Modeling Sterilized Interventions and Balance Sheet Effects of Monetary Policy in a New-Keynesian Framework

Beneš, Jaromí­r; Berg, Andrew; Portillo, Rafael; Vávra, David

doi:10.1007/s11079-014-9320-1

Cited by 80 publications

(75 citation statements)

References 42 publications

(22 reference statements)

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“…Large increases in the U.S. short-term bond holdings following QE lowers the marginal benefit of holding these bonds, thus making short-term U.S. bonds less attractive relative to consumption even when the domestic short-term rate remains constant. 5 The remainder of the paper proceeds as follows. The next section introduces the model.…”

Section: Introductionmentioning

confidence: 99%

International Spillovers of Large-Scale Asset Purchases

Alpanda

Kabaca

2019

Journal of the European Economic Association

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This paper evaluates the international spillover effects of large-scale asset purchases (LSAPs) using an estimated two-country dynamic stochastic general-equilibrium model with nominal and real rigidities and portfolio balance effects. Portfolio balance effects arise from imperfect substitutability between short- and long-term bond portfolios in each country, as well as between domestic and foreign bonds within these portfolios. We show that LSAPs in the United States lower long-term yields and stimulate economic activity not only in the United States, but also in the rest of the world (ROW) economy. This occurs despite the currency appreciation in the ROW and the resulting deterioration in their trade balance. The key for this result is the decline in the ROW term premia through the portfolio balance channel, as the relative demand for ROW long-term bonds increases following an LSAP in the United States. Our model indicates that US asset purchases that generate the same output effect as US conventional monetary policy has larger international spillovers due to stronger portfolio balance effects. We also show that international openness in financial markets reduces the stimulatory effects of LSAPs in the originating country, while increasing their international spillover effects.

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Section: Introductionmentioning

confidence: 99%

International Spillovers of Large-Scale Asset Purchases

Alpanda

Kabaca

2019

Journal of the European Economic Association

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“… It is also known that a good understanding of the equilibrium exchange rate is a necessary condition for consistency between the exchange rate policy and the inflation target (Benes et al ., ).…”

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confidence: 97%

Long‐run Determinants of the Brazilian Real: A Closer Look at Commodities

Kohlscheen

2014

Int. J Fin Econ

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We use cointegration analysis to show that the long‐run behaviour of the Brazilian Real effective exchange rate between January 1999 and September 2012 can largely be explained by the price variation of a basket of five commodities—that accounted for 51% of Brazilian export revenues in 2011. We estimate that a 10% variation in the real price of these five commodities moves the fundamental long‐run real exchange rate by almost 5%. Changes in interest rate differentials do not explain short or long term movements in the exchange rate during this period. Furthermore, we find that deviations of the real effective exchange rate from the long run equilibrium level have an estimated half‐life of approximately 8 months. The growing exports of oil and fuel and of iron ores, as well as the important oil discoveries in the pre‐salt layer, suggest that commodity prices will continue to influence the value of the Real in the future. Copyright © 2014 John Wiley & Sons, Ltd.

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“…In a related paper, Benes et al . () analyse the interaction of monetary policy rules with rules describing foreign exchange rate interventions. We have also abstained from analysing in greater detail the challenges posed by fiscal policy in the implementation of monetary policy, even though our model explicitly incorporates the fiscal sector.…”

Section: Resultsmentioning

confidence: 99%

Monetary Policy in Low Income Countries in the Face of The Global Crisis: A Structural Analysis

Baldini

Beneš

Berg

et al. 2015

Pacific Economic Review

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We develop a dynamic stochastic general equilibrium model with a banking sector to analyse the impact of the financial crisis in developing countries and the role of the monetary policy response, with an application to Zambia. We view the crisis as a combination of three related shocks: a worsening in the terms of the trade, an increase in the country's risk premium and a decrease in the risk appetite of local banks. Model simulations broadly match the path of the economy during this period. We derive policy implications for central banks, and for dynamic stochastic general equilibrium modelling of monetary policy, in low‐income countries.

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Modeling Sterilized Interventions and Balance Sheet Effects of Monetary Policy in a New-Keynesian Framework

Cited by 80 publications

References 42 publications

International Spillovers of Large-Scale Asset Purchases

International Spillovers of Large-Scale Asset Purchases

Long‐run Determinants of the Brazilian Real: A Closer Look at Commodities

Monetary Policy in Low Income Countries in the Face of The Global Crisis: A Structural Analysis

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