Monetary Policy

How did a health crisis translate to an economic crisis? Why did the spread of the coronavirus bring the global economy to its knees? The answer lies in two methods by which coronavirus stifled economic activities. First, the spread of the virus encouraged social distancing which led to the shutdown of financial markets, corporate offices, businesses and events. Second, the exponential rate at which the virus was spreading, and the heightened uncertainty about how bad the situation could get, led to flight to safety in consumption and investment among consumers, investors and international trade partners. We focus on the period from the start of 2020 through March when the coronavirus began spreading into other countries and markets. We draw on real-world observations in assessing the restrictive measures, monetary policy measures, fiscal policy measures and the public health measures that were adopted during the period. We empirically examine the impact of social distancing policies on economic activities and stock market indices. The findings reveal that the increasing number of lockdown days, monetary policy decisions and international travel restrictions severely affected the level of economic activities and the closing, opening, lowest and highest stock price of major stock market indices. In contrast, the imposed restriction on internal movement and higher fiscal policy spending had a positive impact on the level of economic activities, although the increasing number of confirmed coronavirus cases did not have a significant effect on the level of economic activities.

The objective of this paper is to explore the feasibility and the efficiency of a strategy of inflation targeting in Tunisia. We check whether the necessary conditions for a successful implementation of inflation targeting are fulfilled or not and we outline the pre-requisites for adopting this strategy in Tunisia. By developing a structural VAR model, we try to evaluate the transmission channels of monetary policy and to identify the conditions for successful adoption of the regime of inflation targeting.

Central banks’ liquidity management plays a crucial role in the implementation of monetary policy. In most countries central banks influence short term interest rates through determining the equilibrium conditions of supply and demand in the market for bank reserves (liquidity). This article describes the liquidity management practice of the National Bank of Hungary in the period of 1998-2001. This period is characterized by two particular circumstances. First, there is a substantial liquidity surplus, therefore the Bank influences market interest rates using the liabilities side instruments of its balance sheet. Second, as a result of the narrow-band exchange rate regime and the fact that the Treasury Account is held with the Bank, the amount of liquidity is highly volatile and hard to forecast. The article explains how the Bank forecasts liquidity and the movements of overnight interest rate in these circumstances, and it describes the development of monetary policy instruments ap...

Central Banks have been at the heart of the recent Global Financial Crisis and in the face of unprecedented challenges: to ensure monetary stability in a period of deep financial turmoil. Which seems to require rethinking the theoretical precepts and practice of international monetary this study is to survey the evolution of the central bank in terms of functions performed throughout its history in the context of the dominant paradigm of each stage of evolution of society. The empirical research work carried out year impact of monetary policy on the evolution of inflation targeting price stability over the last fifty years. The Great Inflation to the current global crisis. Paradigm dedicated to monetary policy focused on price stability as an independent and objective, seems to resist the crisis. Although there is agreement on maintaining price stability as a priority objective of the central bank, most researchers and practitioners believe that financial stability is as important f...

Natural disasters such as earthquakes, floods, massive fires etc. inflict serious damage and so seem to be bad for the economy.

Depending on the experience in different countries, the negative impact on economic indicators mostly occurs in the short run, while in the long run these effects are transient and negligible for the economy and the state budget.

Most noticeable is the direct impact of the natural disasters that we saw with the aftermath of the 21 September 2019 and 26 November 2019 earthquake in Albania. This effect was seen in the damage to infrastructure, the capital of businesses and individuals, and the potential future threat to the exploitation of natural resources.

This paper evaluates whether Nigeria is ready to adopt inflation targeting (IT), a monetary policy framework that several emerging markets have adopted over the last one decade. The paper reviews literature on selected conditions for successful implementation of IT and then ...

Mediterranean countries have noticeable affect on the world wine exportation. Among these countries France, Greece and Turkey are selected for this study because of different wine market, trade systems and wine policies they have. In this study, cointegration analysis was conducted for real wine export prices and real exchange rates for France, Greece and Turkey. The long term relationships between real exchange rates and real wine export values were explored by using cointegration analysis. Annual data from 1970 to 2003 was used for this analysis and the data sets were found to be integrated of the same order. It was also found that they move together in the long run by Johansen Cointegration Test. Then, Error Correction Model (ECM) was applied to search any short term relations and impacts of exchange rate variations on wine exports. French and Greek monetary policies affect their wine export volume by the years. Therefore, any depreciation of local currency in dollar terms will l...

Banking systems have rapidly grown to a point where for many countries bank assets amount to multiples of GDP. As a consequence, government’s capacity to provide stability-enhancing fiscal guarantees against systemic crises can no longer be taken for granted. As regulation of dynamic financial markets will inevitably be imperfect, prudent governments need to adjust other facets of macroeconomic policy in order to mitigate financial instability. A precautionary approach to fiscal policy, leading to moderate levels of public debt relative to GDP over the medium term, is essential for the credibility of government promises to support the financial system, as well as the broader economy.

In this paper we develop a two-country dynamic general equilibrium model by means of which we seek to explain the long-run paths of a converging emerging market economy. The model’s novel feature is the inclusion of quality investment to the standard framework of applied general equilibrium two-country models. This extension proves crucial ingredient for explanation of the trend in real exchange rate. Using a case study calibration of productivity and deep parameters for the Czech economy we demonstrate the ability of the model to consistently explain dynamics in key macroeconomic variables that are essential inputs for commonly used ‘gap models’ in monetary policy practice.

