The assessment: macroeconomic policy

Allsopp, Christopher

doi:10.1093/oxrep/16.4.1

Cited by 66 publications

(34 citation statements)

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“…Now, we remove this assumption to perform a robustness check of our findings testing two different Taylor-type rules. 6 Figure 4: Average unemployment rate and mean firm leverage: Monte Carlo simulations for the baseline model ('circle') and the unemployment benefit scenario ('star'). We call the first Taylor rule a "Fed-type" rule, that is the central bank fixes a target both for unemployment and inflation:…”

Section: Robustness Check: Two Taylor Rulesmentioning

confidence: 99%

“…In principle, indeed, if a demand shock hits the macroeconomy, so leading to higher unemployment, the system is able to spontaneously returns to its "natural" equilibrium through a decrease of nominal wages and (with a constant mark-up) a proportional reduction of prices (although policy makers can avoid such a deflationary process of adjustment through an expansionary monetary and/or fiscal policy). Moreover, in such a "natural" equilibrium setting, monetary policy is mainly addressed to assure a low and stable rate of inflation, as the best way to promote macroeconomic stability and a growth-enhancing environment (Allsopp and Vines, 2000). For these reasons, according to the conventional view, the central bank has to be independent of the government in setting monetary policy (Walsh, 2010).…”

Section: Introductionmentioning

confidence: 99%

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Unemployment Benefits and Financial Leverage in an Agent Based Macroeconomic Model

2013

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This paper is aimed at investigating the effects of government intervention through unemployment benefits on macroeconomic dynamics in an agent based decentralized matching framework. The major result is that the presence of such a public intervention in the economy stabilizes the aggregate demand and the financial conditions of the system at the cost of a modest increase of both the inflation rate and the ratio between public deficit and nominal GDP. The successful action of the public sector is sustained by the central bank which is committed to buy outstanding government securities.

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Section: Robustness Check: Two Taylor Rulesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Unemployment Benefits and Financial Leverage in an Agent Based Macroeconomic Model

2013

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“…Furthermore, following Allsopp and Vines (2000) and Clarida, Gali, and Gertler (1999), we account for foreign output. As we are interested in financial market and monetary policy spillover effects in times of crises, we extend Hayo and Niehof (2013) by including asset prices in the investments and savings (IS) curve (Stracca 2010).…”

Section: The Investment and Savings Curvementioning

confidence: 99%

Analysis of Monetary Policy Responses after Financial Market Crises in a Continuous Time New Keynesian Model

Hayo

Niehof

2014

SSRN Journal

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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. Terms of use: Documents in EconStor may AbstractWe develop a dynamic stochastic full equilibrium New Keynesian model of two open economies based on stochastic differential equations to analyse the interdependence between monetary policy and financial markets in the context of the recent financial crisis. The effect of bubbles on stock and housing markets and their transmission to the domestic real economy and the contagious effects on foreign markets are studied. We simulate adjustment paths for the economies under two monetary policy rules: an open-economy Taylor rule and a modified Taylor rule, which takes into account stabilisation of financial markets as a monetary policy objective. We find that for the price of a strong hike in inflation a severe economic recession can be avoided under the modified rule. Using Bayesian estimation techniques, we calibrate the model to the case of the United States and Canada and find that the resulting economic adjustment paths are similar to those of the theoretical model. JEL Classification Numbers: C02, C63, E44, E47, E52 F41 *

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“…Deviations of actual inflation from its target level and of the actual output from its potential are associated with a deviation of the real interest rate from its neutral level of the same sign. As discussed in Allsopp and 7 In spite of resembling very closely the Wicksellian notion of natural real rate of interest, r* is directly influenced by fiscal policy so that the term neutral is more suitable (Allsopp and Vines, 2000). In fact, standard economic theory implies that the neutral rate of interest is a function of consumers' preferences and of the trend growth rate of output.…”

Section: The Core Model Of Practical Macroeconomicsmentioning

confidence: 99%

“…8 See Cecchetti (2000). Vines (2000), a monetary authority endowed with a rule like (3) can successfully deal with the two main functions usually assigned to monetary policy, that is to provide a nominal anchor to the economy and to stabilize output fluctuations.…”

Section: The Core Model Of Practical Macroeconomicsmentioning

confidence: 99%

Fiscal and Monetary Policy, Unfortunate Events, and the SGP Arithmetics Evidence from a Growth-Gaps Model

2005

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The recent revision (March 2005) of the Stability and Growth Pact (SGP) has confirmed the 3% deficit/GDP ratio as the pillar of the excessive deficits procedure envisaged by the Maastricht Treaty for member countries of the EMU. Since the deficit/GDP ceiling is still in place, research on its implications for fiscal discipline and macroeconomic stabilization has to be pushed further. We argue that the agenda largely involves empirical matters. In particular, this paper presents an econometric estimate and simulations of a macroeconomic model of Italy and Germany aimed at addressing three issues. First, monetary and fiscal rules intercations are explictly modelled and examined in dynamic setting. Second, consistently with common perception and the new formulation of the SGP, the business cycle and the responses of policy variables are cast in terms of growth gaps, not gaps in levels, with respect to potential. Third, budgetary components (primary expenditure and total tax revenue) are examined as separate fiscal rules, which allows us to track the reaction of the fiscal stance to growth shocks more precisely, to point out several pitfalls in current measures of fiscal ratios to GDP, and suggest more accurate assessment of fiscal stances. JEL Classification: E0; E6

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The assessment: macroeconomic policy

Cited by 66 publications

References 0 publications

Unemployment Benefits and Financial Leverage in an Agent Based Macroeconomic Model

Unemployment Benefits and Financial Leverage in an Agent Based Macroeconomic Model

Analysis of Monetary Policy Responses after Financial Market Crises in a Continuous Time New Keynesian Model

Fiscal and Monetary Policy, Unfortunate Events, and the SGP Arithmetics Evidence from a Growth-Gaps Model

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