The Monetary Policy Credibility Channel and the Amplification Effects in a Semi-Structural Model

2020 ◽  
Author(s):  
Thitipat Chansriniyom ◽  
Natan P. Epstein ◽  
Valeriu Nalban
Keyword(s):  
Monetary Policy ◽  
Structural Model ◽  
Policy Credibility

scholarly journals The Monetary Policy Credibility Channel and the Amplification Effects in a Semi-structural Model

2020 ◽  
Vol 20 (201) ◽  
Author(s):  
Thitipat Chansriniyom ◽  
Natan Epstein ◽  
Valeriu Nalban
Keyword(s):  
Monetary Policy ◽  
Structural Model ◽  
Inflation Expectations ◽  
Extended Model ◽  
Inflation Target ◽  
Asymmetric Effects ◽  
Policy Frameworks ◽  
Integrated Policy ◽  
Policy Credibility ◽  
Central Bank Credibility

The paper extends a standard semi-structural model to account for nonlinear and asymmetric effects of monetary policy credibility. In our setting, central bank credibility is proportional to the deviation of inflation expectations from the announced inflation target, with positive deviations being more costly compared to negative ones. A loss in policy credibility as a result of shocks leads to a more persistent, backward-looking inflation process, and is associated with lower output. We find that the extended model with credibility effects matches well the key macroeconomic data over specific past episodes for Indonesia and Philippines and consider its adaptation to integrated policy frameworks as an area for further exploration.

scholarly journals Currency Boards, Dollarized Liabilities, and Monetary Policy Credibility

2003 ◽  
pp. 1.000-34.000
Author(s):  
Diego Valderrama ◽  
◽  
Mark M. Spiegel ◽  
Keyword(s):  
Monetary Policy ◽  
Currency Boards ◽  
Policy Credibility

scholarly journals Monetary Transmission through Shadow Banks

2019 ◽  
Vol 33 (6) ◽  
pp. 2379-2420 ◽  
Author(s):  
Kairong Xiao
Keyword(s):  
Monetary Policy ◽  
Banking Sector ◽  
Structural Model ◽  
Shadow Banking ◽  
Oxford University ◽  
Shadow Banks ◽  
Bank Deposits ◽  
The Difference ◽  
Pass Through ◽  
The Impact

Abstract I find that shadow bank money creation significantly expands during monetary-tightening cycles. This “shadow banking channel” offsets reductions in commercial bank deposits and dampens the impact of monetary policy. Using a structural model of bank competition, I show that the difference in depositor clienteles quantitatively explains banks’ different responses to monetary policy. Facing a more yield-sensitive clientele, shadow banks are more likely to pass through rate hikes to depositors, thereby attracting more deposits when the Federal Reserve raises rates. My results suggest that monetary tightening could unintentionally increase financial fragility by driving deposits into the uninsured shadow banking sector. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

DOES MODEL UNCERTAINTY JUSTIFY CAUTION? ROBUST OPTIMAL MONETARY POLICY IN A FORWARD-LOOKING MODEL

2002 ◽  
Vol 6 (1) ◽  
pp. 111-144 ◽  
Author(s):  
Marc P. Giannoni
Keyword(s):  
Monetary Policy ◽  
Model Uncertainty ◽  
Structural Model ◽  
Optimal Monetary Policy ◽  
Taylor Rules ◽  
True Model ◽  
The Interest Rate ◽  
Zero Sum ◽  
General Method ◽  
Forward Looking

This paper proposes a general method based on a property of zero-sum two-player games to derive robust optimal monetary policy rules—the best rules among those that yield an acceptable performance in a specified range of models—when the true model is unknown and model uncertainty is viewed as uncertainty about parameters of the structural model. The method is applied to characterize robust optimal Taylor rules in a simple forward-looking macroeconomic model that can be derived from first principles. Although it is commonly believed that monetary policy should be less responsive when there is parameter uncertainty, we show that robust optimal Taylor rules prescribe in general a stronger response of the interest rate to fluctuations in inflation and the output gap than is the case in the absence of uncertainty. Thus model uncertainty does not necessarily justify a relatively small response of actual monetary policy.

scholarly journals Monetary Policy Credibility and Exchange Rate Pass-Through

2016 ◽  
Author(s):  
Yan Carriere-Swallow ◽  
Bertrand Gruss ◽  
Nicolas E. Magud ◽  
Fabian V. Valencia
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Policy Credibility ◽  
Pass Through ◽  
Exchange Rate Pass Through
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