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Although negative shocks have persistent effects on output on average, this article shows that macroeconomic policies can influence the speed of recovery and mitigate the persistence of the shock. Indeed, monetary and fiscal stimulus and foreign aid can spur a rebound, with impacts that are asymmetrically stronger than in non-recovery years. Real depreciation and the exchange rate regime also have asymmetric growth effects in a recovery year relative to other years of expansion. (JEL C23, E32, F43, 043), 1. INTRODUCTION The objective of this article is to present a series of stylized facts on how countries recover from recessions. (1) Recent literature demonstrates that negative shocks, particularly financial [...]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jimonfin.2008.10.003 Byline: Peter Tillmann Abstract: This paper studies the time-varying role of the cost channel of monetary transmission, i.e. the supply-side effect of monetary policy based on firms' costs of holding working capital. For that purpose, we provide rolling-window estimates of an augmented New Keynesian Phillips curve and show that the cost channel exhibits important time-varying dynamics. We find, as a general pattern, that the cost channel was most important in the pre-Volcker period and less important in the Volcker-Greenspan era. Recently, however, the cost channel regained importance. Since the cost channel is based on the transmission of policy impulses through bank lending, it is likely that the time-varying cost channel reflects the cyclical nature of financial frictions. Author Affiliation: Swiss National Bank, Economic Analysis, Borsenstrasse 15, CH-8022 Zurich, Switzerland Article Note: (footnote) [star] The views expressed in this paper do not necessarily reflect those of the Swiss National Bank.

Ex post efficient policy responses to bank runs and ex ante incentives these provide to depositors are studied. Policy interventions can have destabilizing effects on the banking system.

A model illustrating the effects of monetary policy and imperfect information on price setting is developed. Firms pay greater attention to idiosyncratic conditions when these are more variable or more important than aggregate conditions.

This paper utilizes differences in de jure deposit insurance coverage across banks and changes in coverage over time to identify a bank-lending channel in Poland. Banks with partial guarantees have a stronger loan response to monetary policy than banks with full guarantees. Furthermore, the weak response of the fully guaranteed banks is attributed to their ability to raise low-reserve, uninsured time deposits relative to the partially covered banks. When differential coverage is eliminated, there is no disparity in the loan response between the two groups. This lending channel has implications for credit control and financial system development in emerging markets. (JEL E52, G21, G28), I. INTRODUCTION The bank-lending channel (BLC) emphasizes the role of bank loans in the transmission of monetary policy. According to the BLC, contractionary monetary policy can decrease the loan supply [...]

The examination of the ripple effects on the duration of unemployment of disinflationary monetary policy shows that African Americans disproportionately bear the brunt of these policies. Contractionary policy weakens income stability by creating new unemployment spells and weaker employment stability reduces job tenure and experience.

An important stylized fact to emerge from VAR estimates is that exogenous monetary policy shocks (also labelled unsystematic monetary policy) have a delayed, persistent, hump-shaped effect on inflation. I argue that this empirical pattern is fragile. In particular, it disappears when one examines periods without large shifts in the level of inflation (such as 1984-2005). An important consequence is that the hump-shaped VAR estimated response of inflation is not appropriate to fit stylized models of the response of inflation around a stable steady state inflation level. JEL classification: E52 Keywords: Monetary policy transmission; VARs; Inflation dynamics

A key reason why wages no longer keep up with productivity growth is because not enough attention is given to reducing unemployment. Economic policy should be recalibrated to correct this condition.

Micro-level price dynamics prior to and after the establishment of the Bretton Woods monetary regime is examined. Price data from the Sears, Roebuck and Company catalog reveals that the average length between nominal changes is two years.

A study was conducted to examine the transmission mechanism of monetary policy in Trinidad and Tobago. Financial markets are usually unsophisticated in developing countries. Findings indicate that credit channel is dominant in Trinidad and Tobago. It is concluded that these results can help policy makers in the design and implementation of monetary policy in other developing countries.

A study was conducted to analyze Post-Keynesian alternatives to the Taylor rule. Two approaches to Post Keynesian interest rate policy are presented. The first approach focuses on the use of nominal interest rates in aggregate demand fine-tuning, while the second approach shifts from reaction functions. Conclusions show that in order to achieve Post Keynesian macro-policy objectives, monetary policies must improve.

A comparison of continuous time and discrete time models is presented. Discrete time sticky price models entail complete price flexibility and longer contracts compared to continuous time models owing to lower menu costs. The implications of monetary shocks and trend inflation on these price models are analyzed.

A variety of macroeconomic models was used to study the counter actions of business firms towards monetary policy shocks. It was found that a hump-shaped inflation is brought byassumptions on the costs of contract renegotiating and that of price adjustment. Impulse responses towards different conditions are presented in graphs.

The study shows that output response is quick and dies out faster when monetary policy shock takes place in the first two quarters of the year, while response is little when shock happens in the last two quarters of the year. Uneven wage contracts in various quarters are also shown to influence differential responses of output.

The study examines the Taylor principle, which refers to the proposal of central banks to raise interest rate by more than one-for-one when inflation rises so as to stabilize the macroeconomy. Findings show that macroeconomic volatility rises when the principle is not satisfied. Details on the impact of regime change and monetary policy are discussed.

Usage of structural vector autoregressive models, to find effect of monetary policy regimes on the U.S. economy is presented.

The trends in the impact of monetary policy on the returns in the stock market are analysed.

