scholarly journals Die japanischen Lehren für die europäische Krise

2013 ◽  
Vol 62 (1) ◽  
Author(s):  
Gunther Schnabl
Keyword(s):  
Interest Rate ◽  
Aggregate Demand ◽  
Adjustment Costs ◽  
Real Income ◽  
Fiscal Policies ◽  
Fiscal Stimulus ◽  
The Real Estate ◽  
Boom And Bust ◽  
The Interest Rate ◽  
Boom And Bust Cycles

AbstractJapan went 15 years earlier than Europe through a boom-and-bust cycle in the real estate and stock markets. The country has made important experience with crisis therapies in form of monetary expansion, Keynesian fiscal stimulus and recapitalization of financial institutions. Japan has reached the zero interest bound in 1999 and has accumulated a very high public debt level. The paper compares the boom-and-bust cycles in Japan and Europe with respect to the reasons for the boom, the characteristics of the crises, and the (potential) effects of the crisis therapies. It is argued that the consequence of expansionary monetary and fiscal policies is the hysteresis of the zero-interest rate and high debt trap, the erosion of the allocation and signaling function of the interest rate, the gradual nationalization of the financial sector and aggregate demand, as well as gradual real income losses. The economic policy implication for Europe and Japan is the timely exit from crisis therapies in form of expansionary monetary and fiscal policies despite high adjustment costs.

Monetary Policy and Structural Decline: Lessons from Japan for the European Crisis

2015 ◽  
Vol 14 (1) ◽  
pp. 124-150 ◽  
Author(s):  
Gunther Schnabl
Keyword(s):  
Interest Rate ◽  
Financial Institutions ◽  
Real Income ◽  
Fiscal Policies ◽  
Fiscal Stimulus ◽  
The Real Estate ◽  
Boom And Bust ◽  
High Government ◽  
The Interest Rate ◽  
High Level

Japan experienced a boom-and-bust cycle in the real estate and stock markets almost 20 years earlier than Europe. Since the bursting of the Japanese bubble economy, the country has fallen into a deep recession and has experimented with crisis therapies in the form of unconventional monetary expansion, Keynesian fiscal stimulus, and recapitalization of financial institutions. Japan reached a low interest rate environment in the mid 1990s and has accumulated an exceptionally high level of public debt during more than two decades of economic stagnation. This paper compares the boom-and-bust cycles in Japan and Europe with respect to the reasons for excessive booms, the characteristics of the crises, and the (potential) effects of the crisis therapies. It is argued that in both Japan and Europe the consequences of expansionary monetary and fiscal policies include the hysteresis of a low-interest rate and high government debt environment, the erosion of the allocation and signaling functions of the interest rate, the gradual quasi-nationalization of financial institutions, as well as gradual real income losses. The economic policy implication for Europe and Japan is the timely exit from crisis therapies in the form of excessively expansionary monetary and fiscal policies.

scholarly journals “WAIT-AND-SEE” MONETARY POLICY

2017 ◽  
Vol 23 (5) ◽  
pp. 1793-1814 ◽  
Author(s):  
Xiaowen Lei ◽  
Michael C. Tseng
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Taylor Rule ◽  
Adjustment Costs ◽  
Optimal Timing ◽  
Bank Of Canada ◽  
Wait And See ◽  
The Interest Rate ◽  
Better Than

This paper develops a model of the optimal timing of interest rate changes. With fixed adjustment costs and ongoing uncertainty, changing the interest rate involves the exercise of an option. Optimal policy therefore has a “wait-and-see” component, which can be quantified using option pricing techniques. We show that increased uncertainty makes the central bank more reluctant to change its target interest rate, and argue that this helps explain recent observed deviations from the Taylor Rule. An optimal wait-and-see policy fits the target interest rates of the Fed and Bank of Canada better than the Taylor Rule.

scholarly journals Interest rates and prices causality in the Czech Republic – Granger approach

2009 ◽  
Vol 55 (No. 7) ◽  
pp. 347-356 ◽  
Author(s):  
J. Poměnková ◽  
S. Kapounek
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Aggregate Demand ◽  
Real Economy ◽  
Investment Activity ◽  
The Czech Republic ◽  
The Interest Rate

