The Effects of Monetary Policy on Asset Price Bubbles: Some Evidence
|
|
- Gervais Barnett
- 6 years ago
- Views:
Transcription
1 The Effects of Monetary Policy on Asset Price Bubbles: Some Evidence Jordi Galí Luca Gambetti September 2013 Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
2 Monetary Policy and Asset Price Bubbles Should monetary policy respond to asset price bubbles? Pre-crisis consensus: - focus on inflation and output gap - ignore asset price developments, unless threat to objectives - the case against a monetary response to bubbles: (i) diffi cult detection (ii) interest rate: "too blunt" an instrument Challenges to the pre-crisis consensus: - macro stability financial stability - bubble-driven asset price booms risk of financial crisis calls for a "leaning against the wind" policy: raise interest rates in response to developing asset price bubbles Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
3 Monetary Policy and Asset Price Bubbles Key maintained assumption: interest rate bubble...but no theoretical or empirical support Galí (2013): What does economic theory have to say regarding......the effects of monetary policy on (rational) asset price bubbles?...the desirability of leaning against the wind policies? Present paper: What is the evidence on the effects of monetary policy on asset price bubbles? Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
4 Interest Rates and Rational Bubbles: Theoretical Issues Key assumption in the case for leaning against the wind policies: Based on "fundamentals" intuition: interest rate bubble interest rate asset price It ignores two key features of a bubble: (i) no payoffs to be discounted (ii) return on the bubble = growth in bubble size Equilibrium requirement: interest rate expected bubble growth risk of amplified fluctuations in the size of the bubble resulting from "leaning against the wind" policies (Galí (2013)) Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
5 Interest Rates and Bubbles: Theoretical Issues Asset yielding a stream of dividends {D t } Exogenous time-varying (gross) real rate {R t } Risk neutral investors Fundamental price: Q F t or, in log-linear version: q F t = const + where Λ Γ/R < 1 E t { k=0 k=1 ( k 1 j=0 (1/R t+j ) ) D t+k } Λ k [(1 Λ)E t {d t+k+1 } E t {r t+k }] Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
6 Interest Rates and Bubbles: Theoretical Issues Observed stock price Q t = Qt F + Qt B Dynamic response of stock price to an interest rate shock: q t+k = (1 γ t 1 ) qf t+k + γ t 1 q B t+k where γ t Q B t /Q t Theory (and evidence) suggest: q F t+k < 0 Conventional view: q B t+k 0 q t+k < 0 Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
7 The Rational Bubble Theory Perspective Asset pricing equation Q t R t = E t {D t+1 + Q t+1 } Fundamental component: Qt F R t = E t {D t+1 + Qt+1} F Bubble component: Qt B R t = E t {Qt+1} B or, equivalently qt B = r t 1 + ξ t where ξ t qt B E t 1 {qt B } and E t 1 {ξ t } = 0. Without loss of generality ξ t = ψ t (r t E t 1 {r t }) + ξt where E t 1 {ξt } = 0 and. E {ξ t r t k } = 0, for k = 0, ±1, ±2,.. both the sign and the size of ψ t are indeterminate Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
8 The Rational Bubble Theory Perspective Predicted dynamic response of the bubble to an interest rate shock q B t+k = { r ψt t r ψ t t + k 1 j=0 r t+j for k = 0 for k = 1, 2,... Predicted dynamic response of the stock price: q t+k 0 Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
9 The Rational Bubble Theory Perspective: An Example Assumptions: for k = 0, 1, 2,... r t+k = ρ k r ; Dynamic response of the asset price q t+k ρ k r d t+k = (1 γ t 1 ) + γ 1 Λρ t 1 r = 0 ( ψ t + 1 ) ρk r 1 ρ r Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
10 The Rational Bubble Theory Perspective: An Example Assumptions: for k = 0, 1, 2,... r t+k = ρ k r ; Dynamic response of the asset price q t+k ρ k r d t+k = (1 γ t 1 ) + γ 1 Λρ t 1 r = 0 ( ψ t + 1 ) ρk r 1 ρ r Implications for the response of asset prices to an interest rate shock: γ t 0 q t+k γ t 0, ψ t 0 q t+k < 0 Simulated responses under alternative calibrations > 0 for large k Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
11 6 Figure 1 : Asset Price Response to an Exogenous Interest Rate Increase: Alternative Calibrations 4 2 asset price response periods after shock gamma = 0 gamma = 0.5, psi =0 gamma = 0.5, psi = -8 gamma = 0.5, psi = 6
12 Evidence based on Vector Autoregressions VAR with constant coeffi cients x t = A 0 + A 1 x t 1 + A 2 x t A p x t p + u t where x t [ y t, d t, p t, i t, q t ] E t {u t u t k } = Σ u t = Sε t with E {ε t ε t} = I and E {ε t ε t k } = 0 for k = 1, 2, 3,... Identification of monetary policy shocks: - i t instrument of monetary policy - ( y t, d t, p t ) predetermined with respect to i t - S block lower-triangular (CEE (2005)) Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
