Monetary policy and redistribution: information from central bank balance sheets in the Euro area and the US

2013 ◽  
Vol 64 (3) ◽  
Author(s):  
Philippine Cour-Thimann
Keyword(s):  
New York ◽  
Monetary Policy ◽  
Central Bank ◽  
Euro Area ◽  
Financial Sector ◽  
Central Banks ◽  
Balance Sheets ◽  
The Us ◽  
Bank Balance Sheets ◽  
Redistributive Effects

AbstractThe exceptional measures by central banks during the financial crisis have led to renewed interest in the redistributive effects of monetary policy. This paper adopts the perspective of central bank balance sheets to assess such effects. It uses information from the euro area National Central Banks and the US Federal Reserve Banks to analyse the regional and sectoral effects of monetary policy. Central bank balance sheets capture sustained imbalances in payment flows across the euro area countries that peaked at 10% of GDP in the so-called Target balances, and across the US districts that reached 5% of GDP in the equivalent Interdistrict Settlement Accounts. These imbalances, combined with accommodative central bank liquidity, shifted risks from the private financial sector to the public sector and among taxpayers - yet, mechanisms are in place to mitigate such risks and the associated redistributive effects. The liquidity injection, while directly channelled at the stressed regions or sectors, has indirectly supported the financial sector at large. In different institutional contexts, the financial centres in Germany and in the New York district have been strengthened. They have been net recipients of payment inflows from the rest of the respective currency areas, equivalent in amounts to a third of the liquidity injection during the crisis.

The Decline of Simplicity and the Rise of Unorthodoxy

2017 ◽  
Author(s):  
Pierre L. Siklos
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Central Banks ◽  
Policy Uncertainty ◽  
Structural Factors ◽  
Balance Sheets ◽  
Advanced Economies ◽  
The World ◽  
Bank Balance Sheets ◽  
Clear Idea

Crises come in various forms, and their impact is not predicable with much accuracy. Crises in emerging markets are not the same as those in advanced economies. By 2007, the idea that monetary policy ought to be rules-based was widely accepted and copied around the world. Policymakers believed that inflation and macroeconomic slack were all that mattered. Demographic and structural factors were underappreciated. The wrong conclusions are now being drawn: rules should not be abandoned, but monetary policy can be improved. Monetary policy now relies more on words. An expansion of central bank balance sheets has taken place and central bank independence is a quaint idea. Central banks no longer influence just prices; they also change financial system quantities. This leads to rising policy uncertainty. Central banks stand accused of hubris, with little clear idea of the “new normal” and how this will redefine a future monetary policy strategy.

scholarly journals Conventional Monetary Policy

2021 ◽  
pp. 29-51
Author(s):  
Ulrich Bindseil ◽  
Alessio Fotia
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Financial Stability ◽  
Balance Sheet ◽  
Central Banks ◽  
Control Measures ◽  
Short Term ◽  
Balance Sheets ◽  
Bank Balance Sheets

AbstractThis chapter introduces conventional monetary policy, i.e. monetary policy during periods of economic and financial stability and when short-term interest rates are not constrained by the zero lower bound. We introduce the concept of an operational target of monetary policy and explain why central banks normally give this role to the short-term interbank rate. We briefly touch macroeconomics by outlining how central banks should set interest rates across time to achieve their ultimate target, e.g. price stability, and we acknowledge the complications in doing so. We then zoom further into monetary policy operations and central bank balance sheets by developing the concepts of autonomous factor, monetary policy instruments, and liquidity-absorbing and liquidity providing balance sheet items. Subsequently we explain how these quantities relate to short-term interest rates, and how the central bank can rely on this relation to steer its operational target, and thereby the starting point of monetary policy transmission. Finally, we explain the importance of the collateral framework and related risk control measures (e.g. haircuts) for the liquidity of banks and for the conduct of central bank credit operations.

Hungary’s rising prices may shift monetary policy

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Euro Area ◽  
Federal Reserve ◽  
Content Type ◽  
Core Inflation ◽  
The Us ◽  
Manufacturing Sectors ◽  
National Bank

Significance The sharp slide in the forint is fuelling inflationary pressures, testing the resolve of the National Bank (MNB -- the central bank) to continue providing stimulus to the economy. Despite a surge in core inflation in Hungary to 3.8%, the MNB is using this year’s dovish U-turns by the ECB and the US Federal Reserve (Fed) as cover to keep monetary policy ultra-loose. Impacts The dollar index is strengthening despite the dovish U-turn by the Fed and is putting an end to the sharp rally in EM currencies in January. Inflationary pressures will be muted across the euro-area, with core inflation falling to 0.8% in March, less than half the ECB’s target. PMIs show Czech and Polish manufacturing sectors continuing to contract and Hungarian growth at its weakest level since 2016.

Paper Money

2013 ◽  
Vol 103 (2) ◽  
pp. 563-584 ◽  
Author(s):  
Christopher A Sims
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Central Bank ◽  
Sovereign Debt ◽  
Price Level ◽  
Balance Sheets ◽  
Policy Interactions ◽  
Paper Money ◽  
Bank Balance Sheets

Drastic changes in central bank operations and monetary institutions in recent years have made previously standard approaches to explaining the determination of the price level obsolete. Recent expansions of central bank balance sheets and of the levels of richcountry sovereign debt, as well as the evolving political economy of the European Monetary Union, have made it clear that fiscal policy and monetary policy are intertwined. Our thinking and teaching about inflation, monetary policy, and fiscal policy should be based on models that recognize fiscal-monetary policy interactions. (JEL E31, E52, E58, E62, H63)

scholarly journals US vs. Euro Area

2019 ◽  
Vol 19 (199) ◽  
Author(s):  
Eugenio Cerutti ◽  
Carolina Osorio Buitron
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Negative Impact ◽  
Financial Sector ◽  
Bank Lending ◽  
Real Sector ◽  
Cross Border ◽  
The Us ◽  
The Impact ◽  
Us Monetary Policy

