دانلود مقاله ISI انگلیسی شماره 9032
عنوان فارسی مقاله

قوانین نرخ بهره و تعیین قیمت: نقش خدمات معاملات اوراق قرضه

کد مقاله سال انتشار مقاله انگلیسی ترجمه فارسی تعداد کلمات
9032 2005 5 صفحه PDF سفارش دهید محاسبه نشده
خرید مقاله
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عنوان انگلیسی
Interest rate rules and price determinacy: The role of transactions services of bonds
منبع

Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)

Journal : Journal of Monetary Economics, Volume 52, Issue 2, March 2005, Pages 329–343

کلمات کلیدی
عدم تعین قیمت - نقدینگی باند
پیش نمایش مقاله
پیش نمایش مقاله قوانین نرخ بهره و تعیین قیمت: نقش خدمات معاملات اوراق قرضه

چکیده انگلیسی

Interest rate rules have been associated with price indeterminacy when they do not respond aggressively enough to inflation. Price indeterminacy is typically associated with indeterminacy of real bond balances, suggesting that the missing element is a meaningful role for government bonds. We assume that government bonds provide arbitrarily small transactions services and show that this can dramatically change the local and global determinacy conditions. In particular, the specification of fiscal policy affects the aggressiveness with which monetary policy must respond to inflation to deliver local determinacy—a range of passive monetary policies, even an interest rate peg, may yield determinacy.

مقدمه انگلیسی

In standard macroeconomic models, the use of interest rate rules to characterize monetary policy can result in nominal indeterminacy; that is, the model determines the real variables of interest, but fails to pin down the price level. The problem typically arises when the interest rate does not respond aggressively enough to an increase in observed inflation; the classic example is an interest rate peg.1 In this paper, we show that price indeterminacy is generally associated with an indeterminacy in real bond balances (making the label “nominal indeterminacy” a bit of a misnomer). This fact often goes unnoticed, since most discussions of the price indeterminacy problem assume a Ricardian model; bonds do not “matter”, and the real variables of interest can be determined without any reference to the real value of bonds. This observation suggests that the problem might be resolved by giving bonds a meaningful role in the equilibrium adjustment process. There are, of course, different ways of introducing non-Ricardian elements, or making bonds matter, in a model. Woodford (1995), for example, considers a model with a non-Ricardian fiscal policy regime.2 In this paper, we assume that the fiscal policy regime is Ricardian in the sense of Woodford—our specifications of fiscal policy ensure fiscal solvency, and the “fiscal theory of the price level” does not apply. We make bonds “matter” by assuming that government bonds (and possibly other money-market assets as well) provide transactions services. We are certainly not the first to do so.3 Our arguments do not require that bonds be a particularly good substitute for money. We show that a much wider class of interest rate rules, even interest rate pegs, can achieve price determinacy if bonds provide an arbitrarily small amount of transactions services. For this reason, we do not think our assumption will be too controversial. If government bonds provide transactions services, then fiscal policy—as a supplier of transactions balances—will play a role in price determination. It is the interaction between monetary and fiscal policy that determines whether or not the price level is determined. In Section 3, we show how fiscal policy can set a nominal anchor when monetary policy does not. We combine the classic interest rate peg with Schmitt-Grohe and Uribe's (2000) balanced budget rule. Schmitt-Grohe and Uribe show that the price level is not pinned down in standard models. We show that our model has a unique bounded equilibrium (with the price level determined). Our arguments are similar to Calvo and Vegh's (1995), although their model was designed to capture Latin American banking institutions, and not what we usually call fiscal policy.4 In Section 4, we assume that fiscal policy is formulated in real terms; it does not set a nominal aggregate. Following Leeper (1991) and others, we combine a monetary policy rule (in which the interest rate responds to observed inflation) with a fiscal rule (in which the real deficit responds to the real level of public-sector debt), and we study the local determinacy of equilibrium. In the standard model (where bonds do not provide transactions services), inflation dynamics are decoupled from government debt dynamics; the interest rate has to respond to changes in observed inflation with an elasticity greater than one to achieve price determinacy. When government bonds provide transactions services, inflation dynamics interact with debt dynamics in a complex way. Using numerical examples, we show that monetary policy can respond less aggressively to inflation and still achieve price determinacy. In 3 and 4, fiscal policy plays a very prominent role in determining steady-state inflation. But, this is due to the fact that we have focused on solutions that converge to a steady state; it is not an implication of our assumption that bonds provide transactions services. In Section 5, we consider global determinacy of equilibrium without restricting ourselves to paths that converge to a steady state. In these equilibria, monetary policy can play a much stronger role in determining inflation. In particular, assuming that fiscal policy is disciplined enough to ensure solvency, monetary policy can select the interest rate as its instrument of monetary policy and “target” an inflation rate. In standard models, the price level would not be determined if the central bank set an interest rate and announced an inflation target (or a growth rate of the money supply). In our model, the price level will be pinned down. In Section 6, we summarize our results. We also discuss some of the broader implications of models in which bonds provide transactions services.

