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Summary: We compare predictive performance of a multitude of alternative Bayesian vector autoregression (VAR) models allowing for cointegration and time‐varying conditional covariances, described by different multivariate stochastic volatility (MSV) models, including their hybrids with multivariate GARCH processes (MSV‐MGARCH), as well as t‐GARCH and Markov‐switching structures. The forecast accuracy is evaluated mainly through predictive Bayes factors, but energy scores and the probability integral transform are also used. Two empirical studies, for the US and Polish economies, are based on a small model of monetary policy comprising inflation, unemployment and interest rate. The results indicate that capturing conditional heteroskedasticity by some MSV‐MGARCH specifications contributes the most to the forecasting power of the VAR/VEC model. [ABSTRACT FROM AUTHOR]

Climate change is often discussed and serves as an essential topic among policymakers and researchers. This study aims to examine the impact of macroeconomic policy and “environmental policy stringency” (EPS) on “ecological footprint” (EF) and “load capacity factor” (LCF) for the BRICS‐T (Brazil, Russia, India, China, South Africa, and Turkey) countries using annual data from 1990 to 2022. It also explores other environmental sustainability factors, such as economic growth and disintegrated energy. This investigation utilizes second‐generation approaches such as Westerlund cointegration, “method of moments quantile regression” (MMQR), and panel causality test. Furthermore, a robustness check is done using long‐run estimators, such as dynamic ordinary least square (DOLS), fully modified ordinary least square (FMOLS), and fixed effect ordinary least square (FE‐OLS). Overall, findings from the method of moments quantile regression (MMQR) test concerning EF suggest that economic growth and fiscal policy contribute to environmental quality. Meanwhile, monetary policy, renewable energy consumption, and environmental policy stringency mitigate the pollution level in all quantiles. Moreover, results from the LCF model indicate that monetary policy, environmental policy stringency, and renewable energy consumption improve the environmental condition. However, fiscal policy has damaged environmental pollution in each quantile. In addition, the study findings confirm the validity of the inverted U‐shaped Environmental Kuznets Curve (EKC) hypothesis and U‐shaped LCC hypothesis. The long‐run estimators support the outcomes from the MMQR method. The empirical findings of the DH panel heterogeneous causality test confirm the presence of bidirectional and unidirectional causality between the model parameters, underscoring that policy interventions such as government expenditure, money supply, and EPS significantly impact environmental quality and vice versa. Thus, the study recommends allocating more funds for eco‐friendly technology, initiating a green lending program, and enforcing stringent environmental laws and regulations to attain Sustainable Development Goals. [ABSTRACT FROM AUTHOR]

This study aims to show the response of foreign direct investment (FDI) inflows to monetary policy (represented by money supply and interest rate) and fiscal policy (represented by tax revenues) in Nigeria during the period (1990–2021). The autoregressive distributed lag approach is employed to estimate long‐run relationship among variables. The results indicate that there is cointegrating long‐run relationship among the study variables. The study provides empirical evidence showing that an increase in the percentage of money supply to gross domestic product (GDP) by (0.971%) leads to a decrease in the percentage of FDI inflows to GDP by (0.975%), an increase in the percentage of tax revenues to GDP by (4.256%) leads to a decrease in the percentage of FDI inflows to GDP by (0.975%), an increase in interest rate by (1.164%) leads to decrease in the percentage of FDI inflows to GDP by (0.975%), and an increase in inflation rate by (0.329%) leads to increase in the percentage of FDI inflows to GDP by (0.905%). [ABSTRACT FROM AUTHOR]

Motivation: Calls for a green monetary policy are intensifying as the climate crisis deepens. Although the leading central banks of low‐inflation countries are the spokesmodels of this discussion, considerations of green central banking under high inflation continue to lag. The motivation of this article is to contribute to this process with a working example from Turkey—an economy under severe inflationary pressure. Purpose: Our first objective is to document the risks associated with climate change for the Central Bank of the Republic of Turkey (CBRT) in terms of its main mandate of price stability and to provide evidence to pursue green policies. We next examine the feasibility of a green monetary design under high inflation. Methods and approach: We scrutinize the duties and responsibilities of the CBRT as set by law and set out the armoury it would have at its disposal in pursuing a green monetary policy. Exhibiting climate change‐related risks to its mandate(s), we find one climate policy‐related and two mandate‐related reasons for the CBRT to go green, matching them with robust green instruments. Findings: Adopting a green monetary policy has the potential to improve the CBRT's ability to reach its objective of price stability. Indicating that green central banking in a high‐inflation country is more of a need than an option, we also document that greening of the monetary policy does not necessarily conflict with the broad mandates of inflation targeting and financial stability. Policy implications: Evidence from Turkey supports the greening of the CBRT. This call is both feasible in terms of its capabilities and critical as regards fulfilling the mandate. Furthermore, by exposing carbon bias in the country's loan portfolio, our findings support aligning monetary policy with emissions‐abatement instruments, thus contributing to the overall design of Turkey's climate policies. [ABSTRACT FROM AUTHOR]

Financial inclusion is a leading driver of household debt across the global South. Although critical geographers have analysed this debt through the lens of financialisation, few have examined it in terms of monetary politics. This is a salient issue, because poorer nations often have limited control over their monetary policy due to their dependence on foreign currencies, which can adversely affect the structure of their financial markets. Building on the concept of monetary dependency from scholarship on financial subordination, I analyse the monetary politics of debt in Cambodia. Drawing on elite interviews and ethnographic research, I argue that Cambodia's extreme monetary dependence on the US dollar has shaped monetary and fiscal policies that compel poorer households to take on private debt to pay for their basic needs. This paper advances critical geographies of debt and development by studying financial subordination and its impact on financial inclusion in the global South. [ABSTRACT FROM AUTHOR]

