Monetary Policy Research Articles

Bridging Prosperity: Unravelling the Interplay of Public Borrowing, Gross Capital Formation, and Economic Growth In The Nepalese Economy

Abstract This study investigates the impact of public borrowing and total capital formation on Nepal’s economic growth. The analysis relies on secondary data from publications from the Nepal Rastra Bank and economic surveys conducted in Nepal. The dataset has 34 consecutive yearly data points from 1988/89 to 2021/22. A causal correlational research design is used. It is guided by positivist research philosophy and deductive reasoning. The robust least square method is employed to explore the impact of independent variables. Research indicates that public debt and capital formation favourably and significantly affect Nepal’s economic growth. The study demonstrates that a one-unit rise in public debt and capital formation leads to 0.2881 and 0.6205 unit increases in Nepal’s economic growth, respectively. The positive impact of capital formation is more effective than public borrowing in promoting the economic growth of Nepal. Policymakers should focus on creating a business-friendly environment, enacting growth-oriented fiscal and monetary policies, efficiently allocating resources for infrastructure and technology, and managing public debt prudently to ensure sustainable and equitable economic development.

Robots and humans: The role of fiscal and monetary policies in an endogenous growth model

Robots and humans: The role of fiscal and monetary policies in an endogenous growth model

Asymmetric Interest Rate Pass-Through in Türkiye: The Role of Global Financial Crisis

The aim of this paper is to investigate the monetary policy rate pass-through to banks’ loan and deposit rates in Turkey. We employ the nonlinear autoregressive distributed lag (NARDL) model with the data set covering the period from January 2002 to October 2019. The loan rates generally have upward rigidities in the long run before the financial crisis, but these rigidities turn into downward and short-run after the financial crisis. These results imply that banks adjusted their loan rates more slowly during monetary tightening periods in the pre-crisis period, while banks' responses are faster during monetary easing periods. However, in the post-crisis period, banks' loan rates react faster during monetary policy tightening than monetary easing periods.

Playing by the Taylor rules or sticking to Friedman’s policy: A new approach to monetary policy identification

Playing by the Taylor rules or sticking to Friedman’s policy: A new approach to monetary policy identification

The transmission of monetary policy shocks: Evidence from Japan

The transmission of monetary policy shocks: Evidence from Japan

Financial Market Responses to the Policy Language of Forward Guidance: Evidence from China

Forward guidance is an innovative unconventional monetary policy tool used to manage expectations. This study not only investigates whether and how forward guidance influences financial markets but also explores its impact on cross-market correlations. Three key findings include: (1) larger absolute change in tone increases currency market volatility but decreases treasury bond and stock market volatilities. The noise-reducing effect is primarily attributable to forward guidance on economic outlook rather than policy inclination, although their effectiveness has reversed since 2015. (2) A positive change in forward guidance tone decreases currency market interest rate, which is economically negligible, albeit statistically significant. Returns of other financial assets are not responsive to the change in forward guidance tone. (3) Forward guidance significantly influences cross-market correlations though the impacts show heterogeneity. Economic-outlook and policy-inclination forward guidance significantly affect the currency-bond correlation in the same direction while exert differential impacts on bond-stock and currency-stock correlations. Two important implications for expectation management are enhancing coordination between different types of forward guidance as well as improving the efficiency of information transmission in communication.

Neural network learning for nonlinear economies

Neural networks offer a promising tool for the analysis of nonlinear economies. In this paper, we derive conditions for the stability of nonlinear rational expectations equilibria under neural network learning. We demonstrate the applicability of the conditions in analytical and numerical examples where the nonlinearity is caused by monetary policy targeting a range, rather than a specific value, of inflation. If shock persistence is high or there is inertia in the structure of the economy, then the only rational expectations equilibria that are learnable may involve inflation spending long periods outside its target range. Neural network learning is also useful for solving and selecting between multiple equilibria and steady states in other settings, such as when there is a zero lower bound on the nominal interest rate.

