The Stability Properties of Monetary Constitutions

2016 ◽  
Vol 22 (2) ◽  
Author(s):  
Pablo Paniagua
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Integral Property ◽  
Stability Properties ◽  
Monetary Transmission Mechanism ◽  
Monetary Neutrality ◽  
The Stability ◽  
Monetary Rules

AbstractThe financial crisis brought about a higher degree of monetary policy unpredictability. To anchor expectations and promote nominal stability, there is a need for predictable monetary rules or stable constitutions. This paper’s purpose is to define the general expectational properties that monetary constitutions should possess to work as coordination devices. I use Buchanan’s predictability criterion, as well as the expectational monetary transmission mechanism, to propose that monetary constitutions should be considered stable as long as they contain dynamics allowing self-reinforcing expectations of monetary neutrality. Self-reinforcement of expectations is an integral property of monetary constitutions for them to be agents of coordination and therefore stable. I find that these expectational properties are consistent with the stability properties established in the constitutional literature.

The Channels of Transmission of Monetary Policy

2021 ◽  
pp. 45-88
Author(s):  
Juan Antonio Morales ◽  
Paul Reding
Keyword(s):  
Monetary Policy ◽  
Emerging Market ◽  
Asset Price ◽  
Balance Sheet ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
The Interest Rate ◽  
The Impact ◽  
Transmission Of Monetary Policy

This chapter explores the monetary transmission mechanism (MTM) in low financial development countries (LFDCs). It successively discusses the interest rate, asset price, bank credit, balance sheet, expectations, and real balance channels. For each channel, conceptual aspects about how it operates, how it transmits monetary policy impulses to the economy’s financial and real spheres, are first presented. Next, the impact of the specificities of LFDCs on the channel’s strength and reliability are examined and the available empirical evidence is surveyed. The chapter concludes with a global assessment of the effectiveness of the monetary transmission mechanism in LFDCs. Evidence points to a transmission mechanism that is effective although not very strong, and possibly also more uncertain than in advanced and emerging market countries.

scholarly journals MONETARY TRANSMISSION MECHANISM UNDER DUAL FINANCIAL SYSTEM IN INDONESIA: CREDIT-FINANCING CHANNEL

2019 ◽  
Vol 4 (2) ◽  
pp. 251-278
Author(s):  
Reza Jamilah Fikri
Keyword(s):  
Monetary Policy ◽  
Error Correction ◽  
Financial System ◽  
Error Correction Model ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Correction Model ◽  
Monetary Transmission Mechanism ◽  
Financing Channel

The presence of Islamic and conventional banking in the dual financial system of Indonesia equally hold the role as financial intermediator which theoretically banks collect fund from the debitors to be distributed to creditors. However, along with the changing of time there has been a development in the financial industry, when financial deregulation occurs, where the role of providing credit is not only owned by the banks but also other financial institutions. As the result, banks are no longer considered as the center of financial intermediation but could be replaced by other financial instruments. This study aims to reconsider the role of banking as financial intermediation in the monetary transmission mechanism using three methodoligal approaches which  are Vector Autoregression and Vector Error Correction Model (VAR-VECM), Error Correction Model (ECM), and Autoregressive Distributed Lag (ARDL). The long-term results of ECM and VECM estimations both show that credit and finacing channel are still relevant to be employed in the monetary transmission mechanism after the development of financial sector and the change of monetary policy, yet only have an impact to economy and do not give effect to inflation. While the result of ARDL estimation indicates that none of the variables affect the  monetary policy objectives which means that credit and financing channel are considered to be getting weaker in the monetary transmission mechanism.   Keywords : Monetary Transmission Mechanism, Credit Channel, Dual Financial System JEL Classification: E51, E52, E58

Asymmetric Information and the Transmission Mechanism of Monetary Policy

2007 ◽  
Vol 8 (3) ◽  
pp. 428-446 ◽  
Author(s):  
Ulrike Neyer
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Asymmetric Information ◽  
Credit Markets ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Credit Channel ◽  
Absolute Value ◽  
Monetary Transmission Mechanism ◽  
External Finance

Abstract This paper analyses the consequences of asymmetric information in credit markets for the monetary transmission mechanism. It shows that asymmetric information can not only reinforce but can also weaken or overcompensate the effects of the standard interest rate channel. Crucial is that informational problems lead to an external finance premium that can be positive or negative for marginal entrepreneurs. Tight money may lead to an increase in the absolute value of this premium, implying that there is a credit channel of monetary policy, but its working direction is ambiguous.

scholarly journals Structural VARs and the Monetary Transmission Mechanism in Low-Income African Countries†