13 Evidence based on Vector Autoregressions VAR with time-varying coeffi cients x t = A 0,t + A 1,t x t 1 + A 2,t x t A p,t x t p + u t where E t {u t u t k } = Σ t u t = S t ε t with E {ε t ε t} = I and E {ε t ε t k } = 0 for k = 1, 2, 3,... Identification of monetary policy shocks: - i t instrument of monetary policy - ( y t, d t, p t ) predetermined with respect to i t - S t block lower-triangular, for all t Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
14 Assumptions Letting θ t = vec([a 0,t, A 1,t..., A p,t ]), where ω t N(0, Ω) is white noise. θ t = θ t 1 + ω t Letting Σ t F t D t F t where F t is lower triangular with ones on the diagonal and D t diagonal. Define φ t = vec(ft 1 ) and σ t = vec(d t ). φ t = φ t 1 + ζ t log σ t = log σ t 1 + ξ t where ζ t N(0, Ψ) and ξ t N(0, Ξ) are (uncorrelated) white noise. Estimation: Bayesian approach (Primiceri (2005)) Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
15 Evidence Impulse responses: VAR with constant coeffi cients Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
16 Dividends Stock prices Figure 2.a : Estimated Responses to Monetary Policy Shock Nominal interest rate Real interest rate
17 Figure 2.b : Estimated Responses to Monetary Policy Shock Observed (red, dotted) vs. Fundamental (blue, solid) Stock Price
18 Evidence Impulse responses: VAR with constant coeffi cients Impulse responses: VAR with time-varying coeffi cients Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
19 Figure 3.a : Estimated Responses to Monetary Policy Shock: TVC-VAR Nominal Interest Rate
20 Figure 3.b : Estimated Responses to Monetary Policy Shock: TVC-VAR Real Interest Rate
21 Figure 3.c : Estimated Responses to Monetary Policy Shock: TVC-VAR Dividends
22 Figure 3.d : Estimated Responses to Monetary Policy Shock: TVC-VAR Stock Prices
23 Evidence Impulse responses: VAR with constant coeffi cients Impulse responses: VAR with time-varying coeffi cients (q t+k q F t+k ) In the simple example above: (q t+k q F t+k ) = γ t 1 ( q B t+k qf t+k ( ρ k = γ r t 1 + ψ 1 Λρ t + 1 ) ρk r r 1 ρ ( ) r 1 γ t 1 + ψ 1 ρ t r which is positive, as long as γ t 1 > 0 and ψ t 0. ) Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
24 Figure 3.e : Estimated Responses to Monetary Policy Shock: TVC-VAR Fundamental Stock Price
25 Figure 3.f : Estimated Responses to Monetary Policy Shock: TVC-VAR Observed minus Fundamental Stock Price
26 Figure 4.a : Response of q q F at different horizons
27 Figure 4.b : Probability of a positive response of q q F at different horizons
28 Figure 5.a : Estimated Responses to Monetary Policy Shock: TVC-VAR Observed vs. Fundamental Stock Price: 1965Q1-1967Q4 Fundamental: blue, solid Observed: red, dotted
29 Figure 5.b : Estimated Responses to Monetary Policy Shock: TVC-VAR Observed vs. Fundamental Stock Price: 1976Q1-1978Q4 Fundamental: blue, solid Observed: red, dotted
30 Figure 5.c : Estimated Responses to Monetary Policy Shock: TVC-VAR Observed vs. Fundamental Stock Price: 1984Q4-1987Q3 Fundamental: blue, solid Observed: red, dotted
31 Figure 5.d : Estimated Responses to Monetary Policy Shock: TVC-VAR Observed vs. Fundamental Stock Price: 1997Q1-1999Q4 Fundamental: blue, solid Observed: red, dotted
32 Concluding Remarks Maintained assumption in the case for "leaning against the wind" policies: higher interest rates reduce the size of asset price bubbles Theoretical foundations: at best, fragile. Empirical evidence: - no clear support for the conventional view - consistent with the possibility of destabilizing "leaning against the wind" policies emphasized in Galí (2013) Need to understand better how monetary policy affects asset prices before such policies are adopted Jordi Galí, Luca Gambetti () Monetary Policy and Bubbles September / 17
33 Monetary Policy and the Stock Market Bubble Stock Price Index Discount Rate
34 Monetary Policy and the Dotcom Bubble
35 Monetary Policy and the Housing Bubble
The Effects of Monetary Policy on Stock Market Bubbles: Some Evidence Jordi Galí Luca Gambetti This version: December 2013 (October 2013)
The Effects of Monetary Policy on Stock Market Bubbles: Some Evidence Jordi Galí Luca Gambetti This version: December 2013 (October 2013) Barcelona GSE Working Paper Series Working Paper nº 724 The Effects
More informationStock Price, Risk-free Rate and Learning
Stock Price, Risk-free Rate and Learning Tongbin Zhang Univeristat Autonoma de Barcelona and Barcelona GSE April 2016 Tongbin Zhang (Institute) Stock Price, Risk-free Rate and Learning April 2016 1 / 31
More informationDiscussion The Changing Relationship Between Commodity Prices and Prices of Other Assets with Global Market Integration by Barbara Rossi