Due to their ties with elected leaders, central bankers may pursue policies that are not in society's best interests. Consequently, the relationship between the public and the central bank can be characterized as a principal-agent problem. An inflation and stabilization bias arise as a result of this agency problem and the magnitudes of these biases depend on the political environment.

Many studies have considered the efficacy of the Central Bank of Nigeria (CBN)'s monetary policy to ensure Deposit Money Banks (DMBs) performance in Nigeria but scantily mentioned in literature are assertions on other roles that the Asset Management Corporation of Nigeria (AMCON)-an agency aligned to the CBN, could perform to further strengthen the efficacy of the CBN's monetary policy (and/or macro/microprudential guidelines) in financial sector management, even so during this COVID-19 pandemic and afterward, and besides AMCON's statutory role of debt recovery. Also, the need for initiatives that could inform efforts to strengthen the efficacy of CBN's policy instruments, despite post-2010 debt-recovery activities by AMCON, remains. Thus, this review article examines the activities of AMCON and their implications on CBN's policy instruments design/formulation and implementation in Nigeria. Our findings thereof include AMCON contributes to DMBs' surveillance which could inform CBN's policy instruments design/formulation, and that the basis of the association between CBN and AMCON is prominent in respect to policy instruments' implementation and compliance. Therefore, this study recommends CBN to leverage on AMCON's recurrent interface with DMBs to further strengthen the operational effectiveness of so established policy instruments. Asset Management Companies (AMCs) are reputed to be trusted agencies in a bid for the management of systemic crisis that emerges in world economies, with examples in Asia-recall the Asian Financial Crisis 1 , Europe-in countries such as Ireland, Spain, and Africa-which as of 2009, the second-largest (and now largest) economy Nigeria was hit hard by the global financial crisis that originated from the United States of America. But then, irrespective of their capabilities i.e., AMCs to address potential stress factors in Deposit Money Banks (DMBs) which outplay as precursors to such events, Central Banks-saddled purposefully with the mandate to ensure financial sector sanity through monetary policy design (and/or macro/microprudential guidelines formulation) and implementation-in respective countries and increasingly common these days to work with certain financial system supervisory units/arms/agencies aligned to them (inclusive of AMCs) continually demand of DMBs to practice prudent management of loan books and compliance to ethical corporate

This paper is an attempt to conduct an analysis of the origins and the primary outcomes of ‘Quantitative Easing’ that European Central Bank has been implementing since March 2015.
The aim of the paper is to show the effectiveness of Quantitative Easing and the responsiveness of the Eurozone to obtain the expected results. Although the general idea is that QE effectively sustained economic recovery from the 2012 Global Financial Crisis, some critiques have been enhanced by academics: all these important evaluations would be taken into account in the completion of this work.
The analysis will be conducted through the usage of updated statistics regarding the main macroeconomic indicators which might assess either the results either the prospects or the consequences which Eurozone would face after QE’s ending in the short-run.

To cite: Gundes, S., Atakul, N. (2021) Relationships between construction output, interest rates and construction loans. 3. International Izmir Economics Congress, 12-13 March. /

Countries use a variety of policy tools to stimulate sectors, increase their output and thus revive economic growth. One of the most important of these is to benefit from monetary policy instruments for influencing economic activity through direct interventions on interest rates and the money supply. According to this view, changes in money supply trigger a chain of reactions, starting from interest rates to investments and finally leading to a change in output. When contractionary or expansionary policies are adopted in this manner, sectoral output patterns in an economy change. Thus, relationships between output, interest rates and credit demand have long been the center of debates in economic literature. While the mechanisms empirically examining the causal links between these variables have been tested by a large number of economic studies covering various periods and countries, industrial responses to monetary policy options are still being explored. This paper presents the initial findings of a broader research on the relationships between interest rates, bank loans to the construction sector and construction output which are all affected by the adoption of different monetary transmission mechanisms. The paper concludes by insights into the prudence required for the interpretation of results and how the next phase of the research attempts to tackle these issues.

Continuous growth in Islamic finance calls for an in-depth study of the framework in which the monetary policy maker (i.e., the central bank) performs its functions. Central banks in Muslim countries are using various instruments for monetary policy purpose including interest rate. As a result, Islamic Financial Institutions (IFIs) are facing issues in benchmarking the price of financial instruments. Acceptable solution to benchmarking lies in the presence of a real economic activity in the base of any proposal and its feasibility for business performance when put against conventional banking. This paper presents empirical evidence of statistical equivalence of nominal GDP growth rate and official interest rate for ‘advanced,’ ‘all,’ and some Muslim countries. We propose nominal GDP growth rate as benchmark for pricing domestic financial transactions of IFIs as well as for pricing external bilateral/multilateral loans. The paper also suggests nominal income targeting as monetary policy regime and provides a liquidity management mechanism for banking system in Islamic financial environment.

This working paper gathers three projects of articles which have as a same subject inflation expectations and their use within the framework of monetary policy. It appeared convenient to synthesize them in the form of three parts of only one document, thus making it possible to the reader to have a vision as complete as possible on this question. The first part is of a theoretical nature and presents the literature. The second points out this literature, specifies the characteristics of a monetary policy founded on a direct target of inflation, and proposes an econometric analyse in the French case. The third extends this methodology to the case of the euro zone and shows the difficulties of it.

Several studies have established the predictive power of the yield curve in terms of real economic activity. In this paper we use data for a variety of E.U. countries: both EMU (Germany, France, Italy, Portugal and Spain) and non-EMU members (Norway, Sweden and the U.K.). The data used range from 1991:Q1 to 2009:Q3. For each country, we extract the long