Monetary policy analysis concerns both the assumptions of the transmission mechanism and the direction of causality between the nominal (i.e. the money) and real economy. The traditional channel of monetary policy implementation works via the interest rate changes and their impact on the investment activity and the aggregate demand. Altering the relationship between the aggregate demand and supply then impacts the general price level and hence inflation. Alternatively, the Post-Keynesians postulate money as a residual. In their approach, banks credit in response to the movements in investment activities and demand for money. In this paper, the authors use the VAR (i.e. the vector autoregressive) approach applied to the “Taylor Rule” concept to identify the mechanism and impact of the monetary policy in the small open post-transformation economy of the Czech Republic. The causality (in the Granger sense) between the interest rate and prices in the Czech Republic is then identified. The two alternative modelling approaches are tested. First, there is the standard VAR analysis with the lagged values of interest rate, inflation and economic growth as explanatory variables. This model shows one way causality (in the Granger sense) between the inflation rate and interest rate (i.e. the inflation rate is (Granger) caused by the lagged interest rate). Secondly, the lead (instead of lagged) values of the interest rate, inflation rate and real exchange rate are used. This estimate shows one way causality between the inflation rate and interest rate in the sense that interest rate is caused by the lead (i.e. the expected future) inflation rate. The assumptions based on money as a residual of the economic process were rejected in both models.

Inside the Bank Box

2019 ◽  
pp. 368-405
Author(s):  
Leonardo Gambacorta ◽  
Paul Mizen
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Adjustment Costs ◽  
Bank Lending ◽  
Bank Capital ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Pass Through ◽  
The Interest Rate

Central bank policy operates first through financial markets and then through banks as they adjust their interest rates. This chapter discusses the transmission of policy in this first step of the monetary transmission mechanism, known as interest-rate pass-through. Historically, the focus of attention has been the interest-rate channel. We show the origins of this channel via a microfounded model of interest-rate setting by deposit-taking institutions that are Cournot oligopolists facing adjustment costs. We then examine other channels such as the bank lending channel and the bank capital channel and the role of central bank communications, signaling, and forward guidance over future interest rates. Each is shown to influence the setting of current short-term interest rates. The chapter closes with some issues for the future of pass-through in the transmission process.

Tunisian Fiscal Policy Effects in a New Keynesian Model With Price Rigidity and Monopolistic Competition

2021 ◽  
Vol 10 (1) ◽  
pp. 13-31
Author(s):  
Slah Slimani
Keyword(s):  
Fiscal Policy ◽  
Interest Rate ◽  
Private Consumption ◽  
Monopolistic Competition ◽  
Aggregate Demand ◽  
Public Spending ◽  
New Keynesian ◽  
Keynesian Model ◽  
The Business Cycle ◽  
The Interest Rate

This paper applies a multivariate neo-Keynesian DSGE model to study the effects of changes in Tunisian public spending on the business cycle, private consumption, wages, interest rate, and inflation rate in the presence of monopolistic competition and price nominal short-term rigidity. The main finding of this paper shows a Tunisian pro-cyclical fiscal policy. Expansionary public spending has two initial effects. The output increases due to the usual increase in labor supply, and aggregate demand increases due to an incomplete crowding out of private consumption. By increasing aggregate demand, the central bank increases the nominal interest rate, which moves in concert with inflation in order to counteract inflationary pressures. Households reduce their consumer spending at the same time as the real interest rate increases. Some companies are responding to the change in the interest rate by reducing their expenses, their employment demands, and their capital utilization rates.

scholarly journals Liquidity Trap and Excessive Leverage

2016 ◽  
Vol 106 (3) ◽  
pp. 699-738 ◽  
Author(s):  
Anton Korinek ◽  
Alp Simsek
Keyword(s):  
Interest Rate ◽  
Aggregate Demand ◽  
Liquidity Trap ◽  
Interest Rate Policy ◽  
Macroprudential Policies ◽  
Ex Ante ◽  
Rate Policy ◽  
The Interest Rate ◽  
Insurance Decisions

