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Europe > Ireland

You are looking at 1 - 6 of 6 items for :

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Cover IMF Working Papers
Steady as She Goes—Estimating Potential Output During Financial “Booms and Busts”
Mr. Helge Berger
,
Mr. Thomas Dowling
,
Mr. Sergi Lanau
,
Mr. Mico Mrkaic
,
Mr. Pau Rabanal
, and
Marzie Taheri Sanjani
Potential output—in the sense of the GDP level or path an economy can sustain over the medium term—is a crucial benchmark for policymakers. However, it is difficult to estimate when financial “booms and busts” are driving the real economy. This paper uses a simple multivariate filtering approach to illustrate the role financial variables play in driving potential or sustainable output. The results suggest that it moves more steadily during financial “boom and bust” periods than implied by conventional HP filter estimates, which tend to more closely follow actual GDP. A two-region, multisector New Keynesian DSGE model with financial frictions sheds light on the economic forces that could be behind the results obtained from the filter. This has important implications for policymakers.
Keywords:
WP; MVF output gap; boom and bust; Spain output gaps estimate; house price; MVF-implied output gap; Spain output gaps from a MVF Model; Potential output; Output gap; Credit; housing price movement; Housing prices; Financial frictions; Global
Cover IMF Working Papers
Investment in the Euro Area: Why Has It Been Weak?
Ms. Bergljot B Barkbu
,
Pelin Berkmen
,
Pavel Lukyantsau
,
Mr. Sergejs Saksonovs
, and
Hanni Schoelermann
Investment across the euro area remains below its pre-crisis level. Its performance has been weaker than in most previous recessions and financial crises. This paper shows that a part of this weakness can be explained by output dynamics, particularly before the European sovereign debt crisis. The rest is explained by a high cost of capital, financial constraints, corporate leverage, and uncertainty. There is a considerable cross country heterogeneity in terms of both investment dymanics and its determinants. Based on the findings of this paper, investment is expected to pick up as the recovery strengthens and uncertainty declines, but persistent financial fragmentation and high corporate leverage in some countries will likely continue to weigh on investment.
Keywords:
WP; investment; cash flow; investment dynamics; cost of capital; credit rationing; aggregate investment equation; area investment; investment model; investment performance; investment pattern; performance in Europe; equipment investment; investment equation; Stocks; Neoclassical theory; Currencies; Yield curve; Europe
Cover IMF Working Papers
Output Gap in Presence of Financial Frictions and Monetary Policy Trade-offs
Francesco Furlanetto
,
Paolo Gelain
, and
Marzie Taheri Sanjani
The recent global financial crisis illustrates that financial frictions are a significant source of volatility in the economy. This paper investigates monetary policy stabilization in an environment where financial frictions are a relevant source of macroeconomic fluctuation. We derive a measure of output gap that accounts for frictions in financial market. Furthermore we illustrate that, in the presence of financial frictions, a benevolent central bank faces a substantial trade-off between nominal and real stabilization; optimal monetary policy significantly reduces fluctuations in price and wage inflations but fails to alleviate the output gap volatility. This suggests a role for macroprudential policies.
Keywords:
WP; monetary policy; Financial Frictions; Potential output; Optimal Monetary Policy; Output Gap; output gap stabilization; computing output gap; wage inflation; mark-up shock; asset price inflation; efficient frontier; output gap dynamics; monetary policy authority; implied output gaps; output gap in presence; inflation target shock; monetary policy shock; Wages; Inflation
Cover IMF Working Papers
Cyclical Behavior of Inventories and Growth Projections Recent Evidence From Europe and the United States
Mr. Willy A Hoffmaister
and
Mr. Jens R Clausen
In the United States and a few European countries, inventory behavior is mainly the outcome of demand shocks: a standard buffer-stock model best characterizes these economies. But most European countries are described by a modified buffer-stock model where supply shocks dominate. In contrast to the United States, inventories boost growth with a one-year lag in Europe. Moreover, inventories provide limited information to improve growth forecasts particularly when a modified buffer-stock model characterizes inventory behavior.
Keywords:
WP; stock; inventory behavior; buffer-stock model; Inventories; business cycle; forecasting; inventory investment; foresight inventory model; stylized fact; inventory change; inventories stem; Production growth; Business cycles; Employment protection; Vector autoregression; Supply shocks; Europe
Cover IMF Working Papers
Dissecting Taylor Rules in a Structural VAR
Woon Gyu Choi
and
Yi Wen
This paper uncovers Taylor rules from estimated monetary policy reactions using a structural VAR on U.S. data from 1959 to 2009. These Taylor rules reveal the dynamic nature of policy responses to different structural shocks. We find that U.S. monetary policy has been far more responsive over time to demand shocks than to supply shocks, and more aggressive toward inflation than output growth. Our estimated dynamic policy coefficients characterize the style of policy as a "bang-bang" control for the pre-1979 period and as a gradual control for the post-1979 period.
Keywords:
WP; interest rate; monetary policy; GDP deflator; endogenous monetary policy; Taylor rule; structural VAR; spectral decomposition; output growth; interest rate volatility; inflation volatility; inflation pressure; Inflation; Production growth; Supply shocks; Central bank policy rate; Business cycles; Global
Cover IMF Working Papers
Explaining International Comovements of Output and Asset Returns: The Role of Money and Nominal Rigidities
Robert Miguel W. K. Kollman
Empirically, output and asset returns are highly positively correlated across the United States and the other major industrialized countries. Standard business cycle models that assume flexible prices and wages, in the Real Business Cycle tradition, have great difficulties explaining this fact. This paper presents a dynamic-optimizing stochastic general equilibrium model of a two-country world with sticky nominal prices and wages and a flexible exchange rate. The structure here predicts positive international transmission of country-specific monetary policy and technology shocks, and it generates sizable cross-country correlations of output and of asset returns.
Keywords:
WP; Cross-country correlation of output and asset returns; money; nominal rigidities; international transmission of business cycles; money supply shock; price level; money supply supply shock; nominal interest rate; money supply innovation; equity return; supply schedule; home money supply supply shock; Monetary base; Sticky prices; Supply shocks; Currencies; Exchange rates