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How the Euro Crisis Evolved and how to Avoid Another: EMU, Fiscal Policy and Credit Ratings

Polito, Vito; Wickens, Michael - In: Journal of Macroeconomics 39 (2014) PB, pp. 364-374

This paper argues that the crisis was an outcome of EMU: setting a common monetary policy for countries with different initial inflation rates. The crisis countries were those with high inflation rates which then had negative real interest rates and consequently over-borrowed. Current policy...

Persistent link: https://www.econbiz.de/10010786706

Stabilising Taylor rules when the supply shock has a unit root

Yao, Fang - In: Journal of Macroeconomics 41 (2014) C, pp. 16-20

This paper studies the implication of unit root supply shocks for the Taylor rule. I find that, when supply shocks have a unit root, if a central bank wishes to guarantee the stationarity of inflation, then their interest rate reaction function should not respond to the output gap. Once the...

Persistent link: https://www.econbiz.de/10011065294

Coexistence and welfare cost of inflation

Lee, Manjong - In: Journal of Macroeconomics 36 (2013) C, pp. 23-32

The welfare cost of inflation is studied with a model in which non-interest-bearing money coexists with an interest-bearing liquid asset. Compared to a money-only model, the presence of an interest-bearing liquid asset reduces the consumption distortion of inflation. However, it also induces the...

Persistent link: https://www.econbiz.de/10010875198

On model ambiguity and money neutrality

Lioui, Abraham; Poncet, Patrice - In: Journal of Macroeconomics 34 (2012) 4, pp. 1020-1033

We solve for the equilibrium of a stochastic neo-classical continuous time model without and with money under model ambiguity. We show that: (i) the correction for ambiguity stemming from the money supply is nil at equilibrium; (ii) money is neutral with respect to the stock market equilibrium...

Persistent link: https://www.econbiz.de/10010595235

What can we tell about monetary policy synchronization and interdependence over the 2007–2009 global financial crisis?

Arouri, Mohamed; Jawadi, Fredj; Nguyen, Duc Khuong - In: Journal of Macroeconomics 36 (2013) C, pp. 175-187

We investigate the synchronization and nonlinear adjustment dynamics of short-term interest rates for France, the UK and the US using the bi-directional feedback measures proposed by Geweke (1982) and appropriate smooth transition error-correction models (STECM). We find evidence to support the...

Persistent link: https://www.econbiz.de/10010875204

Monetary information and monetary policy decisions: Evidence from the euroarea and the UK

Chevapatrakul, Thanaset; Kim, Tae-Hwan; Mizen, Paul - In: Journal of Macroeconomics 34 (2012) 2, pp. 326-341

This paper uses a modified New Keynesian framework to consider the use of monetary information in making monetary policy decisions. We add monetary indicators derived from theoretical models to conventional economic variables in an instrument rule and estimate the equations using euroarea and UK...

Persistent link: https://www.econbiz.de/10010574744

Monetary policy: Why money matters (and interest rates don’t)

Thornton, Daniel L. - In: Journal of Macroeconomics 40 (2014) C, pp. 202-213

Since the late 1980s the Fed has implemented monetary policy by adjusting its target for the overnight federal funds rate. Money’s role in monetary policy has been tertiary, at best. Indeed, several influential economists suggest that money is irrelevant for monetary policy because central...

Persistent link: https://www.econbiz.de/10010875185

Has the Fed been a failure?

Selgin, George; Lastrapes, William D.; White, Lawrence H. - In: Journal of Macroeconomics 34 (2012) 3, pp. 569-596

As the 100th anniversary of the 1913 Federal Reserve Act approaches, we assess whether the nation’s experiment with the Federal Reserve has been a success or a failure. Drawing on a wide range of recent empirical research, we find the following: (1) The Fed’s full history (1914 to present)...

Persistent link: https://www.econbiz.de/10010595237

How much Fiscal Discipline in a Monetary Union?

De Grauwe, Paul; Ji, Yuemei - In: Journal of Macroeconomics 39 (2014) PB, pp. 348-360

The nature of fiscal policies was changed dramatically by the creation of the Eurozone. While prior to the start of the … Eurozone, national governments were sovereign in that they could back up the issue of debt by the issue of money, they lost … this sovereignty in the Eurozone. This had dramatic effects that were largely overlooked by the designers of the Eurozone …

Persistent link: https://www.econbiz.de/10010786712

The changing macroeconomic response to stock market volatility shocks

Beetsma, Roel; Giuliodori, Massimo - In: Journal of Macroeconomics 34 (2012) 2, pp. 281-293

There is substantial consensus in the literature that positive uncertainty shocks predict a slowdown of economic activity. However, using US data since 1950 we show that the macroeconomic response pattern to stock market volatility shocks has changed substantially over time. The negative...

Persistent link: https://www.econbiz.de/10010574753

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