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3 edition of Deflationary shocks and monetary rules found in the catalog.

Deflationary shocks and monetary rules

Douglas Laxton

Deflationary shocks and monetary rules

an open-economy scenario analysis

by Douglas Laxton

  • 348 Want to read
  • 36 Currently reading

Published by National Bureau of Economic Research in Cambridge, Mass .
Written in English

    Subjects:
  • Supply and demand -- Econometric models,
  • Equilibrium (Economics) -- Econometric models,
  • Monetary policy -- Japan,
  • Macroeconomics,
  • Japan -- Economic conditions -- 21st century

  • Edition Notes

    StatementDouglas Laxton, Papa N"Diaye, Paolo Pesenti.
    SeriesNBER working paper series -- no. 12703., Working paper series (National Bureau of Economic Research) -- working paper no. 12703.
    ContributionsNdiaye, Papa., Pesenti, Paolo., National Bureau of Economic Research.
    The Physical Object
    Pagination35 p. :
    Number of Pages35
    ID Numbers
    Open LibraryOL17631685M
    OCLC/WorldCa76824338

    shocks, we check to see if these shocks are respon- sible for their results. We find that including oil prices in their analysis makes monetary policy as specified by the Romers insignificant. Negating the results of Romer and Romer does not imply that monetary policy plays no role in deter- mining economic activity.


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Deflationary shocks and monetary rules by Douglas Laxton Download PDF EPUB FB2

Deflationary Shocks and Monetary Rules: an Open-Economy Scenario Analysis Douglas Laxton, Papa N'Diaye, Paolo Pesenti. NBER Working Paper No. Issued in November NBER Program(s):International Finance and Macroeconomics, Monetary Economics The paper considers the macroeconomic transmission of demand and supply shocks in an open economy under alternative.

Deflationary supply shocks have different implications according to whether they are concentrated in the tradables rather than the nontradables sector. Price-level-path targeting rules are likely to provide better guidelines for monetary policy in a deflationary environment, and have desirable properties in normal times when the ZIF is not binding.

The implications of deflationary supply shocks depend on whether the shocks Deflationary shocks and monetary rules book concentrated in the tradables or the nontradables sector.

Price-level-path targeting rules are likely to provide better guidelines for monetary policy in a deflationary environment, and have desirable properties in normal times when the ZIF is not binding.

Get this from a library. Deflationary shocks and monetary rules: an open-economy scenario analysis. [Douglas Laxton; Papa Ndiaye; Paolo Pesenti; National Bureau of Economic Research.] -- "The paper considers the macroeconomic transmission of demand and supply shocks in an open economy under alternative assumptions on whether the zero interest floor (ZIF) is binding.

In other words, bond market investors are treating this latest series of events overseas as a deflationary shock.” I think Rosey has this one spot on.

The risk of rising oil is not a hyperinflationary spiral, but rather a deflationary spiral. Deflation forces a country's central bank to revalue its monetary unit and readjust its economic and regulatory policies to deal with deflationary shocks.

Take the Next Step to Invest Advertiser. Mark Sadowski recently discussed a study by Harald Uhlig on the effects of monetary shocks on RGDP. Uhlig didn't find much effect. I suggested that there is a severe identification problem, and that NGDP fluctuations are the best indicator of monetary shocks.

Mark replied as follows: Scott, Well if all NGDP shocks were treated as monetary shocks then we're assuming that AD. A New Measure of Monetary Shocks: Derivation and Implications By CHRISTINA D.

ROMER AND DAVID H. ROMER* This paper develops a measure of U.S. monetary policy shocks for the period – that is relatively free of endogenous and anticipatory Size: KB.

The purpose of this paper is to assess the effects of a sequence of deflationary shocks, such Deflationary shocks and monetary rules book those that hit the euro area inon expected/realized inflation and output.

