Статті в журналах з теми "Fiscal policy. Monetary policy. Household balance sheets"

Drastic changes in central bank operations and monetary institutions in recent years have made previously standard approaches to explaining the determination of the price level obsolete. Recent expansions of central bank balance sheets and of the levels of richcountry sovereign debt, as well as the evolving political economy of the European Monetary Union, have made it clear that fiscal policy and monetary policy are intertwined. Our thinking and teaching about inflation, monetary policy, and fiscal policy should be based on models that recognize fiscal-monetary policy interactions. (JEL E31, E52, E58, E62, H63)

The article examines macroeconomic policy options for advanced economies to respond to adverse shocks in the environment of very low interest rates and very high levels of public debt, when the scope for using conventional policy tools is limited. The standard transmission mechanism of monetary policy in the ELB conditions stops working normally, and the economy faces the “liquidity trap” effect. The deployment by central banks of unconventional monetary tools (forward guidance, quantitative easing, and negative interest rates) after global financial crisis was helpful in combatting the downturn, but carries risk of possible side effects. Large-scale purchases of financial assets lead to significant increase in central banks’ balance sheets, and this creates a threat to future financial stability and central bank independence. Negative interest rates can have detrimental effects on bank profitability and be contractionary through bank lending. There is a consensus that today fiscal policy has to play a major role in stabilizing the business cycle. But the effectiveness of conventional tools of discretional fiscal policy is uncertain because of long political lags and small spending multiplier. Existing automatic fiscal stabilizers are focused on social protection goals and not on macroeconomic stabilization. Thus, the newly proposed measures for rules-based fiscal stimulus (asymmetric semiautomatic stabilizers – tax or spending measures triggered by the crossing of some statistical threshold, e.g. a high unemployment rate) and unconventional fiscal policy (the use of consumption taxes to increase inflation expectations) have become the object of active discussion. Here lies the danger in the fusion of monetary and fiscal policy: central banks’ operations are becoming increasingly quasi-fiscal, aimed at financing budget deficit, and functions of monetary policy are proposed to assign to fiscal policy. Besides, the expansion of fiscal stimulus threatens financial stability in the future, as it leads to increase in public debt and narrows a country’s fiscal space.

Abstract Using household survey data for the U.S. and the U.K., we show that the aggregate response of consumption to interest rate changes is driven by households with a mortgage. Outright home-owners do not adjust expenditure at all while renters change their spending but by less than mortgagors. Income rises for all households as interest rate cuts directly affect firm investment and household consumption, boosting aggregate demand. A crucial difference between the housing tenure groups is the composition of their balance sheets: mortgagors hold sizable illiquid assets but little liquid wealth. Our results reveal that general equilibrium effects on household income coupled with balance-sheet-driven heterogeneity in the marginal propensity to consume play a key role in the transmission of monetary policy.

It is often postulated that the reintroduction of credit controls would be neither effective nor politically possible. Major changes have been implemented over the last eight years both in the way that financial markets work (domestically and internationally) and in the conduct of monetary policy. Controls over either the size of the balance sheets of financial institutions or the terms under which customers can obtain loans would seem to run totally counter to these developments. Does this rule them out completely?

Exploiting variation in the timing of resets of adjustable-rate mortgages (ARMs), we find that a sizable decline in mortgage payments (up to 50 percent) induces a significant increase in car purchases (up to 35 percent). This effect is attenuated by voluntary deleveraging. Borrowers with lower incomes and housing wealth have significantly higher marginal propensity to consume. Areas with a larger share of ARMs were more responsive to lower interest rates and saw a relative decline in defaults and an increase in house prices, car purchases, and employment. Household balance sheets and mortgage contract rigidity are important for monetary policy pass-through. (JEL D12, D14, E43, E52, G21, R31)

