Скачать презентацию 1 Monetary Institutions Partisanship and Inflation Targeting presented Скачать презентацию 1 Monetary Institutions Partisanship and Inflation Targeting presented

e3cddc56162bf9145b052357a42064f3.ppt

  • Количество слайдов: 11

1 Monetary Institutions, Partisanship, and Inflation Targeting presented by David Andrew Singer Massachusetts Institute 1 Monetary Institutions, Partisanship, and Inflation Targeting presented by David Andrew Singer Massachusetts Institute of Technology co-author: Bumba Mukherjee Princeton/University of Notre Dame IPES November 18, 2006

Inflation Targeting (IT): A Nominal Anchor for Monetary Policy l Numerically specified target for Inflation Targeting (IT): A Nominal Anchor for Monetary Policy l Numerically specified target for inflation – – Public commitment to price stability Requires transparency and publication of inflation forecasts l l 2 Since 1989, 25 countries have adopted IT The “monetary framework of choice” for LDCs (IMF 2006); Ben Bernanke also an advocate David Andrew Singer MIT

Table 2: Inflation Targeting Countries (as of 2003) Country Adoption Date Australia Mexico 1995 Table 2: Inflation Targeting Countries (as of 2003) Country Adoption Date Australia Mexico 1995 Brazil 1999 New Zealand 1989 Canada 1991 Norway 2001 Chile 1990 Peru 2002 Colombia 1999 Philippines 2002 Czech Rep. 1997 Poland 1998 Finland 1993 S. Africa 2000 Hungary 2001 Spain 1995 Iceland 2001 Sweden 1993 Israel 1991 Thailand 2000 Korea 3 1998 U. K. 1992 Source: Truman (2003). The Slovak Republic, Indonesia, and Romania adopted IT in 2005. Finland Spain joined the EMU in 1999 and no longer have autonomous monetary policies.

Research Question l l Why do some countries adopt IT, while others do not? Research Question l l Why do some countries adopt IT, while others do not? Importance: – – – 4 Declining popularity of fixed exchange rates Alternative nominal anchors (e. g. , money targets) largely discredited Is central bank independence sufficient to fight inflation? David Andrew Singer MIT

Open Economy Monetary Policy Model l l Two actors: government and central bank Government’s Open Economy Monetary Policy Model l l Two actors: government and central bank Government’s loss function (based on Barro & Gordon 1983; Persson & Tabellini 2000) – – 5 Inflation vs. output deviation Our key modification: partisanship (L, R) determines degree of inflation aversion (θ) David Andrew Singer MIT

Model (continued) l Central bank’s loss function: – – 6 Assume IT as an Model (continued) l Central bank’s loss function: – – 6 Assume IT as an inflation-fighting option Innovation: allow central bank’s inflation preferences to vary as a function of its regulatory mandate l Central bank regulators more sensitive to financial stability, less likely to enact tight monetary policy (Copelovitch and Singer 2006) l λ = 1 if central bank and bank regulator are separated David Andrew Singer MIT

Observable Implication l Adoption of IT more likely when right-leaning government and central bank Observable Implication l Adoption of IT more likely when right-leaning government and central bank not a regulator – 7 Compatibility of preferences between government and central bank over inflation David Andrew Singer MIT

Two Empirical Analyses l First analysis: Markov transition model to explain adoption of IT Two Empirical Analyses l First analysis: Markov transition model to explain adoption of IT – l 8 Captures the effect of IVs on probability of adopting IT, and conditional probability of maintaining IT [Second analysis: parametric and non-parametric models to explore impact of IT on inflation] David Andrew Singer MIT

Markov Model: Data and Variables l l l Sample: 49 countries, 1987 -2003 DV: Markov Model: Data and Variables l l l Sample: 49 countries, 1987 -2003 DV: dichotomous (IT=1, 0 otherwise) IVs: – – – 9 Central bank mandate (regulator=0, separate=1) Partisanship CBI Polity, veto players Exch rate regime and variability Economic controls interaction David Andrew Singer MIT

Model 1 Model 2 Model 3 Covariates. 031*** (. 012) . 045*** (. 020) Model 1 Model 2 Model 3 Covariates. 031*** (. 012) . 045*** (. 020) . 040** (. 019) . 039*** (. 015) . 058*** (. 014) Real Interest Rate . 050*** (. 022) . 059*** (. 021) . 043*** (. 020) . 057*** (. 022) . 061*** (. 022) . 055*** (. 021) Nominal Interest rate . 068 (. 074) -. 065 (. 092) . 073 (. 058) -. 062 (. 049) . 050 (. 062) -. 069 (. 070) Trade Openness . 038 (. 144) -. 071 (. 088) . 060 (. 118) -. 075 (. 073) . 022 (. 145) -. 058 (. 087) REER variability . 039*** (. 018) . 032*** (. 010) . 020*** (. 008) . 024*** (. 007) . 043*** (. 012) . 035*** (. 014) NEER variability . 024 (. 028) -. 031 (. 030) . 023 (. 020) -. 035 (. 028) . 035 (. 030) -. 025 (. 032) Current Account -. 022** (. 011) -. 036** (. 017) -. 055* (. 030) -. 072* (. 041) -. 045** (. 018) -. 038** (. 019) CBI . 030 (. 071) . 039 (. 050) . 029 (. 020) . 033 (. 042) . 031 (. 026) . 044 (. 031) Partisanship x Separate . 151*** (. 049) . 138*** (. 037) . 103*** (. 036) . 142*** (. 040) . 132*** (. 036) Partisanship 10 . 035*** (. 011) . 021* (. 012) . 032* (. 018) . 034* (. 019) . 022* (. 013) . 023* (. 014) . 024* (. 014) Separate Central Bank . 051* (. 030) . 045* (. 024) . 043* (. 027) . 040* (. 024) . 041* (0. 22) . 055* (. 033) . 114*** (. 045) See paper for full regression table GDP Growth variability

Findings l Right government + non-regulatory central bank increases likelihood of adopting IT – Findings l Right government + non-regulatory central bank increases likelihood of adopting IT – l 11 When separate CB, one std. dev change in partisanship (toward the right) increases probability by 35% Additional finding: IT reduces inflation (see paper) David Andrew Singer MIT