HAZARDS IN IMPLEMENTING A MONETARY CONDITIONS INDEX

Oxford Bulletin of Economics and Statistics - Tập 58 Số 4 - Trang 765-790 - 1996
Kari H. Eika1, Neil R. Ericsson2, Ragnar Nymoen3,4,5,6
1Bank of Norway
2Board of Governors of the Federal Reserve - Division of International Finance (IFDP) - Trade and Financial Studies Section
3* The views expressed in this paper are solely the responsibility of the authors and should not be interpreted as reflecting those of Norges Bank, the Board of Governors of the Federal Reserve System, or other members of their staffs. The second author gratefully acknowledges the generous hospitality of Norges Bank, where he was visiting when he became involved in this research. An earlier version of this paper appeared under the title ‘Making a Monetary Conditions Index Operational’. We wish to thank Anindya Banerjee, Carol Bertaut, Richard Dennis, Pierre Duguay, Dick Freeman, Dale Henderson, David Hendry, Eilev Jansen, Karen Johnson, Anne Sofie Jore, David Longworth, Cathy Mann, Arturo O’Connell, Adrian Pagan, Sunil Sharma, Ralph Smith, an anonymous referee, and participants at the Project LINK Fall 1995 meeting and the EUI conference ‘The Econometrics of Economic Policy’ for helpful discussions and comments
4Bengt Hansson and Anne Sofie Jore for providing the data in Hansson (1993) and Jore (1994)
5Jurgen Doornik and David Hendry for providing us with a β-test version of PcGive 9.00. All numerical results were obtained using PcGive Professional Versions 8.00, 8.10, and 9.00 β01
6cf. Doornik and Hendry (1994).

Tóm tắt

Some recent studies have suggested constructing a Monetary Conditions Index (or MCI) to serve as an indicator of monetary policy stance. The central banks of Canada, Sweden and Norway all construct an MCI and (to varying degrees) use it in conducting monetary policy. Empirically, an MCI is calculated as the weighted sum of changes in a short‐term interest rate and the exchange rate relative to values in a baseline year. The weights aim to reflect these variables’ effects on longer‐term focuses of policy — economic activity and inflation. This paper derives analytical and empirical properties of MCIs in an attempt to ascertain their usefulness in monetary policy.An MCI assumes an underlying model relating economic activity and inflation to the variables in the MCI. Several issues arise for that model, including its empirical constancy, cointegration, exogeneity, dynamics and potential omitted variables. Because of its structure, the model is unlikely to be constant or to have strongly exogenous variables, yet constancy and exogeneity are critical for the usefulness of an MCI. Empirical analyses of Canadian, Swedish and Norwegian MCIs confirm such difficulties. Thus, the value of an MCI for conduct of economic policy is in doubt.

Từ khóa


Tài liệu tham khảo

Bank of Canada, 1994, ‘Monetary Conditions — Les Conditions Monétaires’, Bank of Canada Review — Revue de la Banque du Canada, 1994, 18

Bank of Canada, 1995, Monetary Policy Report, 1995

De Brouwer G.andEricsson N. R.(1995).‘Modelling Inflation in Australia’ International Finance Discussion Paper No. 530 Board of Governors of the Federal Reserve System Washington D.C. November.

Chote R., 1996, ‘IMF Urges Rate Cut by Germany’, Financial Times, 1

10.2307/1910133

Davies G., 1996, ‘Summary’, The International Economics Analyst, 11, iii

Doornik J. A., 1994, PcGive Professional 8.0: An Interactive Econometric Modelling System

10.1016/0304-3932(94)90013-2

10.2307/1913236

10.2307/1911990

Ericsson N. R.(1994a).‘Hendry Approach on Money Demand Equations’ memo Division of International Finance Board of Governors of the Federal Reserve System Washington D.C. September.

Ericsson N. R.(1994b).‘Models of the U.S. CPI’ memo Division of International Finance Board of Governors of the Federal Reserve System Washington D.C. July.

Ericsson N. R., 1990, ‘PC‐GIVE and David Hendry’s Econometric Methodology’, Revista de Econometria, 10, 7

10.1016/0014-2921(93)90084-N

Freedman C., 1994, Frameworks for Monetary Stability

10.2307/1912791

Hansson B., 1993, Monetary Policy Indicators

Hansson B., 1994, ‘Monetary Conditions Index — A Monetary Policy Indicator’, Quarterly Review, 12

10.1017/CCOL0521345529.002

10.1111/j.1467-9485.1994.tb01107.x

Hendry D. F., 1993, ‘Evaluating Dynamic Econometric Models by Encompassing the VAR’, Models, Methods, and Applications of Econometrics

Hendry D. F., 1984, ‘Dynamic Specification’, Handbook of Econometrics, 2

International Monetary Fund, 1996, World Economic Outlook, May 1996

10.2307/2938278

Jore A. S., 1994, ‘Beregning av en indikator for pengepolitikken’, Penger og Kreditt, 94, 100

10.1016/0161-8938(92)90014-4

Leiderman L., 1995, Inflation Targets

Mayes D. G., 1996, ‘The Effectiveness of Monetary Policy in New Zealand’, Reserve Bank Bulletin, 59, 5

Reserve Bank of New Zealand, 1996, ‘Summary Indicators of Monetary Conditions’, Reserve Bank Bulletin, 59, 223

Suttle P., 1996, ‘Monetary Conditions Worldwide’, World Financial Markets, 26

Thông tin
Thông tin xuất bản

Oxford Bulletin of Economics and Statistics

Tập 58 Số 4

765-790

Thông tin tác giả