Structural Reforms And Monetary Policies In A Behavioural Macroeconomic Model
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| Author | : Paul De Grauwe |
| Publisher | : |
| Total Pages | : 273 |
| Release | : 2019 |
| Genre | : Business & Economics |
| ISBN | : 019883232X |
Modern macroeconomics has been based on the paradigm of the rational individual capable of understanding the complexity of the world. This has created a very shallow theory of the business cycle in which nothing happens in the macroeconomy unless shocks occur from outside. Behavioural Macroeconomics: Theory and Policy uses a different paradigm. It assumes that individual agents experience cognitive limitations preventing them from having rational expectations. Instead these individuals use simple rules of behaviour. Behavioural Macroeconomics introduces rationality by allowing individuals to learn from their mistakes and to switch to the rules that perform better. It introduces the idea of endogenously generated "animals spirits" that drive the business cycle and are in turn influenced by it, and applies this model to shed new light on a number of important issues. It analyses the role of fiscal policy in stabilizing the economy while maintaining debt sustainability; expands the model to include a banking sector and show how banks amplify the booms and busts; and explains how animal spirits help to synchronize the business cycles across countries. The model set out in Behavioural Macroeconomics leads to very different policy implications from the mainstream macroeconomic model. It shows how policymakers have a responsibility to stabilize an otherwise unstable system.
| Author | : Mr.Jonathan David Ostry |
| Publisher | : International Monetary Fund |
| Total Pages | : 62 |
| Release | : 2009-10-15 |
| Genre | : Business & Economics |
| ISBN | : 1589068181 |
This volume examines the impact on economic performance of structural policies-policies that increase the role of market forces and competition in the economy, while maintaining appropriate regulatory frameworks. The results reflect a new dataset covering reforms of domestic product markets, international trade, the domestic financial sector, and the external capital account, in 91 developed and developing countries. Among the key results of this study, the authors find that real and financial reforms (and, in particular, domestic financial liberalization, trade liberalization, and agricultural liberalization) boost income growth. However, growth effects differ significantly across alternative reform sequencing strategies: a trade-before-capital-account strategy achieves better outcomes than the reverse, or even than a "big bang"; also, liberalizing the domestic financial sector together with the external capital account is growth-enhancing, provided the economy is relatively open to international trade. Finally, relatively liberalized domestic financial sectors enhance the economy's resilience, reducing output costs from adverse terms-of-trade and interest-rate shocks; increased credit availability is one of the key mechanisms.
| Author | : Paul De Grauwe |
| Publisher | : Princeton University Press |
| Total Pages | : 147 |
| Release | : 2012-10-14 |
| Genre | : Business & Economics |
| ISBN | : 1400845378 |
In mainstream economics, and particularly in New Keynesian macroeconomics, the booms and busts that characterize capitalism arise because of large external shocks. The combination of these shocks and the slow adjustments of wages and prices by rational agents leads to cyclical movements. In this book, Paul De Grauwe argues for a different macroeconomics model--one that works with an internal explanation of the business cycle and factors in agents' limited cognitive abilities. By creating a behavioral model that is not dependent on the prevailing concept of rationality, De Grauwe is better able to explain the fluctuations of economic activity that are an endemic feature of market economies. This new approach illustrates a richer macroeconomic dynamic that provides for a better understanding of fluctuations in output and inflation. De Grauwe shows that the behavioral model is driven by self-fulfilling waves of optimism and pessimism, or animal spirits. Booms and busts in economic activity are therefore natural outcomes of a behavioral model. The author uses this to analyze central issues in monetary policies, such as output stabilization, before extending his investigation into asset markets and more sophisticated forecasting rules. He also examines how well the theoretical predictions of the behavioral model perform when confronted with empirical data. Develops a behavioral macroeconomic model that assumes agents have limited cognitive abilities Shows how booms and busts are characteristic of market economies Explores the larger role of the central bank in the behavioral model Examines the destabilizing aspects of asset markets
| Author | : Frederic S. Mishkin |
| Publisher | : MIT Press |
| Total Pages | : 561 |
| Release | : 2007 |
| Genre | : Monetary policy |
| ISBN | : 0262134829 |
This book by a leading authority on monetary policy offers a unique view of the subject from the perspectives of both scholar and practitioner. Frederic Mishkin is not only an academic expert in the field but also a high-level policymaker. He is especially well positioned to discuss the changes in the conduct of monetary policy in recent years, in particular the turn to inflation targeting. Monetary Policy Strategydescribes his work over the last ten years, offering published papers, new introductory material, and a summing up, "Everything You Wanted to Know about Monetary Policy Strategy, But Were Afraid to Ask," which reflects on what we have learned about monetary policy over the last thirty years. Mishkin blends theory, econometric evidence, and extensive case studies of monetary policy in advanced and emerging market and transition economies. Throughout, his focus is on these key areas: the importance of price stability and a nominal anch fiscal and financial preconditions for achieving price stability; central bank independence as an additional precondition; central bank accountability; the rationale for inflation targeting; the optimal inflation target; central bank transparency and communication; and the role of asset prices in monetary policy.
