Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In a New Keynesian model with the BGG accelerator and risk shocks, we show that violations of Tinbergen's Rule and strategic interaction between economic authorities undermine the effectiveness of monetary and financial policies. Separate monetary and financial policy rules produce higher welfare than a monetary rule augmented with credit spreads. The latter yields a tight money-tight credit regime in which the interest rate responds too much to inflation and not enough to credit. Reaction curves for the policy-rule elasticities are nonlinear, which reflects shifts in these elasticities from strategic substitutes to complements. The Nash equilibrium is inferior to the Cooperative equilibrium, both are inferior to a first-best outcome, and both might produce tight money-tight credit regimes. Keywords: Financial Frictions, Monetary Policy, Financial Policy. JEL Classification: E44; E52; E58. Terms of use: Documents inResumen: En un modelo Nuevo Keynesiano con el acelerador de BGG y choques de riesgo, mostramos que violaciones de la Regla de Tinbergen y la interacción estratégica entre autoridades económicas disminuyen la efectividad de las políticas monetaria y financiera. Reglas separadas de política monetaria y financiera producen un bienestar mayor que una regla monetaria aumentada con spread crediticios. Esta última arroja un régimen con restricciones monetarias y crediticias, en el cual la tasa de interés responde demasiado a la inflación y no lo suficiente al crédito. Las curvas de reacción de las elasticidades de las reglas de política son no lineales, lo cual refleja cambios en estas elasticidades de substitutos estratégicos a complementos. El equilibrio de Nash es inferior al equilibrio Cooperativo, ambos son inferiores al mejor diseño de política, y ambos pueden producir regímenes monetarios y crediticios restrictivos.

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In this paper, we propose a simple econometric framework to disentangle the respective roles of monetary policy inertia and persistent shocks in interest rate rules. We exploit the restrictions of a DSGE model that is confronted with a monetary SVAR. We show that, provided enough informative variables are included in the formal test, the data favor a monetary policy representation with modest inertia and highly serially correlated monetary shocks. To the contrary, when the procedure is based solely on the dynamic behavior of the nominal interest rate, no clear-cut conclusion can be reached about the correct representation of monetary policy.

La serie de Documentos de Investigación del Banco de México divulga resultados preliminares de trabajos de investigación económica realizados en el Banco de México con la finalidad de propiciar el intercambio y debate de ideas. El contenido de los Documentos de Investigación, así como las conclusiones que de ellos se derivan, son responsabilidad exclusiva de los autores y no reflejan necesariamente las del Banco de México.The Working Papers series of Banco de México disseminates preliminary results of economic research conducted at Banco de México in order to promote the exchange and debate of ideas. The views and conclusions presented in the Working Papers are exclusively the responsibility of the authors and do not necessarily reflect those of Banco de México. two anonymous referees for their helpful comments, Luis Hernández, Valeria Durán, and Julio Pierre-Audain for their research assistance, and Tatsiana Syman for her suggestions along the edition process. This paper has benefited from helpful discussions during presentations at various seminars and conferences.

This paper studies the effects of three financial shocks in the economy: a net-worth shock, an uncertainty or risk shock, and a credit-spread shock. We argue that only the latter can push the nominal interest rate against its zero lower bound. Further, a recessionary shock to the net worth or the credit spread generates a positive response for loans, which is counter-intuitive during an economic downturn. Finally, we find that there is an optimal commitment period for the central bank to keep the nominal interest rate equal to zero (forward guidance) after a financial turmoil. Beyond that optimal period, the volatility of inflation and output rise quick and sharply. Thus, an excessive forward guidance policy may destabilize the economy.

Wage indexation practices have changed. Evidence on the U.S. for instance suggests that wages were heavily indexed to past inflation during the Great Inflation but not during the Great Moderation. However, most DSGE models assume fixed indexation parameters in wage setting, which might not be structural in the sense of Lucas (1976). This paper presents a New-Keynesian model in which workers, by maximizing their welfare, set their wage indexation rule in response to aggregate shocks and monetary policy. We find that workers index their wages to past inflation when technology and permanent inflationtarget shocks drive output fluctuations; when aggregate demand shocks do, workers index to trend-inflation. In addition, workers' choices do not coincide with the social planner's choice, which may explain the observed changes in wage indexation in the post-WWII U.S. data.

We study the ability of exclusion and sign restrictions to measure monetary policy shocks in small open economies. Our Monte Carlo experiments show that sign restrictions systematically overshoot inflation responses to the said shock, so we propose to add prior information to limit the number of economically implausible responses. This modified procedure robustly recovers the transmission of the shock, whereas exclusion restrictions show large sensitivity to the assumed monetary transmission mechanism of the model and the set of foreign variables included in the VAR. An application with Mexican data supports our findings.

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