Can Money Help to Achieve the Paris Agreement Goal? The Missing Piece of the Puzzle: How Green Monetary Policy Can Bridge the Emissions Gap

Can Money Help to Achieve the Paris Agreement Goal? The Missing Piece of the Puzzle: How Green Monetary Policy Can Bridge the Emissions Gap

Data-driven monetary policy: Evidence from the Bank of Japan’s equity purchase program

Data-driven monetary policy: Evidence from the Bank of Japan’s equity purchase program

Inflationary realities: Lessons from Iran’s inflationary experience for the Western consumers

In response to the recessions of 2008 and 2020, governments and central banks injected massive amounts of liquidity into their respective economies. The subsequent monetary devaluation resulted in a number of developed nations experiencing their highest inflation levels for 40 years, with many consumers living through double-digit inflation for the first time. Although monetary authorities claim to have inflation under control, high chronic inflation nonetheless remains a possibility. This paper considers the case of Iran, a country with chronic high inflation, and through a qualitative study explores the experience of consumers and their adaptive strategies in such economic circumstances. For Western consumers, businesses and policy makers, it will be illuminating to grasp the impact and consequences of failed monetary policies and ongoing inflation on consumers’ lives and society at large.

Structural monetary policy, corporate behavior, and pay gap: Evidence from SMEs in China

Structural monetary policy, corporate behavior, and pay gap: Evidence from SMEs in China

Global Transmission Shocks of U.S. Monetary Policy on China's Housing Prices

The paper demonstrates that the monetary policy of the United States has important spillover effects to China. Based on the monthly data from January 2016 to April 2024, this paper establishes a VAR model to analyze the influence of U.S. monetary policy on China's real estate prices and its transmission channels, including interest rate, exchange rate, consumer confidence, and asset price. The results show that the impact of the Federal Funds Effective Rate on housing prices is very quick, reaching a maximum in the first month and continuing to have a positive impact over the long term. The Federal Funds Effective Rate and China's Loan Prime Rate have a positive impact on housing prices in the early stage, but then there is a change in impact direction. The Exchange Rate, Consumer Confidence Index and CSI 300 index all had positive spillover effects on housing prices in the early days. The variance decomposition analysis shows that the exchange rate channel plays the most significant role in causing China’s real estate price fluctuations.

Islamic Economics towards the Sustainability of Economic Development

Islamic economics, grounded in sharia principles, serves as a pivotal force in advancing sustainable economic development, prioritizing justice, environmental sustainability, and the enhancement of social welfare. One of the main pillars of Islamic Economics is the prohibition of usury, which has a significant impact on the distribution of wealth and economic stability. The principle of justice in Islamic Economics is reflected in mechanisms for sharing profits and losses, such as mudarabah and musharakah, where the involvement of all parties in sharing the results creates a more stable economic environment. This system encourages active participation and shared responsibility, reducing the risk of speculation that could undermine economic stability. The importance of sustainability is realized through Islamic ecological principles. The caliphate concept, which emphasizes human responsibility as custodians of nature, is the basis for environmentally friendly economic practices. In this context, Islamic Economics encourages sustainable use of resources, supporting economic growth that does not damage the environment. In facing global economic challenges, Islamic Economics also offers an alternative to conventional monetary policy. Monetary policy directed at the stability of the value of money and distributional justice is the main focus, avoiding the risk of inflation which is often associated with uncontrolled money creation. Thus, Islamic Economics is not only an alternative economic framework but also a solution that has a perspective of justice and sustainability in facing the challenges of contemporary economic development. By combining ethical values, fair distribution, and attention to the environment, Islamic Economics paves the way towards inclusive and sustainable economic development.

THE EXCHANGE RATE OF THE RUPIAH IN INDONESIA: VOLATILITY AND ECONOMIC STABILITY

<p>The exchange rate of the rupiah is inelastic, which means that changes in the exchange rate do not always lead to significant changes in the supply and demand for the currency. The objective of this research is to analyze the factors influencing the inelasticity of the rupiah exchange rate and its impact on the Indonesian economy. Using literature review and secondary data analysis methods, this study will identify factors such as inflation, monetary policy, and global economic uncertainty that contribute to the inelasticity of the rupiah exchange rate. The research methodology adopts a comprehensive literature review approach by examining the current conditions of the local currency exchange rate, key factors, and potential volatility. This study refers to a number of academic sources and central banks, including the latest academic papers. The research results show that although there is exchange rate volatility, the market's reaction to that volatility tends to be minimal, thus having a significant impact on economic stability.</p>

