scholarly journals CREDIT MARKET DISTORTIONS, ASSET PRICES AND MONETARY POLICY

2012 ◽  
Vol 18 (3) ◽  
pp. 631-650 ◽  
Author(s):  
Damjan Pfajfar ◽  
Emiliano Santoro
Keyword(s):  
Asset Prices ◽  
Rational Expectations ◽  
Inflation Targeting ◽  
Bank Lending ◽  
Real Activity ◽  
Cost Channel ◽  
Pass Through ◽  
The Cost ◽  
Borrowing Cost ◽  
Cost Effect

We study the conditions that ensure rational expectations equilibrium (REE) determinacy and expectational stability (E-stability) in a standard sticky-price model augmented with the cost channel. We allow for varying degrees of pass-through of the policy rate to bank-lending rates. Strong cost-side effects limit the size of the policy rate response to inflation that is consistent with determinacy, so that inflation-targeting policies may not be capable of ensuring REE uniqueness. In this case it is advisable to combine policy rate responses to inflation with an appropriate reaction to the output gap and/or firm profitability. The negative reaction of real activity and asset prices to inflationary shocks adds a negative force to inflation responses that counteracts the borrowing cost effect and prevents expectations of higher inflation from becoming self-fulfilling.

Margins of Fair Trade Wine along the Supply Chain: Evidence from South African Wine in the U.S. Market

2019 ◽  
Vol 14 (3) ◽  
pp. 274-297
Author(s):  
Robin M. Back ◽  
Xinyang Liu ◽  
Britta Niklas ◽  
Karl Storchmann ◽  
Nick Vink
Keyword(s):  
Supply Chain ◽  
South African ◽  
Fair Trade ◽  
The United States ◽  
Export Prices ◽  
Retail Prices ◽  
Pass Through ◽  
Matching Models ◽  
The Cost ◽  
Cost Effect

AbstractIn this paper, we analyze profit margins and markups of Fair Trade (FT) wines sold in the United States. We are particularly interested in whether and to what extent the FT cost impulse in production is passed along to the supply chain. We draw on a limited sample of about 470 South African wines sold in Connecticut and New Jersey in the fall of 2016; about 90 of them are certified FT. For these wines we have free on board export prices, wholesale prices, and retail prices, which allows us to compute wholesale and retail margins and analyze the FT treatment effect. We run OLS, 2SLS, and propensity score matching models and find evidence of asymmetrical pricing behavior. While wholesalers seem to fully pass-through the FT cost effect, retailers appear to amplify the cost effect. As a result, at the retail level, FT wines yield significantly higher margins than their non-FT counterparts. (JEL Classifications: L11, L31, L43, L81, Q17)

A NOTE ON THE BUSINESS CYCLE IMPLICATIONS OF TRADE IN INTERMEDIATE GOODS

2013 ◽  
Vol 18 (5) ◽  
pp. 1172-1186 ◽  
Author(s):  
Aurélien Eyquem ◽  
Güneş Kamber
Keyword(s):  
Business Cycle ◽  
Open Economy ◽  
Small Open Economy ◽  
Intermediate Goods ◽  
Relative Prices ◽  
Cost Channel ◽  
The Business Cycle ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Cost

Trade in intermediate goods is an important feature of trade in developed small open economies. We show that a model that assumes trade in intermediate goods brings the dynamics of an otherwise standard small open economy closer to what is observed in the data. With trade in intermediate goods, movements of international relative prices affect the economy through an additional channel, denoted the “cost channel.” A model embedding this channel comes closer to business cycle data in several dimensions compared to models with trade in final goods only. It increases the share of output variance explained by foreign shocks, lowers the exchange rate pass-through, and delivers a positive international correlation of outputs. In addition, the matching of other business cycle moments is at least as good as in a model with trade in final goods only.

Fear of Free Floating or Forced Exchange Rate Fixing

2004 ◽  
pp. 112-122
Author(s):  
O. Osipova
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Float Exchange Rate ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate Arrangements ◽  
Pass Through

After the financial crisis at the end of the 1990 s many countries rejected fixed exchange rate policy. However actually they failed to proceed to announced "independent float" exchange rate arrangement. This might be due to the "fear of floating" or an irreversible result of inflation targeting central bank policy. In the article advantages and drawbacks of fixed and floating exchange rate arrangements are systematized. Features of new returning to exchange rates stabilization and possible risks of such policy for Russia are considered. Special attention is paid to the issue of choice of a "target" currency composite which can minimize external inflation pass-through.

The influence of inflation targeting on the pass-through effect of the exchange rate

2018 ◽  
pp. 70-84
Author(s):  
Ph. S. Kartaev ◽  
Yu. I. Yakimova
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Short And Long Term ◽  
The Exchange Rate ◽  
Pass Through ◽  
The Impact

The paper studies the impact of the transition to the inflation targeting regime on the magnitude of the pass-through effect of the exchange rate to prices. We analyze cross-country panel data on developed and developing countries. It is shown that the transition to this regime of monetary policy contributes to a significant reduction in both the short- and long-term pass-through effects. This decline is stronger in developing countries. We identify the main channels that ensure the influence of the monetary policy regime on the pass-through effect, and examine their performance. In addition, we analyze the data of time series for Russia. It was concluded that even there the transition to inflation targeting led to a decrease in the dependence of the level of inflation on fluctuations in the ruble exchange rate.

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