The Relationship between Monetary Policy and Asset Prices
... results to the Bernanke and Kuttner analysis. For example, an unanticipated 25-basis point increase in the short-term interest rate results in a 1.7% decline in the S&P 500. Laevan and Tong (2012) take a deeper look at this question by examining varying responses by different types of firms. There s ...
... results to the Bernanke and Kuttner analysis. For example, an unanticipated 25-basis point increase in the short-term interest rate results in a 1.7% decline in the S&P 500. Laevan and Tong (2012) take a deeper look at this question by examining varying responses by different types of firms. There s ...
Chapter 22
... So the demand for money is some percent (k) of income. For the nation, income means national income. As we saw with the quantity theory of money, national income equals Nominal GDP. This is the product of the price level (GDP Deflator) times the quantity produced (Real GDP). (With simple numbers, if ...
... So the demand for money is some percent (k) of income. For the nation, income means national income. As we saw with the quantity theory of money, national income equals Nominal GDP. This is the product of the price level (GDP Deflator) times the quantity produced (Real GDP). (With simple numbers, if ...
4A FIRST LOOK AT MACROECONOMICS
... C) the fluctuations of real GDP around potential GDP. D) the maximum point of real GDP as the economy moves through the business cycles. Answer: B Topic: Productivity Growth Slowdown Skill: Recognition ...
... C) the fluctuations of real GDP around potential GDP. D) the maximum point of real GDP as the economy moves through the business cycles. Answer: B Topic: Productivity Growth Slowdown Skill: Recognition ...
Trends in potential output
... and their productivity, as well as variations in investment and the degree of unemployment persistence. Therefore, variations in annual measures of potential output growth should be distinguished from the long-run trend rate of potential output growth, which is primarily determined by the rate of te ...
... and their productivity, as well as variations in investment and the degree of unemployment persistence. Therefore, variations in annual measures of potential output growth should be distinguished from the long-run trend rate of potential output growth, which is primarily determined by the rate of te ...
New Keynesian Model
... Rational Expectations and the New Keynesian Model Long-term labor contracts are one source of rigidity that prevents wages and prices from responding fully to changes in the expected price level (called wage-price stickiness). For example, workers might find themselves at the end of the first year ...
... Rational Expectations and the New Keynesian Model Long-term labor contracts are one source of rigidity that prevents wages and prices from responding fully to changes in the expected price level (called wage-price stickiness). For example, workers might find themselves at the end of the first year ...
KOF - ETH Zürich
... • How the Short Run Differs from the Long Run • Most economists believe that classical theory describes the world in the long run but not in the short run. • Changes in the money supply affect nominal variables but not real variables in the long run. • The assumption of monetary neutrality is not ap ...
... • How the Short Run Differs from the Long Run • Most economists believe that classical theory describes the world in the long run but not in the short run. • Changes in the money supply affect nominal variables but not real variables in the long run. • The assumption of monetary neutrality is not ap ...
Inflation Targeting, Reserves Accumulation, and Exchange Rate
... although control of a monetary aggregate has also been observed in IT experiences (e.g. Peru between 1994 and 2001). In an inflation targeting regime, the inflation rate is (of course) the main target of policy. In fact, in the Latin American episodes to be reviewed below, the charters establishing ...
... although control of a monetary aggregate has also been observed in IT experiences (e.g. Peru between 1994 and 2001). In an inflation targeting regime, the inflation rate is (of course) the main target of policy. In fact, in the Latin American episodes to be reviewed below, the charters establishing ...
Lecture 15: AD-AS
... Increase in spending on new hospitals Decrease in the supply of money (higher ...
... Increase in spending on new hospitals Decrease in the supply of money (higher ...
McGraw-Hill/Irwin - McGraw Hill Higher Education
... It can reduce the amount of information that prices convey. Inflation is a very serious problem it increases to hyperinflation – exceptionally high levels of inflation, 100 percent or more a year. ...
... It can reduce the amount of information that prices convey. Inflation is a very serious problem it increases to hyperinflation – exceptionally high levels of inflation, 100 percent or more a year. ...
Economics of Money, Banking, and Fin. Markets, 10e, Global Edition
... B) the costs of higher inflation in terms of the distortions it produces in the economy are high. C) it is more difficult to stabilize the inflation rate at a higher targeting level. D) all of the above. Answer: D Ques Status: New AACSB: Reflective thinking skills 3) The "Greenspan doctrine" - centr ...
... B) the costs of higher inflation in terms of the distortions it produces in the economy are high. C) it is more difficult to stabilize the inflation rate at a higher targeting level. D) all of the above. Answer: D Ques Status: New AACSB: Reflective thinking skills 3) The "Greenspan doctrine" - centr ...
The IS*LM/AD*AS Model: A General Framework for Macroeconomic
... goods market and shift the IS curve. • An increase in G, financed by a tax increase, would do this but this is not the only source of a shift in the IS curve. • The resulting excess demand for goods and services at constant output can only be eliminated by changes in the real rate of interest. ...
... goods market and shift the IS curve. • An increase in G, financed by a tax increase, would do this but this is not the only source of a shift in the IS curve. • The resulting excess demand for goods and services at constant output can only be eliminated by changes in the real rate of interest. ...
Dynamics of Food Price Trends and Policy Options in Ethiopia
... So far, there is no consensus on why Ethiopia experienced such high food price surges. The puzzle is that the increase in inflation in the recent years coincided with relatively favorable harvests, whereas in the past inflation Ethiopia had typically been associated with agricultural supply shocks d ...
... So far, there is no consensus on why Ethiopia experienced such high food price surges. The puzzle is that the increase in inflation in the recent years coincided with relatively favorable harvests, whereas in the past inflation Ethiopia had typically been associated with agricultural supply shocks d ...