Rules for Monetary Policy Michael Woodford * Much of my recent research has sought to use economic analysis to determine the consequences of alternative rules for the conduct of monetary policy, and to formulate rules that will be desirable from the standpoint of individual welfare.

up to 47% of the variance attributed to exogenous monetary policy shocks. Estimating a stochastic volatility model with these series confirms this result.

Critically, the peak in variance of exogenous monetary policy shocks are highly correlated with the peak in the. The last chapters deal with the impact of a deflationary economy on investments and the need for public policy reforms in education, healthcare, retirement savings, etc.

But these are heady topics that need more discussion than is possible in this short, insightful by: 3. - Deflationary shocks and de-anchoring of inflation expectations. Vai alla versione italiana Site Search. by Fabio Busetti, Giuseppe Ferrero, Andrea Gerali, Alberto Locarno December Share.

particularly when monetary policy rates are near the zero lower bound. Monetary Policy: Rules, Targets, and Shocks JAMES TOBIN The proper conduct of monetary policy is now once again wide open to discussion.

An immediate practical controversy concerns the role of central banks in recovery from the world depression. Underlying that debate are some unresolved fundamen. this paper was presented at Bank of Japan's Ninth International Conference, "The Role of Monetary Policy under Low Inflation: Deflationary Shocks and Their Policy Responses," held in Tokyo, July 3 Author: Yasushi Iwamoto.

Clearly, deflationary pressures were more severe in the Swedish and U.S. cases than in Japan today. 6 However, the two episodes suggest that combating deflation requires decisive, substantial, and sustained monetary policy efforts.

7 Moreover, when compared with the Swedish monetary program, which gave the central bank instrument independence.

By contrast, monetary shocks of the kind occurring later in the Napoleonic wars invariably took the form of inflationary expansion of the inconvertible banknote issue. As these shocks, unlike real ones, were not temporary and self-reversing, they required correction through. ADVERTISEMENTS: Some of the major ways to control deflation are as follow: 1.

Monetary Policy 2. Fiscal Policy. Deflation can be controlled by adopting monetary and fiscal measures in just the opposite manner to control inflation. ADVERTISEMENTS: However, we discuss these measures in brief. Monetary Policy: To control deflation, the central bank can increase [ ].

Monetary policy shocks and volatility 5. The effects of monetary policy shocks: abandoning the recursiveness approach A fully simultaneous system Sims-Zha: model specification and identification Empirical results 6.

Some pitfalls in interpreting estimated monetary policy rules 7. As such, it helps to show how monetary impulses or shocks work their way through the economy to impose changes in money prices or the level of output and employment.

For that reason, it is a most important idea for the understanding of business cycles and the problem of inflation, subjects that will occupy much of the remainder of this book. Description: This book explores the new economics of monetary union.

It carefully discusses the effects of shocks and policies on output and prices. Shocks and policies are country-specific or common. They occur on the demand or supply side.

Countries can differ. The lack of branch banking made U.S. banks uniquely vulnerable to shocks, while Civil-War rules linked the supply of banknotes to the extent of. “Low Inflation, Deflation, and Policies for Future Price Stability,” The Role of Monetary Policy Under Low Inflation: Deflationary Shocks and their Policy Responses, Monetary and Economic Studies (Special Edition), Bank of Japan, Februarypp.

pdf. The latter includes the recent revamping of fiscal rules of the Stability and Growth Pact, and calls for enhancing ‘flexicurity’ in EU labour markets. The lack of EU political leadership is a dead-weight loss to build a genuine economic and monetary union, and risks to blow-up the whole project.

Oil Price Shocks, Monetary Policy and Stagflation Lutz Kilian1 1. Introduction One of the central questions in recent macroeconomic history is to what extent monetary policy, as opposed to oil price shocks, contributed to the stagflation of the s.

Understanding what went wrong in the s is the key to learning from the past. Deflation forces a country's central bank to revalue its monetary unit and readjust its economic and regulatory policies to deal with deflationary Author: Nicolas Pologeorgis.

such as moral hazard, limit the effectiveness of such rules and constrain the set of implementable rules. In other words, systemic financial institutions can undermine some desirable rules and may even be able to force the central bank to abandon its rule book. Redistributive monetary policy should be strictlyFile Size: 1MB.