We investigate the role of macroprudential policies in mitigating liquidity traps. When constrained households engage in deleveraging, the interest rate needs to fall to induce unconstrained households to pick up the decline in aggregate demand. If the fall in the interest rate is limited by the zero lower bound, aggregate demand is insufficient and the economy enters a liquidity trap. In this environment, households' ex ante leverage and insurance decisions are associated with aggregate demand externalities. Welfare can be improved with macroprudential policies targeted toward reducing leverage. Interest rate policy is inferior to macroprudential policies in dealing with excessive leverage. (JEL D14, E23, E32, E43, E52, E61, E62)

scholarly journals Kredit Ketahanan Pangan dan Energi: Implementasi dan Persepsi oleh Petani Padi

2018 ◽  
Vol 15 (2) ◽  
pp. 99
Author(s):  
Iman Widhiyanto ◽  
Nunung Nuryartono ◽  
NFN Harianto ◽  
Hermanto Siregar
Keyword(s):  
Interest Rate ◽  
Agricultural Sector ◽  
Financial Education ◽  
Advanced Technology ◽  
Fiscal Policies ◽  
Market Rate ◽  
Lower Interest Rate ◽  
The Government ◽  
The Interest Rate ◽  
Farm Business

<p>Agricultural sector is the government’s priority through fiscal policies. One of the policies implemented is the interest rate subsidy for Food and Energy Security Credit Program (KKP-E). Some Banks had been appointed and in collaboration with the government to provide KKP-E. KKP-E program had lower interest rate than the market rate and it was expected that the farmers could access it. KKP-E was intended to meet the needs of agricultural equipment and farm inputs purchase. Since the program rolled out from 2008 to 2015, the implementation of KKP-E was below the credit limit. This study aimed to analyze the KKP-E implementation, farmers’ perspectives of KKP-E, and change from KKP-E to KUR (People’s Business Credit) for Agricultural Sector. Results of the study showed that KKP-E disbursement was relatively low. KKP-E distribution channels needed enhancement and the credit could not satisfy all farm business. Farmers did not receive KKP-E from the bank on time. Continuity of subsidized credit was important for farmers. Basic scheme of KKP-E program should be applied to KUR for Agricultural Sector. The government and the Banks need to be more actively in socializing the program, to improve financial education, to utilize more advanced technology, and to simplify bureaucracy.</p><p> </p><p>Abstrak</p><p>Pemerintah berusaha untuk membangun sektor pertanian melalui berbagai instrumen kebijakan fiskal. Salah satu kebijakan yang telah digulirkan adalah subsidi bunga Kredit Ketahanan Pangan dan Energi (KKP-E). Pemerintah bekerjasama dengan bank pelaksana menyediakan KKP-E. Petani diharapkan dapat mengakses KKP-E karena tingkat bunganya lebih rendah dari pasar. KKP-E digunakan untuk memenuhi kebutuhan pembelian peralatan pertanian dan input usaha taninya. Sejak digulirkan pada tahun 2008 sampai dengan 2015, realisasi penyaluran KKP-E masih jauh di bawah plafon kredit, dan realisasi subsidi bunga tidak efisien pada tahun-tahun awal digulirkannya subsidi bunga KKP-E. Penelitian ini bermaksud menganalisis secara diskriptif implementasi KKP-E, perspektif usaha tani terhadap KKP-E, dan perubahan KKP-E menjadi KUR (Kredit Usaha Rakyat) sektor pertanian. Data di lapangan menunjukkan bahwa jangkauan KKP-E masih rendah, saluran distribusi KKP-E perlu ditambah, terjadi fungibility penggunaan KKP-E, pinjaman KKP-E belum dapat memenuhi semua kebutuhan usaha tani, dan pencairan KKP-E masih lama dan tidak tepat waktu. Usaha tani menginginkan agar skim kredit dengan subsidi bunga dapat dilanjutkan di masa yang akan datang. Kemudahan-kemudahan yang ada pada KKP-E hendaknya diterapkan pada KUR sektor pertanian. Pemerintah bersama bank pelaksana perlu lebih masif melakukan sosialisasi dan edukasi keuangan dengan memanfaatkan teknologi yang lebih maju dan menyederhanakan birokrasi. </p>

scholarly journals Capital Controls: Theory and Evidence

2021 ◽  
Vol 59 (1) ◽  
pp. 45-89
Author(s):  
Bilge Erten ◽  
Anton Korinek ◽  
José Antonio Ocampo
Keyword(s):  
Capital Flows ◽  
Aggregate Demand ◽  
Capital Controls ◽  
International Capital Flows ◽  
Empirical Literature ◽  
International Capital ◽  
Pecuniary Externalities ◽  
Boom And Bust ◽  
Boom And Bust Cycles ◽  
Benefits And Costs

