Quantitative easing and the loan to collateral value ratio

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Dynamics and Control. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Dynamics and Control, Volume 45, August 2014, Pages 146–164. doi:10.1016/j.jedc.2014.05.013Based in part on second author's doctoral dissertation, 2014 http://hdl.handle.net/10871/16503We study monetary optimal policy in a New Keynesian model at the zero bound interest rate where households use cash alongside house equity borrowing to conduct transactions. The amount of borrowing is limited by a collateral constraint. When either the loan to value ratio declines or house prices fall, we observe a decrease in the money multiplier. We argue that the central bank should respond to the fall in the money multiplier and therefore to the reduction in house prices or the loan to collateral value ratio. We also find that optimal monetary policy generates a large and persistent fall in the money multiplier in response to the drop in the loan to collateral value ratio

Three Essays on Monetary Policy and Learning

The first chapter co-authored with Tatiana Damjanovic studies optimal monetary policy in a New Keynesian model at the zero bound interest rate where households use cash alongside house equity borrowing to conduct transactions. The amount of borrowing is limited by a collateral constraint. When either the loan to value ratio declines or house prices fall, we observe a decrease in the money multiplier. We argue that the central bank should respond to the fall in the money multiplier and therefore to the reduction in house prices or the loan to collateral value ratio. We also find that optimal monetary policy generates a large and persistent fall in the money multiplier in response to the drop in the loan to collateral value ratio. The second chapter is focused on a macroeconomic model with sticky prices, firms borrowing market and the labour market frictions. We study connection between monetary policy and labour market under the negative financial and the positive productivity shocks. We have found that the interest rate rule with inflation and labour market targeting performs better than the rules with the aggregate consumption and debt targeting and is closest to the optimal policy as compared to the other regimes in terms of the welfare measure. We demonstrate too that the sign of the coefficient next to unemployment in the policy rule depends on the value of workers bargaining power. The third chapter co-authored with Tatiana Damjanovic and Keqing Liu uses the classical cobweb model framework to investigate properties of the transition matrix in the bounded memory econometric OLS-type learning. We define memory length as the number of past observations used to form a forecast and analytically prove that for any length, the eigenvalues of the transition matrix lie within the unit circle. In addition, we sketch the proof of stationarity of the cobweb model under bounded memory learning. Furthermore, we investigate the relationship between the volatility of forecasts and the length of memory and find that shorter memory causes higher variance in both forecasts and estimates of the OLS parameters.ESRC: Southwest Doctoral Training Centr

Feeling the heat: Financial crises and their impact on global climate change

This interdisciplinary paper uses world-systems analysis as a theoretical framework to argue that both the 1870s, 1930’s economic depressions reduced mean global temperatures. As global consumer demand fell, factories worldwide began producing less commodities and, as a result, emitted less greenhouse gasses. We find that in both instances there is evidence to support the hypothesis that financial crises lead to cooler temperatures.Kondratiev waves, Schumpeter, world-systems analysis, environmental economics, global climate change, Environmental Economics and Policy, Financial Economics, N22, N50, Q54,

Greenhouse emissions and economic recessions: Did industrial economies “Stay Cool” during the 1930s economic crisis?

In this historical economic interdisciplinary research we investigate the impact of the 1930s economic crisis and their relationship to global warming. We investigate two consecutive hegemonic powers: the United Kingdom and the United States. Our assumption was that a reduction in demand would lead to a decrease in mean global temperatures during depressions. We find that in fact reduced carbon dioxide in the atmosphere resulting from lowered production does not result in cooling temperatures.Historical economic sociology, Kondratiev wave theory, World-systems analysis, economic crises, global climate change

Development of states and forms of capitalism: An empirical examination of their relationship

Given the current economic crisis, we find this time of economic analysis to be both timely, and useful in determining which economic “style” is most supportive countries’ development in global capitalism. The goal of this paper is to determine which form of capitalism is most supportive the country’s development. The hypothesis that is raised in this paper is “The countries with the Liberal Market Economics system are more developed than Coordinated Market economics system countries”. This paper uses Hall and Soskice’s (2001) theoretical approach to varieties of capitalism to analyze countries’ competitiveness according to the World Economic Forum (WEF) and International Institute For Development Management (IMD) competitiveness indices. We use Knell and Srholec’s (2005) introduced methodology to calculate the index of coordination, which determines a country’s type of capitalism. The index consists of 12 variables, which later are divided into 4 groups according to the factor analysis results. Calculations confirmed the main differences, indicated in the literature, between two forms of capitalism at opposite extremes: Liberal Market Economies (LME) and Coordinated Market Economies (CME). Moreover, we discovered that CME is more supportive according to the human development rankings

Feeling the heat: Financial crises and their impact on global climate change

This interdisciplinary paper uses world-systems analysis as a theoretical framework to argue that both the 1870s, 1930’s economic depressions reduced mean global temperatures. As global consumer demand fell, factories worldwide began producing less commodities and, as a result, emitted less greenhouse gasses. We find that in both instances there is evidence to support the hypothesis that financial crises lead to cooler temperatures

Greenhouse emissions and economic recessions: Did industrial economies “Stay Cool” during the 1930s economic crisis?

In this historical economic interdisciplinary research we investigate the impact of the 1930s economic crisis and their relationship to global warming. We investigate two consecutive hegemonic powers: the United Kingdom and the United States. Our assumption was that a reduction in demand would lead to a decrease in mean global temperatures during depressions. We find that in fact reduced carbon dioxide in the atmosphere resulting from lowered production does not result in cooling temperatures