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Income
Distribution and Monetary Policy in Small Open Economies
-- Christopher
Malikane
This
paper investigates the role of income distribution in a
small monetary model for policy analysis and assesses whether
a central bank in a small open economy can improve economic
performance by paying explicit attention to changes in income
distribution. The study answers this question by reformulating
a Ball-Svensson type macromodel, extended to incorporate
both sluggish nominal wage and price adjustment and income
distribution effects on aggregate demand. Further, it is
observed that a simple price inflation targeting rule that
does not react explicitly to changes in income distribution
is incapable of achieving macrostability. The study shows
that a simple rule that targets the productivity-adjusted
nominal wage inflation rate is capable of achieving macrostability.
These findings motivate income distribution sensitive monetary
policy rules.
©
2007 The Icfai University Press. All Rights Reserved.
Structural
Changes in Australia's Monetary Aggregates and Interest
Rates -- Abbas Valadkhani and Mosayeb
Pahlavani
This
paper employs all quarterly time series currently available
to determine endogenously the time of structural breaks
for three monetary aggregates—the long- and short-term
interest rates as well as the consumer price index—in
Australia using the ZA (Zivot and Andrews, 1992) test and
the LP (Lumsdaine and Papell, 1997) test. After accounting
for the single most significant structural break,
the results from the ZA test (model C) provide no evidence
against the unit root null hypothesis for all series examined.
However, when two structural breaks are incorporated in
the testing procedure within the framework proposed by LP
(i.e., model CC) the test results indicate that the unit
root hypothesis is indeed rejected for four out of six of
the variables under investigation at the 5% level. The estimated
two structural breaks were found to be statistically significant
in five out of six variables. The dates of structural breaks
in most of the cases point to: (a) The 1973 oil shock; (b)
The culmination of financial deregulation and innovation
in the late 1980s; (c) The 1990-91 recession; and (d) The
launch of the 1996 Wallis Inquiry into financial system.
©
2007 The Icfai university Press. All Rights Reserved.
Monetary
Policy Transmission Mechanisms in the CEECs: How Important
are the Differences with the Euro Area?
-- Jérôme
Creel and Sandrine Levasseur
We
use a structural VAR model with short-term restrictions
to investigate the relative importance of interest rate,
exchange rate and credit channels in the monetary policy
transmission (MPT) for the Czech Republic, Hungary and Poland
over 1993:1-2004:3. Main results are as follows. First,
in the three countries, following a positive shock on the
interest rate, prices increase instead of decreasing, due
to the immediate depreciation of the nominal exchange rate.
The results thus exhibit an "exchange rate" puzzle
conducing to the appearance of a "price-puzzle".
Second, no channel is very powerful for the MPT in the three
countries. Nevertheless, in the recent years the exchange
rate and the interest rate channels play a major role in
Poland, compared with the same in the Czech Republic and
Hungary. As nominal exchange rate fluctuations allow for
greater real shocks dampening in Poland, the cost of entering
EMU may be more costly for this country than for the Czech
Republic or Hungary.
©
2007 The Icfai University Press. All Rights Reserved.
Measuring
Monetary Policy Efficiency in European Union Countries:
The Pre-EMU Years -- Stefan
Krause
This
paper proposes a method for measuring the contribution of
an improved monetary policy to the changes in macroeconomic
performance—identified with inflation and output stability.
The technique used involves estimating actual and optimal
policy rules as a function of the aggregate supply and demand
shocks, with the purpose of examining how much of the change
in performance can be accounted for by changes in the volatility
of the aggregate shocks and how much can be ascribed to
improvements in policy efficiency. A study of the changes
in the macroeconomic performance of 14 European Union countries
from the 1980s to the 1990s is undertaken here. The findings
suggest that an improved monetary policy has played an important
stabilization role in almost all European Union countries,
while a diminished exposure to aggregate shocks has largely
contributed towards improved performance in at least seven
countries.
©
2007 The Icfai University Press. All Rights Reserved.
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