Discussion The Changing Relationship Between Commodity Prices and Prices of Other Assets with Global Market Integration by Barbara Rossi Domenico Giannone Université libre de Bruxelles, ECARES and CEPR
More informationFiscal and Monetary Policies: Background
Fiscal and Monetary Policies: Background Behzad Diba University of Bern April 2012 (Institute) Fiscal and Monetary Policies: Background April 2012 1 / 19 Research Areas Research on fiscal policy typically
More informationCredit Shocks and the U.S. Business Cycle. Is This Time Different? Raju Huidrom University of Virginia. Midwest Macro Conference
Credit Shocks and the U.S. Business Cycle: Is This Time Different? Raju Huidrom University of Virginia May 31, 214 Midwest Macro Conference Raju Huidrom Credit Shocks and the U.S. Business Cycle Background
More informationSentiments and Aggregate Fluctuations
Sentiments and Aggregate Fluctuations Jess Benhabib Pengfei Wang Yi Wen June 15, 2012 Jess Benhabib Pengfei Wang Yi Wen () Sentiments and Aggregate Fluctuations June 15, 2012 1 / 59 Introduction We construct
More informationTechnology shocks and Monetary Policy: Assessing the Fed s performance
Technology shocks and Monetary Policy: Assessing the Fed s performance (J.Gali et al., JME 2003) Miguel Angel Alcobendas, Laura Desplans, Dong Hee Joe March 5, 2010 M.A.Alcobendas, L. Desplans, D.H.Joe
More informationOn the new Keynesian model
Department of Economics University of Bern April 7, 26 The new Keynesian model is [... ] the closest thing there is to a standard specification... (McCallum). But it has many important limitations. It
More informationCountry Spreads and Emerging Countries: Who Drives Whom? Martin Uribe and Vivian Yue (JIE, 2006)
Country Spreads and Emerging Countries: Who Drives Whom? Martin Uribe and Vivian Yue (JIE, 26) Country Interest Rates and Output in Seven Emerging Countries Argentina Brazil.5.5...5.5.5. 94 95 96 97 98
More information1. Operating procedures and choice of monetary policy instrument. 2. Intermediate targets in policymaking. Literature: Walsh (Chapter 11, pp.
Monetary Economics: Macro Aspects, 7/4 2014 Henrik Jensen Department of Economics University of Copenhagen 1. Operating procedures and choice of monetary policy instrument 2. Intermediate targets in policymaking
More informationHousing Prices and Growth
Housing Prices and Growth James A. Kahn June 2007 Motivation Housing market boom-bust has prompted talk of bubbles. But what are fundamentals? What is the right benchmark? Motivation Housing market boom-bust
More informationMonetary Policy and Rational Asset Price Bubbles
Monetary Policy and Rational Asset Price Bubbles Jordi Galí November 2011 (First draft: April 2011) Abstract I examine the impact of alternative monetary policy rules on a rational asset price bubble,
More informationOptimal Credit Market Policy. CEF 2018, Milan
Optimal Credit Market Policy Matteo Iacoviello 1 Ricardo Nunes 2 Andrea Prestipino 1 1 Federal Reserve Board 2 University of Surrey CEF 218, Milan June 2, 218 Disclaimer: The views expressed are solely
More informationNBER WORKING PAPER SERIES MONETARY POLICY AND RATIONAL ASSET PRICE BUBBLES. Jordi Galí. Working Paper
NBER WORKING PAPER SERIES MONETARY POLICY AND RATIONAL ASSET PRICE BUBBLES Jordi Galí Working Paper 18806 http://www.nber.org/papers/w18806 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue
More informationThe Basic New Keynesian Model
Jordi Gali Monetary Policy, inflation, and the business cycle Lian Allub 15/12/2009 In The Classical Monetary economy we have perfect competition and fully flexible prices in all markets. Here there is
More informationSentiments and Aggregate Fluctuations
Sentiments and Aggregate Fluctuations Jess Benhabib Pengfei Wang Yi Wen March 15, 2013 Jess Benhabib Pengfei Wang Yi Wen () Sentiments and Aggregate Fluctuations March 15, 2013 1 / 60 Introduction The
More informationGernot Müller (University of Bonn, CEPR, and Ifo)
Exchange rate regimes and fiscal multipliers Benjamin Born (Ifo Institute) Falko Jüßen (TU Dortmund and IZA) Gernot Müller (University of Bonn, CEPR, and Ifo) Fiscal Policy in the Aftermath of the Financial
More informationAsset Prices, Collateral and Unconventional Monetary Policy in a DSGE model
Asset Prices, Collateral and Unconventional Monetary Policy in a DSGE model Bundesbank and Goethe-University Frankfurt Department of Money and Macroeconomics January 24th, 212 Bank of England Motivation
More informationTOPICS IN MACROECONOMICS: MODELLING INFORMATION, LEARNING AND EXPECTATIONS LECTURE NOTES. Lucas Island Model
TOPICS IN MACROECONOMICS: MODELLING INFORMATION, LEARNING AND EXPECTATIONS LECTURE NOTES KRISTOFFER P. NIMARK Lucas Island Model The Lucas Island model appeared in a series of papers in the early 970s
