The effects of the monetary policy stance on the transmission mechanism

2014 ◽  
Vol 18 (3) ◽  
Author(s):  
Ana Beatriz Galvao ◽  
Massimiliano Marcellino
Keyword(s):  
Monetary Policy ◽  
Taylor Rule ◽  
Structural Break ◽  
Transmission Mechanism ◽  
Actual Rate ◽  
Negative Effects ◽  
The One ◽  
Actual Policy

AbstractThis paper contributes to the literature on changes in the transmission mechanism of monetary policy by introducing a model whose parameter evolution explicitly depends on the stance of monetary policy. The model, a structural break endogenous threshold VAR, also captures changes in the variance of shocks, and allows for a break in the parameters at an estimated time. We show that the transmission is asymmetric depending on the extention of the deviation of the actual policy rate from the one required by the Taylor rule. When the policy stance is tight – actual rate is higher than the one implied by the Taylor rule – contractionary shocks have stronger negative effects on output and prices.

Can a Taylor rule better explain the Fed’s monetary policy through the 1920s and 1930s? A nonlinear cliometric analysis

2018 ◽  
Vol 22 (5) ◽  
Author(s):  
Olivier Damette ◽  
Fredj Jawadi ◽  
Antoine Parent
Keyword(s):  
Monetary Policy ◽  
Business Cycle ◽  
Interwar Period ◽  
Taylor Rule ◽  
Structural Break ◽  
Output Gap ◽  
Time Varying ◽  
Working Paper ◽  
The Great Depression ◽  
Monetary Regimes

Abstract This paper investigates whether a variant of a Taylor rule applied to historical monetary data of the interwar period is useful to gain a better understanding of the Fed’s conduct of monetary policy over the period 1920–1940. To this end, we considered a standard Taylor rule (using two drivers: output gap and inflation gap) and proxied them differently for robustness. Further, we extended this Taylor rule to a nonlinear framework while enabling its coefficient to be time-varying and to change with regard to the phases in business cycle, in order to better capture any further asymmetry in the data and the structural break induced by the Great Depression. Accordingly, we showed two important findings. First, the linearity hypothesis was rejected, and we found that an On/Off Taylor Rule is appropriate to reproduce the conduct of monetary policy during the interwar period more effectively (the activation of drivers only occurs per regime). Second, unlike Field [Field, A. 2015. “The Taylor Rule in the 1920s.” Working Paper], we validated the use of a Taylor rule to explain the conduct of monetary policy in history more effectively. Consequently, this nonlinear Taylor rule specification provides interesting results for a better understanding of monetary regimes during the interwar period, and offers useful complements to narrative monetary history.

scholarly journals The Monetary Policy of the National Bank of Romania in The Inflation Targeting Era. A Taylor Rule Approach

2015 ◽  
Vol 8 (2) ◽  
pp. 91-102
Author(s):  
Bogdan Căpraru ◽  
Norel Ionuţ Moise ◽  
Andrei Rădulescu
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Inflation Targeting ◽  
Taylor Rule ◽  
Output Gap ◽  
Inflation Differential ◽  
Rule Approach ◽  
National Bank ◽  
Potential Gdp ◽  
The One

AbstractIn this paper we analyse the monetary policy of the National Bank of Romania during 2005-2015 by estimating the Taylor rule, on a quarterly basis. We determined the potential GDP by employing the Hodrick-Prescott filter, in order to distinguish between the cyclical and the structural components of the output. Then, we estimated the traditional Taylor rule function (with a classic OLS regression), but slightly modified, as to take into account the forward-looking attitude of the NBR. The results confirm the direct correlation between the monetary policy rate and the output gap on the one hand, and the inflation differential (inflation - inflationtarget) on the other hand. Also, the results show us that NBR paid a higher attention to the dynamics of the inflation versus its target than to the output gap. Last, but not least, the central bank has been also sensitive to the financial stability, as reflected by the results of the incorporation of the ROBOR-EURIBOR spread in the classical Taylor rule.

scholarly journals Taylor Rule and the Macroeconomic Performance in Pakistan

2010 ◽  
Vol 49 (1) ◽  
pp. 37-56 ◽  
Author(s):  
Wasim Shahid Malik ◽  
Ather Maqsood Ahmed
Keyword(s):  
Monetary Policy ◽  
Taylor Rule ◽  
Jel Classification ◽  
Macroeconomic Performance ◽  
Policy Strategy ◽  
Simple Instrument ◽  
Extreme Deviation ◽  
Parameter Values ◽  
Actual Policy ◽  
Counterfactual Simulation

A near-consensus position in modern macroeconomics is that policy rules have greater advantage over discretion in improving economic performance. For developing countries in particular, simple instrument rules appear to be feasible options as pre-requisites since more sophisticated targeting rules are generally lacking. Using Pakistan’s data, this study has attempted to estimate the Taylor rule and use it as monetary policy strategy to simulate the economy. Our results indicate that the State Bank of Pakistan (SBP) has not been following the Taylor rule. In fact, the actual policy has been an extreme deviation from it. On the other hand, counterfactual simulation confirms that macroeconomic performance could have been better in terms of stability of inflation and output, had the Taylor rule been adopted as monetary policy strategy. The study also establishes that further gains are possible if the parameter values of the rule are slightly modified. JEL classification: E47, E31, E52 Keywords: Taylor Rule, Macroeconomic Performance, Counterfactual Simulation

scholarly journals Modeling changes in US monetary policy with a time-varying nonlinear Taylor rule