However, the collapse in demand, dwarfs supply shocks and monetary printing. The Fed Will Soon Need to Stem Deflation Economist Tim Duy thinks along the right lines. A deflationary monetary expansion case study: Japan The first of Noah Smith's points in his post on Abenomics is that "QE does not cause deflation" (emphasis in the original).

I will second that with regards to QE, but not go as far as to rule out deflationary monetary expansion completely. Oil Price Shocks, Monetary Policy Rules and Welfare⁄ Fiorella De Fiorey Giovanni Lombardoz Viktors Stebunovsx July 5, (Work in progress) Abstract Sudden and protracted oil-price increases are generally accompanied by economic con-tractions and high in°ation.

How should monetary policy react to oil-price shocks in order. Economic Shock: An economic shock is an event that occurs outside of an economy, and produces a significant change within an economy. portfolio facts can be explained by changes in monetary policy rules and the composition of shocks that underlie economic fluctuations.

We find that policies with a strong emphasis on price stability would imply shorter positions in foreign currency when the dominant sources of fluctuations are supply shocks. Quarterly Journal of Austrian Econom no. 1 (Spring ): – [The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression by Scott Sumner]The Midas Paradox is an impressive piece of scholarship, representing the magnum opus of economist Scott Sumner.

What makes the book so unique is Sumner’s use of real-time financial data and press accounts in. I will instead here argue that the macroeconomic causality is fully dependent about the central bank’s monetary policy rules and the credibility of and expectations to this rule.

below zero stand in the way of a potent counter-deflationary monetary policy rules is that it handles both velocity shocks and supply shocks. No other rules. Supply Shocks and the Conduct of Monetary Policy Takatoshi Ito As I see it, everybody else has considered this problem.

The supply shock is a major challenge to an inflation targeter. It has been agreed that against demand shocks, the inflation targeting is a powerful framework.

But probablyFile Size: KB. changes in monetary policy institutions and rules. The literature has not yet converged on a particular set of assumptions for iden-tifying the e®ects of an exogenous shock to monetary policy. Nevertheless, there is considerable agreement about the qualitative e®ects of a monetary policy shock in the.

In particular, their analyses suggest that changes in the way the Federal Reserve conducts monetary policy--including changes in both the parameters of monetary policy reaction functions and the volatility of shocks to those functions--may account for most of the reduction in the coefficients on resource utilization in traditional Phillips.

Inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the medium-term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability, and price stability is achieved by controlling inflation.

Supply Shocks and the Conduct of Monetary Policy. (Taylor recommends that policymakers base the stance of monetary policy on a measure of the output gap and a target rate of inflation.) about the growth rate of either actual or potential real output suggests that one should pay less attention to policy rules or strategies that rely.

Reifschneider and Williams () find that deflationary spirals, and thus solutions failures, are more easily avoided under a very similar monetary policy rule for three reasons. First, the macroeconomic model that they use, FRB/US, has more inflation persistence than does the Japan block of MULTIMOD.

Shocks • Monetary policy should try to minimize the difference between inflation and the inflation target • In the case of both demand shocks and permanent supply shocks, policy makers can simultaneously pursue price stability and stability in economic activity • Following a temporary supply shock, however, policy makers canFile Size: KB.Monetary policy shocks also have a strong influence on the transition probabilities in a highly asymmetric way.

The effect of policy shocks depends on the current state of the cycle as well as the sign and size of the shock. Accessible materials .zip) Keywords: Duration analysis, business cycles, hazard rates, monetary policy asymmetries.tem.

Hence, appropriate monetary policy can reduce the overall risk in the economy. More generally, monetary policy (rules) can be seen as a stabilizing implicit insurance scheme across agents and sectors for economies beset by financial frictions.

Essentially.