More informationTFP Persistence and Monetary Policy. NBS, April 27, / 44
TFP Persistence and Monetary Policy Roberto Pancrazi Toulouse School of Economics Marija Vukotić Banque de France NBS, April 27, 2012 NBS, April 27, 2012 1 / 44 Motivation 1 Well Known Facts about the
More informationA Model with Costly Enforcement
A Model with Costly Enforcement Jesús Fernández-Villaverde University of Pennsylvania December 25, 2012 Jesús Fernández-Villaverde (PENN) Costly-Enforcement December 25, 2012 1 / 43 A Model with Costly
More informationChapter 9 Dynamic Models of Investment
George Alogoskoufis, Dynamic Macroeconomic Theory, 2015 Chapter 9 Dynamic Models of Investment In this chapter we present the main neoclassical model of investment, under convex adjustment costs. This
More informationMonetary Policy and Bubbles in a New Keynesian Model with Overlapping Generations
Monetary Policy and Bubbles in a New Keynesian Model with Overlapping Generations Jordi Galí Discussion by Franck Portier The new macroeconomics of aggregate fluctuations and stabilisation policy UCL-ADEMU
More informationUnemployment Fluctuations and Nominal GDP Targeting
Unemployment Fluctuations and Nominal GDP Targeting Roberto M. Billi Sveriges Riksbank 3 January 219 Abstract I evaluate the welfare performance of a target for the level of nominal GDP in the context
More informationAsset pricing in the frequency domain: theory and empirics
Asset pricing in the frequency domain: theory and empirics Ian Dew-Becker and Stefano Giglio Duke Fuqua and Chicago Booth 11/27/13 Dew-Becker and Giglio (Duke and Chicago) Frequency-domain asset pricing
More informationLecture 23 The New Keynesian Model Labor Flows and Unemployment. Noah Williams
Lecture 23 The New Keynesian Model Labor Flows and Unemployment Noah Williams University of Wisconsin - Madison Economics 312/702 Basic New Keynesian Model of Transmission Can be derived from primitives:
More informationThe Government Spending Multiplier at. the Zero Lower Bound
The Government Spending Multiplier at the Zero Lower Bound Shengliang Ou Universitat Pompeu Fabra JOB MARKET PAPER This Version: November 22, 2018 Click Here for the Latest Version Abstract I estimate
More informationLecture 2, November 16: A Classical Model (Galí, Chapter 2)
MakØk3, Fall 2010 (blok 2) Business cycles and monetary stabilization policies Henrik Jensen Department of Economics University of Copenhagen Lecture 2, November 16: A Classical Model (Galí, Chapter 2)
More informationOil and macroeconomic (in)stability
Oil and macroeconomic (in)stability Hilde C. Bjørnland Vegard H. Larsen Centre for Applied Macro- and Petroleum Economics (CAMP) BI Norwegian Business School CFE-ERCIM December 07, 2014 Bjørnland and Larsen
More informationMoney and monetary policy in Israel during the last decade
Money and monetary policy in Israel during the last decade Money Macro and Finance Research Group 47 th Annual Conference Jonathan Benchimol 1 This presentation does not necessarily reflect the views of
More informationMoney and monetary policy in the Eurozone: an empirical analysis during crises
Money and monetary policy in the Eurozone: an empirical analysis during crises Money Macro and Finance Research Group 46 th Annual Conference Jonathan Benchimol 1 and André Fourçans 2 This presentation
More informationMonetary Policy in a New Keyneisan Model Walsh Chapter 8 (cont)
Monetary Policy in a New Keyneisan Model Walsh Chapter 8 (cont) 1 New Keynesian Model Demand is an Euler equation x t = E t x t+1 ( ) 1 σ (i t E t π t+1 ) + u t Supply is New Keynesian Phillips Curve π
More informationDoes a Big Bazooka Matter? Central Bank Balance-Sheet Policies and Exchange Rates
Does a Big Bazooka Matter? Central Bank Balance-Sheet Policies and Exchange Rates Luca Dedola,#, Georgios Georgiadis, Johannes Gräb and Arnaud Mehl European Central Bank, # CEPR Monetary Policy in Non-standard
More informationMonetary Policy and Housing Bubbles:
Monetary Policy and Housing Bubbles: Some Evidence when House Price is Sticky Vorada Limjaroenrat May 7 Abstract The assumption of fully flexible house prices is widely applied in general equilibrium monetary
More informationThe New Keynesian Approach to Monetary Policy Analysis: Lessons and New Directions
The to Monetary Policy Analysis: Lessons and New Directions Jordi Galí CREI and U. Pompeu Fabra ice of Monetary Policy Today" October 4, 2007 The New Keynesian Paradigm: Key Elements Dynamic stochastic
More informationAsset Pricing and Equity Premium Puzzle. E. Young Lecture Notes Chapter 13
Asset Pricing and Equity Premium Puzzle 1 E. Young Lecture Notes Chapter 13 1 A Lucas Tree Model Consider a pure exchange, representative household economy. Suppose there exists an asset called a tree.