2019 ◽  
Vol 28 (4) ◽  
pp. 455-478
Author(s):  
Bin Grace Li ◽  
Christopher Adam ◽  
Andrew Berg ◽  
Peter Montiel ◽  
Stephen O’Connell
Keyword(s):  
Monetary Policy ◽  
Low Income ◽  
Transmission Mechanism ◽  
Low Income Countries ◽  
Monetary Transmission ◽  
Finite Sample ◽  
African Countries ◽  
Monetary Transmission Mechanism ◽  
Structural Vars ◽  
The Impact

AbstractStructural Vector Autoregression (SVAR) methods suggest the monetary transmission mechanism may be weak and unreliable in many low-income African countries. But are structural VARs identified via short-run restrictions capable of detecting a transmission mechanism when one exists, under research conditions typical of low-income countries (LICs)? Using a small DSGE as our data-generating process, 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. Nonetheless many of these features undermine the precision of estimated impulse responses to monetary policy shocks, and cumulatively they suggest that statistically and economically insignificant results can be expected even when the underlying transmission mechanism is strong. These data features not only undermine the efficacy of the SVAR methodology for research and policy-making, but are also severe enough to motivate a continued search for monetary policy rules that are robust to these limitations.

Analisis Sektor Pertambangan Dan Penggalian Melalui Jalur Kredit Dalam Mekanisme Transmisi Di Indonesia (Tahun 2002-2012)

2016 ◽  
Vol 1 (01) ◽  
pp. 68-75
Author(s):  
Regina Mayo
Keyword(s):  
High Technology ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Credit Channel ◽  
Estimation Technique ◽  
Working Capital ◽  
Monetary Transmission Mechanism ◽  
The Stability

This research analyzes the effectiveness of the credit channel in the monetary transmission mechanism in Indonesia with sectoral study. It is expected by using these credit channel, can indicate which sector contributes greatly to inflation and then handling the sector so there is not give a contribute significantly to inflation like the main purpose in the UU No. 3, 2004, 7 can be achieved, the stability of the rupiah, as reflected in low inflation and stable. The VECM estimation technique with research periods 2002-2012 covering  variables BI  rate, credit rates of  investment, credit  rates  of  working  capital,  sectoral  investment  credit sectoral working capital credit, sectoral of GDP and inflation. The result shows: sectoral working capital credit of mining and quarrying which effectively explains inflation, it is because this sector is capital solid with advanced equipment and high technology, it takes a lot of fund.

A NOTE ON THE POLICY IMPLICATIONS OF USING DIVISIA CONSUMPTION AND MONETARY AGGREGATES

2007 ◽  
Vol 12 (1) ◽  
pp. 132-149 ◽  
Author(s):  
LEIGH DRAKE ◽  
ADRIAN R. FLEISSIG
Keyword(s):  
Monetary Policy ◽  
Durable Goods ◽  
Transmission Mechanism ◽  
Policy Implications ◽  
Monetary Transmission ◽  
Monetary Aggregates ◽  
Monetary Transmission Mechanism ◽  
Consumption Goods ◽  
Monetary Assets ◽  
Insight Into

Using U.K. data that are consistent with utility maximizing behavior by consumers, we construct aggregates for both consumption goods (nondurables and services) and monetary assets that are consistent with economic aggregation theory. Using these aggregates and the stock of durable goods, we estimate the elasticities of substitution between various consumption goods and monetary assets. These estimates are compared to the corresponding results from conventional monetary and consumption aggregates. The results give important information for monetary policy and the monetary transmission mechanism. In particular, these substitution estimates provide insight into the recent changes in expenditure on durable goods. We also show that the use of conventional U.K. consumption and monetary aggregates often give incorrect estimates of substitution and can provide misleading policy insights.

On the Monetary Transmission Mechanism in Europe / Zum Transmissionsmechanismus in Europa

1999 ◽  
Vol 219 (3-4) ◽  
Author(s):  
Jan Gottschalk
Keyword(s):  
Monetary Policy ◽  
Money Demand ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Inflation Expectations ◽  
Real Rate ◽  
Policy Makers ◽  
Monetary Transmission Mechanism ◽  
Short Run ◽  
The Interest Rate

SummaryThis paper presents an analysis of a money demand system for the euro area. The objective is to investigate some aspects of the monetary transmission mechanism. Of particular interest is the interest rate channel, which asserts that monetary policy works by affecting the long real rate. The evidence suggests that the long bond rate is mainly determined by inflation expectations and that the long real rate appears to have been beyond the influence of monetary policy makers. In addition real money effects are considered. At least in the short-run excess money has positive significant effects on output and inflation.

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