In this paper, we examine the effect of monetary policy on liquidity creation (LC) by banks in India. We also study the role of bank characteristics in the transmission of monetary policy to LC. We apply static and dynamic panel regressions to bank‐level data from India, spanning the period 1999–2020. We find a negative impact of monetary policy tightening on total as well as on‐balance sheet LC. We also find that the capital, size and profit of banks support the monetary policy transmission to LC. Finally, the LC channel seems to operate for both public sector and private sector banks. Our findings suggest that the monetary policy authority must closely monitor bank‐level characteristics to improve the efficacy of the LC channel of monetary policy. [ABSTRACT FROM AUTHOR]

India is the second most populous country in the world and stood at seventh rank in a major climate risk index in 2019, which is a grave concern for the Indian government, policymakers and environmentalists. Therefore, the present study examines the role of fiscal policy and monetary policy instruments along with select macroeconomic variables on carbon emission in India over the period 1971–2019 in the non‐linear framework. The outcome of the study reveals that the impact of fiscal and monetary policy instruments on carbon emission is asymmetric in nature. In addition, the positive and negative shocks in fiscal and monetary policy instruments have a positive and negative impact on carbon emissions, respectively. Based on the coefficients' magnitude, the role of fiscal policy instruments has a more prominent effect on carbon emissions than monetary policy instruments. The findings of the study imply that the Indian government is required to implement green fiscal and monetary policies. Use fiscal policy to implement a 'green tax ratio' and a 'green subsidy programme' for manufacturers and investors to reduce CO2 emissions. A 'green lending programme' should be introduced for commercial banks by implementing monetary policy via the central bank. [ABSTRACT FROM AUTHOR]

This paper examines the effects of COVID‐19 new infections on the financial sovereign risks in the group of ten (G10) countries. The paper utilises panel least squares regression using monthly data over the period February 2020–July 2021. Two sovereign risk measures are examined: the Spread of Government Bond Yields and Sovereign Credit Default Swap spread. The results of the robustness tests show that the spread of the COVID‐19 has affected the sovereign risks significantly and positively. Contagion risks have been extended to exchanges rates and growth rates of international reserves. This paper offers two contributions. First, the results show robust evidence on the impact of COVID‐19 on country's sovereign risks. Second, the severity of COVID‐19 on country's sovereign risks is further. The empirical results carry policy implications that (a) countries must sustain efforts for safeguarding the evolution of COVID‐19 pandemic since it is hindering country's credit worthiness, thus increasing sovereign risks, (b) the G10 countries are advised to follow the zero COVID‐19 strategy, (c) macro prudential measures have to be implemented along with monetary policies that mitigate the sovereign risks and (d) implement social measures to restore the health system and contain the uncertainty on both economic and social grounds. [ABSTRACT FROM AUTHOR]

Members of the Monetary Policy Committee (MPC) of the Bank of England seek to subdue inflation using 'monetary policy' to regulate the availability of money and credit to the financial system. The central bank 'policy rate' is the blunt instrument conventionally employed to affect the pacing of economic activity, stimulating or retarding growth. Credibly explaining that the rise in interest rates – the 'tightening' of monetary policy – underway at the moment will continue suppressing demand for goods and services until an inflation target of around 2 per cent is achieved is the emphatic message the bank seeks to convey. Such intentionally destructive and potentially brutal interventions are the critical aim of current bank policy. This article demonstrates how the design of the contemporary monetary regime, which presents itself unequivocally as the outcome of macroeconomic developments, can be recast in anthropological terms, thus revealing the role of the public in the unfolding monetary drama. [ABSTRACT FROM AUTHOR]

Herein, we propose a novel non‐parametric frequency Granger causality test. We apply a filtering process in the time domain to remove possible spurious causality, thereby eliminating potential interference. Thereafter, in the frequency domain, we perform a local kernel regression for each frequency and test the non‐causality hypothesis from the distance between each estimate to zero. We provide asymptotic results for strict stationary series concerning α‐mixing conditions. Our method can also perform group causality tests, a feature that is absent in most alternative methods. Monte Carlo experiments illustrate that our method is comparable, and in some cases, performs better than alternative methods in the literature. Finally, we test the causality between monetary policy variables and stock prices. [ABSTRACT FROM AUTHOR]

This article shows how the European Central Bank (ECB) reduced the risk of politicization and de facto de‐delegation despite experiencing contestation. During the euro area crisis and the coronavirus emergency the ECB's monetary policy measures have been widely praised for their effectiveness. Even though the ECB is an independent trustee that cannot be easily sanctioned, it needs to engage with its principals to receive their political backing for common projects and in order to reaffirm its own centrality in governance. This article identifies different trustee strategies to reduce politicization and thereby to decrease the risk of de facto de‐delegation: (i) dualism, (ii) voluntary self‐restraint, and (iii) changing the yard stick. It concludes by showing that the ECB has expanded its monetary policy toolbox without triggering neither formal nor de facto de‐delegation. [ABSTRACT FROM AUTHOR]