More informationNotes for a New Guide to Keynes
Notes for a New Guide to Keynes Jordi Galí CREI, UPF and Barcelona GSE EEA Congress, Málaga 2012 Jordi Galí (CREI, UPF and Barcelona GSE) Notes for a New Guide to Keynes EEA Congress, Málaga 2012 1 / 36
More informationECON 4325 Monetary Policy and Business Fluctuations
ECON 4325 Monetary Policy and Business Fluctuations Tommy Sveen Norges Bank January 28, 2009 TS (NB) ECON 4325 January 28, 2009 / 35 Introduction A simple model of a classical monetary economy. Perfect
More informationHabit Formation in State-Dependent Pricing Models: Implications for the Dynamics of Output and Prices
Habit Formation in State-Dependent Pricing Models: Implications for the Dynamics of Output and Prices Phuong V. Ngo,a a Department of Economics, Cleveland State University, 22 Euclid Avenue, Cleveland,
More informationExercises on the New-Keynesian Model
Advanced Macroeconomics II Professor Lorenza Rossi/Jordi Gali T.A. Daniël van Schoot, daniel.vanschoot@upf.edu Exercises on the New-Keynesian Model Schedule: 28th of May (seminar 4): Exercises 1, 2 and
More informationUnemployment Persistence, Inflation and Monetary Policy in A Dynamic Stochastic Model of the Phillips Curve
Unemployment Persistence, Inflation and Monetary Policy in A Dynamic Stochastic Model of the Phillips Curve by George Alogoskoufis* March 2016 Abstract This paper puts forward an alternative new Keynesian
More informationState-Dependent Pricing and the Paradox of Flexibility
State-Dependent Pricing and the Paradox of Flexibility Luca Dedola and Anton Nakov ECB and CEPR May 24 Dedola and Nakov (ECB and CEPR) SDP and the Paradox of Flexibility 5/4 / 28 Policy rates in major
More informationChapter 1. Introduction
Chapter 1 Introduction 2 Oil Price Uncertainty As noted in the Preface, the relationship between the price of oil and the level of economic activity is a fundamental empirical issue in macroeconomics.
More informationThe Structural Dynamics of U.S. Output and Inflation: What Explains the Changes?
LUCA GAMBETTI EVI PAPPA FABIO CANOVA The Structural Dynamics of U.S. Output and Inflation: What Explains the Changes? We examine the dynamics of U.S. output and inflation using a structural time-varying
More informationWhat Can Rational Investors Do About Excessive Volatility and Sentiment Fluctuations?
What Can Rational Investors Do About Excessive Volatility and Sentiment Fluctuations? Bernard Dumas INSEAD, Wharton, CEPR, NBER Alexander Kurshev London Business School Raman Uppal London Business School,
More informationOil Price Uncertainty in a Small Open Economy
Yusuf Soner Başkaya Timur Hülagü Hande Küçük 6 April 212 Oil price volatility is high and it varies over time... 15 1 5 1985 199 1995 2 25 21 (a) Mean.4.35.3.25.2.15.1.5 1985 199 1995 2 25 21 (b) Coefficient
More informationShort & Long Run impact of volatility on the effect monetary shocks
Short & Long Run impact of volatility on the effect monetary shocks Fernando Alvarez University of Chicago & NBER Inflation: Drivers & Dynamics Conference 218 Cleveland Fed Alvarez Volatility & Monetary
More informationExchange Rates and Fundamentals: A General Equilibrium Exploration
Exchange Rates and Fundamentals: A General Equilibrium Exploration Takashi Kano Hitotsubashi University @HIAS, IER, AJRC Joint Workshop Frontiers in Macroeconomics and Macroeconometrics November 3-4, 2017
More informationRisks for the Long Run: A Potential Resolution of Asset Pricing Puzzles
: A Potential Resolution of Asset Pricing Puzzles, JF (2004) Presented by: Esben Hedegaard NYUStern October 12, 2009 Outline 1 Introduction 2 The Long-Run Risk Solving the 3 Data and Calibration Results
More informationKeynesian Views On The Fiscal Multiplier
Faculty of Social Sciences Jeppe Druedahl (Ph.d. Student) Department of Economics 16th of December 2013 Slide 1/29 Outline 1 2 3 4 5 16th of December 2013 Slide 2/29 The For Today 1 Some 2 A Benchmark
More informationOverborrowing, Financial Crises and Macro-prudential Policy. Macro Financial Modelling Meeting, Chicago May 2-3, 2013
Overborrowing, Financial Crises and Macro-prudential Policy Javier Bianchi University of Wisconsin & NBER Enrique G. Mendoza Universtiy of Pennsylvania & NBER Macro Financial Modelling Meeting, Chicago
More informationslides chapter 6 Interest Rate Shocks
slides chapter 6 Interest Rate Shocks Princeton University Press, 217 Motivation Interest-rate shocks are generally believed to be a major source of fluctuations for emerging countries. The next slide
More informationImperfect Information and Market Segmentation Walsh Chapter 5
