Regulation and the Neo-Wicksellian Approach to Monetary Policy

Duca, John V.; Wu, Tao

doi:10.24149/wp0807

wp 2008

DOI: 10.24149/wp0807

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Regulation and the Neo-Wicksellian Approach to Monetary Policy

John V. Duca¹,

Tao Wu²

Abstract: Laubach and Williams (2003) employ a Kalman filter approach to jointly estimate the neutral real federal funds rate and trend output growth using an IS relationship and an output gap based inflation equation. They find a positive link between these two variables, but also much error surrounding neutral real rate estimates. We modify their approach by including variables for regulations on deposit interest rates and on wages and prices. These variables are statistically significant and notably affect estimates … Show more

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Cited by 4 publications

References 7 publications

(14 reference statements)

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Do Expectations Matter? The Great Moderation Revisited

Canova

Gambetti

2008

SSRN Journal

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We examine the role of expectations in the Great Moderation episode. We derive theoretical restrictions in a New-Keynesian model and test them using measures of expectations obtained from survey data, the Greenbook and bond markets. Expectations explain the dynamics of inflation and of interest rates but their importance is roughly unchanged over time. Systems with and without expectations display similar reduced form characteristics. Including or excluding expectations hardly changes the economic explanation of the Great Moderation. Results are robust to changes in the structure of the empirical model. JEL classification: C11, E12, E32, E62

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Do Expectations Matter? The Great Moderation Revisited

Canova

Gambetti

2008

SSRN Journal

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Credit, Housing Collateral and Consumption: Evidence from the U.K., Japan and the U.S.

Aron

Duca²,

Muellbauer³

et al. 2010

Self Cite

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The consumption behaviour of UK, US and Japanese households is examined and compared using a modern Ando-Modigliani style consumption function. The models incorporate income growth expectations, income uncertainty, housing collateral and other credit effects. These models therefore capture important parts of the financial accelerator. The evidence is that credit availability for UK and US but not Japanese households has undergone large shifts since 1980. The average consumption-to-income ratio shifted up in the UK and US as mortgage downpayment constraints eased and as the collateral role of housing wealth was enhanced by financial innovations, such as home equity loans. The estimated housing collateral effect is roughly similar in the US and UK, while land prices in Japan still have a negative effect on consumer spending. Together with evidence for negative real interest rate effects in the UK and US and positive ones in Japan, this suggests important differences in the transmission of monetary and credit shocks between Japan and the US, UK and other credit-liberalized economies. Keywords consumption, credit conditions, housing collateral and housing wealth JEL Codes E21, E32, E44, E51 * We thank Jessica Renier for research assistance. An earlier version was presented at the American Economic Association meetings and at Statistics Norway, in 2009, and we are grateful for comments received. The views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Dallas, or the Board of Governors of the Federal Reserve System. Any remaining errors are our own. Research support is acknowledged from the ESRC under "Improving Methods for Macro-econometric Modelling", RES-000-23-0244.

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Shifting Credit Standards and the Boom and Bust in U.S. House Prices

Duca¹,

Muellbauer²,

Murphy³

2011

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Regulation and the Neo-Wicksellian Approach to Monetary Policy

Cited by 4 publications

References 7 publications

Do Expectations Matter? The Great Moderation Revisited

Do Expectations Matter? The Great Moderation Revisited

Credit, Housing Collateral and Consumption: Evidence from the U.K., Japan and the U.S.

Shifting Credit Standards and the Boom and Bust in U.S. House Prices

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