The author of this article draws special attention to two particular claims the free bankers concerning supposed working characteristics a fractional-reserve banking system which may strike reader as questionable. first these relates alleged absence real-balance effect under banking. second bankers’ reference Walras’ Law providing rationale for system’s «offsetting» actions when confronted with...

abstract today, debt stabilization in an uncertain environment is an important issue. in particular, the question how fiscal and monetary authorities should deal with this uncertainty is of much importance. especially for some developing countries such as iran, in which on average 60 percent of government revenues comes from oil, and consequently uncertainty about oil prices has a large effect ...

This paper provides a comprehensive analysis of the interest rate pass-through euro area monetary policy to retail rates outside area, contributing literature on consequences unofficial financial euroisation and transmission channels spillovers. The results suggest that in long run, more than one third all euroised countries central, eastern south-eastern Europe (CESEE) are linked shadow rate. ...

In this paper the optimal choice of a monetary target is investigated for a small open economy that is subject to foreign monetary policy shocks. In contrast to large parts of the literature, pegging the exchange rate is never the best policy choice for the small open economy in our model. Instead, monetary targeting and, depending on the parameter combination, producer price index targeting co...

When impulse responses in dynamic multivariate models such as identified VARs are given economic interpretations, it is important that reliable statistical inferences be provided. Before probability assessments are provided, however, the model must be normalized. Contrary to the conventional wisdom, this paper argues that normalization, a rule of reversing signs of coefficients in equations in ...

This paper empirically evaluates the operational performance of the McCallum rule, the Taylor rule and hybrid rules in India over the period 1996–2011 using quarterly data, with a view to analytically informing the conduct of monetary policy. The results show that forward-looking formulations of both rules and their hybrid version setting a nominal output growth objective for monetary policy wi...

In this paper we re–examine banks’ lending behavior taking into account changes in the stance of monetary policy in conjunction with changes in financial sector uncertainty. Using a very large data set covering all banks in the US between 1979–2000, we show that financial sector uncertainty plays an important role in banks’ lending decisions: for a given size classification, less liquid banks (...

We examine global dynamics under learning in New Keynesian models with price level targeting that is subject to the zero lower bound. The role of forward guidance is analyzed under transparency about the policy rule. Properties of transparent and non-transparent regimes are compared to each other and to the corresponding cases of inflation targeting. Robustness properties for different regimes ...

Inflation targeting needs to be supplemented by an economic growth target so that central banks will not adopt monetary policy which results in stagnation. There is no guarantee that the economy will move towards full employment by itself when the inflation rate is kept between two to three per cent. Monetary policy does not have a comparative advantage in achieving price stability. Svensson's ...

This paper proposes a simple prototype model that describes the complex dynamics of a sophisticated monetary economy. The interaction between the current and intertemporal financial constraints on economic units brings about irregular fluctuations at both micro and macro levels. We use qualitative dynamic analysis and numerical simulations to investigate the interaction between financial fragil...