In the last three decades, legal delegation of monetary policy to independent central banks (CBI) has achieved the status of a global norm of good governance. The recent backlash against this independence is an important but understudied trend. Our article analyzes the potential for delegation reversals with a focus on Latin America where CBI was effective in maintaining price stability, but placed important policy constraints on governments. We theorize that, in the shadow of the global norm for CBI, the increasing distance in preferences between the government and the central bank, and the procedural hurdles to change the status quo, explain the intensity of challenges to the delegation contract or the delegated agent. An analysis of the frequency of irregular central bank leadership replacements, and instances of politicization and de‐delegation show the plausibility of our argument. We also show that, in Latin America, reforms de‐delegating monetary policy have been small, balancing the needs that justified delegation in the first place, but rolling back the most stringent constraints placed on financing the government. [ABSTRACT FROM AUTHOR]

Egypt has a long history with external financing dating back to the 19th century. Nevertheless, Egypt's external debt has been mounting remarkably in the past few years. This paper examines the impact of Egypt's external debt on its price level, a topic ignored by researchers. Nonetheless, as inflation is a hydra‐headed problem, this paper develops several models which incorporate fiscal and monetary policies besides other inflation‐inducing internal and external factors using monthly data extending from 2000M1 to 2020 M1. By employing ARDL cointegration analyses on monthly time series variables and using Egypt's wholesale price index to account for inflation, the paper concludes that external debt raises prices both in the short and long runs. Moreover, money supply and interest rate were also found to increase prices in the long run long despite decreasing them in the short run. Finally, upsurges in the international prices of primary products stimulate domestic prices both in the short and long terms, while depreciation in the local currency aggravates inflation in the short and long terms as well. As external debt raises inflation and affects many other inflation‐inducing factors indirectly, the paper concludes that reducing Egypt's external debt may help in curbing Egypt's inflation. [ABSTRACT FROM AUTHOR]

This paper dealt with the regulatory and policy variables influencing Foreign Direct Investment (FDI) in South Africa. Since the advent of democracy 26 years ago, South Africa had its own share of benefits from democratic rule. This was the period of great success, and three free and fair elections were held without violence and intimidation. The South African government started using the "inflation targeting monetary policy framework" to have an environment where inflation will stabilise. Although in literature it is stated that many governments have adopted this policy in order to lure investors in through their attractive risk‐free returns in their investment portfolios. The paper used unobtrusive techniques to analyse secondary data. The South African investment climate remains faced with challenges, which curtail the full attainment of conditions conducive for quality FDI. When regulations are made less cumbersome, it becomes simpler for investment to flow into the country, and international and local entrepreneurs prosper as the ease of doing business improves. South Africa does not have a complex regulatory framework, but its challenges stem from a lack of regulatory transparency, which impeded investment. TISA the agency, which DTI created to reduce obstacles encountered in FDI offers foreign investors clarification on the regulatory and legal environment. Many countries have also cancelled their BITs with South Africa, including Ecuador, Bolivia, and Venezuela. South Africa's business environment and its investment climate are largely dependent on the events that occur in the political arena and the economic environment. [ABSTRACT FROM AUTHOR]

This study shows how exchange market pressure, FDI inflow, and FDI outflow in large emerging market economies interact with monetary policy uncertainty from the United States (US). A panel of 14 countries were examined using bootstrap Granger causality procedure that captures cross‐sectional dependence, reflecting the shared developmental features among emerging economies. In the panel of countries, two‐way relationships were unveiled between the US monetary policy uncertainty and exchange market pressure, between the US monetary policy uncertainty and FDI inflow, between the US monetary policy uncertainty and FDI outflow, between the exchange market pressure and FDI inflow, and between the exchange market pressure and FDI outflow. However, there are variations in country‐specific results. Most importantly, a feedback relationship exists between the US monetary policy uncertainty and exchange market pressure in two countries, while one‐way causality runs from monetary policy uncertainty to exchange market pressure in five countries and from exchange market pressure to monetary policy uncertainty in two countries. No causality was found in five countries. Causality also flows from US monetary policy uncertainty to FDI inflow in six countries and to FDI outflow in one country. [ABSTRACT FROM AUTHOR]

This study assesses the role of monetary, fiscal factors, and trade openness causing variations of nominal and real interest rates in India for the deregulated regime. The autoregressive distributive lag (ARDL) bounds testing approach to cointegration finds that deposit rate, lending rate, and real interest rate have long‐run associations with the monetary, fiscal policy instruments, and trade openness. The error correction model representation of the ARDL framework finds that the broad money supply negatively impacts the deposit rate and the real interest rate, while positive impacts of income on each of the three interest rates are noticed. The fiscal deficit has a significant short‐term negative impact on the deposit rate and has a positive impact on the real interest rate. The exchange rate and openness to trade lower interest rates. The econometric appraisal may be perceptive to keep interest rate in the desired trail through the judicious adjustments of the policy instruments and deficit management. The significant impact of openness to trade on interest rates is a critical issue that the macroeconomic policy may face more challenges. [ABSTRACT FROM AUTHOR]

This paper examines critically the economic package announced by the Indian central government to counter the challenges of lives and livelihood in the Covid‐19 pandemic. This paper estimates the shares of the fiscal economic packages in two phases as per the shares of the vulnerable workers and number of Covid‐19 cases in the Indian states. The recent data on labour market are used from National Sample Survey Organization and data on Covid‐19 cases from Ministry of Health and Family Welfare. This paper recommends alternatively a fiscal stimulus package of Rs. 10 lakh crores (5% of GDP) with an immediate effect to counter the present problems of health, food and unemployment in the pandemic and should be extended to Rs. 24 lakh crores (12% of Indian GDP) to the Indian states for at least 1 year to protect the lives and livelihood of the most vulnerable, informal and migrant workers. The populous and poor states like Uttar Pradesh and Bihar have higher share of vulnerable workers and highly industrialized states like Maharashtra, Gujarat, Delhi and Tamil Nadu have higher number of Covid‐19 cases. Due to the unplanned lockdown in India, there has been a surge in Covid‐19 cases across the country that in turn led to an increase in vulnerable workers in poor states due to reverse migration from industrialized states to populous and poor states during the pandemic. Furthermore, the paper explains the five significant factors that justify the adoption of an expansionary fiscal policy rather than monetary policy. [ABSTRACT FROM AUTHOR]