One distinguishable characteristic of emerging market economies is that they are not financially robust. These economies are incapable of smoothing out large external shocks, as sudden capital outflows imply abrupt swings in the real exchange rate. Using a small open-economy model, this paper examines alternative monetary policy rules for economies with different degrees of liability dollarization. The paper answers the question of how efficient it is to use inflation targeting (IT) under high liability dollarization. Our findings suggest that it might be optimal to follow a nonlinear policy rule that defends the real exchange rate in a financially vulnerable economy. JEL classification: E52; E58; F41 Keywords: Liability dollarization; Inflation targeting; Monetary policy roles; Latin America

In this paper, we evaluate seven simple monetary policy rules in a wide range of models of the Canadian economy. Our results indicate that none of the seven simple policy rules we examined is robust to model uncertainty, in that no single rule performs well in all models. In fact, our results show that the performance of some of the simple rules, particularly rules with interest rate smoothing and rules with a high coefficient on the inflation gap, can substantially deviate from that of the optimal rule and can even be unstable in some models. Furthermore, we find that 'open-economy' rules do not perform well in many models. We find that adding an exchange rate term to a simple policy rule often increases the value of the policy-maker's loss function. Although it is not robust, we find that a simple nominal Taylor-type rule that has a coefficient of 2 on the inflation gap and 0.5 on the output gap outperforms the other simple rules in a certain class of models. However, even in those models, the loss-function value of this simple rule can be substantially higher than that of the optimal or base-case rule. JEL classification: E52, E58

This paper studies optimal fiscal and monetary policy under imperfect competition in a stochastic, flexible-price, production economy without capital. It shows analytically that in this economy the nominal interest rate acts as an indirect tax on monopoly profits. Unless the social planner has access to a direct 100% tax on profits, he will always find it optimal to deviate from the Friedman rule by setting a positive and time-varying nominal interest rate. The dynamic properties of the Ramsey allocation are characterized numerically. As in the perfectly competitive case, the labor income tax is remarkably smooth, whereas inflation is highly volatile and serially uncorrelated. An exact numerical solution method to the Ramsey conditions is proposed. JEL classification: E52; E61; E63 Keywords: Optimal fiscal and monetary policy; Imperfect competition; Friedman rule; Profit taxes

We develop an equilibrium model of the monetary policy transmission mechanism that highlights information frictions in the market for money and search frictions in the labour market. The information friction increases the persistence in the response of interest rates following monetary policy regime shifts. This occurs because agents have incomplete information about the nature of the shifts and optimally update their inflation forecasts using an 'adaptive' expectations rule. The search friction transmits the interest rate movements to the labour market by affecting job creation activities; together, the two frictions imply that unemployment reacts very gradually to monetary policy shocks. JEL Classification: E4, E5 Marches du travail, liquidite, et regimes de politiques monetaires. Les auteurs developpent un module d'equilibre general du mecanisme de transmission des effets de la politique monetaire qui souligne les frictions informationnelles dans le marche de la monnaie et les frictions dans le processus de recherche d'emploi dans le marche du travail. Un changement dans le regime de politique monetaire, qu'on presente ici comme une reduction exogene dans le taux cible a long terme de la croissance du stock de monnaie se traduit par un manque persistant de liquidite et un accroissement persistant du taux d'interet. Cette persistance se produit parce que les agents ont une information incomplete quant a la nature du choc, ce qui les amene a optimiser l'ajustement de leur prevision d'inflation en utilisant une regle d'anticipations adaptatives. La periode de haut taux d'interet reduit les activites de creation d'emploi darts le

In this paper we study the effects of monetary policies on employment, capital accumulation, consumption, and the term structure of interest rates in a cash-in-advance economy, where money is required for consumption expenditures. Monetary policy involves targeting the inflation rate. The detailed dynamics of the model are fully worked out. As no numerical analysis is involved, we are able to identify very clearly the different channels through which monetary policy will impinge on the important macroeconomic variables. The model is also used to discuss the 'Great Canadian Slump.' JEL Classification: E52 and E43 Politique monetaire dans une economie ou l'argent comptant est requis pour les depenses de consommation: emploi, accumulation de capital et structure temporelle des taux d'interet. Ce memoire etudie les effets des politiques monetaires sur l'emploi, l'accumulation du capital, la consommation et la structure temporelle des taux d'intere dans une economie ou l'argent comptant est requis pour les depenses de consommation. La politique monrtaire est definie par des cibles pour le taux d'inflation. On developpe la dynamique du modele en details. Comme il ne s'agit pas d'une analyse numerique, on est en mesure d'identifier clairement les differents canaux a travers lesquels la politique monetaire peut avoir un impact sur les variables macroeconomiques importantes. Le modele est aussi utilise pour discuter la <>.

The changes in short-term interest rates in Brazilian Monetary Policy Committee's meeting days is assessed to study the impact of monetary policy on the interest structure. Analysis indicates that the inflation targeting approach coupled with floating exchange rate reduced interest rate changes.

Economic growth in the European union remains slow, and budget deficits are increasing rapidly. Labor inflexibility is gaining more attention than the restrictive fiscal and monetary policies, which are the main causes for economic downturn. At this juncture it is imperative that the European Union abandon entirely the limits on budget deficits for their member nations. European Union should see to it that monetary policy does not dominate the overall economic policy.

This paper analyzes how the optimal monetary policy of the European Central Bank varies with the persistence in supply and demand shocks.

On a study on concerns that reductions in reserve balances increases volatility of interest rates and reduces monetary policy effectiveness, this paper concludes that such reductions have not impinged on the ability of the Federal Reserve to conduct monetary policy in the manner that it has in recent years.