Monetary Policy in Transition

This paper analyzes monetary policy in transition. It examines the dynamics of monetary policy in Mongolia using granger-causality tests for monetary variables and inflation. The paper also analyzes money demand using data from 22 Mongolian regions during 1993-1998. The analyses confirm the key role of monetary policy in stabilization and reveal that even in a transition economy as rudimentary as Mongolia, a stable money demand and a predictable relationship between inflation and monetary variables do exist. Hence market-based monetary policy is effective. In addition, the analysis points to a difference between transition and industrial economies in the elasticity of money demand with respect to activity, reflecting the larger role for transactions demand for money.Transition economies;monetary policy, inflation, money demand, money supply, money stock, central bank, demand for money, moderate inflation, reserve requirements, monetary authorities, inflation process, monetary fund, real interest rate, monetary indicators, price level, monetary aggregates, price stability, real money, aggregate demand, real interest rates, inflation rate, monetary sector, national bank, relative prices, money growth, nominal interest rate, foreign currency, foreign exchange, monetary model, inflation performance

The Impact of Changes in Stock Prices and House Priceson Consumption in OECD Countries

This paper quantifies the different impact of stock and house prices on consumption using data for 16 OECD countries. The analysis finds that the long-run impact of an increase in stock prices and house prices is in general higher in countries with a market-based financial system. The sensitivity of consumption to changes in stock wealth is about twice as large as the sensitivity to changes in housing wealth. Splitting the sample into the 1980s and 1990s shows that both countries with a market-based financial system and countries with a bank-based financial system moved toward a higher degree of responsiveness of consumption to changes in stock prices and house prices.

Inflation and Growth in Transition

This paper examines the progress made in four Asian transition economies—China, Lao P.D.R., Vietnam, and Mongolia—to market-based systems. Overall, these economies appear to have had a more favorable experience with inflation stabilization and output growth than that of transition economies elsewhere. While initial conditions played an important role in determining the strategy and speed of the transition, growth performance benefited from continued macroeconomic stability and reforms in a key sector (such as agriculture); this confirms the need for sustained and rapid structural reforms and highlights the constraints for sustainable growth posed by weak financial and enterprise sectors.

The Real Effects of Monetary Policy in the European Union: What Are the Differences?

The main finding of this paper is that the European Union (EU) countries fall into two broad groups according to the effects of monetary policy adjustments on economic activity. Estimates based on a vector autoregression model indicate that the full effects of a contractionary monetary shock on output in one group of EU countries (Austria, Belgium, Finland, Germany, the Netherlands, and the United Kingdom) take roughly twice as long to occur, but are almost twice as deep as in the other group (Denmark, France, Italy, Portugal, Spain, and Sweden). The paper discusses the implications of these results for the effective conduct of monetary policy in the euro area.

Wealth Effects and the New Economy

This paper investigates if there is a different impact from changes in "new" and "old" economy stock valuations on private consumption. Estimating a reduced-form VAR for seven OECD countries for the 1990s, it is found that the impact from changes in old economy stock valuations on consumption is in general larger in the United States, Canada, and United Kingdom than in continental Europe. Furthermore, the impact from changes in new economy valuations to consumption is roughly the same in the United States, Canada, and United Kingdom and in continental Europe. Finally, the results suggest that in continental Europe the impact on consumption from changes in the valuation of new economy stocks is bigger than from the old economy stocks, whereas for the United States, Canada, and United Kingdom the impact is more or less the same between the two sectors.

New Economy Stock Valuations and Investmen in the 1990's

This paper investigates whether there is a different impact from changes in "new" and "old" economy stock valuations on private investment for seven OECD economies. A vector autoregressive model is estimated for each individual country, using quarterly data over the period 1990-2000. We find that the impact from changes in valuations of new economy stocks to investment is roughly the same in North America and United Kingdom as in continental Europe. By contrast, the impact from changes in old economy stock valuations on investment is, in general, larger in North America and United Kingdom than in continental Europe. Finally, the results suggest that in continental Europe the impact on investment from changes in the valuation of new economy stocks is bigger than for old economy stocks, whereas for North America and United Kingdom the impact is more similar.Stock markets;stock market, stock market capitalization, stock valuations, stock prices, capital formation, international financial statistics, stock price, financial system, stock market volatility, stock valuation, consumer price index, financial systems, stock market index, bond, call money, bond markets, money market, financial markets, equity market, access to bond markets, stock price index, financial economics, capital stock, stock market developments, capital theory, asset markets, stock market prices

Do Asset Prices in Transition Countries Contain Information About Future Economic Activity?