This paper synthesizes recent advances in the theoretical and empirical literature on capital controls. We start by observing that international capital flows have both benefits and costs, but some of these are not internalized by individual actors and thus constitute externalities. The theoretical literature has identified pecuniary externalities and aggregate demand externalities that respectively contribute to financial instability and recessions. These externalities provide a natural rationale for countercyclical capital controls that lean against boom and bust cycles in international capital flows. The empirical literature has developed several measures of capital controls to capture different aspects of capital account openness. We evaluate the strengths and weaknesses of different measures and provide an overview of the empirical findings on the effectiveness of capital controls in addressing the externalities identified by the theory literature, that is, in reducing financial fragility and enhancing macroeconomic stability. We also discuss strategies to deal with the endogeneity of capital controls in such statistical exercises. We conclude by providing an overview of the historical and current debates on the role of capital controls in macroeconomic management and their relationship to the academic literature. (JEL D62, F32, F33, F38, F44)

Examining the Asymmetric Impact of Monetary Policy in India

2017 ◽  
Vol 11 (3) ◽  
pp. 290-314 ◽  
Author(s):  
Jeevan Kumar Khundrakpam
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Negative Impact ◽  
Aggregate Demand ◽  
Jel Classification ◽  
Government Consumption ◽  
Policy Shocks ◽  
Significant Negative Impact ◽  
The Interest Rate ◽  
The Impact

Though an accumulating body of work has analysed monetary policy transmission in India, there are few studies examining the asymmetric aspect of the transmission. Against this backdrop, segregating the interest rate setting process captured by a Taylor rule type into unanticipated and anticipated components, this article analyses the asymmetric effects of monetary policy on aggregate demand and its components, and inflation in India using quarterly data from 1996–97Q1 to 2013–14Q3. It finds that unanticipated hikes and cuts in the policy rate have a symmetric impact on aggregate demand, but differentially impact the components. While the impacts on investment are negative and symmetric, they are asymmetric on private consumption, with only an unanticipated cut in policy rate having a significant negative impact. Government consumption is unaffected by monetary policy shocks. The impact of unanticipated interest rate changes on inflation is negative and symmetric. Anticipated policy rate changes also have a negative impact on aggregate demand and its components, except for government consumption, but between certain levels, such changes are ineffective, indicating a neutral impact. Anticipated policy rate changes have a negative impact on inflation at all levels. JEL Classification: C32, C51, E31, E52

Empirical Evidence of Dynamic Interactions Among Price Level, Interest Rate, Money Supply and Real Income: The Case of the Indian Economy

2020 ◽  
pp. 097215092098029
Author(s):  
Haroon Rasool ◽  
Masudul Hasan Adil ◽  
Md. Tarique
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Money Supply ◽  
Inflation Targeting ◽  
Price Level ◽  
Real Income ◽  
Causality Test ◽  
Indicator Approach ◽  
Multiple Indicator ◽  
The Interest Rate

Monetary policy approaches in India have changed from the simple monetary targeting frameworks in the mid-1980s to the multiple-indicator approach in the late 1990s and to the current flexible inflation targeting framework. The study aims to investigate the relationships among the macroeconomic variables money supply, real income, price level and interest rate for the period 1998–2014 in the case of India, a period when India adopted the multiple-indicator approach as its monetary policy strategy. The study uses the vector autoregression (VAR) model to examine the dynamic relationships among the variables. The Granger causality test via the VAR framework suggests that four pairs of causality exist; in particular, bidirectional causality exists between money supply and price level. Interest rate Granger-causes both real income and price level, and money supply Granger-causes the rate of interest. However, the study could not find any causal relationship between real income and money supply in either direction. The findings that money supply causes the interest rate and the interest rate causes real output are in line with the Keynesian theory, which argues that money supply affects output through the nominal interest rate. Finally, the results also support the arguments made in favour of a policy move from the multiple-indicator approach to the inflation targeting framework in India.

Sign in / Sign up

Export Citation Format

Share Document