1,720,984 research outputs found
Can central banks be heard over the sound of gunfire?
No full textIn this study, we examined the effectiveness of central bank communications during times of significant adverse shocks. Specifically, we examined how the National Bank of Ukraine (NBU) regulated foreign exchange (FX) markets during the Russo‐Ukrainian War in 2022. Data collected from both the black and authorized FX markets suggested that the content of the NBU\u27s announcements significantly impacted FX market agents. Announcements aimed at maintaining a fixed (floating) FX rate prompted an increase (decrease) in the black market premium in cash transactions. Moreover, the NBU\u27s announcements influenced the sale side of foreign currency more than any other aspect, an area where the black market FX traders held near monopolistic power
The flood that caused a drought
No full textTo determine how an exogenous supply shock affects product availability, prices, and price‐setting behavior, we analyzed a unique dataset representing a natural experiment concerning the 2011 flood in Thailand, which affected the production facilities of Western Digital, the world\u27s largest producer of hard drives. The natural disaster impacted the overseas inventory of hard drives in the United States, where availability declined by more than 40% and price indexes increased by as much as 38%. However, our findings suggest that such supply shocks, when transmitted to either substitute or complementary products, are likely to be absorbed within production networks
Monetary Policy Evaluation in Real Time: Forward-Looking Taylor Rules Without Forward-Looking Data
Full text linkThere is widespread agreement that monetary policy should be evaluated by using forward-looking Taylor rules estimated with real-time data. For the case of the U.S., this analysis can be performed using Greenbook data, but only through 2002. In countries outside the U.S., central banks do not regularly release their forecasts to the public. I propose a methodology for conducting monetary policy evaluation in real-time when forward-looking real-time data is unavailable. I then implement this methodology and estimate the resultant Taylor rules for the U.S., Canada, the U.K., and Germany. The methodology consists of calibrating models to closely replicate Greenbook forecasts, and then applying them to international real-time datasets. The results show that the U.S. output gap series is well described by quadratic detrending, while Greenbook inflation forecasts can be closely replicated using Bayesian model averaging over Autoregressive Distributed Lag models in inflation and the GDP growth rate. German and U.S. Taylor rules are characterized by inflation coefficients increasing with the forecast horizon and a positive output gap response. The U.K. and Canada interest rate reaction functions achieve maximum inflation response at middle-term horizons of about 1/2 year and the output gap coefficient enters the reaction functions insignificantly. Estimating the U.K. and Canadian Taylor rules as forward-looking is crucial, as backward-looking specifications produce nonsensical estimates. This is not the case for the U.S. and Germany.real-time data, Taylor rule, monetary rules, inflation forecasts, output gap
Monetary Policy Evaluation in Real Time: Forward-Looking Taylor Rules Without Forward-Looking Data
Full text linkThere is widespread agreement that monetary policy should be evaluated by using forward-looking Taylor rules estimated with real-time data. For the case of the U.S., this analysis can be performed using Greenbook data, but only through 2002. In countries outside the U.S., central banks do not regularly release their forecasts to the public. I propose a methodology for conducting monetary policy evaluation in real-time when forward-looking real-time data is unavailable. I then implement this methodology and estimate the resultant Taylor rules for the U.S., Canada, the U.K., and Germany. The methodology consists of calibrating models to closely replicate Greenbook forecasts, and then applying them to international real-time datasets. The results show that the U.S. output gap series is well described by quadratic detrending, while Greenbook inflation forecasts can be closely replicated using Bayesian model averaging over Autoregressive Distributed Lag models in inflation and the GDP growth rate. German and U.S. Taylor rules are characterized by inflation coefficients increasing with the forecast horizon and a positive output gap response. The U.K. and Canada interest rate reaction functions achieve maximum inflation response at middle-term horizons of about 1/2 year and the output gap coefficient enters the reaction functions insignificantly. Estimating the U.K. and Canadian Taylor rules as forward-looking is crucial, as backward-looking specifications produce nonsensical estimates. This is not the case for the U.S. and Germany
Foreign Capital, Spillovers and Export Performance in Emerging Economies
No full textThe role of foreign capital inflow, foreign direct investment ( FDI ) and foreign portfolio investment ( FPI ), on export behavior of both recipients and non‐recipient competing firms in the same sector often guides economic development policy. By using panel data of I ndian IT firms over 2000–2006, we show that FDI reduces the sunk costs of entering foreign markets and therefore positively effects both the decision to export and the export propensity of recipient firms. Foreign portfolio investment has no effect on the decision to export, but it does marginally increase the volume of exports. Further, these positive FDI and FPI recipient effects do not spill‐over to non‐recipients
Monetary Policy Shifts and the Forward Discount Puzzle
Full text linkThis paper argues that considerable switches in monetary policy are able to explain a major part of the forward discount puzzle. We build a theoretical model suggesting that violations of the uncovered interest rate parity are owed to shifts in monetary policy from a destabilizing (when the Taylor principle is violated) to a stabilizing regime (when a central bank follows a Taylor-type rule). Following the switch is an \adjustment period" during which forecasters gradually update their expectations, eventually restoring the parity. It is in this adjustment period, when the forward discount puzzle arises. In the second part of the paper we test the model on the Canadian dollar, German mark, and British pound, all against the US dollar. Results indicate that the forward discount puzzle loses signi cance after allowing for an adjustment period of about 1 { 2 years. Our results are robust to various di erent speci cations, such as the use of di erent maturities or base currencies. Further, it seems unlikely that our results coincide with contemporaneous events
Inflation Persistence and the Taylor Principle
Full text linkAlthough the persistence of inflation is a central concern of macroeconomics, there is no consensus regarding whether or not inflation is stationary or has a unit root. We show that, in the context of a “textbook” macroeconomic model, inflation is stationary if and only if the Taylor rule obeys the Taylor principle, so that the real interest rate is increased when inflation rises above the target inflation rate. We estimate Markov switching models for both inflation and real-time forward looking Taylor rules. Inflation appears to have a unit root for most of the 1967 – 1981 period, and is stationary before 1967 and after 1981. We find that the Fed’s response to inflation is also regime dependent, with both the pre and post-Volcker samples containing monetary regimes where the Fed both did and did not follow the Taylor principle. This contrasts to recent research that suggests the Fed’s response to inflation has been time invariant, and that changes in monetary policy only occurred with respect to the output gap
Taylor Rules and the Euro.
