Optimal Monetary Policy rules for the Euro area in a DSGE framework

This paper evaluates optimal monetary policy rules within the context of a dynamic stochastic general equilibrium model estimated for the Euro Area. Under assumption of an ad hoc loss function for the central bank, we compute the unconditional losses both under discretion and commitment. We compare the performance of unrestricted optimal rules to the performance of optimal simple rules. The results indicate that there are considerable gains from commitment over discretion, probably due to the stabilization bias present under discretion. The lagged variant of the Taylor type of rule that allows for interest rate inertia does relatively well in approaching the performance of the unrestricted optimal rule derived under commitment. On the other hand, simple rules expressed in terms of forecasts to next period’s inflation rate seem to perform relatively worse.optimal rules, commitment, discretion, stabilization bias

Estimation of monetary policy preferences in a forward-looking model: a Bayesian approach. NBB Working Papers No. 129, 13 March 2008

In this paper, we adopt a Bayesian approach to estimating monetary policy preference parameters in a general equilibrium framework. We start out from the model presented by Smets and Wouters (2003) for the euro area, where, in the original set-up, monetary policy behaviour is described by an empirical rule. We abandon this way of representing monetary policy behaviour and instead assume that monetary policy authorities optimise an intertemporal quadratic loss function under commitment. We consider two alternative specifications for the loss function. The first specification includes inflation, the output gap and difference in the interest rate as target variables. The second loss function includes an additional wage inflation target. The weights assigned to the target variables in the loss functions, i.e. the preferences of monetary policy, are estimated jointly with the structural parameters in the model. The results imply that inflation variability remains the main concern of optimal monetary policy. In addition, interest rate smoothing and the output gap appear to be important target variables as well, albeit to a lesser extent. Comparing the marginal likelihood of the original Smets and Wouters (2003) model to our specification with optimal monetary policy indicates that the latter performs only slightly worse. Since we are faced with the time-inconsistency problem under commitment, we initialise our estimates by considering a pre-sample period of 40 quarters. This enables an empirical approach to the timeless perspective framework

Optimal Monetary Policy Rules for the Euro Area in a DSGE Framework

This paper evaluates optimal monetary policy rules within the context of a dynamic stochastic general equilibrium model estimated for the Euro Area. Under assumption of an ad hoc loss function for the central bank, we compute the unconditional losses both under discretion and commitment. We compare the performance of unrestricted optimal rules to the performance of optimal simple rules. The results indicate that there are considerable gains from commitment over discretion, probably due to the stabilization bias present under discretion. The lagged variant of the Taylor type of rule that allows for interest rate inertia does relatively well in approaching the performance of the unrestricted optimal rule derived under commitment. On the other hand, simple rules expressed in terms of forecasts to next period's inflation rate seem to perform relatively worse.monetary policy, discretion, commitment

Estimation of monetary policy preferences in a forward-looking model : a Bayesian approach

In this paper we adopt a Bayesian approach towards the estimation of the monetary policy preference parameters in a general equilibrium framework. We start from the model presented by Smets and Wouters (2003) for the euro area where, in the original set up, monetary policy behaviour is described by an empirical Taylor rule. We abandon this way of representing monetary policy behaviour and assume, instead, that monetary policy authorities optimize an intertemporal quadratic loss function under commitment. We consider two alternative specifications for the loss function. The first specification includes inflation, output gap and difference in the interest rate as target variables. The second loss function includes an additional wage inflation target. The weights assigned to the target variables in the loss functions, i.e. the preferences of monetary policy, are estimated jointly with the structural parameters in the model. The results imply that inflation variability remains the main concern of optimal monetary policy. In addition, interest rate smoothing and the output gap appear to be, to a lesser extent, important target variables as well. Comparing the marginal likelihood of the original Smets and Wouters (2003) model to our specification with optimal monetary policy indicates that the latter performs only slightly worse. Since we are faced with the time-inconsistency problem under commitment, we initialize our estimates by considering a presample period of 40 quarters. This allows us to approach, empirically, the timeless perspective framework.optimal monetary policy, commitment, central bank preferences, euro area monetary policy

Monetary and macroprudential policies in an estimated model with financial intermediation

We estimate the Smets and Wouters (2007) model augmented with the Gertler and Karadi (2011) financial intermediation sector on US data by using real and financial observables. Given the framework of the estimated model, we address the question whether and how standard monetary policy should interact with macroprudential policy in order to safeguard real and financial stability. For this purpose, monetary policy is described by a flexible inflation targeting regime using the interest rate as instrument, while the macroprudential regulator adopts a tax/subsidy on bank capital in a countercyclical manner in order to stabilize nominal credit growth and the output gap. We look at the gains from coordination between the central bank and the macroprudential regulator under alternative assumptions regarding the degree of importance assigned to output gap fluctuations in the macroprudential mandate. The results suggest that there can be considerable gains from coordination if the macroprudential regulator has been assigned a sufficiently high weight on output gap stabilization, i.e. the common objective with monetary policy. If, on the other hand, the main focus of the macroprudential mandate is on credit growth, the macroprudential policy maker can reach better outcomes, while the central bank does worse, in the absence of coordination. Therefore, whether and to which extent monetary policy gains from coordination with the macroprudential regulator depends on the relative weight assigned to output fluctuations in the macroprudential mandate. Our counterfactual analysis further confirms the effectiveness of the countercyclical macroprudential tax/subsidy in containing the amplification effects triggered by a financial shock, and suggests that having a macroprudential regulatory tool at work could have successfully avoided the massive drop in credit such as the one observed at the onset of the Great Recession

Monetary and macroprudential policy games in a monetary union. National Bank of Belgium Working Paper No. 304