2018 ◽  
Vol 22 (5) ◽  
Author(s):  
Anh D. M. Nguyen ◽  
Efthymios G. Pavlidis ◽  
David A. Peel
Keyword(s):  
Monetary Policy ◽  
Economic Activity ◽  
Sequential Monte Carlo ◽  
Taylor Rule ◽  
Structural Break ◽  
Monetary Economics ◽  
Time Varying ◽  
Sequential Monte Carlo Methods ◽  
Asymmetric Preferences ◽  
Us Monetary Policy

Abstract The monetary economics literature has highlighted four issues that are important in evaluating US monetary policy since the late 1960s: (i) time variation in policy parameters, (ii) asymmetric preferences, (iii) real-time nature of data, and (iv) heteroskedasticity. In this paper, we exploit advances in sequential monte carlo methods to estimate a time-varying nonlinear Taylor rule that addresses these four issues simultaneously. Our findings suggest that US monetary policy has experienced substantial changes in terms of both the response to inflation and to real economic activity, as well as changes in preferences. These changes cannot be captured adequately by a single structural break at the late 1970s, as has been commonly assumed in the literature, and play a non-trivial role in economic performance.

scholarly journals ANALYSIS OF THE ECB MONETARY POLICY MATCH FOR THE NEEDS OF THE EURO AREA COUNTRIES NEEDS

Ekonomika ◽  
2013 ◽  
Vol 92 (3) ◽  
pp. 41-58
Author(s):  
Tomas Reichenbachas
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Euro Area ◽  
Taylor Rule ◽  
Currency Area ◽  
The Face ◽  
Asymmetric Shock ◽  
The Interest Rate ◽  
The One

Abstract. In this paper, using the Taylor rule (Taylor, 1993), the European Central Bank (ECB) monetary policy in 2000–2012, as well as individual interest rate needs of the euro area (EA) countries are analysed. It is assumed that the estimated Taylor rule interest rates are optimal for individual members. We have analysed whether the actual ECB interest rates and the calculated rates are different and have become more balanced towards individual countries’ needs. The work focuses attention on the last period (2008–2012) when the EA faced economic problems and an asymmetric shock. The analysis shows controversial results: on the one hand, the interest deviation mean decreases (just a little), but an increasing gap between individual needs can be seen: some countries are becoming increasingly divorced from the general EA needs. It makes them very vulnerable, and there is a risk that these countries in the face of asymmetric challenges can be “left behind” by the ECB focusing on the EA as a whole. Also, in this paper, the stationarity of the calculated deviations is analysed to help understand their nature. This approach is new, and the author is unaware of similar works. Analysis of the optimal interest rate dynamics has revealed that Germany needed the interest rates that were opposite to the needs of Spain and Greece and susceptible to divergence, so this led to the ECB difficulties in determining the proper interest for all countries’ needs. The EA as a currency area is most optimal for Belgium, Cyprus, Finland, France, Italy, and the Netherlands from the interest rate setting perspective.Key words: the Taylor rule, optimal monetary policy, asymmetric shocks, optimal currency area

Monetary policy and the effect of the transfer of oil prices to inflation

2020 ◽  
pp. 41-50
Author(s):  
Ph. S. Kartaev ◽  
I. D. Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Negative Effects ◽  
Price Shocks ◽  
Policy Regime ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

Contributions to the Knowledge of Sandy Soils from Oltenia Plain

2020 ◽  
Vol 71 (1) ◽  
pp. 192-200
Author(s):  
Anca-Luiza Stanila ◽  
Catalin Cristian Simota ◽  
Mihail Dumitru
Keyword(s):  
Chemical Properties ◽  
Soil Formation ◽  
Sandy Soils ◽  
Physical Geography ◽  
Parent Material ◽  
Negative Effects ◽  
Small Water ◽  
Wind Characteristic ◽  
The One ◽  
Physical And Chemical

Highlighting the sandy soil of Oltenia Plain calls for a better knowledge of their variability their correlation with major natural factors from each physical geography. Pedogenetic processes specific sandy soils are strongly influenced by nature parent material. This leads, on the one hand, climate aridity of the soil due to strong heating and accumulation of small water reserves, consequences emphasizing the moisture deficit in the development of the vegetation and favoring weak deflation, and on the other hand, an increase in mineralization organic matter. Relief under wind characteristic sandy land, soil formation and distribution has some particularly of flat land with the land formed on the loess. The dune ridges are less evolved soils, profile underdeveloped and poorly supplied with nutrients compared to those on the slopes of the dunes and the interdune, whose physical and chemical properties are more favorable to plant growth.Both Romanati Plain and the Blahnita (Mehedinti) Plain and Bailesti Plain, sand wind shaped covering a finer material, loamy sand and even loess (containing up to 26% clay), also rippled with negative effects in terms of overall drainage. Depending on the pedogenetic physical and geographical factors that have contributed to soil cover, in the researched were identified following classes of soils: protisols, cernisols, cambisols, luvisols, hidrisols and antrosols.Obtaining appropriate agricultural production requires some land improvement works (especially fitting for irrigation) and agropedoameliorative works. Particular attention should be paid to preventing and combating wind erosion.

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