Purpose This is a theoretical paper in the field of international macroeconomics. The purpose of this paper is to focus on a dynamic interaction between current account imbalance and unemployment in response to some policy-induced shocks for a small open economy under a flexible exchange rate. Design/methodology/approach The paper uses a two-sector framework: one sector is traded and another is the non-traded sector that is subject to an effective demand constraint. The current account imbalance arises due to the discrepancy between production of traded goods, household consumption of traded goods and government purchases of importables. The authors keep the asset structure simple by considering only domestic currency and foreign bonds that are imperfect substitutes. The paper considers a standard methodology of dynamic adjustment process involving change in foreign exchange reserves and exchange rate under perfect foresight. The saddle path properties of the equilibrium are also examined. Findings The results of comparative static exercises depend on a set of structural features of a developing country, which include asset substitutability, wage price rigidity and sectoral asymmetries. The paper shows that expansionary monetary policy, balanced budget fiscal expansion and financial liberalization have an ambiguous effect on the current account balance, foreign exchange reserves, non-traded sector and the level of employment. Originality/value The existence of Keynesian unemployment with fixed prices is the key ingredient of this paper. The paper introduces the problem of effective demand to analyze the dynamics of current account balance and exchange rate, which, in turn, determine the sectoral composition of output and level of employment.

EMU imbalances correction sparked active discussions on choosing the optimal policy for mitigating risks of divergence and restoring competitiveness. Concentration on balance of payments is within the framework of simultaneously solving the problem of external imbalance, capital outflow, restoring growth, and preventing the opposing vectors of trajectory of the real effective exchange rates. However, overcoming the crisis consequences requires a wider approach to how the imbalances correction contributes to the growth recovery. Theoretically, the rate of post-crisis growth recovery should correspond with the variables that constitute imbalances correction. Based on regression analysis, it is clear that such hypothesis is proved only partially. Growth is more likely to recover if there is a more substantial correction of current account and credit market cleaning-up, whereas the correction on real estate market is not as effective. At the same time, real disposable income correction is likely to negatively influence the growth recovery. Nevertheless, this doesn’t mean that internal devaluation shouldn’t be utilized as an option during macroeconomic adjustment. It should occur with credit market cleaning-up. Fiscal space is crucial here, as it determines the credibility of fiscal policy devoted to mitigation of accumulated household sector debt burden. The reaction to the financial cycle is a fundamentally important element of macroeconomic management in the monetary union in regards to the macroeconomic design of integration zone.

Globally, the economy continues to recover. The economic growth in AS increases supported by solid consumption and increase on non-residential investment, as well as the economy of Tiongkok, supported by private investment and better export performance. European economy also better off with stronger consumption and export, and the reduction of geopolitical risk post the presidential election in France. The economy in Japan also increases supported by stronger domestic and export demand. This global trend supports the growth in Indonesia that rises to the level of 5,01% (yoy), with the pillars of exportperformance, better global demand and commodity prices, as well as higher government expenditure – particularly on investment – and the household consumption. Spatially, the national growth was mainly from Java and Kalimantan due to their better export performance. Inflation increases slightly particularly related to price regulation implemented in early 2017. Spatially, inflation occurs in most area except Sumatera who recorded deflation. The balance of payment recorded a surplus arisen from financial and capital surplus of 7.9 milliard dolar AS. However, the current account recorded deficit due to the deficit of oil trade balance and primary income. The reserve increases to 121.8 miliar dolar AS, accompanied with stronger Rupiah with lower volatility relative to peer countries. Following the monetary ease on previous Quarter IV, 2016, the monetary transmission is better yet not optimal due to the prudent practice of the bank on allocating credit. The interest rate decreases reflected on daily PUAB O/N reduction by 7 point to 4.23%. The deposit rate also decreases as well as the lending rate with larger decrease. Lookingforward, the growth in 2017 will be higher than 2016 on the range of 5.0 – 5.4%, while inflation will be around the target of 4 + 1%. We need to anticipate the impact of Fed Fund Rate increase, the lower of FED balance, and the trade and fiscal US policy, as well as the geopolitical dynamics across regions particularly in Korean Bay. Bank Indonesia will keep strengthening his policy mix and macroprudential, and his coordination with the government to ensure the inflation control, greater stimulus for growth, and the implementation of structural reform run on the right track, and hence preserve the sustainable economic development.

