Found 392 article(s) in category 'Monetary Policy'

Europe and the Euro

Europe and the Euro. Alberto Alesina, April 1, 2010, Book. “It is rare for countries to give up their currencies and thus their ability to influence such critical aspects of their economies as interest and exchange rates. Yet ten years ago a number of European countries did exactly that when they adopted the euro. Despite some dissent, there were a number of arguments in favor of this policy change: it would facilitate exchange of goods, money, and people by decreasing costs; it would increase trade; and it would enhance efficiency and competitiveness at the international level…” Link

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The Politics of Monetary Policy

The Politics of Monetary Policy. Alberto Alesina, April 2010, Paper.“In this paper we critically review the literature on the political economy of monetary policy, with an eye on the questions raised by the recent financial crisis. We begin with a discussion of rules versus discretion. We then examine the issue of Central Banks independence both in normal times, in times of crisis. Then we review the literature of electoral manipulation of policies. Finally we address international institutional issues concerning the feasibility, optimality and political sustainability of currency unions…” Link

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Redemption or Abstinence? Original Sin, Currency Mismatches and Counter-Cyclical Policies in the New Millenium

Redemption or Abstinence? Original Sin, Currency Mismatches and Counter-Cyclical Policies in the New Millenium. Ricardo Hausmann, February 2010, Paper. “This paper updates our previous work on the level and evolution of original sin. It shows that while the number of countries that issue local-currency debt in international markets has increased in the past decade, this improvement has been quite modest. Although we find that countries have been borrowing at home, thanks to deepening domestic markets, we document that foreign participation in these markets is more limited than what is usually assumed…” Link

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Currency Choice and Exchange Rate Pass-through

Currency Choice and Exchange Rate Pass-through. Gopinath, Gita, Oleg Itskhoki, and Roberto Rigobon, 2010, Paper. “We show, using novel data on currency and prices for US imports, that even conditional on a price change, there is a large difference in the exchange rate pass-through of the average good priced in dollars (25 percent) versus nondollars (95 percent). We document this to be the case across countries and within disaggregated sectors. This finding contradicts the assumption in an important class of models that the currency of pricing is exogenous. We present a model of endogenous currency choice in a dynamic price…” Link

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Mitigating the Potential Inequity of Reducing Corporate Rates

Mitigating the Potential Inequity of Reducing Corporate Rates. Daniel Halperin, July 29, 2009, Paper. “Since the statutory marginal U.S. income tax rate on corporate income is higher than the marginal rate imposed by all of our trading partners except Japan, there have been a number of proposals to reduce the U.S. marginal corporate rate. At the same time, it seems likely that the top individual rate will be increased. However, a differential between marginal corporate and individual rates could reduce the overall rate of tax on corporate distributions and enable higher-income taxpayers to shelter their income from services or...” Link

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Economic Catastrophe Bonds

Economic Catastrophe Bonds. Joshua D. Coval, Erik Stafford,  June 2009, Paper. “The central insight of asset pricing is that a security’s value depends on both its distribution of payoffs across economic states and state prices. In fixed income markets, many investors focus exclusively on estimates of expected payoffs, such as credit ratings, without considering the state of the economy in which default is likely to occur. Such investors are likely to be attracted to securities whose payoffs resemble those of economic catastrophe bonds – bonds that default only under severe economic conditions…” Link

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Understanding Inflation-Indexed Bond Markets

Understanding Inflation-Indexed Bond Markets. John Campbell, Luis Viceira, May 3, 2009, Paper. “This paper explores the history of inflation-indexed bond markets in the US and the UK. It documents a massive decline in long-term real interest rates from the 1990’s until 2008, followed by a sudden spike in these rates during the financial crisis of 2008. Breakeven inflation rates, calculated from inflation-indexed and nominal government bond yields, stabilized until the fall of 2008, when they showed dramatic declines. The paper asks to what extent short-term real interest rates, bond risks, and liquidity explain the trends before 2008...” Link

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Global Currency Hedging

Global Currency Hedging. John Campbell, January 28, 2009, Paper. “Over the period 1975 to 2005, the US dollar (particularly in relation to the Canadian dollar) and the euro and Swiss franc (particularly in the second half of the period) have moved against world equity markets. Thus these currencies should be attractive to risk-minimizing global equity investors despite their low average returns. The risk-minimizing currency strategy for a global bond investor is close to a full currency hedge, with a modest long position in the US dollar. There is little evidence that risk-minimizing investors should adjust their currency...” Link

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Exchange Rate Volatility and Productivity Growth: The Role of Financial Development

Exchange Rate Volatility and Productivity Growth: The Role of Financial Development. Philippe Aghion, Kenneth Rogoff, 2009, Paper. “This paper offers empirical evidence that real exchange rate volatility can have a significant impact on long-term rate of productivity growth, but the effect depends critically on a country’s level of financial development. For countries with relatively low levels of financial development, exchange rate volatility generally reduces growth, whereas for financially advanced countries, there is no significant effect. Our empirical analysis is based on an 83 country data set spanning the years 1960-2000…”  Link

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Comment: Policymaking Insights from Behavioral Economics

Comment: Policymaking Insights from Behavioral Economics. David Laibson, 2009, Opinion. “Annamaria Lusardi’s paper is a wonderful summary of what is known about financial literacy and financial decisionmaking. I strongly recommend that anyone who is thinking about household savings behavior or savings policy read her paper. It emphasizes the recent findings that Lusardi and her coauthors have generated: financial illiteracy is an important contributor to suboptimal investment choicesMy comments cover four topics. First, I discuss the classical economic argument that economic choices might be sophisticated…” Link

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