Can introducing a central bank digital currency (CBDC) improve social welfare? We construct a dual currency model to study whether CBDC with a record‐keeping technology can reduce tax evasion incentives in cash transactions and further achieve better allocations than a cash‐only economy with respect to fiscal arithmetic. We show that when there is inefficiency associated with tax evasion in cash transactions, introducing CBDC with strictly positive interest can remove the inefficiency and thus improve welfare by discouraging tax evasion and rewarding tax payments. This beneficial effect of the CBDC depends on the central bank's fiscal role. [ABSTRACT FROM AUTHOR]

Evidence indicates that since the early 2000s, the central bank in Mexico has been able to implement a solid and credible monetary policy, which has resulted in maintaining the purchasing power of the Mexican peso. Motivated by such evidence and the fact that Mexico (like Canada and the US) is a major oil‐producing country, we set out to examine the dynamic relationship among oil prices and Mexico‐Canada and Mexico‐US exchange rates for 2000–2020. Our findings indicate that (i) these series are co‐integrated and possess a long‐run equilibrium relationship, (ii) oil prices asymmetrically respond to eliminate disequilibrium and (iii) both Mexico‐Canada and Mexico‐US exchange rates are weakly exogenous. Such findings point to the success of the central bank in largely shielding Mexico's exchange rates from oil price fluctuations in the NAFTA region. [ABSTRACT FROM AUTHOR]

This paper examined the effect of oil prices on headline and core inflation in Jordan over the period 2002Q1–2019Q4. Using the Johansen cointegration test and the vector error correction model, the empirical findings show that, in the short‐run, oil prices have a positive significant effect on headline inflation, and a unidirectional Granger causality relationship from oil prices only to headline inflation is found, while core inflation is not affected by oil prices movements. In the long run, oil prices—that appear to be transitory—have no substantial positive effect on headline or core inflation, while both inflation indices are affected by the GDP growth, interest rate, and the import prices for the core inflation model. The study suggests that policymakers should be concerned about targeting core inflation movements when implementing monetary policies. [ABSTRACT FROM AUTHOR]

This study seeks to examine the pass‐through effect of monetary policy tools on economic growth in Nigeria using quarterly time series data from Q12008 to Q42018. The study employed Augmented Dickey Fuller's unit root test, lag selection criteria, and impulse response function under Toda‐Yamamoto approach to examine the pass‐through effect of monetary policy tools on economic growth. The summary of the results is that, the dynamism in monetary policy tools through money supply remains inconsistent and the changes (either increase/decrease) in these elements could dampen down availability of credit to core private sectors thus hampering growth and development. This study therefore recommends; that monetary authority takes proactive measures to ensure sound and robust commercial banks that can facilitates substantial funds to core private sector to boost productivity of the economy. This can be achieve through close monitoring of banks and ensuring full implementations of indirect monetary policy tools. [ABSTRACT FROM AUTHOR]

Why do governments fail to implement policy commitments in contractual agreements with international organizations? While scholars have scrutinized domestic factors as obstacles to compliance, we argue that reform programs may be unimplementable by design. We study this hypothesis in the context of International Monetary Fund (IMF) programs, in which borrowing countries must commit to far‐reaching economic policy reforms for access to credit. We collect detailed compliance data on individual policy conditions to assess the determinants of compliance failures of IMF programs from 1980 to 2009. Controlling for a host of borrower‐specific variables, features of the loan, unexpected shocks during implementation, donor influence, and bureaucratic interest, we find that the number of conditions is a robust predictor of implementation failure. Our theoretical explanation for these findings is that over‐ambitious program designs are the result of intra‐organizational bargaining within the IMF bureaucracy. While an area department within the IMF drafts the initial reform program, functional departments use their amendment power to include policy conditions that they care about, without due consideration of local circumstances, which leads to over‐ambitious programs. These findings have important implications for theories of compliance as well as for policymaking in international organizations. [ABSTRACT FROM AUTHOR]

Studies that explore the relationship between financial innovation and the stability of money demand in Africa use the indirect measure of financial innovation. Previous studies on Nigeria also ignored total monetary aggregates (M3), despite its importance to monetary policy formulation and liquidity management. This paper contributes to the existing literature in two ways; first, we expand the generic money demand function to include the direct measure of financial innovation. Second, we test the model on Nigeria using a broader definition of money demand—narrow money (M1), broad money (M2) and total monetary aggregates (M3). We employ the Pesaran et al. (2001) autoregressive distributed lag (ARDL) bounds test approach to cointegration in estimating the respective equations and find evidence of a long‐run relationship between money demand and financial innovation. The CUSUM and CUSUM‐of‐Squares tests reveal stable money demand across the three measures of money demand, which indicates that the inclusion of financial innovation has not altered the long‐run stability of money demand in Nigeria. [ABSTRACT FROM AUTHOR]