| Author | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 74 |
| Release | : 2015-10-23 |
| Genre | : Business & Economics |
| ISBN | : 1498344062 |
Over the past two decades, many low- and lower-middle income countries (LLMICs) have improved control over fiscal policy, liberalized and deepened financial markets, and stabilized inflation at moderate levels. Monetary policy frameworks that have helped achieve these ends are being challenged by continued financial development and increased exposure to global capital markets. Many policymakers aspire to move beyond the basics of stability to implement monetary policy frameworks that better anchor inflation and promote macroeconomic stability and growth. Many of these LLMICs are thus considering and implementing improvements to their monetary policy frameworks. The recent successes of some LLMICs and the experiences of emerging and advanced economies, both early in their policy modernization process and following the global financial crisis, are valuable in identifying desirable features of such frameworks. This paper draws on those lessons to provide guidance on key elements of effective monetary policy frameworks for LLMICs.
| Author | : Paul De Grauwe |
| Publisher | : Oxford University Press |
| Total Pages | : 273 |
| Release | : 2019-10-25 |
| Genre | : Business & Economics |
| ISBN | : 0192568353 |
Modern macroeconomics has been based on the paradigm of the rational individual capable of understanding the complexity of the world. This has created a very shallow theory of the business cycle in which nothing happens in the macroeconomy unless shocks occur from outside. Behavioural Macroeconomics: Theory and Policy uses a different paradigm. It assumes that individual agents experience cognitive limitations preventing them from having rational expectations. Instead these individuals use simple rules of behaviour. Behavioural Macroeconomics introduces rationality by allowing individuals to learn from their mistakes and to switch to the rules that perform better. It introduces the idea of endogenously generated "animals spirits" that drive the business cycle and are in turn influenced by it, and applies this model to shed new light on a number of important issues. It analyses the role of fiscal policy in stabilizing the economy while maintaining debt sustainability; expands the model to include a banking sector and show how banks amplify the booms and busts; and explains how animal spirits help to synchronize the business cycles across countries. The model set out in Behavioural Macroeconomics leads to very different policy implications from the mainstream macroeconomic model. It shows how policymakers have a responsibility to stabilize an otherwise unstable system.
| Author | : John B. Taylor |
| Publisher | : University of Chicago Press |
| Total Pages | : 460 |
| Release | : 2007-12-01 |
| Genre | : Business & Economics |
| ISBN | : 0226791262 |
This timely volume presents the latest thinking on the monetary policy rules and seeks to determine just what types of rules and policy guidelines function best. A unique cooperative research effort that allowed contributors to evaluate different policy rules using their own specific approaches, this collection presents their striking findings on the potential response of interest rates to an array of variables, including alterations in the rates of inflation, unemployment, and exchange. Monetary Policy Rules illustrates that simple policy rules are more robust and more efficient than complex rules with multiple variables. A state-of-the-art appraisal of the fundamental issues facing the Federal Reserve Board and other central banks, Monetary Policy Rules is essential reading for economic analysts and policymakers alike.
| Author | : Jorge M. Katz |
| Publisher | : United Nations Publications |
| Total Pages | : 164 |
| Release | : 2001 |
| Genre | : Business & Economics |
| ISBN | : |
In the last ten to fifteen years, profound structural reforms have moved Latin America and the Caribbean from closed, state-dominated economies to ones that are more market-oriented and open. Policymakers expected that these changes would speed up growth. This book is part of a multi-year project to determine whether these expectation have been fulfilled. Focusing on technological change, the impact of the reforms on the process of innovation is examined. It notes that the development process is proving to be highly heterogenous across industries, regions and firms and can be described as strongly inequitable. This differentiation that has emerged has implications for job creation, trade balance, and the role of small and medium sized firms. This ultimately suggests, amongst other things, the need for policies to better spread the use of new technologies.
| Author | : Jordi Galí |
| Publisher | : Princeton University Press |
| Total Pages | : 295 |
| Release | : 2015-06-09 |
| Genre | : Business & Economics |
| ISBN | : 1400866278 |
The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts
| Author | : Michael D. Bordo |
| Publisher | : University of Chicago Press |
| Total Pages | : 545 |
| Release | : 2013-06-28 |
| Genre | : Business & Economics |
| ISBN | : 0226066959 |
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
