Monetary Policy Research Articles

Pengaruh Kebijakan Moneter dan Fiskal terhadap Pengangguran di Indonesia

The purpose of this study is to analyze the impact of monetary policy as seen from the BI Rate and the money supply (M2, and fiscal policy as seen from government spending and tax revenue in influencing the unemployment rate in Indonesia. The approach used in this research is quantitative. The data used are the BI Rate, the money supply (M2), government spending, tax revenue and unemployment in the form of time series data in an annual form from 1995 to 2019. The method used in this study is the Vector Auto analysis model. Regression (VAR). The stages used in this research test are a stationarity test, optimum lag test, VAR stability test, impulse response test, and variance decomposition test. The results of the impulse response indicate that the unemployment variable responds most to the shock of the interest rate variable (monetary policy) compared to other variables. The results of variance decomposition indicate that the contribution given by the BI Rate to the unemployment rate is the most significant relative to the contribution given by the variable money supply (M2), government spending, and tax revenue.

Why Survey-Based Subjective Expectations Are Meaningful and Important

For decades, households’ subjective expectations elicited via surveys have been considered meaningless because they often differ substantially from the forecasts of professionals and ex-post realizations. In sharp contrast, the literature we review shows that household characteristics and the ways in which households collect and process economic information help us understand previously considered puzzling facts about their subjective expectations. In turn, subjective expectations contribute to explain heterogeneous consumption, saving, investment, and debt choices as well as different reactions by similar households to the same monetary and fiscal policy measures. Matching microdata on households’ characteristics with the price signals the same households observe, their subjective expectations, and their real-world economic decisions is crucial to establishing these facts. Our growing understanding of households’ subjective expectations inspires several theoretical and empirical research directions and begets the design of innovative and more effective policy instruments.

Milton Friedman and nominal income targeting

AbstractFor much of his career, Milton Friedman advocated a constant monetary growth rule to limit central bank discretion and to achieve long‐term price stability. By contrast, Friedman wrote little on nominal income stabilization as an alternative goal for monetary policy. Nevertheless, a careful examination of Friedman's work shows that in his view the desirability of a constant monetary growth rule depended on its ability to stabilize nominal income. Friedman's preference for simple rules, requiring minimal knowledge on the part of central banks, would have given him strong reason to support nominal income targeting over central banks' standard practice of inflation targeting. Several strategies for achieving a nominal income target are considered, including a modified Taylor rule and several monetary base rules.

Monetary policy, income distribution and semi‐autonomous demand in the US

Monetary policy, income distribution and semi‐autonomous demand in the US

The Effect of China's Monetary Policy on Financial Constraints of New Energy Vehicle Companies -- Panel Regression Model based on the SA Index and LPR

The Effect of China's Monetary Policy on Financial Constraints of New Energy Vehicle Companies -- Panel Regression Model based on the SA Index and LPR

Exploring causal interactions between macroprudential policy and financial cycles in South Africa

This study investigated the causal interactions between macroprudential policy, measured by the Macroprudential Policy Index (MPI), and financial cycles represented by the Aggregate Financial Cycle (AFC) and the Credit and Asset Prices Financial Cycle (CAFC) in South Africa from 1970q1 to 2023q2. Additionally, the study explored the effects of macroprudential policy during different phases of financial cycles. Using the time-varying Granger-causality model, the study found that the MPI Granger-caused financial cycles during the 2003/07 credit boom in South Africa, while the AFC and CAFC Granger-caused macroprudential policy during the Covid-19-induced collapse of financial markets. The results suggest that macroprudential policy is employed more proactively during financial booms and more reactively during financial busts in South Africa. The Markov switching dynamic regression model used to assess the MPI's effects revealed that macroprudential policy's effectiveness is stronger during financial busts and weaker during financial booms in South Africa. This is because financial institutions in South Africa tend to resist stricter regulations during boom phases due to heightened optimism about future prospects. Conversely, they are more receptive to stimulatory interventions during bust phases. Based on these findings, it is recommended that the South African Reserve Bank and the Prudential Authority use macroprudential policy more assertively during financial booms to enhance its effectiveness. This could involve setting more stringent parameters upon activating macroprudential policy tools or complementing macroprudential policy with monetary policy during financial booms.

Examining the New Keynesian Phillips Curve in the U.S.: Why has the relationship between inflation and unemployment weakened?

This paper conducts a comprehensive review of the relationship between inflation and unemployment in the U.S. as described by the Phillips curve in a New Keynesian framework and investigates whether this relationship has changed systematically over time. We also aim to identify possible explanations for these changes. Three different hypotheses are discussed to assess whether they are consistent with more recent developments, such as the evolution of inflation expectations, the impact of globalization, and possible nonlinearities in the functional shape of the Phillips curve. We find that the relationship between inflation and unemployment has weakened since the 1980s and especially during the Covid-19 pandemic due to forces of globalization and better anchored inflation expectations resulting from more credible monetary policy. This has led to question of whether the Phillips curve is outdated. We conclude with the implications of these findings for the conduct of monetary policy.

