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Business and Economics > Production and Operations Management

You are looking at 1 - 10 of 10 items for :

  • Type: Journal Issue x
  • Demand for Money x
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Cover IMF Working Papers
Structural Quarterly Projection Model for Belarus
Karel Musil
,
Mikhail Pranovich
, and
Mr. Jan Vlcek
Belarusian authorities contemplate transiting to inflation targeting. The paper suggests a small structural model at the core of the forecasting and policy analysis system. A well-researched canonical structure of Berg, A., Karam, P. and D. Laxton (2006) is extended to capture specifics of Belarusian economy and macroeconomic policy. The modified model’s policy block reflects a monetary targeting regime and allows for transition from it to an interest-rate-based framework. Adding wages, directed lending and dollarization allow for studying implications of activist wage policy, state program lending, and dollarization for macroeconomic stability and the strength of the policy transmission mechanism.
Keywords:
WP; transmission mechanism; depreciation target; core inflation; nominal exchange rate depreciation; changes monetary policy strategy; Belarus; Quarterly Projection Model; Monetary Policy; Dollarization; Nominal Wages; Fiscal Impulse; depreciation shock; Exchange rates; Inflation; Inflation targeting; Output gap; Demand for money
Cover IMF Working Papers
Money As Indicator for the Natural Rate of Interest
Mr. Helge Berger
and
Mr. Henning Weber
The natural interest rate is of great relevance to central banks, but it is difficult to measure. We show that in a standard microfounded monetary model, the natural interest rate co-moves with a transformation of the money demand that can be computed from actual data. The co-movement is of a considerable magnitude and independent of monetary policy. An optimizing central bank that does not observe the natural interest rate can take advantage of this co-movement by incorporating the transformed money demand, in addition to the observed output gap and inflation, into a simple but optimal interest rate rule. Combining the transformed money demand and the observed output gap provides the best information about the natural interest rate.
Keywords:
WP; money gap; monetary policy; Natural interest rate; money demand; optimal monetary rule; gap coefficient; observed output gap; interest rate rule; policy rule; Demand for money; Output gap; Consumption; Monetary policy frameworks; Productivity
Cover IMF Working Papers
Does Money Matter for Inflation in Ghana?
Mr. Arto Kovanen
Money has only limited information value for future inflation in Ghana over a typical monetary policy implementation horizon (four to eight quarters). On the other hand, currency depreciation and demand pressures (as measured by the output gap) are shown to be important predictors of future price changes. Inflation inertia is high and inflation expectations are largely based on backward-looking information, suggesting that inflation expectations are not well anchored and hence more is needed to strengthen the credibility of Ghana's inflation-targeting regime.1
Keywords:
WP; monetary policy; money demand; inflation expectation; monetary policy credibility; inflation-targeting; monetary policy implementation; gap indicator; inflation-targeting arrangement; inflation objective; reaction function; Inflation; Inflation targeting; Monetary base; Demand for money; Output gap; Africa
Cover IMF Working Papers
On the Optimal Adherence to Money Targets in a New-Keynesian Framework: An Application to Low-Income Countries
Mr. Andrew Berg
,
Ms. Filiz D Unsal
, and
Mr. Rafael A Portillo
Many low-income countries continue to describe their monetary policy framework in terms of targets on monetary aggregates. This contrasts with most modern discussions of monetary policy, and with most practice. We extend the new-Keynesian model to provide a role for “M” in the conduct of monetary policy, and examine the conditions under which some adherence to money targets is optimal. In the spirit of Poole (1970), this role is based on the incompleteness of information available to the central bank, a pervasive issues in these countries. Ex-ante announcements/forecasts for money growth are consistent with a Taylor rule for the relevant short-term interest rate. Ex-post, the policy maker must choose his relative adherence to interest rate and money growth targets. Drawing on the method in Svensson and Woodford (2004), we show that the optimal adherence to ex-ante targets is equivalent to a signal extraction problem where the central bank uses the money market information to update its estimate of the state of the economy. We estimate the model, using Bayesian methods, for Tanzania, Uganda (both de jure money targeters), and Ghana (a de jure inflation targeter), and compare the de facto adherence to targets with the optimal use of money market information in each country.
Keywords:
WP; interest rate
Cover IMF Working Papers
Sources of Inflation in Sub-Saharan Africa
Mr. Shanaka J Peiris
and
Régis Barnichon
This paper explores the sources of inflation in Sub-Saharan Africa by examining the relationship between inflation, the output gap, and the real money gap. Using heterogeneous panel cointegration estimation techniques, we estimate cointegrating vectors for the production function and the real money demand function to recover the structural output and money gaps for seventeen African countries. The central finding is that both gaps contain significant information regarding the evolution of inflation, albeit with a larger role played by the money gap. There is no significant evidence of asymmetry in the relationship.
