger bank spreads (implying lower bank interest rates) on current account and time deposits. This would suggest that the competitive pressure is heavier in the loan market than in the deposit markets, so that banks compensate for their reduction in loan market income by lowering their deposit rates. We observe also that bank interest rates in more competitive markets respond more strongly to changes in market interest rates. These findings have important monetary policy implications, as they suggest that measures to enhance competition in the European banking sector will tend to render the monetary policy transmission mechanism more effective. JEL Classification: D4, E50, G21, L10. |
| Keywords: | Monetary transmission, banks, retail rates, competition, panel data. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080885&r=cba |
| By: | Dario Caldara (Stockholm University, Institute for International Economic Studies, Universitetsvägen 10, House A, 8th Floor, SE-106 91 Stockholm, Sweden.); Christophe Kamps (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | The empirical literature using vector autoregressive models to assess the effects of fiscal policy shocks strongly disagrees on even the qualitative response of key macroeconomic variables to government spending and tax shocks. We provide new evidence for the U.S. over the period 1955-2006. We show that, controlling for differences in specification of the reduced-form model, all identification approaches used in the literature yield qualitatively and quantitatively very similar results as regards government spending shocks. In response to such shocks real GDP, real private consumption and the real wage all significantly increase following a hump-shaped pattern, while private employment does not react. In contrast, we find strongly diverging results as regards the effects of tax shocks, with the estimated effects ranging from non-distortionary to strongly distortionary. The differences in results can to a large extent be traced back to differences in the size of automatic stabilizers estimated or calibrated for alternative identification approaches. These differences also translate into uncertainty about the effects of policy experiments typically considered in theoretical models. JEL Classification: C32, E60, E62, H20, H50. |
| Keywords: | Fiscal policy, vector autoregression, identification, robustness. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080877&r=cba |
| By: | Jurgen Von Hagen (University of Bonn); Iulia Siedschlag (Economic and Social Research Institute (ESRI)) |
| Abstract: | The countries of Central and Eastern Europe went from being largely closed to being largely open to international capital flows. This paper discusses their experience with capital account liberalization and coping with large capital inflows. We start with a discussion of basic economic characteristics and the real convergence achieved so far, and then discuss the pace and sequencing of capital account liberalization and the degree of international financial integration over the past decade. We then analyze trends and patterns of capital inflows in these countries in recent years. These stylized facts are useful for understanding the macroeconomic implications and policy challenges of coping with large capital inflows, which we discuss next. Finally we conclude with policy implications for emerging Asian economies. |
| Keywords: | International financial integration, Macroeconomic policy, Central and Eastern Europe, Emerging Asian economies |
| JEL: | E44 F36 F41 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp234&r=cba |
| By: | Marcus Hagedorn (Institut for Empirical Research (IEW), University of Zurich, Blümlisalpstrasse 10, CH-8006 Zürich, Switzerland.) |
| Abstract: | Central bankers’ conventional wisdom suggests that nominal interest rates should be raised to implement a lower inflation target. In contrast, I show that the standard New Keynesian monetary model predicts that nominal interest rates should be decreased to attain this goal. Real interest rates, however, are virtually unchanged. These results also hold in recent vintages of New Keynesian models with sticky wages, price and wage indexation and habit formation in consumption. JEL Classification: |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080878&r=cba |
| By: | Metodij Hadzi-Vaskov |
| Abstract: | The negative correlation between relative consumption growth and real exchange rate changes is a recurrent puzzle in international macroeconomics (Backus and Smith, 1993). Using panel dataset with quarterly observations for all 12 countries from the Eurozone after the introduction of the common currency (1999-2006), this paper demonstrates that the nominal exchange rate is the main source of the puzzle. When nominal exchange rates fluctuations are eliminated, relative consumption growth is positively correlated with the change in the real exchange rate. Moreover, this result is contrasted with alternative samples of (relatively) flexible exchange rate: while the inflation differential is still positively correlated, the nominal exchange rate is negatively correlated with the relative consumption growth. These findings are robust to alternative regression specifications, estimation methods, and data samples. |
| Keywords: | International Risk-Sharing, Exchange Rates, Backus-Smith Puzzle |
| JEL: | F31 F33 F41 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0732&r=cba |
| By: | Metodij Hadzi-Vaskov; Clemens J.M. Kool |