There is ample empirical evidence for developed economies that asset prices contain information about future economic developments. But is this also the case in transition economies? Using a panel of monthly data for the Czech Republic, Hungary, Poland, Russia, Slovakia, and Slovenia for the period 1994-1999 it is shown that historical values for interest rates, exchange rates, and stock prices signal future movements in real economic activity. This result has significant implications for policymakers, and a composite leading indicator based on the three asset prices is presented, which contains information about the future development of economic activity.Transition economies;transition countries, financial sector, stock market, financial sector development, money market, stock markets, unemployment rate, financial markets, stock returns, stock prices, financial system, equity markets, financial intermediation, stock ownership, stock market development, stock indices, stock exchange, asset markets, stock price, equity market, money market interest rates, financial systems, financial intermediaries, money market interest, transition period, international standards, financial intermediary development, political decisions, real money market rate, stock index, real money market rates, foreign ownership, non-member countries, exchange rate movements, tradable goods, money market rate, financial liberalization, financial fragility, international financial statistics, currency crisis, stock exchanges, output growth, exchange rate policies, domestic companies, foreign stock, financial structure, moral hazard

Capital Account Liberalization and Economic Performance

This paper reviews and discusses issues involved in assessing the relationship between capital account liberalization and economic performance. First, it discusses the different measures of restrictions used in the literature. Second, it reviews the literature on the relationship between growth and capital account liberalization. Finally, it identifies and explains some of the differences in the results of the various studies and provides some support for a positive effect of capital account liberalization on growth, especially for developing countries.Capital account liberalization;Capital flows;Capital controls;capital account, capital accounts, capital account openness, capital mobility, stock market, capital account restrictions, capital movements, capital inflows, capital markets, international capital flows, open capital accounts, current account, capital account transactions, international capital, liberalization of capital, private capital flows, capital account restriction, closed capital accounts, open capital account, open capital markets, capital account liberalizations, capital control, equity prices, capital market, private capital, net capital flows, border capital flows, unregulated capital flows, net capital, openness to capital flows, balance of payments, balance of payments statistics

Exchange Rates and Capital Flows

This paper explores the ability of portfolio and foreign direct investment flows to track movements in the euro and the yen against the dollar. Net portfolio flows from the euro area into U.S. stocks—possibly reflecting differences in expected productivity growth—track movements in the euro against the dollar closely. Net FDI flows, which capture the recent burst in cross-border M&A activity, appear less important in tracking movements in the euro-dollar rate, possibly because many M&A transactions consist of share swaps. Movements in the yen versus the dollar remain more closely tied to such conventional variables as the current account and interest differential.Capital flows;exchange rate, exchange rates, bonds, bond, exchange rate movements, bond flows, bilateral exchange rate, government bonds, dollar exchange rate, corporate bonds, multilateral exchange rate, bilateral exchange rates, stock returns, stock prices, government bond, net bond, current accounts, currency markets, foreign exchange, stock markets, current account balance, currency exchange, bond yields, foreign bond, corporate bond, home currency, financial markets, currency exchange rates, stock market, international finance, exchange rate economics, exchange rate determination, equity markets, financial institutions, effective exchange rate, international capital, multilateral exchange rates, exchange rate dynamics, exchange rate instability, stock ownership, hedge, exchange rate developments, effective exchange rates, government bond yields, stock adjustment, financial sector, foreign investment, exchange rate behavior, stock valuations, currency areas, financial system, foreign equity, international currency

International Financial Integration and Economic Growth

This paper uses new data and new econometric techniques to investigate the impact of international financial integration on economic growth and also to assess whether this relationship depends on the level of economic development, financial development, legal system development, government corruption, and macroeconomic policies. Using a wide array of measures of international financial integration on 57 countries and an assortment of statistical methodologies, we are unable to reject the hypothesis that international financial integration does not accelerate economic growth even when controlling for particular economic, financial, institutional, and policy characteristics.Economic growth;Foreign direct investment;capital flows, capital inflows, international financial, international financial integration, financial integration, capital account liberalization, stock market, capital account restrictions, international capital flows, flows of capital, inflation rate, consumer price index, international financial statistics, international capital, capital outflows, international financial transactions, capital controls, foreign assets, financial markets, capital outflow, foreign capital, capital flow, capital account transactions, capital restrictions, international finance, capital mobility, foreign liabilities, domestic equity, financial intermediation, capital control, capital-abundant countries, stock exchanges, capital stock, gross domestic product, current account deficits, stock transactions, international financial liberalization, equity prices, capital accounts, international financial system