April 8th, 2021

Our latest Policy Forum deals with the Chinese financial and monetary system. 

Policy Forum 13 (April 2021)

November 16th, 2020

Discussion Paper 2020/8 is now available:

Benchimol, J. / Ivashchenko, J.: Switching Volatility in a Nonlinear Open Economy

Abstract:

Uncertainty about an economy's regime can change drastically around a crisis. An imported crisis such as the global financial crisis in the euro area highlights the effect of foreign shocks. Estimating an open-economy nonlinear dynamic stochastic general equilibrium model for the euro area and the United States including Markov-switching volatility shocks, we show that these shocks were significant during the global financial crisis compared with periods of calm. We describe how US shocks from both the real economy and financial markets affected the euro area economy and how bond reallocation occurred between short- and long-term maturities during the global financial crisis. Importantly, the estimated nonlinearities when domestic and foreign financial markets influence the economy, should not be neglected. The nonlinear behavior of market-related variables highlights the importance of higher-order estimation for providing additional interpretations to policymakers.

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November 9th, 2020

Our latest Policy Forum deals with the relation of trade liberalization and inequality in China.

Policy Forum 12 (November 2020) 

October 28th, 2020

Discussion Paper 2020/6 is now available: Benchimol, J. / El-Shagi, M. / Saadon, Y..: Do Expert Experience and Characteristics Affect Inflation Forecasts?

Abstract:

Each person's characteristics may influence that person's behaviors and their outcomes. We build and use a new database to estimate experts' performance and boldness based on their experience and characteristics. We classify experts providing inflation forecasts based on their education, experience, gender, and environment. We provide alternative interpretations of factors affecting experts' inflation forecasting performance, boldness, and pessimism by linking behavioral economics, the economics of education, and forecasting literature. An expert with previous experience at a central bank appears to have a lower propensity for predicting deflation.

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October 26th, 2020

Discussion Paper 2020/5 is now available: El-Shagi, M. / Jiang, L. / Zhang, L..:  One Country - Two Monetary Policies: Evidence from a new indicator of the PBoC´s monetary policy support for poor regions

Abstract:

In recent years, one of the PBoC′s major issues was to avoid a generally conservative monetary policy that would jeopardize the central government′s poverty-alleviation strategy by limiting credit supply in rural areas where it is already scarce. We develop a range of new indicators to measure those aspects of the PBoC′s policy and demonstrate that the PBoC has successfully implemented policies targeted at poor counties. That is, we show that a central bank has the general potential to address regional diversity and distributional issues.

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October 20th, 2020

Discussion Paper 2020/4 is now available: El-Shagi, M. / Zheng, Y.: Money Demand: A Pseudo-Metastudy

Abstract:

In this paper, we provide conclusive evidence on the role of measurement and estimation techniques in money demand estimation. Over the past few decades, there have been 100s of papers assessing money demand in the main economies of the globe. We develop a pseudo-metastudy framework where, based on modeling choices found in the literature, we estimate thousands of different specifications for the US, China, the UK and the Euro area, allowing us to assess what has driven the diverging results in the previous literature.

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July 6th, 2020

Our latest policy forum presents Modern Monetary Theory.

Policy Forum 11 (July 2020)

May 25th, 2020

Discussion Paper 2020/3 is now available: Tong, B. / Yang, G.: Interest Rate Pegging, Fluctuations and Fiscal Policy in China

Abstract:

This paper proves in a New Keynesian model that interest rate pegging can explain the unusual business cycle fluctuations in China. It is traditional wisdom that when the nominal interest rate is inflexible, there is no unique equilibrium in macroeconomic models. We prove that a unique equilibrium exists if the nominal rate is pegged for a limited period, after which it switches to a flexible rate regime.The peg alters the propagation of external shocks, magnifies volatility of endogenous variables, and leads to instability of the economy. Besides, the model becomes more unstable when the peg duration extends, and when the pegged rate deviates from steady state. At the same time, fiscal multiplier increases under the peg, indicating fiscal policy may be more effective in mitigating economic fluctuations when monetary policy is restricted by interest rate pegging.

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February 1st, 2020

We are excited to announce that the CFDS is organizing its second special issue under the umbrella of the BRICS Network University (BRICS NU). This time a Symposium (a collection of roughly half a dozen thematically matching papers in one issue) will be published in Economic Systems on the topic "Economic Growth and Development in the BRICS". Submission Deadline is June 30th, 2020. 

Call for Papers

January 15th, 2020

The Divisia Monetary Aggregates for China have been updated. Chinese Divisia Data