AbstractDuring 1980–90, Japan's annual real GDP growth rate was 4.6%, but which declined to 1.2% in the 1990s. While the drop in itself is a problem, at the same time it exacerbated many other problems, namely inequality, budget deficits, and the increasing burden of an aging society.Society is not concerned about income distribution when the economy is growing, but begins to worry about inequality when an economic slump shows no signs of ending. Moreover, prolonged recession magnifies inequality. With the employment situation surrounding young people worsening, there arose an inequality between those finding jobs and those unemployed. And, the prolonged recession led to a huge budget deficit and the accumulation of government debt. Tax revenue shrank, and the government repeatedly increased public investment in the form of economic stimulus measures, but the Japanese economy did not recover in a sustained fashion.Japan's low growth has already continued for 20 years. Incomes of the younger and middle-aged segments of the population have not increased. Additionally, Japan is an aging society. The aged need pensions, and medical treatment and care, costs which must be borne by younger and middle-aged segments of the population, in fact those who have not experienced Japan's prosperous times.This paper discusses issues relating to the Great Recession, inequality, and the budget deficit and burden of an aging population.Japan's Great Recession is basically explained by monetary shocks. Just the bubble and its bursting are not solely responsible for the prolonged slump. There is no empirical evidence for the assertion that certain structural problems lessened the efficiency of the Japanese economy in the 1990s. TFP (total factor productivity) in the 1990s did not decline compared with the early 1980s. Fiscal policy and the diminution of the financial intermediary function can only explain the Great Recession in small part.The absence of any real monetary policy hampered economic growth through the channels of stock prices and improvement in bank balance sheets. Using vector autoregressive models, the exchange rate was not found to be an important channel of monetary policy, but there is some evidence that it significantly affected output.On inequality problems, that among younger generations is important since it will increase inequality in the future. Japan's economy will stagnate for a long time if the young are not employed and cannot garner skills.Another important point is that the way of maintaining social stability and alleviating inequality in Japan is extremely inefficient. To construct useless dams, roads, ports, and airports is extremely costly just to give jobs to the unemployed. It would be much better to give direct assistance to those in need.There is some reason to think that a budget deficit is not so serious a problem as generally believed, and that the important thing is to cut wasteful government expenditure and not raise government revenue. While I admit this argument carries some weight, there is nevertheless good reason to think that it is necessary to reduce the budget deficit.Before the global financial crisis, Japan's budget deficit was controlled, and declining, but subsequently became uncontrollable. Additionally, and more importantly, an aging population demands more social security expenditure, which causes serious budget problems, but Japan does not seem ready to cope with such problems.The selection of these topics is subjective, but I believe that these are reflected in the Japanese concerns now. Japanese academic circles do not necessarily respond to the interests of the society, but I have tried to select papers on these topics to the extent possible.

