November 3rd, 2021

 

We are excited to announce that the program of our HenU/INFER Workshop on Applied Macroeconomics 5.5 is now available featuring keynote speeches by Prof. Helmut Lütkepohl, Prof. Song (Micheal) Zheng, and Prof. Joshua Aizenman as well as over 30 excellent paper presentations from scholars in China and the rest of the world. 

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July 11th, 2021

Discussion Paper 2021/2 is now available: El-Shagi, M. / Ma, Y.: Nine blind men and the PBoC

Abstract:

Over the past decade, several dozen papers have been written that identify the People’s Bank of China’s monetary policy shocks. Yet, what often seems like minor differences in measurements of monetary policy and identifying assumptions yield vastly different implied shocks. In this paper, we pitch 20 shock time series from the literature against each other in a horse race. We use a local projections framework to produce impulse responses based on all shocks for production, prices, money and interest rates and use them to assess the economic plausibility of the competing results. Our results confirm the frequently mentioned relevance of monetary aggregates for Chinese monetary policy but also point the importance of using forward looking policy reaction functions (or account for forward looking variables in a VAR framework) when identifying monetary policy shocks.

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April 13th, 2021

Discussion Paper 2021/1 is now available: El-Shagi, M. / Tochkov, K.: Divisia Monetary Aggregates for Russia: Money Demand, GDP Nowcasting, and the Price Puzzle

Abstract:

The lack of developed financial markets and well-functioning transmission channels assigns monetary aggregates in emerging economies the potential role of nominal anchor, intermediate target, or informational variable for monetary policy. The effectiveness of this approach relies crucially on the correct measurement of money, which is not fulfilled by the conventional index based on the simple sum of financial assets. This paper calculates alternative Divisia monetary aggregates for Russia over the period 1998-2019, which account for the level of liquidity of a given monetary asset by assigning weights according to the usefulness of that asset for transaction services. Divisia is found to follow a growth pattern markedly different from the simple sum, whereby deviations between the two series are even more pronounced when foreign-currency accounts are included. We conduct three empirical exercises to demonstrate the advantages of Divisia over the simple sum. Divisia confirms the stability of the money demand function and reflects portfolio shifts in response to changes in the opportunity cost of simple sum. Lastly, Divisia mitigates the price puzzle phenomenon relative to the conventional measure. We conclude that Divisia monetary aggregates would improve the effectiveness of monetary policy in Russia. 

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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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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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