The Eurosystem, the U.S. Federal Reserve, and the Bank of Japan: Similarities and Differences

Gerdesmeier, Dieter; Mongelli, Francesco Paolo; Roffia, Barbara

doi:10.1111/j.1538-4616.2007.00087.x

Cited by 30 publications

(19 citation statements)

References 43 publications

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“…Clausen and Hayo (2002) differ also with respect to the second sub-period, because they again suggest larger coefficients. A recent paper by Gerdesmeier et al (2007) affirms that the reaction function of the ECB still fulfils the Taylor principle. To summarize, a review of the related literature does not give clear suggestions.…”

Section: µ =mentioning

confidence: 91%

Why are the Effects of Recent Oil Price Shocks so Small?

Schmidt

Zimmermann

2007

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. Abstract Recent oil price shocks have relatively small effects on real economic activity and inflation compared to the experiences of the seventies and the early eighties. In this paper we analyse possible reasons for these phenomena using the example of the German economy. At first, by estimating a VAR-model and calculating impulse responses to an oil price shock it is confirmed that the macroeconomic effects have become much smaller. Moreover, our simulations show that oil price hikes are more closely related to global economic activity since the early nineties. Then, to get a deeper understanding of the structural changes which are responsible for these results we utilize a new Keynesian open economy model. It becomes obvious that the small effects of the recent oil price shocks on the German economy can be explained by a combination of a reduced energy cost share and good luck in terms of a strong growing global economy. Hence, if global economic growth decreases, pure oil price shocks may still have substantial effects on the German economy, even if the energy pricevulnerability has been reduced. These results should be valid also for other oil importing countries, at least from a qualitative point of view. JEL Classification: E31, E32, F41 Terms of use: Documents in

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Section: µ =mentioning

confidence: 91%

Why are the Effects of Recent Oil Price Shocks so Small?

Schmidt

Zimmermann

2007

SSRN Journal

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“…Clarida, Gali and Gertler (1998) provide empirical evidence of how interest rate reaction functions differ among OECD countries. Gerdesmeier, Mongelli and Roffia (2007) compare the monetary policies implemented by the Eurosystem, the Fed and the Bank of Japan, and also find differences in estimated Taylor rule coefficients. Since central banks target short-term nominal interest rates and, in general, follow different interest rate setting rules, higher forecasting power of the Taylor rule model in a single-equation framework at the short horizon is plausible.…”

Section: Introductionmentioning

confidence: 92%

Forecasting exchange rates out-of-sample with panel methods and real-time data

Ince

2014

Journal of International Money and Finance

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This paper evaluates out-of-sample exchange rate forecasting with Purchasing Power Parity (PPP) and Taylor rule fundamentals for 9 OECD countries vis-à-vis the U.S. dollar over the period from 1973:Q1 to 2009:Q1 at short and long horizons. In contrast with previous work, which reports "forecasts" using revised data, I construct a quarterly real-time dataset that incorporates only the information available to market participants when the forecasts are made. Using bootstrapped outof-sample test statistics, the exchange rate model with Taylor rule fundamentals performs better at the one-quarter horizon and panel estimation is not able to improve its performance. The PPP model, however, forecasts better at the 16-quarter horizon and its performance increases in panel framework. The results are in accord with previous research on long-run PPP and Taylor rule models.A common problem with the papers discussed above is their reliance on ex-post revised data for the forecasting analysis. Although it seems obvious that out-of-sample exchange rate forecasting should be evaluated using real-time data, which reflects information available to market participants, it is still very rare in the exchange rate literature. Almost all existing studies on exchange rate forecasting exploit revised data which contains future information, due to revisions and additions of new data, that is not available to either policymakers or market participants. Out-of-sample forecast evaluations based on ex-post revised data yield misleading inference about the exchange rate models, and information problems of market agents are not accounted in the analysis. Meese and Rogoff (1983a) use both ex-post revised data and actual realized values of future explanatory variables to test the forecasting ability of structural models. As Rossi (2005) emphasizes, to forecast economic variables which are driven by persistent and permanent shocks, the econometrician might measure agent's probability distribution poorly by using actual realized values of future explanatory variables.To forecast exchange rates, which are primarily driven by expectations, real-time data would be more advantageous due to capturing the information set of market participants as closely as possible in contrast to ex-post revised data and actual realized values of future explanatory variables.The first paper to use real-time data to evaluate nominal exchange rate predictability is Faust, Rogers and Wright (2003). Examining the predictive ability of Mark's (1995) monetary model using real-time data for Japan, Germany, Switzerland and Canada vis-à-vis the U.S, they report that the models consistently perform better using real-time data than fully revised data. However, none of the models perform better than the random walk model. More recently, Molodtsova, Papell (2008, 2011) find evidence of predictability with Taylor rule fundamentals using real-time data for the Deutschmark/dollar and Euro/dollar exchange rates. Molodtsova, Nikolsko-Rzhevskyy, and Papell (2008) find evidence of out-...

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“…Third, although emerging markets are not homogeneous in terms of their monetary policy reaction rules, central banks respond to changes in exchange rates in most cases. Similar to the findings regarding developed economies, our review of developing economies suggests that, although Taylor rules are a good approximation of central banks' behaviors, there is room for heterogeneity in the responses of different countries (see, for instance, Clarida et al, 1998;and Gerdesmeier et al, 2007).…”

Section: Monetary Policy In Emerging Economiesmentioning

confidence: 55%