This paper analyzes the drivers of cross-border bank lending to 49 Emerging Markets (EMs) during the period 1990Q1-2014Q4, by assessing the impact of monetary, financial and real sector shocks in both the US and the euro area. The literature has traditionally highlighted the influence of US monetary policy on driving cross-border bank flows, and more recently the importance of both US and Euro Area (EA) financial/banking sectors’ related variables. Our contribution is the simultaneous analysis of the role of these US and EA drivers, as well as their interactions with real sector shocks. We corroborate the negative impact of US monetary policy tightening on cross-border lending to EMs, but we find that EA monetary policy seems to have an impact mostly on Emerging Europe, reflecting the fact that cross-border lending to most other EM regions is dollar denominated. We also find that real sector shocks in both the US and EA trigger an increase in cross-border lending, but less in EA when modeling the financial sector. Finally, for financial sector shocks, such as those associated with a decrease in bank leverage, our results indicate a broad-based overall contraction of cross-border lending if the shock originates in the US, and heterogenous effects across borrowing regions if the shock originates in the EA.

scholarly journals Monetary Policy and Euro Area Governance in the EMU

2018 ◽  
Author(s):  
Herwig C H Hofmann
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Monetary Union ◽  
Euro Area ◽  
European Central Bank ◽  
Central Banks ◽  
Single Currency ◽  
Diverse Range ◽  
European Central ◽  
The Eu

One of the European Union’s most ambitious policy projects to date is the ‘economic and monetary union whose currency is the euro’ (EMU, Article 3(4) TEU). The EMU’s two polices—the economic union and the monetary union—are an unequal set of twins. On one hand, the monetary union’s central elements are well developed: as an element of substance, the introduction of the euro as a single currency; as an institutional achievement, the creation of the European System of Central Banks (ESCB) together with the European Central Bank (ECB) on the EU level as a highly independent body having the power to adopt a diverse range of measures. Additionally, the Treaties contain specific provisions on the goals and principles of monetary policy.

scholarly journals Gravity Among Central Bank Balance Sheets: Monetary Policy Spill-Over on FX Volatility

2020 ◽  
Vol 5 (1) ◽  
pp. 33-57
Author(s):  
Gábor Dávid Kiss ◽  
Mercédesz Mészáros
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Relative Size ◽  
Reducing Power ◽  
Central Banks ◽  
Gravity Models ◽  
Quantitative Easing ◽  
Subprime Crisis ◽  
European Central ◽  
Bank Balance Sheets

AbstractFollowing the subprime crisis, most of the European central banks implemented several unconventional monetary instruments. As a result of the late quantitative easing, there was a shift from stimulating lending to the immediate stimulation of the securities market in the monetary policy of the European Central Bank (ECB) and of the smaller central banks, too. These securities purchase programs, first and second-market transactions, and asset purchases have led to an increase in the stock of securities held by the central banks, whose spill-over effects have not been fully explored yet. The aim of our research is to identify the spill-over effects of the central banks’ unconventional instruments and quantitative easing on currency volatility while considering the relative size of the issuing central bank and the situation of small open economies. By running an adapted version of gravity models, we analyzed a sample of six European central banks and the ECB. Based on our results, the high volatility levels of European currencies around the eurozone have come from their relative smallness and unconventional monetary policy, and considerations about safe havens have a reducing power on F X volatility.

scholarly journals The efficiency of monetary policy instruments of the European Central Bank in liquidity regulating in euro area

Equilibrium ◽  
2010 ◽  
Vol 5 (2) ◽  
pp. 195-208
Author(s):  
Ilona Pietryka
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Euro Area ◽  
European Central Bank ◽  
Banking System ◽  
Policy Instruments ◽  
Central Banks ◽  
European Central

Mechanism of forming of liquidity level of national central banks participating in ESCB is clear. It is based on centralized and decentralized operations. The ECB decides on the direction of monetary policy, and the national central banks implement monetary policy taking into account those guidelines as well as the conditions of their country. The aim of the paper is to estimate the efficiency of the EBC monetary policy in regulating the liquidity of the banking system in euro area. The aim was achieved by characterizing the organizational and balance relationship banks of the Eurosystem because of this regulation. Special accent was placed on monetary policy instruments, which are created by national central banks and they form liquidity of the euro area.

Russian Banking System under Conditions of Global Crisis

2009 ◽  
pp. 4-14 ◽  
Author(s):  
G. Gref ◽  
K. Yudaeva
Keyword(s):  
Banking System ◽  
Commodity Prices ◽  
Financial Sector ◽  
Banking Crises ◽  
Economic Recovery ◽  
Balance Sheets ◽  
Current Economic Crisis ◽  
Risk Appetite ◽  
The Us ◽  
The Face

Problems in the financial sector were at the core of the current economic crisis. Therefore, economic recovery will only become sustainable after taking care of the major weaknesses in the financial sector. This conclusion is relevant both for the US and UK - the two countries where crisis has started, and for other economies which financial institutions turned out to be fragile in the face of the swings in the risk appetite. Russia is one of the countries where the crisis has revealed serious deficiency in the financial sector. Our study of 11 banking crises during the last 25-30 years shows that sustainable economic recovery and decrease in the dependence on commodity prices will be virtually impossible without cleaning of balance sheets and capitalization of the financial sector.

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