Imperfect Information and Market Segmentation Walsh Chapter 5 1 Why Does Money Have Real Effects? Add market imperfections to eliminate short-run neutrality of money Imperfect information keeps price from
More informationEstimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach
Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach Gianluca Benigno 1 Andrew Foerster 2 Christopher Otrok 3 Alessandro Rebucci 4 1 London School of Economics and
More informationEXAMINING MACROECONOMIC MODELS
1 / 24 EXAMINING MACROECONOMIC MODELS WITH FINANCE CONSTRAINTS THROUGH THE LENS OF ASSET PRICING Lars Peter Hansen Benheim Lectures, Princeton University EXAMINING MACROECONOMIC MODELS WITH FINANCING CONSTRAINTS
More informationIs asset-pricing pure data-mining? If so, what happened to theory?
Is asset-pricing pure data-mining? If so, what happened to theory? Michael Wickens Cardiff Business School, University of York, CEPR and CESifo Lisbon ICCF 4-8 September 2017 Lisbon ICCF 4-8 September
More informationExamining the Bond Premium Puzzle in a DSGE Model
Examining the Bond Premium Puzzle in a DSGE Model Glenn D. Rudebusch Eric T. Swanson Economic Research Federal Reserve Bank of San Francisco John Taylor s Contributions to Monetary Theory and Policy Federal
More informationAsset Pricing under Information-processing Constraints
Asset Pricing under Information-processing Constraints YuleiLuo University of Hong Kong Eric.Young University of Virginia November 2007 Abstract This paper studies the implications of limited information-processing
More informationConsumption Dynamics, Housing Collateral and Stabilisation Policy
Consumption Dynamics, Housing Collateral and Stabilisation Policy A Way Forward for Macro-Prudential Instruments? Effective Macroprudential Instruments - CFCM-MMF-MMPM Conference Jagjit S. Chadha University
More informationECON 815. A Basic New Keynesian Model II
ECON 815 A Basic New Keynesian Model II Winter 2015 Queen s University ECON 815 1 Unemployment vs. Inflation 12 10 Unemployment 8 6 4 2 0 1 1.5 2 2.5 3 3.5 4 4.5 5 Core Inflation 14 12 10 Unemployment
More informationInternational recessions
International recessions Fabrizio Perri University of Minnesota Vincenzo Quadrini University of Southern California July 16, 2010 Abstract The 2008-2009 US crisis is characterized by un unprecedent degree
More informationA Macroeconomic Model with Financial Panics
A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 September 218 1 The views expressed in this paper are those of the
More informationLorant Kaszab (MNB) Roman Horvath (IES)
Aleš Maršál (NBS) Lorant Kaszab (MNB) Roman Horvath (IES) Modern Tools for Financial Analysis and ing - Matlab 4.6.2015 Outline Calibration output stabilization spending reversals Table : Impact of QE
More informationDemand Effects and Speculation in Oil Markets: Theory and Evidence
Demand Effects and Speculation in Oil Markets: Theory and Evidence Eyal Dvir (BC) and Ken Rogoff (Harvard) IMF - OxCarre Conference, March 2013 Introduction Is there a long-run stable relationship between
More informationChapter 5 Macroeconomics and Finance
Macro II Chapter 5 Macro and Finance 1 Chapter 5 Macroeconomics and Finance Main references : - L. Ljundqvist and T. Sargent, Chapter 7 - Mehra and Prescott 1985 JME paper - Jerman 1998 JME paper - J.
More informationTaxing Firms Facing Financial Frictions
Taxing Firms Facing Financial Frictions Daniel Wills 1 Gustavo Camilo 2 1 Universidad de los Andes 2 Cornerstone November 11, 2017 NTA 2017 Conference Corporate income is often taxed at different sources
More informationA Model of Financial Intermediation
A Model of Financial Intermediation Jesús Fernández-Villaverde University of Pennsylvania December 25, 2012 Jesús Fernández-Villaverde (PENN) A Model of Financial Intermediation December 25, 2012 1 / 43
More information1 The Goodwin (1967) Model
page 1 1 The Goodwin (1967) Model In 1967, Richard Goodwin developed an elegant model meant to describe the evolution of distributional conflict in growing, advanced capitalist economies. The Goodwin model
More informationNotes on Macroeconomic Theory II
Notes on Macroeconomic Theory II Chao Wei Department of Economics George Washington University Washington, DC 20052 January 2007 1 1 Deterministic Dynamic Programming Below I describe a typical dynamic
More informationAdvanced Topics in Monetary Economics II 1
Advanced Topics in Monetary Economics II 1 Carl E. Walsh UC Santa Cruz August 18-22, 2014 1 c Carl E. Walsh, 2014. Carl E. Walsh (UC Santa Cruz) Gerzensee Study Center August 18-22, 2014 1 / 38 Uncertainty
More informationDebt Financing and Real Output Growth: Is There a Threshold Effect?