PurposeThis paper provides a quantitative assessment of the “asset ratio” rule defined in Turkey as part of measures taken to stimulate the economy amid the Covid-19 pandemic. The main objective of the new rule was to boost credit growth in the economy and provide lending for credit-constrained households and firms that are in need. A secondary aim was to shift the denomination structure of the deposits toward domestic currency. Hence, the paper focus particularly on how the policy affected the growth rate of loans and the share of domestic deposits relative to foreign ones among the commercial banks. The policy was also heavily criticized due to the possibility that it will subjugate the banking system to excessive risk. The paper explore this possible impact by measuring how much the policy affected the default risk allowances in the banking system.Design/methodology/approachThe new policy required banks with deposits above a threshold level, i.e. large banks, to maintain a certain asset ratio. Banks with deposits below the threshold, i.e. small banks, were held exempt from it. The paper implement a difference-in difference methodology to assess the quantitative impacts of the asset ratio policy by taking large banks as the treatment group, and small banks as the control group.FindingsDifference-in-difference estimation results suggest that the asset ratio policy resulted in a 9.6% rise in loans and an 8.4% rise in government securities. Deposits also increased, with no significant change in their composition. The policy initially generated a 7% increase in the credit risk allowances of banks in the treatment group, which vanished in the following periods. Based on all these, the paper argue that the policy was successful in providing liquidity to the economy without jeopardizing the financial stability.Research limitations/implicationsThe findings of this study show that asset ratio policy is effective in increasing credit growth in countries with limited policy space such as Turkey. While saying this, the importance of the robust and prudent structure of the banking system in the economy should be underlined. Otherwise, the policy may have an unintended consequence of raising systemic risk. The policy suggestions also apply to advanced countries where the monetary policy has reached a natural limit due to the zero lower bound (ZLB). The ZLB problem encouraged these countries to use quantitative easing schemes in the aftermath of the Covid-19 crisis, just like the global financial crisis. However, it may take a long time to undo the effects of this policy on the balance sheets of central banks. In such cases, asset ratio policy can also be considered as an alternative tool for advanced economies notwithstanding the fact that the banking system should be prudent, well-capitalized and the country should have enough fiscal space. The main objective of the asset ratio policy was to help SMEs that were in urgent need of liquidity at the beginning of the crisis. The bank balance sheet data used in this paper does not contain information about the borrowers of the loans extended during the implementation of the policy. Analysis of this dimension using matched bank-firm level data will better demonstrate the success of the policy in achieving this goal. The paper address this as the main limitation of the paper and leave that analysis for future research.Originality/valueThis paper provides an important contribution to the literature by assessing a new unique policy whose objective is to stimulate loans and mitigate the impact of the Covid-19 crisis on the economy. The policy in question is predicted to have effects on the asset and liability structure and risk exposure of the banking system in Turkey. The quantitative analysis in this study estimates these impacts and discusses the effectiveness of the new policy in providing a relief for firms and households in need. Whether or not the policy caused a disruption in the sound structure of the banking system in Turkey is another question addressed in the paper.

Based on 25 years (1995–2019) of fully integrated sectoral data, this study builds on monetary circuit theory to examine the Italian experience of growing private debt followed by a long recession with balance-sheet restructuring. It is argued that this process cannot be identified as a typical balance-sheet recession. After the global financial crisis of 2007–2008, Italian firms increased financial sources from economic activities by retaining earnings, lowering wages, and disinvesting. Their deleverage, however, rested largely on the overall financial wealth reallocation that occurred after 2012, which was induced by monetary and fiscal policy, creating the conditions for households to increase net saving and to channel cumulated wealth from government securities and money balances towards equities.

Abstract We examine the effect of monetary policy on household spending when households are indebted and interest rates on outstanding loans are linked to short-term interest rates. Using administrative data on balance sheets and consumption expenditure of Swedish households, we reveal the cash-flow transmission channel of monetary policy. On average, indebted households reduce consumption spending by an additional 0.23–0.55 percentage points in response to a one-percentage-point increase in the policy rate, relative to a household with no debt. We show that these responses are driven by households that have some or a large share of their debt in contracts where interest rates vary with short-term interest rates, such as adjustable-rate mortgages (ARMs), which implies that monetary policy shocks are quickly passed through to interest expenses.

Abstract I study the effects of the US fiscal policy response to the Great Recession, accounting both for standard tools and financial sector interventions. A nonlinear model calibrated to the US allows me to study the state-dependent effects of different fiscal policies. I combine the model with data on the fiscal policy response to find that the fall in consumption would have been one-third larger in the absence of that response, for a cumulative loss of 7.18%. Transfers and bank recapitalizations yielded the largest fiscal multipliers through new transmission channels that arise from linkages between household and bank balance sheets.

Azerbaijan is recovering from a banking crisis and recession caused by a prolonged decline in oil prices since mid-2014. Monetary conditions remain tight under a de facto peg. Despite rising government spending, the fiscal position is projected to strengthen in 2019 mainly due to firmer oil prices and improvements in revenue administration. Weaknesses in bank balance sheets, structural and policy rigidities, and institutional and governance deficiencies hinder medium-term growth prospects and weaken resilience to shocks.

