Econometric policy evaluation: A critique

https://dialnet.unirioja.es/descarga/articulo/2112221.pdf

Central bank independence and monetary policymaking institutions — Past, present and future

This is an extensive survey of worldwide developments in the area of monetary policymaking institutions during the second half of the twentieth century and beyond. In addition the last section discusses current open issues and future challenges. Section 2 reviews the changes that have occurred in the area of central bank independence (CBI) during the last twenty years, discusses reasons for those developments and provides an overview of accumulated empirical evidence on the relation between CBI and the performance of the economy. Section 3 discusses lessons from stabilization of inflation, reviews the evidence and implications of asymmetric central bank objectives and considers the issue of CBI within the broader context of choosing a nominal anchor. Section 4 reviews the impact of effective conservativeness (or independence) on economic performance in the presence of labour unions. A main insight is that, in the presence of large wage setters, CBI affects real variables like the rate of unemployment implying that conservativeness affects economic performance even in the long run. Section 5 considers future challenges facing modern central banks. The discussion presumes that CBI and price stability are here to stay and focuses on issues relating to the conduct of monetary policy by independent central banks in an era of price stability. The section discusses the risks associated with flexible inflation targeting, issues of accountability and transparency and the impact of central bank capital and finances on its independence.

https://papers.ssrn.com/sol3/Delivery.cfm/DP6441.pdf?abstractid=1138554&mirid=1

Central Bank Independence and Monetary Policymaking Institutions - Past Present and Future

The main result of Morris and Shin (2002)–restated in papers by Amato, Morris, and Shin (2002) and Amato and Shin (2003) and commented upon by the Economist (2004)–has been presented and interpreted as an anti-transparency result: more public information can be bad. However, some scrutiny of the result shows that it is actually pro transparency: except in very special circumstances, more public information is good. Furthermore, for a conservative benchmark of equal precision in public and privateinformation, social welfare is higher than in as ituation without public information.

/pdf/social-value-of-public-information-comment-morris-and-shin-3aqcgozr77.pdf

Social Value of Public Information: Comment: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con

This paper studies the implications of introducing large monopolistic banks, which can affect macroeconomic outcomes and thus the response of monetary policy to inflation, in a model with a collateral constraint linking the borrowers’ credit capacity to the value of their durable assets. First, we find that strategic interaction generates a countercyclical loan spread, which amplifies the impact of monetary and technology shocks on the real economy. This type of financial accelerator adds up to the one due to financial frictions and is crucially related to the existence of non-atomistic banks. Second, the level of the spread and the degree of amplification are positively related to the level of entrepreneurs’ leverage, reflecting the fact that higher leverage implies greater elasticity of the policy rate to changes in loan rates, which in turn increases banks’ market power. Third, we find that amplification is stronger the more aggressive the central bank’s response to inflation, as measured by the inflation coefficient in the Taylor rule.

/pdf/large-banks-loan-rate-markup-and-monetary-policy-1jkb67xpph.pdf

Large Banks, Loan Rate Markup and Monetary Policy

Svensson (2006) argues that Morris and Shin's (2002) analysis is, contrary to what is claimed, actually pro-transparency This paper re-examines the issue but with an important modification to the original Morris and Shin framework Recognizing that central banks impact on the economy not only indirectly via their public announcements, but also directly through their policy actions, we consider the social value of public information in the presence of active policy intervention Our results strengthen Morris and Shin's conclusions considerably: in particular we find that public disclosure of the central bank's information is always undesirable

Optimal Policy Intervention and the Social Value of Public Information

The Monetary Model of Exchange Rates: Evidence from the Canadian Float of the 1950s

The paper examines the implications of strategic wage-setting behaviour by an inflation-averse monopoly union for the appropriate specification of central bank objectives. Our principal findings are as follows. First, the optimal setting of the parameters of the central bank's objective function differ in a significant way according to the relative timing of monetary policy and wage determination. Second, the ability of the central bank to precommit to a particular setting of monetary policy does not confer any welfare benefits. Third, we find little support in this context for the notion that placing monetary policy in the hands of a conservative central bank will improve social welfare. Copyright 2001 by Oxford University Press.

Monetary policy, central bank objectives, and social welfare with strategic wage setting

This paper examines the welfare implications of public information dissemination within a model in which information is heterogeneous across agents and where a strategic complementarity is present. The focus of the analysis is on how the presence of stabilization policy affects the case for transparency. In considering this issue, it extends James and Lawler's (2011) contribution by incorporating an alternative payoff function and by employing a different representation of public disclosure. The study's key finding is that the conclusions drawn in its precursor are robust to these modifications; specifically, in the presence of optimally designed policy intervention zero transparency maximizes welfare.

Strategic Complementarity, Stabilization Policy and the Optimal Degree of Publicity

Monetary uncertainty, strategic wage setting and equilibrium employment

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