Composite indicators for monetary analysis

The prominent role assigned to money by the ECB has been the subject of an intense debate because of the declining predictive power of the monetary aggregate M3 for inflation in recent years. This paper reassesses the information content of monetary analysis for future inflation using dynamic factors extracted from a new and richer cross-section of data including the monetary aggregate M3, its components and counterparts, and a detailed breakdown of deposits and loans at sectoral level. Weighting monetary and credit variables according to their signal to noise ratio allows us to downplay those that in recent times contributed significantly to the deterioration of the information content of the M3. Factor-model based inflation forecasts turn out to be more accurate than those produced by traditional competitor models at the relevant policy horizon of six-quarters ahead. All in all, our results support the view that an analysis based on a large set of monetary and credit variables is a more useful tool for assessing risks to price stability than one that simply focuses on the dynamic of the overall monetary aggregate M3.monetary analysis, factor models, forecasting

Short-term interest rate futures as monetary policy forecasts

The prices of futures contracts on short-term interest rates are commonly used by central banks to gauge market expectations concerning monetary policy decisions. Excess returns - the difference between futures rates and the realized rates - are positive, on average, and statistically significant, both in the euro area and in the United States. We find that these biases are significantly related to the business cycle only in the United States. Moreover, the sign and the significance of the estimated relationships with business cycle indicators are unstable over time. Breaking the excess returns down into risk premium and forecast error components, we find that risk premia are counter-cyclical in both areas. On the contrary, ex-post prediction errors, which represent the greater part of excess returns at longer horizons in both areas, are correlated with the business cycle (negatively) only in the United States.futures rates, monetary policy, risk-premium

Oil and the macroeconomy: a quantitative structural analysis

We consider an economy in which the oil costs, industrial production, and other macroeconomic variables fluctuate in response to fundamental domestic and external demand and supply shocks. We estimate the effects of these structural shocks on US monthly data for the 1973.1-2007.12 period using robust sign restrictions suggested by theory. The interplay between the oil market and the US economy goes in both directions. About 20% of changes in the cost of oil come in response to US aggregate demand shocks, while shocks originating in the oil market also affect the US economy, the impact depending on the nature of the shock: a negative oil supply shock reduces US output, whereas a positive oil demand shock has a positive and persistent effect on GDP.Business cycle; Oil prices; Structural VAR

The transmission of monetary policy shocks from the US to the euro area

This paper studies the transmission of monetary policy shocks from the US to the euro-area using a two-country structural VAR with no exogeneity assumption. The analysis reveals the following results. First, in response to an unexpected increase in the Federal funds rate, the euro immediately depreciates with respect to the dollar and then appreciates in line with the prediction of the uncovered interest parity condition. Second, there is evidence of a temporary positive spillover to euro-area output in the short run, while a negative effect emerges in the medium run. Third, the contribution of the trade balance channel to the transmission of monetary shocks is negligible. Finally, the degree of pass-through of the exchange rate changes onto euro-area consumer prices is incomplete and small in the short run, while it is close to zero in the medium run.VAR, Monetary Policy, International transmission

Superposition principle for the tensionless contact of a beam resting on a winkler or a pasternak foundation

A Green function-based approach is presented to address the nonlinear tensionless contactproblem for beams resting on either a Winkler or a Pasternak two-parameter elastic foundation.Unlike the traditional solution procedure, this approach allows determination of the contact locus position independently from the deflection curves. By doing so, a general nonlinear connection between the loading and the contact locus is found, which enlightens the specific features of the loading that affect the position of the contact locus. It is then possible to build load classes sharing the property that their application leads to the same contact locus. Within such load classes, the problem is linear and a superposition principle holds. Several applications of the method are presented, including symmetric and nonsymmetric contact layouts, which can be hardly tackled within the traditional solution procedure. Whenever possible, resultsare compared with the existing literature. © 2013 American Society of Civil Engineers

FORECASTING OUTPUT GROWTH AND INFLATION IN THE EURO AREA: ARE FINANCIAL SPREADS USEFUL?

This paper deals with the usefulness of several measures of financial spreads (the slope of the yield curve, the reverse yield gap, the credit quality spread) for fore-casting real economic activity and inflation in the euro area. A quarterly Bayesian vector autoregression model is used to assess the marginal forecasting power of financial spreads for real economic activity and inflation. A benchmark BVAR is set up, containing real GDP, inflation and key indicators of monetary policy and foreign macroeconomic variables. The properties of the spreads as leading indicator are then assessed by augmenting the benchmark BVAR with the spreads, one at a time. We find that financial spreads have no or negligible marginal predictive con-tent for either target variable. Overall, there is no ready-to-use financial indicator that can replace an encompassing multivariate model for the prediction of target variables in the euro area.financial spreads, bayesian VAR models, bayesian analysis, forecasting

Disentangling demand and supply in credit developments: a survey-based analysis for Italy

This paper combines qualitative information from the Eurosystem Bank Lending Survey with micro-data on loan prices and quantities for the participating Italian banks to assess the role of supply and demand factors in credit developments, with a focus on the sharp slowdown of 2008-09. Both demand and supply have played a relevant role, especially for lending to enterprises, in the whole sample period and during the financial crisis. A counterfactual exercise shows that the effect of supply factors on the growth of lending to firms was strongest after the Lehman collapse. On average, over the crisis period (2007q3-2009q4) the negative effect on the annualized quarter-on-quarter growth rate of the panel banksÂ’ lending to enterprises can be estimated in a range of 2.2 to 3.1 percentage points, depending on the specification. About one fourth of the total supply effect can be attributed to costs related to the banksÂ’ balance sheet position, the rest to their perception of credit risk.credit growth, supply tightening, financial crisis

The interbank market after August 2007: what has changed, and why?

The outbreak of the financial crisis coincided with a sharp increase of worldwide interbank interest rates. We analyze the micro and macroeconomic determinants of this phenomenon, finding that before August 2007 interbank rates were insensitive to borrower characteristics, whereas afterwards they became reactive to borrowers’ creditworthiness. At the same time, conditions for large borrowers became relatively more favorable, both before and after the failure of Lehman Brothers. This suggests that banks have become more discerning in their lending, a welcome change, but that moral hazard considerations related to the â€too big to fail†argument should remain a main concern for central banks.Interbank markets, Spreads, Financial crisis

On the effect of curing time and environmental exposure on impregnated Carbon Fabric Reinforced Cementitious Matrix (CFRCM) composite with design considerations

This paper investigates the effect of curing time and aggressive environmental exposure on the mechanical performance of impregnated Carbon Fabric Reinforced Cementitious Matrix (CFRCM) composite. Following the recently published IIC-ES AC434 guidelines, saltwater, distilled water, alkali and acid resistance are investigated together with freeze-thaw cycles. Mechanical characterization is based on tensile uni-axial tests under deformation control of rectangular-base prismatic specimens. 28- and 60-day curing times are considered for the control environment as well as for saltwater and alkali resistance. Deformation is monitored via digital acquisition. Besides uni-axial tests, experimental results comprise optical and scanning electron microscopy, crack pattern analysis and failure mechanism assessment. Focus is set on the determination of the design limits for the composite system at failure for the tested environments and curing times. In particular, a comparison is drawn with established design criteria already coded for FRP systems, which introduce the concept of safety (or partial) factors. Environmental conversion factors are also defined and calculated on a statistical basis in a twofold manner, as a mean to determine the design strain and strength limits of exposed specimens from the control (unexposed) data. It is found that they provide a convenient method for assessing the composite vulnerability to the aggressive environments at different curing times