TARGET2 Unlimited: monetary policy implications of asymmetric liquidity management within the Euro area. CEPS Policy Brief No. 248, 13 July 2011

This paper analyses the implications of a continued divergence of TARGET2 balances for monetary policy in the euro area. The accumulation of TARGET2 claims (liabilities) would make the ECB’s liquidity management asymmetric once the TARGET2 claims in core countries have crowded out central bank credit in those regions. Then while providing scarce liquidity to banks in countries with TARGET2 liabilities, the ECB will need to absorb excess liquidity in countries with TARGET2 claims. We discuss three alternatives and their implications for absorbing excess liquidity in core regions: 1) using market-based measures might accelerate the capital flight from periphery to core countries and would add to the accumulation of risky assets by the ECB; 2) conducting non-market based measures, such as imposing differential (unremunerated) reserve requirements, would distort banking markets and would support the development of shadow banking; and 3) staying passive would lead to decreasing interest rates in core Europe entailing inflationary pressure and overinvestment in those regions and possibly future instability of the banking system

Inflation Targeting by Debtor Central Banks in Emerging Market Economies

Given buoyant capital inflows and managed exchange rates the majority of emerging market central banks have continued to accumulate massive foreign reserves. If left unsterilized, the liquidity expansion can threaten domestic macroeconomic stability. To contain domestic inflation these central banks absorb rather then provide liquidity in their regular monetary policy operations. Based on an augmented Barro-Gordon framework we show that inflation targeting within an environment of surplus liquidity is less efficient, because absorbing liquidity raises the costs of monetary policy operations. By implementing sterilization costs into the central bank’s objective function the inflation bias increases.inflation targeting, exchange rate targeting, sterilization, debtor central bank

Limits of Monetary Policy Autonomy by East Asian Debtor Central Banks

Due to buoyant capital inflows East Asian central banks with exchange rate targets accumulate foreign reserves and thereby increase surplus liquidity. East Asian central banks with more flexible exchange rate regimes also face surplus liquidity that mainly emanates from past accumulation of foreign reserves. We show based on an augmented Barro-Gordon-type central bank loss function that in both cases surplus liquidity limits monetary policy autonomy. In case of fixed exchange rates East Asian central banks can escape from the impossible trinity and gain monetary policy autonomy by using non-market–based sterilization which leads to financial sector distortions. In a flexible exchange rate regime monetary policy autonomy can be gained without financial sector distortions by using market-based sterilization. As central banks face substantial sterilization costs as well as revaluation losses on foreign reserves, however, monetary policy autonomy is eroded.debtor central banks, monetary policy autonomy, sterilization, exchange rate regime, East Asia

Limits of monetary policy autonomy by East Asian debtor central banks

Due to buoyant capital inflows East Asian central banks with exchange rate targets accumulate foreign reserves and thereby increase surplus liquidity. East Asian central banks with more flexible exchange rate regimes also face surplus liquidity that mainly emanates from past accumulation of foreign reserves. We show based on an augmented Barro-Gordon-type central bank loss function that in both cases surplus liquidity limits monetary policy autonomy. In case of fixed exchange rates East Asian central banks can escape from the impossible trinity and gain monetary policy autonomy by using non-market-based sterilization which leads to financial sector distortions. In a flexible exchange rate regime monetary policy autonomy can be gained without financial sector distortions by using market-based sterilization. As central banks face substantial sterilization costs as well as revaluation losses on foreign reserves, however, monetary policy autonomy is eroded

Inflation targeting by debtor central banks in emerging market economies

Given buoyant capital inflows and managed exchange rates the majority of emerging market central banks have continued to accumulate massive foreign reserves. If left unsterilized, the liquidity expansion can threaten domestic macroeconomic stability. To contain domestic inflation these central banks absorb rather then provide liquidity in their regular monetary policy operations. Based on an augmented Barro-Gordon framework we show that inflation targeting within an environment of surplus liquidity is less efficient, because absorbing liquidity raises the costs of monetary policy operations. By implementing sterilization costs into the central bank's objective function the inflation bias increases

