The idea that a common monetary policy in a monetary union imposes costs when compared with independent policies at the country level is largely widespread in the literature. This result leads directly to a greater emphasis on national Þscal policies. We show in this paper that a common monetary policy has more power to asymmetrically affect countries than is usually stated in the literature. A...

Central bank credit has expanded dramatically in some of the euro area member countries since the beginning of the …nancial crisis. This paper makes two contributions to understand this stylized fact. First, we discuss a simple model of monetary policy that includes (i) a credit channel and (ii) a common pool problem in a monetary union. We illustrate that the interaction of the two elements le...

The remarkable stability of low domestic inflation in many countries requires explanation. In this paper, a number of competing hypotheses are evaluated on a stand-alone basis, and all are found to be inadequate. This includes the view that this outcome has been solely the result of more effective disinflationary monetary policies. However, a combination of these hypotheses (including a signifi...

Bank-speci…c determinants of bank failure during the …nancial crisis in Colombia are identi…ed and studied using duration analysis. The process of failure of banks and related …nancial institutions during that period can be explained by di¤erences in …nancial health and prudence across institutions. The capitalization ratio is the most signi…cant indicator explaining bank failure. Increases in ...

This paper provides parametric estimates of technical change, e¢ ciency change, economies of scale, and total factor productivity growth for large banks (those with assets in excess of $1 billion) in the United States, over the period from 2000 to 2005. In doing so, we propose a distance function based primal total factor productivity growth index, which is valid under both perfect and imperfec...

Price level targeting (without base drift) and in‡ation targeting (with base drift) are compared with persistence in output (generated by sticky prices, for instance). Counter to conventional wisdom, price level targeting results in lower short-run in‡ation variability than in‡ation targeting (if output is at least moderately persistent). Price level targeting also eliminates any average in‡ati...

This paper examines the predictive content of several macroeconomic variables for the decisions of the Federal Open Market Committee (FOMC) to change its target for the Federal funds rate. To take the discrete nature of the target changes and their serial dependence into account we develop forecasting procedures that are based on dynamic extensions of a multinomial logit model. We …nd that the ...

This paper investigates the disinflation experiences of three countries, Australia, Canada and New Zealand. Unlike previous approaches which have sought to use institutional data to pre-determine the causes, speed and duration of the transitions to low inflation regimes this paper allows price data itself to determine the speed and timing of the reforms using smooth transition analysis. The res...

Financial Globalization and Monetary Policy* The process of financial globalization has significantly altered the environment in which national monetary policy authorities operate. What implications does this have for the design of monetary policy? The question can be properly addressed only in the context of a model where monetary policy interacts with financial market efficiency. This paper i...

It is widely acknowledged that the Fed can control the average inflation rate over a period of time reasonably well. Because of this and the Federal Open Market Committee’s (FOMC’s) long-standing commitment to price stability, the author argues that the FOMC has an implicit long-run inflation objective (LIO)—lower and upper bounds to the long-run inflation rate. He shows that the statements mad...