The empirical evidence on the nexus between monetary policy and economic growth remains ambiguous with mixed and differing results, depending on the country's characteristics, the choice of monetary policy variables employed, and recently, the place of financial inclusion in monetary policy formulation and transmission mechanism. This study explores the nexus between monetary policy and economic growth in Nigeria while accounting for the roles of interest rate, money supply, and financial inclusion over a base period of 2004q1 to 2020q4 and a projected period of 30 quarters. Using the dynamic simulation autoregressive distributed lag (ARDL) model, the study finds that in the short run, only the effect of money supply on economic growth is statistically significant. However, in the long run, interest rate, money supply, and financial inclusion have statistically significant effects on economic growth. The results are supported by the plots of the dynamic simulated ARDL, where economic growth response is predicted at various time periods after forcing a ±1% change (positive and negative shocks) in interest rate, money supply, and financial inclusion. We, therefore, recommend among other things an aggressive financial inclusion strategy with clearly defined deliverables and timelines to reduce the percentage of persons excluded from the formal financial system. [ABSTRACT FROM AUTHOR]

Given the importance of output growth in Nigeria and the need for monetary policy decisions to be guided by the knowledge of the asymmetric effects of positive and negative monetary policy shocks, this study investigates the asymmetric effects of monetary policy shocks on output growth in Nigeria using quarterly data from 1981Q1 to 2018Q4. The study employs the recently developed Lee and Strazicich unit root test with structural breaks, Nonlinear ARDL, and the Hatemi‐J causality tests. The result reveals the presence of long‐run and short‐run asymmetries in the effect of monetary policy shocks on output growth in Nigeria. The results of the long‐run effect show that both positive and negative monetary policy rate shocks have positive, elastic, and statistically significant effect on output growth. For the short‐run, the results indicate that the effect of negative monetary policy shocks dominate the effects of positive monetary policy rate shocks, while the effect of positive money supply shocks dominates the effect of negative money supply shocks. Furthermore, the study finds evidence in support of the expansionary monetary policy in the long‐run. Hence, the recommendations for expansionary monetary policy decision to enhance output growth. [ABSTRACT FROM AUTHOR]

In developing countries, there has been a surge in the size of the informal economy in recent years. However, the effect of monetary policy on the informal economy and informal economy responses to shocks from the formal economy is yet to receive empirical attention. Our study aims to explore monetary policy effect on the informal economy and response to shocks in the formal economy in Nigeria for 48 years (1970–2018). Using Autoregressive Distributed Lag and Impulse Response Function, we examined empirically how various monetary policy instruments affect the informal economy and responses to shocks in the formal economy. Our result indicates that credit to the private sector along with the exchange rate had a positive and significant effect on the informal economy both in the long run and short run. The estimate further indicates bank lending rate had a positive and insignificant effect on the informal economy. Our research reveals that in the short run, the informal economy responds positively to shocks in the formal economy while the reserve is the case in the long run. These results underscore the importance of factoring the informal economy in monetary policy decisions. [ABSTRACT FROM AUTHOR]

We use rich microdata from the 1951 Survey of Consumer Finances to study inflation expectations and consumption during the Korean War, in an episode when monetary policy was constrained. We provide the first detailed analysis of consumer inflation expectations from that era. Using survey measures of actual and expected spending on durables, cars, and homes at extensive and intensive margins, we show that the difference between consumption in 1950 and expected consumption in 1951 increases with expected inflation. Effect sizes are modest, even though household balance sheets were healthy and inflation was salient. [ABSTRACT FROM AUTHOR]

Using high‐frequency identification, I show that the Federal Reserve significantly influences its political environment. A 50‐bp exogenous contractionary monetary shock is associated with a decline in the U.S. president's job approval by up to five percentage points in the subsequent 12 to 24 months. This loss exceeds the victory margin in six out of the eight latest elections. My findings also suggest that presidents who are in the second half of their terms are particularly vulnerable to monetary shocks. Such vulnerability is largely explained by the evolving attitudes toward key macroeconomic factors like unemployment and inflation over the presidential life cycle. Related Articles: Cho, Sungdai, and Garry Young. 2008. "The Asymmetric Impact of Inflation on Presidential Approval." Politics & Policy 30(3): 401–30. https://doi.org/10.1111/j.1747‐1346.2002.tb00128.x Hazakis, Konstantinos J. 2015. "The Political Economy of Economic Adjustment Programs in the Eurozone: A Detailed Policy Analysis." Politics & Policy 43(6): 822–54. https://doi.org/10.1111/polp.12141 Pulatov, Abdullo, and Ahmad Hassan Ahmad. 2021. "Political Business Cycles in Post‐Communist European Countries." Politics & Policy 49(5): 1248–69. https://doi.org/10.1111/polp.12427 [ABSTRACT FROM AUTHOR]

This article explores legal and constitutional dimensions of central banks' powers to create money, 'central bank reserves', through monetary policy operations. Despite the prominence of monetary authority since the Financial Crisis, the law supporting the creation of central bank reserves is very obscure, as is the role of law in structuring constitutional authority over money. We de‐mystify those important matters in three steps. First, we explain, for a legal audience, the role of central bank reserves in the financial system and broader economy. Secondly, we analyse the legal basis for the creation of central bank reserves in three prominent 'North Atlantic' monetary jurisdictions: the US Dollar, Euro and Sterling systems. Thirdly, we show how the legal structure of central banking intermediates the constitutional state's authority over money through parts of the financial system, focusing on high‐profile policy proposals, including 'QE for the people', and the creation of central bank digital currencies. [ABSTRACT FROM AUTHOR]

