Front Cover -- Monetary Policy in the Context of the Financial Crisis: New Challenges and Lessons -- Copyright page -- Contents -- List of Contributors -- Editorial Advisory Board Members -- Introduction -- References -- Acknowledgment -- 1 Adoption of Inflation Targeting and Economic Policies Performance in Emerging Countries: A Dynamic Treatment Effe... -- 1 Introduction -- 2 Literature Review -- 3 Data and Stylized Facts -- 4 Methodology -- 4.1 The Propensity Score Matching Method -- 4.2 The Time-Varying Treatment Effect -- 4.3 Treatment, Result, and Conditioning Variables -- 4.3.1 Treatment versus Outcome Variables -- 4.3.2 The Conditioning Variables -- 5 Results -- 5.1 Intertemporal Estimation of Propensity Scores -- 5.2 The Results of Matching -- 6 Conclusion and Policy Implications -- Acknowledgments -- References -- Appendix A: Stylized Facts -- Appendix B: Variables Definitions and Sources -- Appendix C: Descriptive Statistics -- 1st Interaction -- 2nd Interaction -- 2 Careful Price Level Targeting -- 1 Introduction -- 2 The Model -- 3 Partial Commitment in Practice -- 4 Conclusion -- References -- 3 Are Price Dynamics Homogenous across Emerging Europe? Empirical Evidence from Panel Data -- 1. Introduction -- 2. Empirical Specification and Data -- 2.1. Theoretical Aspects -- 2.2. Econometric Specification -- 2.3. Variables and Data -- 3. Results and Discussion -- 3.1. Exploring Cross-Sectional Dependence and Panel Stationarity -- 3.2. Pooled Mean Group Results -- 3.3. Robustness Checks -- 4. Conclusion -- References -- 4 The Global Component of Local Inflation: Revisiting the Empirical Content of the Global Slack Hypothesis with Bay... -- 1 Introduction -- 2 A Model of Inflation Determination in the Global Economy -- 2.1 Building Blocks of the NOEM Model -- 2.1.1 Households -- 2.1.2 Firms -- 2.1.3 Monetary Policy.

2.2 The Workhorse NOEM Model -- 2.3 The Frictionless Model -- 2.4 The Deterministic Steady State -- 3 Bayesian Estimation: Bringing Data to Discipline the Theory -- 3.1 Variables and Data -- 3.1.1 Observables for Estimation -- 3.1.2 Mapping the Observable Data to Model Variables -- 3.2 Eliciting Priors -- 3.2.1 Structural Parameters -- 3.2.2 Parameters of the Shock Processes -- 4 Understanding Local Inflation in an Open-Economy Setting -- 4.1 The Global Component of Local Inflation -- 4.1.1 The World or Global Economy System -- 4.1.2 The Cross-Country Difference System -- 4.2 Empirical Findings: What Matters Most for Local Inflation? -- 4.2.1 Posterior Distributions -- 4.2.2 Bayesian IRFs -- 4.2.3 Bayesian Forecasts -- 5 Concluding Remarks -- Acknowledgments -- References -- Appendix: Proofs -- Proof of Proposition 1. -- 5 Pass-Through of Exchange Rate Shocks to Prices in the Euro Area: Evidence from Pricing Chain Model -- 1. Introduction -- 2. ERPT in EA Countries: Overview of VAR Studies -- 3. Empirical Methodology -- 4. Data Selection and Their Properties -- 5. Empirical Results -- 5.1. Responses to Exchange Rate Shocks -- 5.1.1. Impulse Responses Analysis -- 5.1.2. Factors Influencing ERPT -- 5.2. Responses to Import Price Shocks -- 5.3. Variance Decompositions -- 5.4. Testing for the Recent Decline in ERPT -- 5.5. Historical Decompositions -- 6. Concluding Remarks -- References -- Appendix A: Specification Tests -- Appendix B: Chow Tests For Multiple Time-series Systems -- Appendix C: Generalized Impulse Response For Consumer Prices -- 6 Escape Routes from Sovereign Default Risk in the Euro Area -- 1 Introduction -- 2 Theoretical Analysis -- 2.1 The Infinite Horizon Standard Model on Sovereign Default Risk -- 2.2 A Model Variant 1: Weak Macroeconomic Feedback Effects -- 2.3 Model Variant 2: Strong Macro Feedback Loops.

2.4 A Model Variant 3: Escape Routes from Sovereign Default Risk -- 3 Empirical Analysis -- 3.1 Data Description -- 4 Conclusions -- Acknowledgments -- References -- Appendix: Numerical Procedure -- 7 Actual versus Perceived Taylor Rules: How Predictable Is the European Central Bank? -- 1. Introduction -- 2. Theoretical Framework -- 3. Data and Methodology -- 4. Linear Model Estimations -- 4.1. Estimations for the Quarter and Year Ahead Horizons -- 4.2. Estimations for the One-Quarter and One-Year Horizons -- 4.3. Actual and Perceived Fitted Policy Rules -- 5. Rolling Window Estimations -- 5.1. Coefficient Estimates of Policy Inertia -- 5.2. Coefficient Estimates of Expected Inflation -- 5.3. Coefficient Estimates of Expected GDP Growth -- 6. Estimation with Time Dummies -- 7. Robustness Analysis -- 8. Conclusion -- Acknowledgment -- References -- Appendix -- Variables Used in the Estimations -- Unit Root and Stationarity Tests -- Actual and Perceived Taylor Rules with a Dummy Variable for the ECB Meetings -- Actual and Perceived Taylor Rules with Consensus Economics Forecasts -- Actual and Perceived Taylor Rules with the Economic Sentiment Indicator -- Actual and Perceived Taylor Rules with Consensus Inflation Forecasts and the Economic Sentiment Indicator -- Predicted Refi Rate Target, Investment Bank Forecasts -- Predicted Refi Rate Target, Consensus Economics Forecasts -- Rolling Window Estimates, One-Year Horizon -- Recursive Window Estimates, Year Ahead Horizon -- Recursive Window Estimates, One-Year Horizon -- 8 A Regime Switching Model for the European Central Bank -- 1. Introduction -- 2. The Model -- 3. Data and Methodology -- 4. Empirical Evidence -- 4.1. Actual Regime Switching Taylor Rule -- 4.2. Perceived Regime Switching Taylor Rule -- 4.3. Actual and Perceived Filtered Probabilities -- 4.4. Actual and Perceived Fitted Policy Rates.

