Monetary Policy in Low-Inflation Economies

0521848504......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
Contributors......Page 9
Acknowledgments......Page 13
Introduction......Page 15
THE THEORY CHAPTERS......Page 17
Implementing Monetary Policy in Low-Inflation Environments......Page 22
Threshold Effects on the Costs of Inflation......Page 24
The Interaction of Inflation, Financial Markets, and Intermediation......Page 26
REFERENCES......Page 27
1 The Welfare Cost of Inflation in the Presence of Inside Money......Page 29
1.1 The Household's Problem......Page 30
1.2 Production......Page 31
1.4 Financial Intermediation......Page 32
2.1 Utility Function......Page 33
2.2 Business Cycle Properties......Page 34
3.1 Steady State......Page 38
3.2 Sensitivity/Alternative Calibration......Page 41
3.3 Transition......Page 42
4. CONCLUDING REMARKS......Page 44
REFERENCES......Page 45
Commentary......Page 46
REFERENCES......Page 48
2.1 Small Welfare Costs......Page 49
2.3 Are Large Ticket Items More Likely to Be Bought with Cash?......Page 50
2.5 How Good an Approximation to Leave Out Firms’ Holdings of Money?......Page 52
2.7 Falling Marginal Costs of Inflation Again: Inflation and the Returns to Investing in Deposit-Transactions Technology......Page 53
2.8 Freeman, Henriksen, and Kydland and Wallace's Dictum......Page 54
REFERENCES......Page 55
1. INTRODUCTION......Page 57
2. THE FIRM AND THE CHOICE OF PRICE FLEXIBILITY......Page 59
2.2 Determination of Price Flexibility in the Aggregate......Page 61
3.1 Households......Page 62
3.3 Firms......Page 63
3.5 Solving the Model for Given Price Flexibility......Page 64
3.6 The Determination of Optimal Price Flexibility......Page 65
4. PRICE FLEXIBILITY AND THE EXCHANGE RATE REGIME......Page 68
5. OPTIMAL EXCHANGE RATE RULES......Page 71
6. CONCLUSIONS......Page 74
A.1 Obtaining the Approximation (2.10)......Page 75
A.3 Optimal Policy with Endogenous Price Flexibility......Page 76
ACKNOWLEDGMENTS......Page 77
REFERENCES......Page 78
Commentary......Page 80
REFERENCES......Page 81
Commentary......Page 82
ACKNOWLEDGMENTS......Page 87
1. THE TASKS OF MONETARY POLICY......Page 89
2.2 The Private Sector......Page 92
3. EQUILIBRIUM FOR EXOGENOUS POLICIES......Page 94
4. CONTROLLING INDETERMINACY......Page 97
5. THE INFLATIONARY BIAS FROM INCOMPLETE MARKETS......Page 98
6.1 The Issues......Page 101
6.2 Ideal Policies......Page 102
6.3 Equilibrium Policies......Page 105
7. CONCLUSIONS AND EXTENSIONS......Page 106
REFERENCES......Page 107
Commentary......Page 109
REFERENCES......Page 111
Commentary......Page 112
REFERENCES......Page 115
1. INTRODUCTION......Page 117
2. THE ENVIRONMENT......Page 120
3.1 Search Equilibrium (Bargaining)......Page 125
3.2 Competitive Equilibrium (Price Taking)......Page 127
3.3 Competitive-Search Equilibrium (Posting)......Page 129
4. QUANTITATIVE ANALYSIS......Page 131
4.1 Competitive Search Equilibrium......Page 133
4.2 Search Equilibrium......Page 135
4.3 Competitive Equilibrium......Page 140
5. CONCLUSION......Page 141
REFERENCES......Page 142
1. THE CONVENTIONAL WISDOM OUTLINED BY LUCAS......Page 145
2. INTERPRETING THE MAIN FINDINGS......Page 146
REFERENCES......Page 148
Commentary......Page 149
REFERENCES......Page 153
1. INTRODUCTION......Page 155
2. THE CONTEXT......Page 157
3. METHODOLOGY......Page 159
4. RESULTS—FULL SAMPLE......Page 163
5. DEFLATIONARY PERIOD RESULTS......Page 175
6. RESULTS FOR THE FULL PERIOD WITH EXOGENOUS GOLD SHOCKS......Page 187
7. CONCLUSIONS......Page 199
REFERENCES......Page 200
2. THIS PAPER......Page 203
3. MINOR REMARKS......Page 204
4. THE IDENTIFICATION......Page 205
5. THE ANSWER TO THE QUESTION......Page 206
REFERENCES......Page 207
1. INTRODUCTION......Page 209
2. INFLATION AND MONETARY VOLATILITY: EMPIRICAL TRENDS......Page 211
3. INFLATION, OUTPUT, AND MONEY: A MODEL......Page 219
4. INFLATION, THE OUTPUT GAP, AND MONEY IN THE EURO AREA......Page 223
5. CONCLUSIONS......Page 232
REFERENCES......Page 233
Commentary......Page 235
Commentary......Page 237
ACKNOWLEDGMENTS......Page 241
REFERENCES......Page 242
7 Observations on Disinflation in Transition Economies......Page 243
1. HOW DID THE TRANSITION COUNTRIES DISINFLATE?......Page 250
2. DID INFLATION DO ITS JOB?......Page 256
3. CAN WE BELIEVE THE NUMBERS?......Page 261
4.1 Disinflation in Poland......Page 263
4.2 Disinflation in Romania......Page 266
4.3 Disinflation in Estonia......Page 268
4.4 Disinflation in Russia......Page 269
5. IS INFLATION INEVITABLE IN TRANSITION?......Page 273
6. CONCLUSIONS......Page 276
APPENDIX: THE BALASSA-SAMUELSON EFFECT......Page 277
REFERENCES......Page 279
Commentary......Page 282
1.3 Global Disinflation......Page 283
2. HOW DID THE TRANSITION COUNTRIES DISINFLATE?......Page 284
4. DID INFLATION DO ITS JOB?......Page 285
1. INTRODUCTION......Page 287
2.1 Macro Models without a Role for Banking......Page 288
2.3 The Impact of Nominal Interest Rates and Inflation on Financial Development......Page 289
2.4 The Impact of Inflation on Crises and Economic Volatility......Page 291
3.1 Inflation and Stock Market Size and Performance......Page 293
3.2 Inflation and Equity Returns......Page 295
3.2.1 Inflation and Equity Returns: Time-Series Studies......Page 296
4. DEBT MARKETS: INFLATION AND INTEREST RATES......Page 298
4.1 New Cross-Country Inflation and Interest Rate Tests......Page 299
5.1 Inflation and Banking Development Indicators......Page 305
5.2 Inflation and Credit Availability from Banks: Attitude and Opinion Data......Page 306
5.3 Banking Crises......Page 308
5.4 Bank Profits, Borrowing and Lending Spreads, Net Interest Margins, and Value Added: How Are These Associated with Inflation?......Page 310
5.5 Some New Results on Inflation and Bank Profitability......Page 315
6. INFLATION AND ASSET RETURN VOLATILITY......Page 317
7. SUMMARY AND CONCLUSIONS......Page 320
DATA APPENDIX......Page 323
REFERENCES......Page 326
Commentary......Page 330
REFERENCES......Page 334
2. INFLATION AND FINANCIAL DEVELOPMENT......Page 335
3. INFLATION, FINANCE, AND ECONOMIC GROWTH......Page 337
4. CONCLUSION......Page 340
REFERENCES......Page 341
Index......Page 343