Keywords:
WP; money gap; excess demand; Inflation; Phillips curve; Money Demand; Panel Cointegration; Growth Accounting; panel money demand estimation; money demand function; Phillips Curve Panel GMM; inflation movement; output gap measure; Output gap; Demand for money; Potential output; Estimation techniques; Sub-Saharan Africa; integration estimation technique; Cointegration regression
Cover IMF Staff Country Reports
Korea: Selected Issues
International Monetary Fund
This Selected Issues paper on Korea provides background information on economic developments and policies, with particular emphasis on 1995–96. Following two years of rapid expansion, led by buoyant investment and exports, economic growth moderated in late 1995 and the first half of 1996. The moderation was in response to the earlier tightening of monetary conditions and less favorable short-term export prospects. The slowdown was reflected in a sharp deceleration in final domestic demand, whose contribution to growth fell from 9.1 percent in 1995 to 6.6 percent in the first half of 1996.
Keywords:
ISCR; CR; interest rate; nominal interest rate; liberalization; rate
Cover IMF Working Papers
Inflation, Nominal Interest Rates, and the Variability of Output
Mr. Bankim Chadha
and
Daniel Tsiddon
This paper examines the distribution of output around capacity when money demand is a nonlinear function of the nominal interest rate such that nominal interest rates cannot become negative. When fluctuations in output result primarily from disturbances to the money market, the variance of output is shown to be an increasing function of the trend inflation rate. When they result from disturbances to the goods market, the variance of output is a decreasing function of the trend inflation rate. When both disturbances are significant, there exists, in general, a critical non-zero trend inflation rate that minimizes the variance of output.
Keywords:
WP; rate of inflation; price level; nominal interest rate; trend inflation rate; inflation rate rise; money demand function; long-run inflation rate influence; shock term; Inflation; Demand for money; Capacity utilization; Monetary base; Real interest rates
Cover IMF Staff Country Reports
Philippines: Background Papers
International Monetary Fund
This Background Paper analyzes the Philippines's experience with capital inflows. It compares the episode of 1993–95 with the pre-debt crisis period, and makes the case that the recent inflows are in important respects more benevolent than in the past. The paper concludes that inflows are consistent with a balanced and sustainable revival in the Philippines economy, and indeed are most likely contributing to recovery. This paper also examines financial reintermediation and new challenges to monetary policy. Requirements and plans for the fiscal reform in the medium term are also described.
Keywords:
ISCR; CR; GNP; tax; Philippines; deficit; money demand; liquidity growth; TFP estimate; nominal exchange rate; productivity growth; reform proposal; monetary policy; Capital inflows; Total factor productivity; Demand for money; Liquidity; Asia and Pacific; East Asia
Cover IMF Working Papers
Models of Inflation and the Costs of Disinflation
Mr. Guy M Meredith
,
Mr. Bankim Chadha
, and
Mr. Paul R Masson
This paper focuses on the output costs of disinflation. A model of inflation with both forward and backward elements seems to characterize reality. Such an inflation model is estimated using data for industrial countries, and the output costs of a disinflation path are calculated, first analytically in a simple theoretical model, then by simulation of a global, multi-region empirical model. The credibility of a preannounced path for money consistent with the lowest output loss is considered. An alternative, more credible policy may be to announce an exchange rate peg to a low inflation currency.
Keywords:
WP; rate of inflation; money supply; price level; disinflation path; inflation equation; disinflation program; inflation stickiness; nominal interest rate; Phased-in disinflation; Inflation; Disinflation; Capacity utilization; Monetary base; Demand for money; North America; Europe
Cover IMF Working Papers
The Dynamics of Money Demand and Prices
International Monetary Fund
The paper evaluates whether a monetary aggregate can serve as a useful predictor of inflation, using recent developments in the principle of cointegrated variables. M2 but not M1 is cointegrated with relevant price, transactions, and rate of return variables. However, deviations of M2 from its long-run equilibrium value do not significantly enhance inflation forecasts based on conventional output-gap models, a result that stands in contrast to the Federal Reserve’s P* relationship. Nevertheless, changes in M2 do contain information about future inflation, consistent with the view that the demand for money reflects the forward-looking behavior of private agents.
Keywords:
WP; rate of return; price level; price level variable; inflation equation; money demand theory; output gap; inflation process; time series; Demand for money; Monetary aggregates; Inflation; Output gap; Money markets