Integrasi Islamic Worldview dalam Ekonomi Indonesia: Perspektif Neoklasik, Institusional dan Makroekonomi

The Indonesian economy, as one of the countries with the largest Muslim population in the world, is faced with various challenges in achieving inclusive and sustainable economic development. This article aims to examine how the Islamic worldview can be integrated into Indonesian economic analysis, by referring to three leading economic journals. The first approach taken is the neoclassical perspective in the Journal of Economics and Development, which examines fiscal and monetary policy. Within the framework of the Islamic worldview, this analysis needs to pay attention to the principles of social justice, avoidance of usury, and fair distribution of wealth. Second, in the Journal of Economics and Development Studies, the institutional economics approach highlights the importance of institutions in economic development. In the Islamic view, the principles of shura (deliberation) and amanah (trust) are the keys to institutional management that is oriented towards the welfare of the people. Third, in the Journal of Economic Sciences, globalization is analyzed in the context of its impact on the Indonesian economy. The Islamic worldview offers solutions to global inequality through social instruments such as zakat, infaq, and waqf. Overall, the integration of Islamic economic principles provides a new perspective that focuses more on social justice and shared prosperity, which can enrich Indonesia's economic policies in achieving sustainable and inclusive development.

IMPACT OF ELECTRONIC PAYMENTSON MONEY LAUNDERING CASES IN INDIA

In recent years, there has been a lot of interest in the development of electronic money systems. Electronic money has the potential to simplify and lower the cost of small-value payments for both consumers and companies, potentially replacing cash as the primary means of payment in the future. A consumer keeps track of the money or value that they have accessible to them on their electronic device, which could be a prepaid card or a personal computer that they use to access a computer network such as the Internet. We refer to this record as electronic money. Such a change would have an impact on the effectiveness of monetary policy implementation. A better coordination of monetary and fiscal policy would be necessary, as well as adjustments to the central banks operating aim, should the usage of e-money significantly reduce demand for reserves. Technology advancements have made it feasible to launder money obtained illegally through online bookies, casinos, and, most notably, the buying and selling of cryptocurrency.

Threshold Effect of Monetary and Fiscal Policy on Inflation in Indonesia

Threshold Effect of Monetary and Fiscal Policy on Inflation in Indonesia

Oil Market Demand Shock and Monetary Policy Targets in Nigeria: Evidence From TVP-VAR

Oil Market Demand Shock and Monetary Policy Targets in Nigeria: Evidence From TVP-VAR

Exploring the Effect of the Government Interventions on the Information Asymmetry in the Post-Pandemic

The article aimed to explore the effect of the government intervention on the information asymmetry in Taiwan’s credit card market during the post-pandemic. To achieve the goal, the article constructed the information asymmetry model which was combined with the government interventions, adverse selections and moral hazards and designed the hypotheses. It was concluded that the government interventions involved with the fiscal and monetary policies failed to improve the market failure and even caused the government failure. The conclusions revealed a significant implication for the policymakers to make the proper policies when facing the challenges in the future.

CRYPTOCURRENCY AS A HEDGE AGAINST INFLATION

This paper investigates the potential of cryptocurrencies, particularly Bitcoin and Ethereum, as viable hedges against inflation, in comparison to traditional assets like gold. In light of increasing global inflation, fueled by economic crises and expansive monetary policies, investors are seeking dependable strategies to safeguard their purchasing power. Cryptocurrencies have attracted interest due to their finite supply and decentralized characteristics, which could theoretically position them as suitable inflation hedges. Nonetheless, their significant volatility and speculative traits raise concerns about their reliability in fulfilling this role. This research consolidates insights from three prominent studies on the relationship between cryptocurrency and inflation, analyzing their methodologies and outcomes to evaluate the effectiveness of cryptocurrencies as inflation hedges. In summary, although cryptocurrencies may occasionally respond positively to inflation surges, their volatility and speculative nature hinder their ability to serve as consistent inflation hedges. The findings indicate that cryptocurrencies are currently more suited as high-risk speculative investments rather than reliable stores of value against inflation. Keywords :- Cryptocurrencies , Inflation hedge , Bitcoin , Volatility , Speculative investment , Purchasing power , Gold , Decentralization , Asset reliability, Economic crises