نتیجه گیری انگلیسی

In standard macroeconomic models, the use of interest rate rules to characterize monetary policy can result in nominal indeterminacy; that is, the model determines the real variables of interest, but fails to pin down the price level. The problem typically arises when the interest rate does not respond aggressively enough to an increase in observed inflation; the classic example is an interest rate peg.1 In this paper, we show that price indeterminacy is generally associated with an indeterminacy in real bond balances (making the label “nominal indeterminacy” a bit of a misnomer). This fact often goes unnoticed, since most discussions of the price indeterminacy problem assume a Ricardian model; bonds do not “matter”, and the real variables of interest can be determined without any reference to the real value of bonds. This observation suggests that the problem might be resolved by giving bonds a meaningful role in the equilibrium adjustment process. There are, of course, different ways of introducing non-Ricardian elements, or making bonds matter, in a model. Woodford (1995), for example, considers a model with a non-Ricardian fiscal policy regime.2 In this paper, we assume that the fiscal policy regime is Ricardian in the sense of Woodford—our specifications of fiscal policy ensure fiscal solvency, and the “fiscal theory of the price level” does not apply. We make bonds “matter” by assuming that government bonds (and possibly other money-market assets as well) provide transactions services. We are certainly not the first to do so.3 Our arguments do not require that bonds be a particularly good substitute for money. We show that a much wider class of interest rate rules, even interest rate pegs, can achieve price determinacy if bonds provide an arbitrarily small amount of transactions services. For this reason, we do not think our assumption will be too controversial. If government bonds provide transactions services, then fiscal policy—as a supplier of transactions balances—will play a role in price determination. It is the interaction between monetary and fiscal policy that determines whether or not the price level is determined. In Section 3, we show how fiscal policy can set a nominal anchor when monetary policy does not. We combine the classic interest rate peg with Schmitt-Grohe and Uribe's (2000) balanced budget rule. Schmitt-Grohe and Uribe show that the price level is not pinned down in standard models. We show that our model has a unique bounded equilibrium (with the price level determined). Our arguments are similar to Calvo and Vegh's (1995), although their model was designed to capture Latin American banking institutions, and not what we usually call fiscal policy.4 In Section 4, we assume that fiscal policy is formulated in real terms; it does not set a nominal aggregate. Following Leeper (1991) and others, we combine a monetary policy rule (in which the interest rate responds to observed inflation) with a fiscal rule (in which the real deficit responds to the real level of public-sector debt), and we study the local determinacy of equilibrium. In the standard model (where bonds do not provide transactions services), inflation dynamics are decoupled from government debt dynamics; the interest rate has to respond to changes in observed inflation with an elasticity greater than one to achieve price determinacy. When government bonds provide transactions services, inflation dynamics interact with debt dynamics in a complex way. Using numerical examples, we show that monetary policy can respond less aggressively to inflation and still achieve price determinacy. In 3 and 4, fiscal policy plays a very prominent role in determining steady-state inflation. But, this is due to the fact that we have focused on solutions that converge to a steady state; it is not an implication of our assumption that bonds provide transactions services. In Section 5, we consider global determinacy of equilibrium without restricting ourselves to paths that converge to a steady state. In these equilibria, monetary policy can play a much stronger role in determining inflation. In particular, assuming that fiscal policy is disciplined enough to ensure solvency, monetary policy can select the interest rate as its instrument of monetary policy and “target” an inflation rate. In standard models, the price level would not be determined if the central bank set an interest rate and announced an inflation target (or a growth rate of the money supply). In our model, the price level will be pinned down. In Section 6, we summarize our results. We also discuss some of the broader implications of models in which bonds provide transactions services.

خرید مقاله
پس از پرداخت، فوراً می توانید مقاله را دانلود فرمایید.