We use the two-country model of the euro area developed by Quint and Rabanal (2014) to study policymaking in the European Monetary Union (EMU). In particular, we focus on strategic interactions: 1) between monetary policy and a common macroprudential authority, and; 2) between an EMU-level monetary authority and regional macroprudential authorities. In the first case, price stability and financial stability are pursued at the EMU level, while in the second case each macroprudential authority adopts region-specific objectives. We compare cooperative equilibria in the simultaneous-move and leadership solutions, each obtained assuming policy discretion. Further, we assess the effects on policy performance of assigning shared objectives across policymakers and of altering the level of importance attached to various policy objectives

Forward guidance and long term interest rates: Inspecting the mechanism

Forward guidance policies are often argued to stimulate economic activity by reducing nominal long term interest rates. We document why a lower nominal long rate is neither necessary nor sufficient for forward guidance to be successful. We determine the mechanisms behind widely varying long rate responses in existing empirical structural models. Imperfect information about the rationale for forward guidance can severely distort long rate effects and attenuate much of its expansive effect. These results suggest caution in interpreting event-studies of forward guidance

Offsets in International Weapons Acquisitions: the Turkish Experience

Agile Combat Support is focused on providing fast, flexible, responsive, and reliable support as the foundation of all Air Force operations. Combined with the current Air Force focus on ensuring Time Definite Delivery (TDD) and reducing Customer Wait Time (CWT), this new mind-set will place ever-increasing emphasis on supply chain performance as a determining factor in overall campaign effectiveness of future conflicts. An improved methodology for the systematic performance analysis of the distribution segment of the logistics pipeline may aid AFMC transportation personnel (AFMC/LSO) in the quick identification of system bottlenecks, identification of root causes of performance shortfalls, and the recommendation of corrective actions, resulting in improved material flow times, reduced Customer Wait Times, more accurate Time Definite Delivery. Recommendations offered by this thesis are designed to lay the basis for developing the current methodology and to identify future research areas. The recommendations offered include the development of the current methodology across all AFMC logistics functional areas, the development of a more pro-active analysis procedure to identify problems before they affect TDD and CWT, modification of the current analyses procedure to derive more relevant performance information and present the results in a more digestible format, the automation of the pipeline analyses process, and the initiation of an AFMC-wide logistics pipeline analysis cell staffed by the various functional specialists

Impacto del método de riego por aspersión y fertilizante mineral en la planta de trigo

Aim of the research was to know effect of the appropriate irrigation method and amount of fertilizer specified for urea fertilizer that achieves the best growth for the plant and increase its productivity while avoiding the bad impact on soil properties. The farmer believes that adding chemical fertilizers and amounts of irrigation water to field will increase production, so this is wasted and irrigation water is increased until this leads to it being one of the causes of soil salinization, which has become the most important problem. The Sprinkler irrigation showed significant differences compared to surface irrigation. The length of the spike , number of grain per spike ,1000 grains weight Number of spikes per square meter, grains weight per square meter and the harvest index, while the plant height was not significant only the study also showed that the correlation coefficient between the apparent characteristics of plants was stronger in the case of using sprinkler irrigation compared to the surface irrigation. Therefore, farmers must avoid surface irrigation because it harms the soil and increases its salinity. El objetivo de la investigación fue conocer el efecto del método de riego adecuado y la cantidad de fertilizante especificada para el fertilizante de urea que logra el mejor crecimiento de la planta y aumenta su productividad evitando el mal impacto en las propiedades del suelo. El agricultor cree que añadiendo fertilizantes químicos y cantidades de agua de riego al campo aumentará la producción, por lo que esta se desperdicia y se aumenta el agua de riego hasta llegar a ser una de las causas de la salinización del suelo, que se ha convertido en el problema más importante. El riego por aspersión mostró diferencias significativas respecto al riego superficial. La longitud de la espiga, el número de granos por espiga, el peso de 1000 granos, el número de espigas por metro cuadrado, el peso de los granos por metro cuadrado y el índice de cosecha, mientras que la altura de la planta no fue significativa únicamente. El estudio también mostró que el coeficiente de correlación entre las características aparentes de las plantas era más fuerte en el caso del riego por aspersión en comparación con el riego superficial. Por tanto, los agricultores deben evitar el riego superficial porque daña el suelo y aumenta su salinidad

Effect of sprinkler irrigation method and addition urea fertilizer on wheat plant

Originality/Value: Farmers must use sprinkler irrigation and avoid surface irrigation because it harms the soil and increases its salinity, also represents a waste of water resources.Research limitations: Limited availability of sufficient numbers of sprinkler irrigation devices in Iraq, their high prices, and the lack of experience of farmers to use them.The Purpose of the research is to evaluate the effect of the appropriate irrigation method and the amount of fertilizer specified for urea fertilizer that achieves the best growth for the plant and increase its productivity while avoiding a negative impact on soil properties.Research Method: Two types of irrigation: spraying and flooding, and four mineral fertilization treatments (0. 50.100. 150) kg.ha-1 were used in the work to study the apparent characteristics of wheat and the amount of productivity, using statistical analysis (Gen Stat) and simple correlation coefficient to find strength of association between variables. The experiment was carried out in 2023 at Al-Khatib Farm, located in Al-Numaniyah District, it is bordered to the south by Wasit Governorate, 50 km away, and to the north by Baghdad Governorate,160 km away (Iraq).Results and Discussion. Sprinkler irrigation showed significant differences with the surface irrigation in the length of the spike, number of seed per spike,1000 seed weight, number of spikes per square meter, grain yield kg .ha-1 and the harvest index, while the plant height was not significant. The study also showed that the correlation coefficient between the apparent characteristics of the plants was stronger in the case of using sprinkler irrigation compared to the surface irrigation