| Abstract: | This paper presents evidence of the stochastic discount factor approach to international risk-sharing applied to fixed exchange rate regimes. We calculate risk-sharing indices for two episodes of fixed or very rigid exchange rates: the Eurozone before and after the introduction of the Euro, and several emerging economies in the period 1993-2005. This approach suggests almost perfect bilateral risk-sharing among all countries from the Eurozone. Moreover, it implies that emerging markets with fixed/rigid nominal exchange rates against the US dollar in the period achieved almost perfect risk-sharing with the US. We conclude that risk-sharing measures crucially depend on the behavior of the nominal exchange rate, implying almost perfect risk-sharing among countries with fixed/rigid nominal exchange rates. Second, a counterintuitive ranking of the risk-sharing levels under different nominal exchange rate regimes suggests a limited use of this approach for cross-country risk-sharing comparisons. Real exchange rates might be very smooth, but risk-sharing across countries is not necessarily perfect. |
| Keywords: | International Risk-Sharing, Stochastic Discount Factor, Fixed Exchange Rates, Exchange Rate Regimes |
| JEL: | F31 F33 G12 G15 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0733&r=cba |
| By: | Metodij Hadzi-Vaskov; Clemens J.M. Kool |
| Abstract: | This paper presents a robustness check of the stochastic discount factor approach to international (bilateral) risk-sharing given in Brandt, Cochrane, and Santa-Clara (2006). We demonstrate two main inherent limitations of the bilateral SDF approach to international risk-sharing. First, the discount factors are not uniquely determined in the bilateral framework and crucially depend on the partner country included in the calculations. Second, the deviations between the discount factors obtained in this way (the imprecision in the measurement of marginal utility growth) are larger for countries whose stock market excess return shocks are relatively less important. In order to account for some of these criticisms, we extend the bilateral into a three-country setting. Although the trilateral framework demonstrates that the (final) results for the international risk-sharing index are quite robust to the number of countries used in their calculation, it does not resolve the inherent incoherence found in the bilateral SDF approach. |
| Keywords: | International Risk-Sharing, Stochastic Discount Factor, Exchange Rate Volatility |
| JEL: | F31 G12 G15 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:0734&r=cba |
| By: | Christopher D. Carroll (Johns Hopkins University, Department of Economics, 440 Mergenthaler Hall 3400 N. Charles Street, Baltimore, MD 21218, USA.); Jiri Slacalek (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Martin Sommer (International Monetary Fund, 700 19th Street, N.W., Washington, D.C. 20431, USA.) |
| Abstract: | We estimate the degree of ‘stickiness’ in aggregate consumption growth (sometimes interpreted as reflecting consumption habits) for thirteen advanced economies. We find that, after controlling for measurement error, consumption growth has a high degree of autocorrelation, with a stickiness parameter of about 0.7 on average across countries. The sticky-consumption-growth model outperforms the random walk model of Hall (1978), and typically fits the data better than the popular Campbell and Mankiw (1989) model. In several countries, the sticky-consumption- growth and Campbell–Mankiw models work about equally well. JEL Classification: E21, F41. |
| Keywords: | Sticky Expectations, Consumption Dynamics, Habit Formation. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080886&r=cba |
| By: | Roberto A. De Santis (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Lucio Sarno (Finance Group, Warwick Business School, University of Warwick, Coventry CV4 7AL, UK.) |
| Abstract: | This paper considers a stylized asset pricing model where the returns from exchange rates, stocks and bonds are linked by basic risk-arbitrage relationships. Employing GMM estimation and monthly data for 18 economies and the US (treated as the domestic country), we identify through a simple test the countries whose assets strongly comove with US assets and the countries whose assets might offer larger diversification benefits. We also show that the strengthening of the comovement of returns across countries is neither a gradual process nor a global phenomenon, reinforcing the case for international diversi.cation. However, our results suggest that fund managers are better of constructing portfolios selecting assets from a subset of countries than relying on either fully internationally diversified or purely domestic portfolios. JEL Classification: F31, G10. |
| Keywords: | Asset pricing, exchange rates, international parity conditions, market integration, stochastic discount factor. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080883&r=cba |