Monetary Policy and Unemployment in Morocco: A DSGE Model Approach with Labor Market Frictions and Nash Wage Bargaining

Monetary Policy and Unemployment in Morocco: A DSGE Model Approach with Labor Market Frictions and Nash Wage Bargaining

The Moderating Effect of Macroprudential Policies on the Relationship Between the Effectiveness of the Board of Directors in Shaping the Bank's Risk-Taking Behavior

Macroeconomic instability in 2020 caused by COVID-19 can affect the stability of the country's financial system and trigger risks to banking performance. The implementation of macroprudential policies and the effectiveness of the board of directors as policy implementers can be one of the solutions to this problem. The purpose of this study is to see how the influence of macroprudential policies and the effectiveness of the board of directors in shaping bank risk-taking behavior. The method used is panel data regression method and moderation regression with a sample of 43 banks listed on the Indonesia Stock Exchange including banks that consistently published their financial statements for the last five years. The results showed that partially only the effectiveness of the board of directors and company size affected bank risk-taking behavior, while macroprudential policies, macroprudential policies that moderate the effectiveness of the board of directors, and inflation were considered to not affect bank risk-taking behavior, this was due to differences in bank-specific characteristics, the effectiveness of corporate governance, policy implementation in the form of policy easing and tightening, and the interaction between macroprudential policies and monetary policy. However, simultaneously the independent variables and control variables have a significant influence on bank risk-taking behavior.

The decoupling dilemma: Examining economic growth and carbon emissions in emerging economic blocs

This study explores whether emerging economic blocs can decouple economic growth from carbon emissions amidst global climate change concerns, integrating Environmental Kuznets Curve (EKC) theory, Stakeholder theory, and Ecological Modernization Theory (EMT). Using fuzzy-set qualitative comparative analysis (fsQCA), it examines the relationship between monetary policy and carbon emissions in two key blocs: ASEAN and GCC. Findings reveal that robust GDP growth in ASEAN correlates with higher ecological footprints, underscoring the environmental cost of rapid expansion. Conversely, the GCC region highlights renewable energy consumption as crucial for managing ecological footprints, despite challenges in energy mix adequacy. These insights offer region-specific understandings, challenging conventional views and guiding policymakers in aligning economic growth with environmental sustainability. The research underscores the need for tailored strategies to develop sustainable economic models that decouple growth from environmental degradation.

Exploring the informativeness and drivers of tone during committee meetings: The case of the Federal Reserve

This paper examines the informativeness and drivers of the tone used by FOMC members to gain insights into the decision-making process of the FOMC. We use a bag-of-words approach to measure the tone of transcripts at the speaker-meeting-round level from 1992-2009 and find persistent differences in tone among FOMC members. We also document how Presidents of regional Federal Reserve Banks use a more volatile and positive tone than the Federal Reserve Bank Board of Governors members. Next, we investigate whether the tone used during FOMC deliberations is associated with future monetary policy decisions and study the drivers of differences in tone among FOMC members. Our results suggest that tone is useful in predicting future policy decisions and that differences in tone are mainly associated with the differences in the individual inflation projections of FOMC members.

Tantangan dan Strategi Penerapan Kebijakan Tarif PPN 12%

Increasing the VAT rate is one way for the government to increase tax revenue and address the fiscal deficit. The Indonesian government in 2022 has increased the VAT rate to 11% and 12% in 2025. The increase in the VAT rate to 12% has the potential to be a factor that affects the Economy, Business, and Tax Obligations of Taxpayers. The purpose of this study is to analyze the factors that could be a challenge in implementing a 12% VAT rate and the strategies that the Indonesian government can use to overcome these challenges. The research was conducted qualitatively and data was collected through a literature review. The results show that the challenges faced by the government in implementing the 12 percent VAT rate policy may be caused by the factors of increased tax administration costs, the effect on business and economy, as well as the political system and governance of government institutions. These challenges can be overcome by gradual socialization with the public and building partners, synergizing and correlating fiscal and monetary policies, and political commitment from politicians to support the policy of increasing the VAT rate to 12% so that its implementation can run well.

Stock Returns And Inflation In Fiji

The relationship between stock returns and inflation has important implications for monetary policy and stock market investment and has attracted growing attention from scholars over recent years. Despite this, the empirical evidence so far has been inconclusive. The main objective of this paper is to investigate the impact of inflation on stock returns in the developing stock market of Fiji. We examine the impact of inflation on stock market returns within the GARCH and EGARCH modelling framework using monthly data from 2000:02 to 2018:06 and find that inflation negatively affects stock market returns. Our results indicate the importance of ensuring price stability and suggest that stock market investment will not help hedge against inflation in Fiji. The results suggest that Fiji’s stock market is likely to react more negatively to inflation in response to countercyclical monetary policy and emphasize the significance of portfolio diversification.