Resumen: América Latina experimentó durante 2020 una crisis laboral sin precedentes como consecuencia de la pandemia por COVID‐19. Este artículo analiza los impactos de la pandemia sobre la dinámica del empleo y los ingresos, así como las políticas implementadas por los países de la región. Se observa una drástica contracción del empleo, de las horas trabajadas y de los ingresos como consecuencia de la fuerte reducción del nivel de actividad económica. Estos impactos han sido desigualadores y el sendero de recuperación está siendo acompañado de una amplificación de brechas laborales y de ingresos entre los diferentes grupos de población. [ABSTRACT FROM AUTHOR]

In Sub‐Sahara Africa, few studies have been conducted on how unemployment affects monetary policy in each country. Even an aggregate study of the phenomenon in Sub‐Sahara Africa is near absent despite a high level of unemployment in the region. To investigate the empirical link between unemployment and monetary policy, the study employs a sample of 37 countries in Sub‐Sahara Africa for the period 2011–2017. Data were obtained from the World Bank and International Monetary Fund database. Using the difference Generalized Method of Moments model, the study determines how monetary policy (using the lending rate as proxy) responds to unemployment, employer's condition and total labour force in Sub‐Sahara Africa. We found that monetary policy indirectly responds to employer's condition, but the positive effect of the total labour force on monetary policy is relatively higher than total unemployment as a percentage of the labour force in the region. The study concludes that a linkage exists between monetary policy and employment indicators in Sub‐Sahara Africa and therefore, made some policy recommendations. [ABSTRACT FROM AUTHOR]

Do presidents matter for America's economic performance? This article reports several findings and hypotheses derived from a set of least likely cases, the Gilded Age presidents. These executives are often dismissed as weak and ineffective non‐entities. However, statistical data and qualitative evidence suggest that presidents do matter, even during the Gilded Age. They are powerful and essential actors who can deeply affect American economic performance in three subtle ways. The (in)action of Gilded Age presidents during economic crises appears to have mattered most. More tentatively, presidential vision and skill at coalition building also appear to correlate strongly with economic performance. These findings are not merely of historical interest, as the similarities with the twenty‐first century are striking. These cases therefore have important implications for theories of presidential power and performance, American political development, and the role of ideas in politics. [ABSTRACT FROM AUTHOR]

This paper studies fiscal policy in a model with nominal gross domestic product (GDP) targeting. We find that, with wage rigidity, nominal GDP targeting generates lower welfare losses than inflation targeting and a Taylor rule. On the other hand, adopting this regime makes standard fiscal policy rules, whereby distortionary tax rates are designed to respond to economic activity, dependent on the behavior of inflation instead. We also find that the fiscal multipliers with nominal GDP targeting are smaller than the multipliers under inflation targeting and the Taylor rule. Therefore, nominal GDP targeting does not necessarily outperform other monetary policy rules. [ABSTRACT FROM AUTHOR]

We identify a new channel of the monetary policy transmission that affects asset prices through the secured interbank market. Central bank's open market operations, by changing the relative amount of securities and reserves, alter the amount of securities that can be used as collateral and, consequently, influence their prices. Ceteris paribus the magnitude of the effect depends on assets' pledgeability properties (haircuts). We analyze the relation between yields of euro area government bonds, the haircuts applied to these assets and the relative amount of bonds and central banks reserves. The empirical evidence confirms that this channel is economically relevant. [ABSTRACT FROM AUTHOR]

This article analyses political business cycles (PBCs) in ten former European communist countries. The dataset used covers the period 1990‐2018. The results show that the PBCs manifest themselves in these countries through both fiscal and monetary policy. Changes in government expenditure during election times are found to be significant in reducing unemployment. Hence, it signals that there is a politically driven fiscal expansion. The results also show the importance of institutional quality in reducing the effects of the PBCs. The monetary policy models indicate that changes in money stock during and around election times affect the unemployment rate. Undertaking a subsample analysis of the non‐EU and EU members highlights the case that the membership of the EU is an important factor in preventing the development of PBCs. Related Articles: Hazakis, Konstantinos J. 2015. "The Political Economy of Economic Adjustment Programs in the Eurozone: A Detailed Policy Analysis." Politics & Policy 43 (6): 822‐854. https://doi.org/10.1111/polp.12141 Rogers, Chris. 2009. "The Politics of Economic Policy Making in Britain: A Re‐Assessment of the 1976 IMF Crisis." Politics & Policy 37 (5): 971‐994. https://doi.org/10.1111/j.1747‐1346.2009.00207.x Sager, Fritz, and Markus Hinterleitner. 2016. "How do Credit Rating Agencies Rate? An Implementation Perspective on the Assessment of Austerity Programs during the European Debt Crisis." Politics & Policy 44 (4): 783‐815. https://doi.org/10.1111/polp.12165 [ABSTRACT FROM AUTHOR]

