Monetary Policy Strategy in a Global Environment

Moutot, Philippe; Vitale, Giovanni

doi:10.2139/ssrn.1325247

Cited by 5 publications

(3 citation statements)

References 12 publications

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“…Reducing interest rates would raise the credit boom. This may explain the increase of price bubble in the context of low inflation where central banks that target inflation do not sufficiently control money and credit (Moutot & Vitale, 2008).…”

Section: Inflation Targeting Risk Premium and Asset Pricesmentioning

confidence: 99%

“…Also, inflation targeting has no effect on the variability of short-term interest rate controlled by monetary policymakers. Moutot & Vitale (2008) point out that inflation targeting in the context of price rising balloon can rise to a position of monetary policy, in fact, encourages the growth of asset price bubble. The logic of this argument rests on the rigidity of nominal wages that are not enough to increase in response to the expected productivity shock, such as that to happen that wages are flexible.…”

Section: Introductionmentioning

confidence: 98%

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Empirical Analysis of the Impact of Inflation Targeting on the Risk Premium

Krušković

Maričić²

2014

Journal of Central Banking Theory and Practice

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The basis for the conduct of monetary policy is monetary policy strategy. Monetary strategy is necessary for monetary policy makers to analyse all relevant information in order to undertake effective policy actions. Inflation targeting has enabled countries to achieve low inflation in the very short term. Due to this, the financial markets have adjusted their long-term inflation expectations and incorporated them into the interest rate. Risk premiums that compensate for the uncertainty of inflation have fallen. The aim of this paper is to examine how the adoption of inflation targeting affects the movement of the risk premium. The hypothesis we want to test is that the adoption of inflation targeting affects the reduction of the country risk premium by affecting the formation of a more stable macroeconomic environment through a more stable and predictable inflation rate in the medium and long term. The method used for evaluating the regression coefficients is the dynamic panel generalized method of moments (GMM). This method involves the use of conditional moments in endogenous and exogenous variables with a lag as instruments for the assessment of differential equations, while the difference lagged endogenous variables are used as instruments in the levels equation.

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Section: Inflation Targeting Risk Premium and Asset Pricesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 98%

Empirical Analysis of the Impact of Inflation Targeting on the Risk Premium

Krušković

Maričić²

2014

Journal of Central Banking Theory and Practice

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“…Our paper makes several important contributions. First, we contribute to the literature on globalization and monetary transmission, where the former is reflected in the growth of cross-border assets and liabilities (Rogoff, 2007;Devereux and Sutherland, 2008;Moutot and Vitale, 2009;Woodford, 2010;Obstfeld, 2015;Rey, 2015). This is an issue that has grown in stature in recent times given the role of monetary policy in the response to the 2008 financial crisis (Obstfeld, 2015).…”

Section: Introductionmentioning

confidence: 99%

Do foreign investors insulate firms from local shocks? Evidence from the response of investable firms to monetary policy

Hunter

Kelly

2020

Journal of Empirical Finance

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