Rationale Turkey is identified annually as a material country for the Spanish and euro area banking systems. Moreover, Turkey and Spain are linked by major trade and financial flows. It is therefore important to monitor the country’s macro-financial situation and main weaknesses. Takeaways The Turkish economy continued to post very high inflation rates at end-2022, while economic activity began to slow in Q3, following its strong previous momentum. All of this in the context of sizeable external financing needs, foreign currency debt and low international reserves. Fiscal policy performed better than expected, and the country’s accounts remain healthy. In terms of monetary policy, in August the Turkish central bank resumed the process of reducing the policy interest rate initiated a year earlier, with the real interest rate standing at -75.5% in November. Nonetheless, macroprudential and regulatory measures were implemented to keep credit growth in check and encourage only lending to certain productive sectors. Meanwhile, the banking sector’s balance sheets remain relatively healthy, although some indicators have worsened.

The recovery is solidifying. However, old policy challenges still need to be fully addressed and new challenges are arising, especially on account of rising commodities prices. In many advanced economies the handoff from public to private demand is proceeding. But unemployment remains high and weak public balance sheets and still vulnerable financial sectors mean that the recovery is subject to downside risks. In many emerging market economies, overheating and financial imbalances present growing policy concerns. Monetary policy should stay accommodative in advanced economies, but needs further tightening in a number of emerging and developing economies to rein in inflationary pressure and rapid credit growth. Additionally, in emerging surplus economies, real exchange rate appreciation is needed to help contain inflation and support global demand rebalancing. In most economies, the time has come to begin fiscal adjustment by implementing measures to steadily reduce debt ratios toward more prudent levels. Moreover, financial sector repair and reform need to accelerate. Absent major progress on all these fronts, the recovery will remain vulnerable and job creation will continue to fall short of requirements in many parts of the world.

Savings as an alternative source of capital, in the opinion of most economists, are a much more reliable and rational source of investment funds than others. Therefore, the aim of this research is to determine what factors can drive domestic household savings with further repressions to overall economic growth. This research examined the impact of macroeconomic and financial factors on household savings based on quarterly data from the BiH Agency for Statistics and the Central Bank of Bosnia and Herzegovina for the period 2000-2016. For this purpose, seasoning of variables was done using X-13 ARIMA and TRAMO / SEATS. The stationarity of seasonally adjusted variables was examined through: the extended Dickey-Fuller unit root test, the Phillips-Perrontest unit root test, and the Kwaitkowski-Phillips-Schmidt-Shin stationarity test. The model included only non-stationary first order integration variables, which are also cointegrated, which is a condition for applying the error correction method (ECM). The application of the ECM methodology first required determining the appropriate number of lag in the VAR model and then applying the Johansen cointegration test. The following were used as independent variables in ECM: industrial production, government expenditure in% of GDP, money supply (M2) in% of GDP, foreign trade balance in% of GDP, current account balance in% of GDP, deposit population interest rate and unemployment rate. The variables included are based on ECM methodology criteria, which is the same order of integration and cointegration. Among the long-run interdependence ratios, only general government expenditure ratios in% of GDP, foreign trade balance in% of GDP and current account balance in% of GDP proved to be statistically significantly different from zero. The first two coefficients have a positive sign, while the impact of the current account balance in the gross domestic product is negative. A one percent increase in the share of general government expenditures and foreign trade balance in Gross Domestic Product will in the long run lead to an increase in the household savings rate by 4.1% and 3.5% respectively. The error correction coefficient (EC (-1)) in the short-term part of the model, which measures the rate of equilibrium adaptation in the dynamic model, is with the expected negative sign, but is not statistically significant. The high value of the adjusted coefficient of determination, 0.385, suggests that almost 39% of variations in household savings are explained by variations in the set of independent variables included in the ECM model. The obtained research findings can be significant indicators for adequate monetary and fiscal policy measures in BiH, and can be indicators for the overall macroeconomic policy of the country.