The existing literature portrays that the instruments of monetary policy, such as interest rate, money supply, and price have a direct bearing on economic growth and social welfare. Against this background, the present study investigates the monetary policy transmission on manufacturing output in one of the fastest‐growing economies—India. Highlighting how the Central Bank works in a political–economic context, the precise research question used entails—how does monetary policy affect the manufacturing output in India? And what is the transmission channel and level of magnitude? To address these questions, we employed autoregressive distributed lag bounds testing for co‐integration on the time series data collected from World Development Indicators and International Finance Statistics for the period from 1980 to 2018. The model estimation affirms the presence of a co‐integrating relationship among the variables. In the short run, we have a mixed result of relationship among determining variables and manufacturing output, while in the long run, the lending rate has positive and the exchange rate has significant relationships among the variables. The variables such as consumption and gross capital formation have insignificant influence even though negative. The causality test reveals unidirectional short‐run causality stemming from lending rate to industrial output testifying lending rate‐driven growth. In a nutshell, the lending rate has long‐term positive relationship with that of industrial output, and the functional independence of the Central Bank has long‐term consequences on output and this requires a right chord of balance to be struck between political motives and the RBI's autonomy. [ABSTRACT FROM AUTHOR]

This paper estimates a nonlinear vector autoregression (VAR) model to assess whether the real effects of monetary policy shocks depend on the level of uncertainty. Crucially, uncertainty is modeled endogenously in the VAR, thus allowing to take account of two unexplored channels of monetary policy transmission working through uncertainty direct reaction and uncertainty mean reversion. We find that monetary policy shocks are about 50–75% more powerful during tranquil times than during firm‐ and macro‐level uncertain times. Failing to account for endogenous uncertainty would bias responses and imply twice more effective monetary policy during tranquil times, mainly because of the non‐consideration of uncertainty mean reversion. [ABSTRACT FROM AUTHOR]

This article retraces how financial stability considerations interacted with US monetary policy before and during the Great Recession. Using text‐mining techniques, this article innovates by constructing indicators for financial stability sentiment expressed during testimonies of five Federal Reserve Chairs. Including these text‐based measures adds explanatory power to Taylor‐rule models. Negative financial stability sentiment coincided with a more accommodative monetary policy stance than implied by standard Taylor‐rule factors, even during the decades before the Great Recession. These findings are consistent with a preference for monetary policy reacting to financial instability rather than acting pre‐emptively to a perceived build‐up of risks. [ABSTRACT FROM AUTHOR]

Over the years, there has been an increasing debate over the role of the Central Bank in targeting the policy objectives and the extent to which the targets can anchor the expectations. The present study seeks to identify the linkage between monetary policy and financial stability in India. The study, based on quarterly data from January 2001 to July 2018, finds that the financial sector allied variables (BSE SENSEX index, Exchange Rate and Index of Industrial Production) have shown significant response to shocks in the policy rate, that is, reverse repo rate, except for exchange rate variable that was taken as a proxy for external sector stability. Also in the short‐run, when a shock is imparted to the policy rate, the response of the exchange rate is insignificant. Other than that, the corporate sector along with real output growth and banking sector variables induces a significant change in policy rate when a shock is introduced. With variables responding in the ideal direction to shock in the policy rate, it is inferred that the movement is in line with what ideally should hold over time. This leads us to conclude that the monetary policy safeguards financial stability in India. [ABSTRACT FROM AUTHOR]

The aim of this article is to investigate the dynamic effects of monetary policy shocks on economic activity and aggregate price levels across Mexican states. To do this, a recursive structural panel VAR model is implemented as proposed by Pedroni which allows for regional heterogeneity and structural identifying restrictions of common monetary policy shocks. Empirical evidence suggests a common monetary policy shock to short‐term interest rates induces significant cross‐state variation in prices and output level responses. Additional analysis indicates that structural features, such as the industry mix and the small versus large firm mix, are possible sources of the observed cross‐state variation influenced by interest rates and credit channels. We conclude that the observed differentiated regional impacts are sufficiently important to justify rethinking Mexico's current monetary policy framework in order to explicitly consider a regional view. [ABSTRACT FROM AUTHOR]

The purpose of the current study is to investigate the degree of inflation persistence, its geographical variation, sources of cross‐regional variation, and presence of geographical/sectoral aggregation bias in national monetary policy. Our data set covers 26 NUTS‐2 level Turkish regions and monthly CPI inflation over the period 2003–2019. We first estimate the degree of regional inflation persistence by autoregressive regressions, check its robustness against the presence of structural breaks (by Bai–Perron's algorithm) and nonlinearities (by Markovian Regime Switching regressions). Second, we examine the possibility of geographical and sectoral aggregation bias. Third, we investigate the cross‐regional determinants of inflation persistence by panel data analysis, employing hybrid‐effects spatial panel regressions. We analyze the direct and indirect effects of the determinants and test for regional spillover effects. Three main results are obtained. First, estimated persistence degrees are heterogeneous across regions. The geographical pattern is empirically robust against structural breaks and nonlinearities. We find that inflation persistence is distributed in a spatially correlated manner. Second, when sectoral and regional aggregation bias is tested, only sectoral aggregation indicates a considerable level of bias. Third, we find that the presence of large firms in the region and a higher share of agricultural output in GDP leads to lower persistence, while an increased share of industrial output, and increased trade volume leads to higher inflation persistence. Moreover, we find spatial spillovers of price variability evident in regression analysis. From a policy standpoint, it is required that structural policy programs are targeted to maintain flexibility in the regions where persistence is high (i.e., providing market entry/exit, institutional quality, policy credibility, stimulation of SMEs). Moreover, sectors that have high persistence, such as Hotels and Restaurants (persistence degree 0.55) and Health Services (0.39) should be weighted more in CPI calculations. [ABSTRACT FROM AUTHOR]

