Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Inflation Target Credibility And The Term Structure Of Interest Rates PDF full book. Access full book title Inflation Target Credibility And The Term Structure Of Interest Rates.
| Author | : James Michael Watson |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
| Author | : Peter J. N. Sinclair |
| Publisher | : Routledge |
| Total Pages | : 402 |
| Release | : 2009-12-16 |
| Genre | : Business & Economics |
| ISBN | : 1135179778 |
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
| Author | : Michael D. Bordo |
| Publisher | : University of Chicago Press |
| Total Pages | : 545 |
| Release | : 2013-06-28 |
| Genre | : Business & Economics |
| ISBN | : 0226066959 |
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
| Author | : Lars E. O. Svensson |
| Publisher | : |
| Total Pages | : 30 |
| Release | : 1993 |
| Genre | : Anti-inflationary policies |
| ISBN | : |
A simple test of inflation target credibility is constructed by subtracting the maximum and minimum inflation rates consistent with the inflation targets from the yields to maturity on nominal bonds. This results in a target-consistent range of real yields on nominal bonds. If expected real yields, or market real interest rates on real bonds if such are available, fall outside the range of target- consistent real yields, credibility is rejected. Two concepts of credibility, called absolute credibility and credibility in expectation, are distinguished. The inflation targets of Canada, New Zealand and Sweden are examined with convenient diagrams over yields to maturity and forward interest rates.
| Author | : Sylvester C. W. Eijffinger |
| Publisher | : |
| Total Pages | : |
| Release | : 1999 |
| Genre | : |
| ISBN | : |
This paper examines the implications of the expectations theory of the term structure for the implementation of inflation targeting. We show that the term structure weakens the transmission of short-term interest rates to ultimate policy objectives. Therefore, short term interest rates in the central bank's forward looking monetary policy rule need to respond more strongly to the output gap and deviations of inflation from its target. Thus, in general the term structure implies a higher degree of policy activism. Next, we show that both the sensitivity of the term spread to economic fundamentals, and the extent to which the spread predicts future output, are increasing in the duration of the long bond and the degree of structural output persistence. If the central bank becomes relatively less concerned about inflation stabilization the term spread becomes less sensitive to fundamentals, and the spread will be less successful in predicting real economic activity.
| Author | : Sylvester C. W. Eijffinger |
| Publisher | : |
| Total Pages | : 48 |
| Release | : 2000 |
| Genre | : Anti-inflationary policies |
| ISBN | : |
| Author | : Matthias Neuenkirch |
| Publisher | : |
| Total Pages | : |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
In this paper we systematically evaluate how central banks respond to inflation deviations from target. We present a stylized New Keynesian model in which agents' inflation expectations are sensitive to inflation deviations from target. To (re- )establish credibility, optimal monetary policy under discretion is shown to set higher interest rates today if average inflation exceeded the target in the past. Moreover, policy responds non-linearly to past inflation gaps. This is reflected in an additional term in the central bank's optimal instrument rule, which we refer to as the "credibility loss". Augmenting a standard Taylor (1993) rule with the latter term, we provide empirical evidence for the interest rate response for a sample of nine IT or quasi-IT economies. We find that past deviations from the inflation target are feeding back into the reaction function of seven central banks and that this influence is economically meaningful. A deteroriation in credibility forces central bankers to undertake larger interest rate steps (ceteris paribus). -- Inflation expectations ; credibility ; reaction function ; Taylor rule
| Author | : |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2009 |
| Genre | : Economic stabilization |
| ISBN | : |
| Author | : Jeremy Bay Rudd |
| Publisher | : |
| Total Pages | : 50 |
| Release | : 2003 |
| Genre | : Inflation (Finance) |
| ISBN | : |
| Author | : Eric Schaling |
| Publisher | : |
| Total Pages | : 53 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
In this paper, we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e., the central bank and private agents - who have different information sets about the future sequence of short-term interest rates. We analyse inflation forecast targeting in two environments. One in which the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector interest rate expectations are generated, and one in which the central bank has imperfect knowledge and has to learn the private sector forecasting rule for short-term interest rates. In the case of imperfect knowledge, the central bank has to learn about private sector interest rate expectations, as the latter affect the impact of monetary policy through the expectations theory of the term structure of interest rates. Here, following Evans and Honkapohja (2001), the learning scheme we investigate is that of least-squares learning (recursive OLS) using the Kalman filter. We find that optimal monetary policy under learning is a policy that separates estimation and control. Therefore, this model suggests that the practical relevance of the breakdown of the separation principle and the need for experimentation in policy may be limited.
