infonet-economy

Multivariate filters based on the Hodrick-Prescott filter are appealing because they combine the advantages of the Hodrick-Prescott filter with economic relationships. Recently, a new multivariate filter has been put forward by Hirose and Kamada (2003). In this article we apply this new filter to Swiss data spanning the period from 1981 to 2005. We estimate both potential output and...

In this paper, we introduce a new algorithm to estimate the term structure of interest rates. It is obtained from a constrained optimization, where the objective is to minimize the integral of squared first derivatives of the instantaneous forward interest rate subject to the condition that the estimated bond prices lie within the range of observed bid and ask prices. We use a finite...

Prospect theory has been the focus of increasing attention in many Fields of economics. However, it has scarcely been addressed in macro-economic growth models - neither on theoretical nor on empirical grounds. In this paper we use prospect theory in a stochastic optimal growth model. Thereafter, the focus lies on linking the Eulerequation obtained from a prospect theory growth model...

We analyze regulatory capital requirements where the amount of required capital depends on the level of risk reported by the banks. It is shown that if the supervisors have a limited ability to identify or to sanction dishonest banks, an additional risk-independent leverage ration restriction may be necessary to induce truthful risk reporting. The leverage ration helps to offset the...

This paper examines whether the U.S. Federal Reserve has adjusted high-powered money supply in response to macroeconomic indicators. Applying ex-post and real-time data for the postwar period, we provide evidence that nonborrowed reserves responded to expected inflation and the output-gap. While the output-gap feedback has always been negative, the response of money supply to changes...

I analyze the price discovery, liquidity provision, and transaction-cost components driven by the real-time firm-specific news at the Paris Bourse. I find that the news impact depends on which type of news bulletin is released. Only news items causing extreme price disruptions such as earnings announcements enlarge spreads and information asymmetry risk. In contrast, the greater part...

Historically, money growth has played an important role in Swiss monetary policy, until 1999 as a target and from 2000 onwards as an indicator variable. Since the new policy framework focusses on an inflation forecast, the question arises how useful money growth is for predicting future price developments. Using Swiss data, this paper estimates a model first proposed by Gerlach (2004...

Using U.S. and euro area data, this paper presents a significant and proportional relationship between money growth and subsequent inflation when accounting for equilibrium velocity movements due to inflation regimes changes. These movements, driven by money demand adjustments to low-frequency Fisherian interest rate variations, are derived from consistent U.S. and euro area money...

While monetary targeting has become increasingly rare, many central banks attach weight to money growth in setting interest rates. This raises the issue of how money can be combined with other variables, in particular the output gap, when analysing inflation. The Swiss National Bank emphasises that the indicators it uses to do so vary across forecasting horizons. While real...