This study tries to shed light on whether the inflation targeting framework behaves as a growth enhancing strategy in some selected southern countries. The study also investigates the best choice of inflation targeting regimes. Using panel data regression model for a growth regression, we found that this monetary policy framework has a relatively significant positive effect on economic growth. This means that even in terms of economic growth, using inflation as a nominal anchor is a better framework to conduct monetary policy than using exchange rate or money aggregate. The results also revealed that among different types of inflation targeting frameworks, full‐fledged can be the best choice for the selected southern countries. [ABSTRACT FROM AUTHOR]

The monetary policy framework of India has undergone several transformations reflecting underlying macroeconomic and financial conditions as also the dominant socio‐politico‐economic paradigm. The present study makes pertinent commentary notes on different monetary policy approaches, including, for instance, the era of development planning, the era of monetarism, the era of multiple indicator approach, and the era of inflation targeting in India along with their respective advantages and disadvantages. [ABSTRACT FROM AUTHOR]

We provide new evidence on bank ownership and transmission of monetary policy using bank‐level data on 453 banks in Central and Eastern European economies between 1998 and 2012. Only domestic banks adjust loans to changes in monetary policy, while foreign banks do not. Conventional wisdom says that this is because foreign banks can rely on parent banks' funding to insulate against monetary policy shocks. In this paper we document an alternative explanation. Deposits in foreign banks do not react to monetary policy, hence the bank lending channel is only triggered in domestic banks. [ABSTRACT FROM AUTHOR]

Charles Tilly emphasizes that state formation is a contingent and violent process: states develop as they extract resources, including currency, from a population. Neochartalist approaches to money challenge what I call the extractivist view of state formation because they see currencies as public institutions established by governments, not a resource to be seized from a population. At the same time, neochartalists rarely address how state institutions capable of establishing monetary institutions emerge. In this article, I propose a framework to analyze the entangled development of the institutions of money and state. I then showcase its usefulness by revisiting a series of crowd actions and militarized responses in eighteenth‐century Massachusetts and Pennsylvania today known as Shays' Rebellion and the Whiskey Rebellion, focusing on the initially ad hoc and then routinized funding mechanism that enabled emerging state actors to deploy armed groups. In closing, I argue that despite the violence involved in the emergence of the institutions of state and money, citizens and inhabitants can begin to imagine democratic ways of institutionalizing money today. [ABSTRACT FROM AUTHOR]

Since the Global Financial Crisis of 2007–2009, economists are reconsidering the appropriate role of monetary policy towards equity bubbles. This paper contributes to these deliberations by estimating the response of the stock market to monetary policy tightening by using a Bayesian time‐varying VAR model. By introducing the cyclically adjusted price/earnings ratio, we propose a method that estimates its fundamental and bubble components. We find that asset prices will initially fall and eventually rise again but without the risk of feeding the bubble. Counterfactual policy experiments provide additional evidence that monetary policy can lean against equity and housing prices. [ABSTRACT FROM AUTHOR]

While assertions of debt constraints on monetary policy have been documented in the literature, empirical investigation into this phenomenon remains egregiously limited, with the only study using the Generalized Method of Moments that fails to provide confidence intervals for the threshold estimate. We examine whether or not high debt levels constrain the interest rate setting behaviour of the Bank of Ghana, with the aid of sample splitting and a threshold estimation technique that overcomes the weaknesses of previous studies. We find that monetary policy response to inflation gap in the high debt regime (above the debt to gross domestic product [GDP] threshold of 35.1%) is woefully disproportionate, a key indication of debt constraint and inflation accommodation by a central bank that is supposed to be targeting inflation. Important policy recommendations are proffered. [ABSTRACT FROM AUTHOR]

This paper examines changes in the effects of unconventional monetary policies in the United States. To this end, we estimate a Markov‐switching VAR model with absorbing regimes to capture possible structural changes. Our results detect regime changes around the beginning of 2011 and the middle of 2013. Before 2011, the U.S. large‐scale asset purchases (LSAPs) had relatively large impacts on the real economy and prices, but after the middle of 2013, their effects were weaker and less‐persistent. In addition, after the middle of 2013, which includes the monetary policy normalization period, the asset purchase (or balance sheet) shocks had slightly weaker effects than during the early stage of the LSAPs but stronger effects than during the late stage of the LSAPs, while interest rate shocks had insignificant effects on the real economy and prices. Finally, our results suggest that the positive responses of durables and capital goods expenditures to interest rate shocks weakened the negative impacts of interest rate hikes after the middle of 2013 including the period of monetary policy normalization. [ABSTRACT FROM AUTHOR]

We show that the negative effect of household credit growth on subsequent economic growth documented in the recent literature is not the same across countries. The effect is stronger in countries with weak institutions where the fraction of consumer credit in total household credit is greater. That is an important nuance as consumer credit is a sizable part of household credit in many emerging markets and its rapid buildup should be observed with the same caution as a rapid buildup in housing credit. [ABSTRACT FROM AUTHOR]

We empirically investigate the relationship between the return on collateral and monetary policy implementation in the channel system. Recent developments in monetary theory suggest that the return on government assets which measures the opportunity cost of holding collateral should have negative impacts on the interest‐rate spread and the interbank market rate. The central bank should set a higher spread when the return on collateral is below a cutoff but implements a lower spread when the return on collateral is higher than the cutoff. The interbank market rate tends to lie above the policy target rate when the return on collateral is low and vice versa. We use data from Eurozone area and six industrialized countries to test these theoretical implications. We propose two econometric models: one is more structural and closely related to the monetary model to test the negative relationships, and the other is based on the threshold autoregression model to detect the potential cutoffs. Our findings provide conditional support for the negative impact of return on collateral. [ABSTRACT FROM AUTHOR]