819 research outputs found

    Together or apart? The relationship between currency and banking crises

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    The purpose of this study is to provide empirical evidence on the links between currency and banking crises. Panel data probit and bivariate probit models are estimated to a sample of 21 developed and developing countries having monthly observations between the years 1985 and 2010. The findings indicate that banking crises precede currency crises, and vice versa. Currency crises also indirectly influence future banking crises probability through external shocks, liberalized financial markets, or highly-leveraged banking sectors. The study also finds evidence of contemporaneous correlation between the two crises. The results not only confirm the theoretical links between banking and currency crises, but also underline the importance of higher frequency data in analyzing the relationship between various financial crises

    Central bank policies after the crisis

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    The politics of central bank independence

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    This paper reviews recent research on the political economy of monetary policy-making, both by economists and political scientists. The traditional argument for central bank independence (CBI) is based on the desire to counter inflationary biases. However, studies in political science on the determinants of central bank independence suggest that governments may choose to delegate monetary policy in order to detach it from political debates and power struggles. This argument would be especially valid in countries with coalition governments, federal structures and strongly polarized political systems. The recent financial crisis has changed the role of central banks as evidenced by the large set of new unconventional monetary and macro-prudential policy measures. But financial stability and unconventional monetary policies have much stronger distributional consequences than conventional monetary policies and this has potential implications for the central bank’s independence. It may also have changed the regime from monetary dominance to fiscal dominance. However, our results do not suggest that CBI has been reduced since the Great Financial Crisis. This holds both for legal measures of CBI and the turnover rate of central bank governors

    Monetaire economie

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    Geld heeft de functies van ruilmiddel, rekeneenheid en oppotmiddel. Vaak wordt het nut van geld simpelweg verondersteld door geld in de nutsfunctie op te nemen. Een moderne economie is een monetaire economie, die wordt gekarakteriseerd door het bestaan van geld met die drie rollen. Directe ruil komt in een gezonde economie nauwelijks voor, omdat deze zeer inefficiënt is in vergelijking met het gebruiken van een ruilmiddel in alle transacties. Geld als rekeneenheid vermindert de informatiebehoefte aanzienlijk ten opzichte van wat nodig is in een ruileconomie. Geld fungeert als een subtiele brug tussen het heden en de toekomst en dat onderbouwt de rol als oppotmiddel, al is die functie niet uniek voor geld

    Hawks and Doves at the FOMC

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    Hawks and Doves at the FOMC

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    In this paper we estimate ideal points of Bank Presidents and Board Governors at the FOMC. We use stated preferences from FOMC transcripts and estimate a hierarchical spatial voting model. We find a clear difference between the average Board Governor and Bank President. We find little evidence for difference in ideal points according to the appointing president in case of Bank Governors. Similarly career background has no clear effect on the ideal points. We find that the median ideal point at the FOMC has been fairly stable over our sample period (1989-2007) emphasizing the lack of a political appointment channel. We also show that there was considerable variation in the median ideal point of Bank Presidents and Board Governors, but that these seem to cancel each other out. Also the dispersion of opinions (the spread between the lowest and highest ideal point) varies over time, suggestion variation in agreement at the FOMC

    Sovereign Debt, Bail-Outs and Contagion in a Monetary Union

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    Abstract: The European sovereign debt crisis is characterized by the simultaneous surge in borrowing costs in the GIPS countries after 2008. We present a theory, which can account for the behavior of sovereign bond spreads in Southern Europe between 1998 and 2012. Our key theoretical argument is related to the bail-out guarantee provided by a monetary union, which endogenously varies with the number of member countries in sovereign debt trouble. We incorporate this theoretical foundation in an otherwise standard small open economy DSGE model and explain (i) the convergence of interest rates on sovereign bonds following the European monetary integration in late 1990s, and (ii) - following the heightened default risk of Greece - the sudden surge in interest rates in countries with relatively sound economic and financial fundamentals. We calibrate the model to match the behavior of the Portuguese economy over the period of 1998 to 2012

    Sovereign Debt, Bail-Outs and Contagion in a Monetary Union

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