| By: | Ludger Schuknecht (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jürgen von Hagen (University of Bonn, Indiana University, and CEPR; Address: Department of Economics, University of Bonn, Lennéstrasse 37, 53113 Bonn, Germany.); Guido Wolswijk (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper focuses on risk premiums paid by central governments in Europe and sub-national governments in Germany, Spain, and Canada. With regard to the European governments, we are interested in how these premiums were affected by the introduction of the euro. Using data for bond yield spreads relative to an appropriate benchmark, for the period 1991-2005, we find that risk premiums incurred by central governments of EU member states respond positively to central government debts and deficits. This is consistent with the notion of market-imposed fiscal discipline. We find that German states and, among them, especially those usually receiving transfers under the German fiscal equalization system, enjoyed a very favourable position in the financial markets before EMU as their risk premiums did not respond to fiscal balances. This special status seems to have disappeared with start of EMU. Monetary union, therefore, imposes more fiscal discipline on German states. In contrast, Spanish provinces paid risk premiums related to their fiscal balances both before and after the start of EMU. Both German and Spanish sub-central governments paid fixed interest rate premiums over their national governments which became smaller after the introduction of the euro and are more likely to be interpreted as liquidity premiums. We also estimate empirical models of risk premiums for Canadian provinces for which we find financial market penalties of adverse fiscal balances and debt indicators. However, as in the case of Germany before EMU, those provinces that typically receive transfers under the Canadian fiscal equalization scheme have a more favourable bond market treatment than others. The evidence of market discipline at work in European government bond markets supports the notion that the no-bailout clause in the EU Treaty is credible. JEL Classification: E43, E62, H63, H74. |
| Keywords: | Interest rates, fiscal policy, government debt, bail out, regional public finances. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080879&r=cba |
| By: | Stéphane Dées (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Matthias Burgert (Humboldt University, Berlin and ENSAE. Address - ENSAE, 3, avenue Pierre Larousse, 92245 Malakoff Cedex, France.) |
| Abstract: | In a globalised world economy, global factors have become increasingly important to explain trade-flows at the expense of country-specifc determinants. This paper shows empirically the superiority of direct forecasting methods, in which world trade is directly forecasted at the aggregate levels, relative to "bottom-up" approaches, where world trade results from an aggregation of country-specifc forecasts. Factor models in particular prove rather accurate, where the factors summarise large-scale datasets relevant in the determination of trade-flows. JEL Classification: C53, C32, E37, F17. |
| Keywords: | World trade, Factor models, Forecasts, Time series models. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080882&r=cba |
| By: | Rossi, Lorenza; Mattesini, Fabrizio |
| Abstract: | This paper presents a New Keynesian model characterized by labor indivisibilities, unemployment and a unionized labor market. The bargaining process between unions and firms introduces real wage rigidity and creates an endogenous trade-off between inflation and output stabilization. Under an optimal discretionary monetary policy a negative productivity shock requires an increase in the nominal interest rate. Moreover, an operational instrument rule will satisfy the Taylor principle, but will also require that the nominal interest rate does not necessarily respond one to one to an increase in the efficient rate of interest. The model calibration studies the response of the unionzed economy to productivity shocks under different monetary policy rules. Download Info |
| JEL: | E24 E52 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8414&r=cba |
| By: | Markus Baltzer (Deutsche Bundesbank, Wilhelm-Epstein-Strasse 14, 60431 Frankfurt am Main, Germany.); Lorenzo Cappiello (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Roberto A. De Santis (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Simone Manganelli (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | The study considers three broad categories of financial integration measures: (i) price-based, which capture discrepancies in asset prices across different national mar kets; (ii) news-based, which analyse the impact that common factors have on the return process of an asset; (iii) quantity-based, which aim at quantifying the effects of frictions on the demand for and supply of securities. This paper finds that financial markets in the new EU Member States (plus Cyprus, Malta and Slovenia) are significantly less integrated than those of the euro area. Nevertheless, there is strong evidence that the process of integration is well under way and has accelerated since accession to the EU. JEL Classification: None |
| Keywords: | None |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20080081&r=cba |
| By: | Assenmacher-Wesche , Katrin (Swiss National Bank); Pesaran, and M. Hashem (University of Cambridge) |
| Abstract: | This paper uses vector error correction models of Switzerland for forecasting output, inflation and the short-term interest rate. It considers three different ways of dealing with forecast uncertainties. First, it investigates the effect on forecasting performance of averaging over forecasts from different models. Second, it considers averaging forecasts from different estimation windows. It is found that averaging over estimation windows is at least as effective as averaging over different models and both complement each other. Third, it examines whether using weighting schemes from the machine learning literature improves the average forecast. Compared to equal weights the effect of alternative weighting schemes on forecast accuracy is small in the present application. |
| Keywords: | Bayesian model averaging; choice of observation window; longrun structural vector autoregression |
| JEL: | C32 C53 |
| Date: | 2008–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:snbwpa:2008_003&r=cba |