A striking feature of financial market behaviour in recent years has been the low level of price volatility over a wide range of financial assets and markets. The issue has attracted the attention of central bankers and financial regulators due to the potential implications for financial...

Recent debates on monetary condition and inflation pressures on the Mainland call for an analysis on the inflation dynamics and their main determinants. A natural starting point for the econometric analysis of monetary and inflation developments is the notion of monetary equilibrium. This paper...

Many central banks have abandoned monetary targeting because the link between money growth and inflation seemed to disappear in the 1980s. Using spectral regression techniques, we show that for the euro area, Japan, the UK, and the US there is a unit relationship between money growth and...

This paper studies the relationship between residential property prices and lending in Hong Kong. This is an interesting topic for three reasons. First, swings in property prices have been extremely large and frequent in Hong Kong. Second, under the currency board regime, monetary policy can not...

The deterioration of the U.S. merchandise trade deficit in the 1980s fell mostly on durable goods. Using a representative-agent model, the authors show that the key distinction between the trade balance in nondurables and durables is the role of intertemporal prices in the latter. A decrease in...

This paper studies the term structure of short-term interbank rates in Hong Kong. Principal components analysis suggests that the variation of the term structure can be largely attributed to two components which capture shifts in the level and slope of the yield curve. We find that term spreads...

Following Estrella and Hardouvelis (1991) and Estrella and Mishkin (1995a, b), we study the ability of the term structure to predict recessions in eight countries. The results are four-fold. First, the yield curve predicts future recessions in all countries. Second, term spreads forecast...

This paper studies the responses of residential property and equity prices, inflation and economic activity to monetary policy shocks in 17 countries, using data spanning 1986-2006. We estimate VARs for individual economies and panel VARs in which we distinguish between groups of countries on...

The Kydland-Prescott, Barro-Gordon inflation bias result relies on the presumption that policymakers aim at achieving a level of employment above potential. Both academics and policymakers have recently questioned this presumption on the ground of realism. We show that even if policymakers are...