Debt Financing and Real Output Growth: Is There a Threshold Effect? M. Hashem Pesaran Department of Economics & USC Dornsife INET, University of Southern California, USA and Trinity College, Cambridge,
More informationIdiosyncratic risk, insurance, and aggregate consumption dynamics: a likelihood perspective
Idiosyncratic risk, insurance, and aggregate consumption dynamics: a likelihood perspective Alisdair McKay Boston University June 2013 Microeconomic evidence on insurance - Consumption responds to idiosyncratic
More informationSTATE UNIVERSITY OF NEW YORK AT ALBANY Department of Economics. Ph. D. Preliminary Examination: Macroeconomics Fall, 2009
STATE UNIVERSITY OF NEW YORK AT ALBANY Department of Economics Ph. D. Preliminary Examination: Macroeconomics Fall, 2009 Instructions: Read the questions carefully and make sure to show your work. You
More informationTechnical Appendix: Policy Uncertainty and Aggregate Fluctuations.
Technical Appendix: Policy Uncertainty and Aggregate Fluctuations. Haroon Mumtaz Paolo Surico July 18, 2017 1 The Gibbs sampling algorithm Prior Distributions and starting values Consider the model to
More informationProblem Set 3. Thomas Philippon. April 19, Human Wealth, Financial Wealth and Consumption
Problem Set 3 Thomas Philippon April 19, 2002 1 Human Wealth, Financial Wealth and Consumption The goal of the question is to derive the formulas on p13 of Topic 2. This is a partial equilibrium analysis
More informationHow Much Insurance in Bewley Models?
How Much Insurance in Bewley Models? Greg Kaplan New York University Gianluca Violante New York University, CEPR, IFS and NBER Boston University Macroeconomics Seminar Lunch Kaplan-Violante, Insurance
More informationTime Variation in U.S. Wage Dynamics
Time Variation in U.S. Wage Dynamics Boris Hofmann European Central Bank boris.hofmann@ecb.int Gert Peersman Ghent University gert.peersman@ugent.be Roland Straub European Central Bank roland.straub@ecb.int
More informationEffi cient monetary policy frontier for Iceland
Effi cient monetary policy frontier for Iceland A report to taskforce on reviewing Iceland s monetary and currency policies Marías Halldór Gestsson May 2018 1 Introduction A central bank conducting monetary
More informationSkewness in Expected Macro Fundamentals and the Predictability of Equity Returns: Evidence and Theory
Skewness in Expected Macro Fundamentals and the Predictability of Equity Returns: Evidence and Theory Ric Colacito, Eric Ghysels, Jinghan Meng, and Wasin Siwasarit 1 / 26 Introduction Long-Run Risks Model:
More informationOutput Gaps and Robust Monetary Policy Rules
Output Gaps and Robust Monetary Policy Rules Roberto M. Billi Sveriges Riksbank Conference on Monetary Policy Challenges from a Small Country Perspective, National Bank of Slovakia Bratislava, 23-24 November
More informationEnrique Martínez-García. University of Texas at Austin and Federal Reserve Bank of Dallas
Discussion: International Recessions, by Fabrizio Perri (University of Minnesota and FRB of Minneapolis) and Vincenzo Quadrini (University of Southern California) Enrique Martínez-García University of
More informationBoom or gloom? Examining the Dutch disease in two-speed economies
Boom or gloom? Examining the Dutch disease in two-speed economies Hilde C. Bjørnland Leif Anders Thorsrud Centre for Applied Macro- and Petroleum Economics (CAMP) BI Norwegian Business School CAMP Workshop
More informationMonetary Economics Final Exam
316-466 Monetary Economics Final Exam 1. Flexible-price monetary economics (90 marks). Consider a stochastic flexibleprice money in the utility function model. Time is discrete and denoted t =0, 1,...