Correction to: An empirical examination of the effect of domestic monetary policy on external commercial borrowings to India

Correction to: An empirical examination of the effect of domestic monetary policy on external commercial borrowings to India

A global perspective on post pandemic inflation and its retreat: Remarks prepared for NBER conference on “inflation in the COVID era”

This paper provides a high level review of the common sources of the post pandemic surge in global inflation and some observations about how this surge - and the conduct of monetary policy during this period - may inform us about monetary policy frameworks and execution.

The Impact of the Latest Federal Reserve Interest Rate Hike on the Chinese Economy

This study utilizes weekly data from March 2022 to September 2023, employing the TVP-VAR model to empirically analyze the impact of the Federal Reserve's interest rate hikes on the Chinese economy. The results indicate that the Federal Reserve's rate hikes have exerted negative shocks on China's output, with the effects dissipating after 8 to 12 lags. China's monetary policy has shown a short-term inverse relationship with that of the United States, though the overall impact remains minimal. The rate hikes have suppressed China's fixed asset investments, with a gradually diminishing impact on GDP. Additionally, the rate hikes have negatively affected the RMB exchange rate and China's exports, with the rising USD/RMB exchange rate further restraining exports. The widening interest rate differential between the USD and RMB has impacted China's stock market, making international capital more inclined to invest in U.S. enterprises. To address these challenges, this paper recommends that China continue to implement a prudent monetary policy, advance RMB internationalization and exchange rate marketization reforms, enhance market liquidity, and improve the stock market and institutional frameworks to bolster economic stability and resilience. The findings provide theoretical foundations and feasible strategies for sustaining China's economic growth and mitigating external shocks.

Low- and middle-income countries’ external debt cycle and global economic prospect

The rapid growth of peripheral countries has brought significant changes to the global economic and financial system, making it crucial to examine the relationship between their cyclical debt fluctuations and the world economy. Using the Bayesian dynamic factor model, this paper documents the presence of a set of common factors, known as global debt cycles, in the external debt accumulation of the low- and middle-income countries (LMICs). The interesting finding is that this debt cycles differ from well-known factors for global financial cycles in capital flows, such as U.S. monetary policy and global risk aversion. Even after controlling the factors for global financial cycles, our results reveal a significantly negative predictive effect of estimated debt cycles on global economic growth. Moreover, we demonstrate that this negative effect is primarily dominated by LMICs occupying prominent positions in international debt market networks, especially during the post-2008 financial crisis period. These findings emphasize the increasing importance of peripheral countries in the world system, which has been largely ignored in existing literature.

Legal and regulatory challenges regarding the governance of the central banks in Brazil and Chile: attributions related to monetary policy, macroprudential and financial stability

Changes in the financial regulation system are the object of reflection in this work, especially those made in Chile and Brazil. Debates around financial supervision and regulation are spreading across the world and also involve the role that Central Banks should have in terms of financial stability or at least the regulation of the banking system, thus questioning the accumulation (or not) of functions and the interface that these functions have with the role of stabilizing inflation and conducting monetary policy that these central banks have. This work aims to evaluate the evolution of recent regulatory aspects of the Brazilian financial system and compare it with the Chilean supervisory structure, where different organizations conduct monetary policy and financial regulation.

Domestic Private Investment and Selected Macroeconomic Indicators in Nigeria:An Econometric Analysis

Domestic private investment (DPI) plays significant role in economic growth of any economy. It helps in mobilizing domestic resources for socio-economic advancement. Domestic Investment and its determining factors remains one recalling issues in the field of economics and international finance. This is based on the fact that aggregate investment plays a dominant role in stimulating economic growth and development of every nation. However, most of the developing and underdeveloped economies have witnessed low domestic investment and consequently slow economic growth. Therefore, this study investigates the relationship, trends, and impact of domestic private investment and selected macroeconomic indicators in Nigeria, a developing economy. The study analyzed data gotten from the CBN Statistical Bulletin for the duration of 1991-2020. The statistical package used for the study is Econometric Views (E-Views 9.0). Multiple regression techniques via OLS, Augmented Dickey Fuller (ADF) test and Granger causality procedure was applied to determine causalities while Johansen Co-integration test was administered to verify sustainability of the long-run relationships. The result revealed that there exist short and long-run relationships between domestic private investment and key macroeconomic variables- Inflation, Lending rates, gross domestic savings, real gross domestic product, money supply in Nigeria. Vector error correction model was also adopted to determine the speed of adjustment between the independent variables and the dependent variables. The OLS result revealed that there exist a positive and significant relationship among GDSA, BMOS, RGDP and PDIV, negative and significant relationship among PLER, INFR, and PDIV. Therefore, the study recommends among others that Nigerian government must be resolute in their resolve to drive private domestic investment in the country by implementing appropriate monetary and fiscal policies that address inflation, interest rate, domestic savings and money supply. This will no doubt fast track inclusive growth.

The devolution of federal reserve monetary policy strategy, 2012–24

The devolution of federal reserve monetary policy strategy, 2012–24