Fiscal divergence, current account divergence and TARGET2 imbalances in the EMU

Diverging fiscal policy paths, housing booms and diverging unit labour costs were driving forces of rising intra-European current account imbalances, which were underpinned by low interest rates. Since the outbreak of the crisis, the adjustment of intra-EMU current account imbalances has been postponed by a rising divergence of TARGET2 balances, as the repatriation of private international credit and deposit fl ight from the crisis economies is intermediated by central bank credit. Given that this process has brought the Deutsche Bundesbank into a debtor position to the domestic fi nancial system, the article discusses options for liquidity absorption by the Bundesbank to forestall asset price bubbles in Germany

Low Interest Rate Policy and the Use of Reserve Requirements in Emerging Markets

The paper attempts to shed light on the link between monetary policy in large economies with international currencies (the United States and the euro area) and the use of reserve requirements in emerging markets. Using reserve requirement data for 28 emerging markets from 1998 to 2012 we provide evidence that emerging markets tend to raise reserve requirements and repress financial markets to curb speculative capital inflows when interest rates in the major economies decline. Our finding suggests that the current low interest rate policies of the major economies may have collateral effects on emerging markets by triggering financially repressive policies

The Mini-Robot Khepera as a Foraging Animate: Synthesis and Analysis of Behaviour

Löffler A, Klahold J, Rückert U. The Mini-Robot Khepera as a Foraging Animate: Synthesis and Analysis of Behaviour. In: Rückert U, Sitte J, Witkowski U, eds. Proceedings of the 5th International Heinz Nixdorf Symposium: Autonomous Minirobots for Research and Edutainment (AMiRE01). Vol 97. Paderborn, Germany: Heinz Nixdorf Institut, Universität Paderborn; 2001: 93-130.The work presented in this paper deals with the development of a methodology for resource-efficient behaviour synthesis on autonomous systems. In this context, a definition of a maximal problem with respect to the resources of a given system is introduced. It is elucidated by means of an exemplary implementation of the solution to such a problem using the mini-robot Khepera as the experimental platform. The described task consists of exploring an unknown and dynamically changing environment, collecting and transporting objects, which are associated with light-sources, and navigating to a home-base. The critical point is represented by the accumulated positioning errors in odometrical path-integration due to slippage. Therefore, adaptive sensor calibration using a specific variant of Kohonen’s algorithm is applied in two cases to extract symbolic, e.g. geometric, information from the sub-symbolic sensor data, which is used to enhance position control by landmark mapping and orientation. In order to successfully handle the arising complex interactions, a heterogeneous control-architecture based on a parallel implementation of basic behaviours coupled by a rule-based central unit is proposed

Practices of skin care among nurses in medical and surgical intensive care units: results of a self-administered questionnaire

Dermatitis of hands is a problem among nurses. The aim of this prospective questionnaire based survey was to analyze practice and knowledge of skin care of medical and surgical nurses

A Visualization Tool for the Mini-Robot Khepera: Behaviour Analysis and Optimization

Löffler A, Klahold J, Hußmann M, Rückert U. A Visualization Tool for the Mini-Robot Khepera: Behaviour Analysis and Optimization. In: Floreano D, Nicoud J-D, Mondada F, eds. Proceedings of the 5th International European Conference on Artificial Life (ECAL99). Vol 1674. Lausanne, Switzerland: Springer-Verlag; 1999: 329-333.The design of behavior generating control structures for real robots acting autonomously in a real and changing environment is a complex task. This is in particular true with respect to the debugging process, the documentation of the encountered behavior, its quantitative analysis and the final evaluation. To successfully implement such a behavior, it is vital to couple the synthesis on a simulator and the experiment on a real robot with a thorough analysis. The available simulator tools in general only allow behavioral snapshots and do not provide the option of online interference. In order to cure these shortcomings, a visualization tool for aposteriori graphical analysis of recorded data sets which gives access to all relevant internal states and parameters of the system is presented. The mini-robot Khepera has been chosen as experimentatory platform