Full text linkThis paper uses real-time data to analyze whether the variables that normally enter central banks’ interest-rate-setting rules, which we call Taylor rule fundamentals, can provide evidence of out-of-sample predictability for the United States Dollar/Euro exchange rate from the inception of the Euro in 1999 to the end of 2007. The major result of the paper is that the null hypothesis of no predictability can be rejected against an alternative hypothesis of predictability with Taylor rule fundamentals for a wide variety of specifications that include inflation and a measure of real economic activity in the forecasting regression. We also present less formal evidence that, with real-time data, the Taylor rule provides a better description of ECB than of Fed policy during this period. While the evidence of predictability is only found for specifications that do not include the real exchange rate in the forecasting regression, the results are robust to whether or not the coefficients on inflation and the real economic activity measure are constrained to be the same for the U.S. and the Euro Area and to whether or not there is interest rate smoothing. The evidence of predictability is stronger for real-time than for revised data, about the same with inflation forecasts as with inflation rates, and weakens if output gap growth is included in the forecasting regression. Bad news about inflation and good news about real economic activity both lead to out-of-sample predictability through forecasted exchange rate appreciation.Taylor rule, euro, exchange rate, forecasting, ECB, euro area
The changing nature of the U.S. economic influence in the World
No full textWe argue that the U.S.-led global recession revealed a change in the nature of the U.S. economic influence over the world, evidenced by the unusual delay between the U.S. downturn and its full manifestation in other economies. To validate our argument we conduct a real-time analysis of the evolution of the U.S. business cycles' influence over other countries' business cycles from 1960 to 2007. Our findings suggest that since the early 1980s, cyclical movements in the U.S. economy affect other economies with a lag, rather than contemporaneously. There seems to be an increasing delay between a U.S. downturn and its full manifestation in other economies, suggesting that the U.S. economic influence is still strong but more delayed than before.Business cycle Business fluctuations Decoupling International business cycles
The Health and Labor Market Effects of Spouse Choice, Maternity Leave and Parental Work
No full textThis dissertation explores the health and labor market effects of spousal and parental choices. First chapter of this dissertation studies international marriages in Europe. The effect of international marriage - a union between a country native and an immigrant - on social and family outcomes is endogenous due to the selection into marriage markets and non-random spousal choice. In this paper I use European Union membership and availability of cheap travel as region-specific instrumental variables that increased the probability of intermarriage in Europe. The two-stage least squares analysis applied to 1977-2006 IPUMS International Project Census micro data shows no significant difference in the family size or number of children between intermarried and same-nativity couples. However, it does reveal higher labor force participation rates and much lower marriage rates among mixed nationality couples. In the second chapter, I use Russia\u27s 1981-82 maternity benefit expansion to estimate the long-run effects of maternity leave on health and other outcomes of children. The program was rolled out in stages and has extended both partially paid and unpaid leave for the vast majority of women. To estimate the effects of the program I apply a difference-in-differences framework to the recent 2000-2014 Russian Longitudinal Monitoring Survey data that contain information on both affected and unaffected cohorts, while also taking advantage of the fact that not all regions implemented the program simultaneously. While the results suggest there is no difference in the overall health of individuals that are born before and after the benefit roll-out, there is strong evidence that those born after the reform are less likely to have chronic gastrointestinal diseases, which could be attributed to better nutrition and breastfeeding duration in the first year of life.Third chapter proposes a new way to estimate the effect of maternal labor supply on the achievement of children. I use a country-specific measure of gender inequality as an instrumental variable for the female immigrant\u27s decision to work. For the married women in the New Immigrant Survey, higher values of the Gender Inequality Index were positively correlated with the propensity to work for pay and work longer hours, suggesting their self-selection into the US immigration. ¬¬Two-stage estimates further show that children of working mothers have reading and math scores that are over one standard deviation above average. An additional 10 hours a week of maternal work is estimated to increase reading scores by 37% relative to mean and quantitative reasoning scores by 24% relative to the mean. I also find that working mothers visit their children\u27s classes and attend school meetings more frequently than others; hence, the observed improvement in test scores could be due to a higher involvement of parents in their child\u27s school curriculum
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