L - Spring Branch ISD
... of 6 percent and an unemployment rate of 5 percent The nominal interest rate is 8 percent A. Using a correctly labeled graph with both the short-run and long-run Phillips curves and the rel-evant numbers from above, show the current long-run equilibrium as point A B. Calculate the real interest rate ...
... of 6 percent and an unemployment rate of 5 percent The nominal interest rate is 8 percent A. Using a correctly labeled graph with both the short-run and long-run Phillips curves and the rel-evant numbers from above, show the current long-run equilibrium as point A B. Calculate the real interest rate ...
Long Run Stock Returns: Evidence from Belgium 1838-2008
... steel, glass, banking, telecommunications and electricity. It was also a very international market, with listed companies from all over the world. Before World War I (WW I) Belgium belonged to the top of foreign direct investors (per capita), and a lot of foreign capital flowed to the BSE and was su ...
... steel, glass, banking, telecommunications and electricity. It was also a very international market, with listed companies from all over the world. Before World War I (WW I) Belgium belonged to the top of foreign direct investors (per capita), and a lot of foreign capital flowed to the BSE and was su ...
Inflation outlook over the next two years has taken a turn for the worse
... end of the yield curve can be inferred from the forward rates. On the basis of this analysis, the market expects the policy rate to peak at about 8¼% two years ahead, which is somewhat above the prevailing expectations in mid-May when the Central Bank prepared its previous inflation forecast, reflec ...
... end of the yield curve can be inferred from the forward rates. On the basis of this analysis, the market expects the policy rate to peak at about 8¼% two years ahead, which is somewhat above the prevailing expectations in mid-May when the Central Bank prepared its previous inflation forecast, reflec ...
Targeting Constant Money Growth at the Zero
... passed through the filter developed by Baxter and King (1999) to isolate fluctuations occurring at business cycle frequencies corresponding to periods between 8 and 32 quarters. These tables show that, in fact, modest correlations between money, output, and prices seen over the entire sample of quar ...
... passed through the filter developed by Baxter and King (1999) to isolate fluctuations occurring at business cycle frequencies corresponding to periods between 8 and 32 quarters. These tables show that, in fact, modest correlations between money, output, and prices seen over the entire sample of quar ...
Information Technology and Monetary Policy
... difficult by increasing uncertainty about the targets and the instruments of monetary policy. The targets of monetary policy—low inflation and stable output, for example—are harder to define and to measure when information goods and services are a large or growing part of the economy. The instrument ...
... difficult by increasing uncertainty about the targets and the instruments of monetary policy. The targets of monetary policy—low inflation and stable output, for example—are harder to define and to measure when information goods and services are a large or growing part of the economy. The instrument ...
McGraw-Hill/Irwin
... It can reduce the amount of information that prices convey. Inflation is a very serious problem it increases to hyperinflation – exceptionally high levels of inflation, 100 percent or more a year. ...
... It can reduce the amount of information that prices convey. Inflation is a very serious problem it increases to hyperinflation – exceptionally high levels of inflation, 100 percent or more a year. ...
A Working Solution to the Question of Nominal GDP
... M1 and MZM are drawn from the Federal Reserve Bank of St. Louis’ FRED database; Anderson and Jones (2011) describe their construction in detail. With quite similar results, not shown, we also replicated the analysis using Anderson and Jones’ Divisia M2 series, as well as the much broader, Divisia M ...
... M1 and MZM are drawn from the Federal Reserve Bank of St. Louis’ FRED database; Anderson and Jones (2011) describe their construction in detail. With quite similar results, not shown, we also replicated the analysis using Anderson and Jones’ Divisia M2 series, as well as the much broader, Divisia M ...
The Zero Lower Bound, ECB Interest Rate Policy and the
... pre-emptively in order to raise expectations of future inflation and output. Compatible with this analysis, Orphanides and Wieland (2000) find, using dynamic programming techniques, that the policy rate becomes increasingly sensitive to inflation as it falls and the likelihood that the ZLB will be r ...
... pre-emptively in order to raise expectations of future inflation and output. Compatible with this analysis, Orphanides and Wieland (2000) find, using dynamic programming techniques, that the policy rate becomes increasingly sensitive to inflation as it falls and the likelihood that the ZLB will be r ...
Inflation
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the consumer price index) over time. The opposite of inflation is deflation.Inflation affects an economy in various ways, both positive and negative. Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.Inflation also has positive effects: Fundamentally, inflation gives everyone an incentive to spend and invest, because if they don't, their money will be worth less in the future. This increase in spending and investment can benefit the economy. However it may also lead to sub-optimal use of resources. Inflation reduces the real burden of debt, both public and private. If you have a fixed-rate mortgage on your house, your salary is likely to increase over time due to wage inflation, but your mortgage payment will stay the same. Over time, your mortgage payment will become a smaller percentage of your earnings, which means that you will have more money to spend. Inflation keeps nominal interest rates above zero, so that central banks can reduce interest rates, when necessary, to stimulate the economy. Inflation reduces unemployment to the extent that unemployment is caused by nominal wage rigidity. When demand for labor falls but nominal wages do not, as typically occurs during a recession, the supply and demand for labor cannot reach equilibrium, and unemployment results. By reducing the real value of a given nominal wage, inflation increases the demand for labor, and therefore reduces unemployment.Economists generally believe that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. However, money supply growth does not necessarily cause inflation. Some economists maintain that under the conditions of a liquidity trap, large monetary injections are like ""pushing on a string"". Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.Today, most economists favor a low and steady rate of inflation. Low (as opposed to zero or negative) inflation reduces the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy. The task of keeping the rate of inflation low and stable is usually given to monetary authorities. Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.