5. Robustness Analysis -- 5.1. Actual and Perceived Taylor Rules with Consensus Forecasts -- 5.2. Actual and Perceived Taylor Rules with an Alternative Forecast Horizon -- 5.3. Augmented Taylor Rules -- 6. A Three Regimes Switching Model -- 7. Conclusion -- Acknowledgments -- References -- Appendix -- Variables Used in the Estimations -- Unit Root and Stationarity Tests -- Fitted Policy Rates of the Baseline Model -- Augmented Taylor Rules with a One-Year Forecast Horizon -- A Three Regimes Switching Model with a One-Year Forecast Horizon -- 9 International Trade Imbalance: The Amplification of Monetary Policy Effects through Financial Markets -- 1 Introduction -- 1.1 Global Trade Imbalance -- 1.2 Differences in the Development of Financial Markets across Countries -- 1.3 Differences in Exchange Rate and Monetary Policy across Countries -- 2 Survey of Literature -- 3 The Basic Model -- 3.1 The Basic Environment -- 3.1.1 Currency Demand -- 3.1.2 Monetary Policy -- 3.1.3 The Incompleteness of Financial Markets -- 3.2 Consumer Optimization -- 3.3 Stationary Equilibrium -- 4 Quantitative Analysis -- 4.1 The Set of Parameters -- 4.2 Benchmark Model: The Influence of Different Monetary Policy Combinations on Agent Behavior -- 4.3 The Influence of Incomplete Capital Markets on the Effects of Monetary Policy Combination Two under Equal Φ Values in B... -- 4.4 Differential Incompleteness of Capital Markets and Consumption/Investment in Two Countries -- 5 Conclusion -- References -- Appendix A: Equivalent Model -- Appendix B: Computational Procedure -- 10 Modern Monetary Rules: Any Role for Financial Targeting? -- 1 Introduction -- 2 Motivation and Literature Review -- 3 Monetary Rules under the Basic Scenario -- 3.1 The IS Curve -- 3.2 The Phillips Curve -- 3.3 The Banking Sector Curve -- 3.4 Performance of the Monetary Rules.

4 Monetary Rules in Heterogeneous Environment -- 4.1 Performance of the Monetary Rules -- 5 Conclusions and Discussion -- References -- Addendix A: Baseline Derivation -- Appendix B: The Influence of Heterogeneous Agents -- B.1 The Heterogeneous IS Curve -- B.2 The Heterogeneous Phillips Curve -- B.3 The Heterogeneous Banking Sector Curve -- Appendix C: Model Dynamics -- 11 The Taylor Rule, the Zero Lower Bound, and the Term Structure of Interest Rates -- 1 The Zero Lower Bound Issue -- 2 The Taylor Rule When the ZLB Is Not Binding -- 3 The Taylor Rule When the ZLB is Binding -- 4 Why Hasn't Inflation Accelerated? -- 5 Taylor Rule Inertia -- 6 Measuring Expected Inflation -- 7 The Output Gap Term -- 8 The Fed's Maturity Choices -- Acknowledgment -- References -- 12 A Comparison of the Fed's and ECB's Strategies during the Subprime Crisis -- 1 Introduction -- 2 The Sources of Crises: Bank Funding and Current Account Disequilibria -- 2.1 The Role of Bank Funding of International Banks -- 2.2 Current Accounts Imbalances and Sudden Stops in the Euro Area -- 3 Unconventional Conventional Policies -- 3.1 The Framework of Monetary Policy: Fed and ECB in Normal Times -- 3.2 Monetary Policies and the Rescue of the Banking Sector -- 3.2.1 Insolvency, Credit Constraint, and Liquidity Shortage -- 3.2.1.1 Insolvency and the Drop of Assets Prices -- 3.2.1.2 Capital Requirement and the Lending Constraint -- 3.2.1.3 Liquidity Shortage -- 3.2.2 The Operational Tools -- 4 Comparing Unconventional Monetary Policies -- 4.1 Quantitative Easing Policy in a Context of Zero Lower Bound in the United States -- 4.2 Quantitative Easing Policies by the ECB -- 4.3 Forward Guidance Policy -- 5 Conclusion -- References -- 13 Was Bernanke Right? Targeting Asset Prices May not be a Good Idea After All -- 1 Introduction -- 2 Households -- 3 Firms.

3.1 The "Augmented" NK Phillips Curve.

This is Volume 24 of the monograph series International Symposia in Economic Theory and Econometrics. ISETE publishes proceedings of conferences and symposia, as well as research monographs of the highest quality and importance.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.