Weighing up the Credit-to-GDP Gap: A Cautionary Note

It has been argued that credit-to-GDP gaps (credit gap) are useful early warning indicators for banking crises. In addition, the Basel Committee on Banking Supervision has also advocated using these gaps - estimated using a one-sided Hodrick-Prescott filter with a smoothing parameter of 400,000 - to inform policy on the appropriate counter-cyclical capital buffer. We use the weighted average representation of the same filter and show that it attaches high weights to observations from the past, including the distant past: up to 40 lags (10 years) of past data are used in the calculation of the one-sided trend/permanent component of the credit-to-GDP ratio. We show how past data that belongs to the ‘old-regime’ prior to the crises continue to influence the estimates of the trend for years to come. By using narrative evidence from a number of countries that experienced deep financial crises, we show that this leads to some undesirable influence on the trend estimates that is at odds with the post-crisis environment

The Relative Size of New Zealand Exchange Rate and Interest Rate Responses to News

This paper examines the relative size of the effects of New Zealand monetary policy and macroeconomic data surprises on the spot exchange rate, 2 and 5 year swap rate differentials, and the synthetic forward exchange rate schedule. We find that the spot exchange rate and 5 year swap rates respond by a similar magnitude to monetary surprises, implying there is little response of the forward exchange rate to this type of news. In contrast, the spot exchange rate responds by nearly three times as much as 5 year interest rates to CPI and GDP surprises, implying that forward rates appreciate to higher than expected CPI or GDP news. This is in contrast to standard theoretical models and US evidence. Lastly, we show that exchange rates but not interest rates respond to current account news. The implications of these results for monetary policy are considered.New Zealand, interest rates, exchange rates, news

Some Benefits of Monetary-Policy Transparency in New Zealand

The Reserve Bank of New Zealand (RBNZ) is regarded as one of the most transparent central banks in the world. Recent research suggests that one benefit of such transparency is that financial markets better anticipate a central bank's reaction to incoming data and, in relation, do not over-react to macroeconomic data surprises. In this paper, the authors provide institutional details of how the RBNZ communicates its monetary-policy decisions to financial markets and conduct an events analysis to test whether there are any transparency benefits in the pricing of New Zealand's yield curve. In line with recent empirical literature, the authors´ results suggest that short-term interest rates tend to react appropriately to the data flow, while longer-term interest rates are not unduly influenced. The authors also show that market reactions tend to be in line with the RBNZ´s inflation-target objective.monetary policy, surprises, transparency, New Zealand

Do so-called multivariate filters have better revision properties? An empirical analysis

The output gap plays a crucial role in thinking and actions of many central banks but real time measurements undergo substantial revisions as more data become available (Orphanides (2001), Orphanides and van Norden (forthcoming)). Some central banks augment, such as the Bank of Canada and the Reserve Bank of New Zealand, the Hodrick and Prescott (1997) filter with conditioning structural information to mitigate the impact of revisions to the output gap estimates. In this paper, we use a state space Kalman filter framework to examine whether the augmented (so-called “multivariate filtersâ€) achieve this objective. We find that the multivariate filters are no better than the Hodrick-Prescott filter for real-time NZ data. The addition of structural equations increase the number of signal equations, but at the same time adds more unobserved trend/equilibrium variables to the system. We find that how these additional trends/equilibrium values are treated matters a lot, and they increase the uncertainty around the estimates. In addition, the revisions from these models can be as large as a univariate Hodrick-Prescott filter.output gap, real time, multivariate filters

Monetary policy transmission mechanisms and currency unions A vector error correction approach to a Trans-Tasman currency union

Differences in transmission mechanisms can generate asymmetric behaviour among currency union partners when they experience shocks. This has the potential to widen existing cyclical variation between members of a currency union. Our analysis suggests that the transmission mechanisms of GDP and the CPI of a monetary shock appear to be similar in Australia and New Zealand. However, there are differences in terms of the size of the responses of some variables to identical monetary policy shocks. In a currency union with a different exchange rate pattern and with different monetary policy shocks, New Zealand may experience some new challenges.Impulse responses; vector error correction; monetary transmission mechanism

In search of a Jewish community in the early modern Ottomon Empire : the case of Edirne Jews (c 1686-1750)

Ankara : The Department of History, İhsan Doğramacı Bilkent University, 2011.Thesis (Master's) -- Bilkent University, 2011.Includes bibliographical references leaves 97-110.This thesis examines the demographic development, geographic distribution, and communal organization of the Edirne Jewish Community from the late seventeenth to the mid-eighteenth century by mainly benefitting from Ottoman archival sources and Muslim court records of Edirne. Except some big cities such as Istanbul, Jerusalem, Salonica and Izmir, monographic studies on Ottoman Jews have been rare in Ottoman historiography. These works have either focused on the early periods (Fifteenth and Sixteenth Centuries) or on the nineteenth century. Ottoman Jews in the seventeenth and eighteenth centuries, however, are shortly mentioned within the “decline” paradigm. A monographic study on the Edirne Jewish Community in the seventeenth and eighteenth centuries has not yet been done. Did the Edirne Jewish Community decline in the eighteenth century? How was its demographic situation and spatial organization in the centuries concerned? How did they sustain and develop their relations within the community, and with other groups and the state? The archival materials are the ones drawn upon most heavily in this research. For the demographic situation and the spatial organization of the Edirne Jews, ‘avârız registers, one cizye register, and the census conducted in 1703 have been used. Furthermore, in order to see the neighborhoods where they lived and to analyze their relations with the broader society, court records of Edirne between 1686-1750 concerning Jews were used. Bearing in mind the limits and problems of the sources, I attempted to scrutinize the demographic, spatial, and organzational structure of the Edirne Jewish Community during the late seventeenth and mid-eighteenth centuries.Karagedikli, GürerM.S