Assessing Potential Inflation Consequences of QE after Financial Crises

Reynard, Samuel

doi:10.2139/ssrn.2181013

Cited by 6 publications

(4 citation statements)

References 6 publications

(6 reference statements)

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“…Moessner () does not find that the ECB's credibility changed by the events of recent years. Raynard () indicates that if QE is supposed to raise inflation expectations, in part to avoid a deflationary outcome, the data suggest that the GFC has not changed the relationship between money growth and inflation. Campbell et al .…”

Section: The International Evidence To Date: Macro‐economic Effectsmentioning

confidence: 99%

A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in Our Future?

Lombardi¹,

Siklos

Amand

2018

Journal of Economic Surveys

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This study examines the effectiveness of unconventional monetary policies (UMP). It considers whether these policies have been successful and where their effects remain uncertain. We survey both the domestic financial market and macro‐economic effects of UMP in the economies where these policies were introduced and their international spillover effects. The paper considers the impact of a wide range of UMP rather than the effects of specific policy instruments. We also provide a retrospective on the important case of Japan beginning in the late1990s and ask whether the Eurozone's experience with UMP is substantively different given its structure of policymaking. Finally, we ask: if the ‘old normal’ is not in our future, should the ‘new normal’ in monetary policy routinely include what we now refer to as UMP? We conclude that UMP can prevent economic collapse but are not designed to promote stronger long‐term economic growth. Apart from new communication strategies, the use of UMP under normal circumstances does not appear to be a sound monetary policy strategy. Failure to learn this lesson might also enable future policy makers to ask or expect too much from their central banks.

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Section: The International Evidence To Date: Macro‐economic Effectsmentioning

confidence: 99%

A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in Our Future?

Lombardi¹,

Siklos

Amand

2018

Journal of Economic Surveys

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“…Woodford, ; McCallum and Nelson, ; De Santis et al ., ), a growing interest is devoted to understanding the effects of liquidity injections by the ECB and other central banks in terms of future inflation (see e.g. Dreger and Wolters, ) and the link between money and inflation during and after financial crises (Reynard, ). To address these issues, in our second policy exercise, we evaluate the relevance of our monetary overhang measure in explaining inflation.…”

Section: Money Demand and Monetary Policymentioning

confidence: 99%

On the Stability of Euro Area Money Demand and Its Implications for Monetary Policy

Barigozzi

Conti

2018

Oxf Bull Econ Stat

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We employ a recent time-varying cointegration test to revisit the usefulness of long-run money demand equations for the ECB, addressing the issue of their instability by means of a model evaluation exercise. Building on the results, we make a twofold contribution. First, we propose a novel stable money demand equation relying on two crucial factors: a speculative motive, represented by domestic and foreign price-earnings ratios, and a precautionary motive, measured by changes in unemployment. Second, we use the model to derive relevant policy implications for the ECB, since excess liquidity looks more useful for forecasting stock market busts than future inflation. Overall, this evidence points to (i) a possible evolution of the monetary pillar in the direction of pursuing financial stability and (ii) the exclusion of a sudden liquidity-driven inflationary burst after the exit from the prolonged period of unconventional monetary measures. JEL Classification numbers: E41, E52, C32. *The views here expressed are those of the authors and do not necessary reflect those of the Banca d'Italia or the Eurosystem.1 In contrast, Ireland (2004) has challenged this view and a number of more recent studies have included money in models aimed to monetary policy analysis (Zanetti, 2012;Benati et al., 2017).

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“…However, the hypothesis of weak exogeneity is respected for real money balances and inflation, real income, real asset prices and the term structure do not respond to deviations from the long -run equilibria. Reynard (2012).…”

Section: Var Cointegrationmentioning

confidence: 99%

A Survey of Studies on Money Demand and Inflation Amidst Banking Crisis

Iyede

Onah

Agu

2018

Journal of Accounting, Business and Finance Research

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The paper is borne out of the necessity to create a repository of information on monetary effects of banking crisis with a focus on money demand and inflation. To this end, the paper selectively reviews some empirical studies on money demand and inflation in the face of banking crisis. Overwhelming evidence reveals that money demand does not only increase during banking crisis but is also largely stable. The studies also suggest that long-run cointegrating relationship exists between money demand and its determining variables during banking crisis. However, evidence indicates that banking crisis makes inflation to decline or increase. These pattern of results were evident in developed and developing countries and from different methodologies applied. One policy implication from the survey is that during banking crisis monetary policy would be ineffective. The policy recommendation that can make monetary policy effective is to expand money supply and reduce interest rate for the productive sectors, particularly agricultural and manufacturing sectors.

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Assessing Potential Inflation Consequences of QE after Financial Crises

Cited by 6 publications

References 6 publications

A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in Our Future?

A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in Our Future?

On the Stability of Euro Area Money Demand and Its Implications for Monetary Policy

A Survey of Studies on Money Demand and Inflation Amidst Banking Crisis

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