More informationMonetary Policy and Resource Mobility
Monetary Policy and Resource Mobility 2th Anniversary of the Bank of Finland Carl E. Walsh University of California, Santa Cruz May 5-6, 211 C. E. Walsh (UCSC) Bank of Finland 2th Anniversary May 5-6,
More informationThe Time-Varying Effects of Monetary Aggregates on Inflation and Unemployment
経営情報学論集第 23 号 2017.3 The Time-Varying Effects of Monetary Aggregates on Inflation and Unemployment An Application of the Bayesian Vector Autoregression with Time-Varying Parameters and Stochastic Volatility
More informationFinancial Frictions and the Fiscal Theory of Price Level Determination
Financial Frictions and the Fiscal Theory of Price Level Determination Libo Xu and Apostolos Serletis Department of Economics University of Calgary Calgary, Alberta T2N 1N4 Forthcoming in: Open Economies
More informationNot All Oil Price Shocks Are Alike: A Neoclassical Perspective
Not All Oil Price Shocks Are Alike: A Neoclassical Perspective Vipin Arora Pedro Gomis-Porqueras Junsang Lee U.S. EIA Deakin Univ. SKKU December 16, 2013 GRIPS Junsang Lee (SKKU) Oil Price Dynamics in
More informationNew Business Start-ups and the Business Cycle
New Business Start-ups and the Business Cycle Ali Moghaddasi Kelishomi (Joint with Melvyn Coles, University of Essex) The 22nd Annual Conference on Monetary and Exchange Rate Policies Banking Supervision
More informationResource Allocation within Firms and Financial Market Dislocation: Evidence from Diversified Conglomerates
Resource Allocation within Firms and Financial Market Dislocation: Evidence from Diversified Conglomerates Gregor Matvos and Amit Seru (RFS, 2014) Corporate Finance - PhD Course 2017 Stefan Greppmair,
More informationIntroduction Some Stylized Facts Model Estimation Counterfactuals Conclusion Equity Market Misvaluation, Financing, and Investment
Equity Market, Financing, and Investment Missaka Warusawitharana Toni M. Whited North America meetings of the Econometric Society, June 2014 Question Do managers react to perceived equity mispricing? How
More informationFinancial Vulnerabilities, Macroeconomic Dynamics, and Monetary Policy
Financial Vulnerabilities, Macroeconomic Dynamics, and Monetary Policy DAVID AIKMAN, ANDREAS LEHNERT, NELLIE LIANG, MICHELE MODUGNO 19 MAY, 2017 T H E V I E W S E X P R E S S E D A R E O U R O W N A N
More informationNotes on Estimating the Closed Form of the Hybrid New Phillips Curve
Notes on Estimating the Closed Form of the Hybrid New Phillips Curve Jordi Galí, Mark Gertler and J. David López-Salido Preliminary draft, June 2001 Abstract Galí and Gertler (1999) developed a hybrid
More informationScience of Monetary Policy: CGG (1999)
Science of Monetary Policy: CGG (1999) Satya P. Das @ NIPFP Satya P. Das (@ NIPFP) Science of Monetary Policy: CGG (1999) 1 / 14 1 Model Structure 2 Time Inconsistency and Commitment 3 Discretion Satya
More informationSTATE UNIVERSITY OF NEW YORK AT ALBANY Department of Economics. Ph. D. Comprehensive Examination: Macroeconomics Spring, 2016
STATE UNIVERSITY OF NEW YORK AT ALBANY Department of Economics Ph. D. Comprehensive Examination: Macroeconomics Spring, 2016 Section 1. Suggested Time: 45 Minutes) For 3 of the following 6 statements,
More informationDiscussion of Limitations on the Effectiveness of Forward Guidance at the Zero Lower Bound
Discussion of Limitations on the Effectiveness of Forward Guidance at the Zero Lower Bound Robert G. King Boston University and NBER 1. Introduction What should the monetary authority do when prices are
More informationFiscal and Monetary Policy in a New Keynesian Model with Tobin s Q Investment Theory Features
MPRA Munich Personal RePEc Archive Fiscal and Monetary Policy in a New Keynesian Model with Tobin s Q Investment Theory Features Stylianos Giannoulakis Athens University of Economics and Business 4 May
More informationMacroeconomic Effects of Financial Shocks: Comment
Macroeconomic Effects of Financial Shocks: Comment Johannes Pfeifer (University of Cologne) 1st Research Conference of the CEPR Network on Macroeconomic Modelling and Model Comparison (MMCN) June 2, 217
More informationThe Role of Investment Wedges in the Carlstrom-Fuerst Economy and Business Cycle Accounting
MPRA Munich Personal RePEc Archive The Role of Investment Wedges in the Carlstrom-Fuerst Economy and Business Cycle Accounting Masaru Inaba and Kengo Nutahara Research Institute of Economy, Trade, and
More informationForeign Competition and Banking Industry Dynamics: An Application to Mexico
Foreign Competition and Banking Industry Dynamics: An Application to Mexico Dean Corbae Pablo D Erasmo 1 Univ. of Wisconsin FRB Philadelphia June 12, 2014 1 The views expressed here do not necessarily
More informationFinancial markets and unemployment
Financial markets and unemployment Tommaso Monacelli Università Bocconi Vincenzo Quadrini University of Southern California Antonella Trigari Università Bocconi October 14, 2010 PRELIMINARY Abstract We
More information