Browsing by series

Sort by: Order: Results:

Now showing items 1-6 of 6
  • Kilponen, Juha; Pisani, Massimiliano; Schmidt, Sebastian; Corbo, Vesna; Hledik, Tibor; Hollmayr, Josef; Hurtado, Samuel; Júlio, Paulo; Kulikov, Dmitry; Lemoine, Matthieu; Lozej, Matija; Lundvall, Henrik; Maria, José R.; Micallef, Brian; Papageorgiou, Dimitris; Rysanek, Jakub; Sideris, Dimitrios; Thomas, Carlos; de Walque, Gregory (2019)
    International Journal of Central Banking September 2019
    Also available as European Central Bank Working Paper No 1760 2015.
    This paper employs fifteen dynamic macroeconomic models maintained within the European System of Central Banks to assess the macroeconomic effects of a temporary fiscal tightening when the zero lower bound (ZLB) on monetary policy holds for two years. The main results are as follows. First, the ZLB does not greatly affect short-run multipliers in the case of a temporary fiscal tightening implemented in isolation by a generic euro-area (EA) country. Second, the ZLB unfolds quite sizable effects on the size of multipliers if the same fiscal tightening measure is simultaneously implemented in the whole EA. Third, public consumption multipliers are typically larger in absolute value than short-run tax (on labor income, capital income, and consumption) multipliers. Fourth, recessionary effects of the initial fiscal tightening are lower if distortionary taxes are reduced in the medium and long run.
  • Tölö, Eero; Laakkonen, Helinä; Kalatie, Simo (2018)
    International Journal of Central Banking 2 ; March 2018
    Available also as Bank of Finland Research Discussion Papers 8/2015
    The European Systemic Risk Board (ESRB) recently issued a recommendation on the use of early warning indicators in macroprudential decisions involving the countercyclical capital buffer (Basel III framework). In addition to a primary indicator, deviation in the credit-to-GDP ratio from long-term trend, the ESRB advises the use of supplemental indicators to measure private-sector credit developments and debt burden, overvaluation of property prices, external imbalances, mispricing of risk, and strength of bank balance sheets. Based on empirical analysis of data for European Union countries, a large assortment of potential indicators, and comprehensive robustness checks, we propose specific suitable early warning indicators for each of the six risk categories set forth by the ESRB.
  • Granziera, Eleonora; Bauer, Gregory H. (2017)
    International Journal of Central Banking 3 ; September
    Can monetary policy be used to promote financial stability? We answer this question by estimating the impact of a monetary policy shock on private-sector leverage and the likelihood of a financial crisis. Impulse responses obtained from a panel VAR model of eighteen advanced countries suggest that the debt-to-GDP ratio rises in the short run following an unexpected tightening in monetary policy. As a consequence, the likelihood of a financial crisis increases, as estimated from a panel logit regression. However, in the long run, output recovers and higher borrowing costs discourage new lending, leading to a deleveraging of the private sector. A lower debt-to-GDP ratio in turn reduces the likelihood of a financial crisis. These results suggest that monetary policy can achieve a less risky financial system in the long run but could fuel financial instability in the short run. We also find that the ultimate effects of a monetary policy tightening on the probability of a financial crisis depend on the leverage of the private sector: the higher the initial value of the debt-to-GDP ratio, the more beneficial the monetary policy intervention in the long run, but the more destabilizing in the short run.
  • Juselius,Mikael; Borio, Claudio; Disyatat, Piti; Drehmann, Mathias (2017)
    International Journal of Central Banking 4 ; September
    Published also in Bank of Finland Research Discussion Papers 24/2016.
    Do the prevailing unusually and persistently low real interest rates reflect a decline in the natural rate of interest as commonly thought? We argue that this is only part of the story. The critical role of financial factors in influencing mediumterm economic fluctuations must also be taken into account. Doing so for the United States yields estimates of the natural rate that are higher and, at least since 2000, decline by less. An illustrative counterfactual experiment suggests that a monetary policy rule that takes financial developments systematically into account during both good and bad times could help dampen the financial cycle, leading to significant output gains and little change in inflation.
  • Arias, Jonas E.; Ascari, Guido; Branzoli, Nicola; Castelnuovo, Efrem (2020)
    International Journal of Central Banking 3 ; June
    This paper studies the challenge that increasing the inflation target poses to equilibrium determinacy in a mediumsized New Keynesian model without indexation fitted to the Great Moderation era. For moderate targets of the inflation rate, such as 2 or 4 percent, the probability of determinacy is near one conditional on the monetary policy rule of the estimated model. However, this probability drops significantly conditional on model-free estimates of the monetary policy rule based on real-time data. The difference is driven by the larger response of the federal funds rate to the output gap associated with the latter estimates.
  • Haavio, Markus; Jalasjoki, Pirkka; Kilponen, Juha; Paloviita, Maritta (2021)
    International Journal of Central Banking 2 (June)
    Published also in BoF DP 29/2017
    Using unique real-time quarterly macroeconomic projections of the Eurosystem/ECB staff, we estimate competing specifications of the ECB's monetary policy reaction function. We consider specifications which include inflation and output growth projections, a past inflation gap, a time-varying natural real interest rate, and different inflation targets. Our first key finding is that the de facto inflation target of the ECB lies between 1.6 percent and 1.8 percent. Our second key finding is that the ECB reacts both to short-term macroeconomic projections and to past deviations of inflation from its de facto target.