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on Monetary Economics |
| By: | Vivek H. Dehejia and Nadja Kamhi (Department of Economics,Carleton University) |
| Date: | 2004–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:car:carecp:05-01&r=mon |
| By: | Roel Beetsma; Koen Vermeylen |
| Abstract: | We explore the implications of monetary unification for real interest rates and (relative) public debt levels. The adoption of a common monetary policy renders the risk-return characteristics of the participating countries more similar, so that the substitutability of their public debt increases after unification. This implies that the average expected real return on the debt increases. Also, the share of the unionwide debt issued by relatively myopic governments or of countries that initially have a relatively dependent central bank increases after unification. This may put the political sustainability of the union under pressure. A transfer scheme that penalizes debt increases beyond the union average is able to undo the interest rate effect of unification, but magnifies the spread in relative debt levels. |
| Keywords: | monetary union, (relative) public debt, interest rates, externalities, substitutability, central bank independence |
| JEL: | E42 E62 E63 F33 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1400&r=mon |
| By: | John Y. Campbell; Luis Viceira |
| Abstract: | Recent research in empirical finance has documented that expected excess returns on bonds and stocks, real interest rates, and risk shift over time in predictable ways. Furthermore, these shifts tend to persist over long periods of time. In this paper we propose an empirical model that is able to capture these complex dynamics, yet is simple to apply in practice, and we explore its implications for asset allocation. Changes in investment opportunities can alter the risk-return tradeoff of bonds, stocks, and cash across investment horizons, thus creating a ``term structure of the risk-return tradeoff.'' We show how to extract this term structure from our parsimonious model of return dynamics, and illustrate our approach using data from the U.S. stock and bond markets. We find that asset return predictability has important effects on the variance and correlation structure of returns on stocks, bonds and T-bills across investment horizons. |
| JEL: | G12 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11119&r=mon |
| By: | Arnab Bhattacharjee; Sean Holly |
| Abstract: | The transparency and openness of the monetary policymaking process at the Bank of England has provided very detailed information on both the decisions of individual members of the Monetary Policy Committee and the information on which they are based. In this paper we consider this decision making process in the context of a model in which inflation forecast targeting is used but there is heterogeneity among the members of the committee. We find that internally generated forecasts of output and market generated expectations of medium term inflation provide the best description of discrete changes in interest rates. We also find a role for asset prices through the equity market, foreign exchange market and housing prices. There are also identifiable forms of heterogeneity among members of the committee that improves the predictability of interest rate changes. This can be thought of as supporting the argument that full transparency of monetary policy decision making can be welfare enhancing. |
| Keywords: | Intertemporal macro; Monetary policy; interest rates; monetary policy committee; committee decision making. |
| JEL: | E42 E43 E50 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:san:cdmawp:0503&r=mon |
| By: | Kaniska Dam (School of Economics, Universidad de Guanajuato / UCL-CORE) |
| Keywords: | Financial Intermediation, Moral Hazard, Negatively Assorted Matching |
| JEL: | C78 D82 E44 G24 |
| URL: | http://d.repec.org/n?u=RePEc:gua:wpaper:ec200301&r=mon |