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1.
PAPER (OA)
A global hazard index for the world foreign exchange markets (1999)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: This paper proposes a forward-looking indicator of risk in the foreign exchange markets calculated from the implied volatilities of currency options according to the Garman-Kohlhagen model. We discuss the properties of such indicator and stress that it is related to a notion of risk that does not coincide with that of Gaussian risk underlying most mainstream models. We postulate that it is associated with a broader definition of risk, which we call hazard in order to avoid confusion. The properties of the Global Hazard Indicator (GHI) are assessed against the background of the market turbulence in 1998. This period has been characterized by abnormal fluctuations in the exchange rate markets spurred by a sequence of shocks in some emerging economies and in South East Asia, which have raised fear of contagion in developed countries.
Keywords: F01 ; F31 ; ddc:330 ; world foreign exchange markets
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
2.
PAPER (OA)
Fiscal policy effectiveness and neutrality results in a non-Ricardian world (1999)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: The paper introduces monetary and fiscal regimes into a Blanchard-Weil overlapping generations model. Contrary to intuition, it is shown that fiscal policy becomes more effective, the less the central bank monetises government debt. Furthermore, there is a degree of debt monetisation at which Ricardian equivalence seems to hold in this 'non-Ricardian' model, as fiscal policy is neutral with respect to agent's net wealth. At the origin of these results are the opposite intergenerational wealth effects of money and debt financing. Since, on average, central bank independence increased through EMU, the analysis suggests that fiscal policy might have become a more powerful instrument for euro-area countries. It is further argued that given the Stability and Growth Pact, governments will find it wise to run budget positions 'close to balance or in surplus' in order to maintain the increased fiscal policy effectiveness.
Keywords: E63 ; ddc:330 ; fiscal policy effectiveness
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
3.
PAPER (OA)
What does the single monetary policy do? A SVAR benchmark for the European Central Bank (1999)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: This paper puts forward a characterization of the structural features of the economic system relevant to the monetary-policy decisions of the European Central Bank. The econometric analysis adopts a parsimonious VAR representation of three key macroeconomic variables (interest rates, prices and GDP) aggregated across countries to obtain area-wide time series. The exogenous disturbances driving the multivariate system are identified imposing restrictions based on economic theory. The dynamic properties of the estimated models are analyzed and compared with the available evidence for the US. The robustness of this characterization is corroborated by the estimates from a different sample period and by the findings from an alternative model that singles out German monetary policy in view of its anchor role within the ERM.
Keywords: C32 ; E58 ; ddc:330 ; monetary policy
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
4.
PAPER (OA)
From the ERM to the euro: new evidence on economic and policy convergence among EU countries (1999)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: Skeptic views on EMU are usually cast around three arguments. First, the EU does not satisfy 'Optimum Currency Area' (OCA) conditions. Second, heterogeneous economic and financial structures will produce differences in monetary transmission. Third, the shift from domestic to area-wide considerations may give rise to conflicts in the decision making of the European Central Bank (ECB).
Keywords: E52 ; F02 ; E32 ; ddc:330 ; economic and policy convergence
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
5.
PAPER (OA)
Core inflation: a review of some conceptual issues (1999)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: This paper reviews various approaches to the measurement of core inflation that have been proposed in recent years. The objective is to determine whether the ECB should pay special attention to one or other of these measures in assessing inflation developments in the euro area. I put particular emphasis on the conceptual and practical problems that arise in the measurement of core inflation, and propose some criteria that could be used by the ECB to choose a core inflation measure.
Keywords: C8 ; E0 ; E31 ; ddc:330 ; core inflation
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
6.
PAPER (OA)
A cross-country comparison of market structures in European banking (1999)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: In order to assess the effect of EMU on market conditions for banks based in countries which adopt the Single Currency, we use the H indicator suggested by Panzar and Rosse (1987). Our contribution is to assess results separately for large and small banks, and for interest income and total income as a dependent variable. From a panel of banks over the period 1992-1996, we provide evidence that European banking markets for large banks in the mid-1990s were still characterised by monopolistic competition, as compared to the United States. Regarding small banks, the level of competition appears to be even lower, especially in France and Germany. EMU would therefore imply a notable rise in competition for small banks in France and Germany, as well as an increase in competition for large banks, especially in Italy.
Keywords: G21 ; L12 ; ddc:330 ; banking ; competition ; contestability ; EMU ; panel data analysis
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
7.
PAPER (OA)
The demand for M3 in the euro area (1999)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: In this paper, an empirically stable money demand model for M3 in the euro area is constructed. Starting with a multivariate system, three cointegrating relationships with economic content are found: (i) the spread between the long- and the short-term nominal interest rates, (ii) the long-term real interest rate, and (iii) a long-run demand for broad money M3. There is evidence that the determinants of M3 money demand are weakly exogenous with respect to the long-run parameters. Hence, following a general-to-specific modelling approach, a parsimonious conditional error-correction model for M3 money demand is derived which can be interpreted economically. For the conditional model, long-and short-run parameter stability is extensively tested and not rejected. Insights into the dynamics of money demand are gained by means of SVAR techniques exploring the impulse response functions of the cointegrated multivariate system.
Keywords: C22 ; C32 ; E41 ; ddc:330 ; cointegration ; error-correction model ; euro area ; impulse response analysis ; Money demand
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
8.
PAPER (OA)
Inflation zone targeting (1999)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: We study optimal monetary policy design in a simple model that deviates from the linear-quadratic paradigm and provides a rationale for the practice of inflation zone targeting. We show that the presence of either zone-quadratic preferences or a zone-linear relationship between inflation and economic activity provides strong incentives to deviate from conventional linear policies. We calibrate the model based on parameters for the U.S. and the euro area and employ a numerical dynamic programming algorithm to derive the optimal policies. With this algorithm, we examine the role of uncertainty, model structure and relative preference towards economic stability in determining the width of the implied targeted inflation zone.
Keywords: E31 ; E52 ; E58 ; E61 ; ddc:330 ; inflation
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
9.
PAPER (OA)
Asymptotic confidence bands for the estimated autocovariance and autocorrelation functions of vector autoregressive models (2000)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: This paper provides closed-form formulae for computing the asymptotic standard errors of the estimated autocovariance and autocorrelation functions for stable VAR models by means of the d-method. These standard errors can be used to construct asymptotic confidence bands for the estimated autocovariance and autocorrelation functions in order to assess the underlying estimation uncertainty. A Monte Carlo experiment gives evidence on the small-sample performance of these asymptotic confidence bands compared with that obtained using bootstrap methods. The usefulness of the asymptotic confidence bands for empirical work is illustrated by two applications to euro area data on inflation, output and interest rates.
Keywords: C13 ; C32 ; E31 ; E43 ; ddc:330 ; Vector autoregressions ; autocovariances and autocorrelations ; bootstrap method ; confidence bands ; euro area ; Phillips curve ; yield curve
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper
10.
PAPER (OA)
Indicator variables for optimal policy (2000)
Frankfurt a. M.: European Central Bank (ECB)
Publication Date: 2017-02-24
Description: The optimal weights on indicators in models with partial information about the state of the economy and forward-looking variables are derived and interpreted, both for equilibria under discretion and under commitment. An example of optimal monetary policy with a partially observable potential output and a forward-looking indicator is examined. The optimal response to the optimal estimate of potential output displays certainty-equivalence, whereas the optimal response to the imperfect observation of output depends on the noise in this observation.
Keywords: E37 ; E47 ; E52 ; E58 ; ddc:330
Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
Language: eng
Type: doc-type:workingPaper