Search results

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

The purpose of this paper is to examine the relationship among employment, real wage, and output growth in Canada.

Using quarterly data from 1994q2 to 2012q3, this paper employs a vector autoregressive framework while allowing for the derivation of output from its historical maximum over the sample period to affect future output, employment, and real wage growth dynamics.

There are three main findings: output growth is significant in predicting employment growth and vice versa; real wage growth neither Granger causes employment growth nor output growth, but employment growth Granger causes real wage growth; and non-linear dynamics, captured by the current depth regression (CDR) effect term, through the sign as well as the magnitude of output changes, are important in characterizing the evolution of the relationship among output, employment, and real wage growth.

The findings of this research have significant implications for policy makers. Output and employment growth are important in forecasting each other in Canada. In contrast to the mainstream theory, real growth is insignificant in explaining the future dynamics of employment in Canada. Policies need to be formulated to encourage the growth of employment to ensure sustain output growth.

This study examines empirically the real output, real wage, and employment link in Canada. This study uses the most recently revised GDP data arising from the 2012 Historical Revision of the Canadian System of National Accounts. The econometric methodology involves the standard vector autoregression (VAR) model to which the authors introduce non-linear dynamics through a term that controls for the deviation of output from its preceding historical maximum: the CDR effect.

Provides an evaluation of the reality of the German economy after unification, also answers to some of the questions that the post‐unification era has raised, analyzes aggregate and sectoral data of the former GDR and the Federal Republic of Germany over the period 1970‐1989. The results characterize the former GDR with a steeper supply curve. While the central plan assumed a steady growth of real output over time, it eliminated producers’ incentives to vary capacity utilization in response to demand pressures. Demand pressures proved inflationary without determining conditions in the labor market. In contrast, the market‐oriented plan in West Germany tied output expansion and contraction with demand fluctuations. Consequently, inflationary effects of demand fluctuations appeared moderate in West Germany and real output growth was not sustained at a high level over time. Demand fluctuations determined employment changes in West Germany. Implications of these differences are analyzed in light of the reality of the post‐unification in Germany.

The purpose of this paper is to empirically analyse how different exchange rate regimes affect the links between monetary fundamentals and exchange rates in Sub-Saharan Africa.

Using the Pedroni method for panel cointegration, mean group and pooled mean group and the panel vector autoregressive technique, this study empirically investigates whether monetary fundamentals impact exchange rates similarly in both regimes. Thus, the author acquires needed and credible empirical data.

The result suggests that the impact is dissimilar. In the floating regime, an increase in relative money supply and relative real output depreciates and appreciates the nominal exchange rate in the long run whereas in the non-floating regime, the evidence is mixed. Thus, exchange rates bear a theoretically consistent relationship with monetary fundamentals across SSA countries with floating regimes but fails under non-floating regimes. This provides evidence that regime choice is important if the relationship between monetary fundamentals and exchange rates in SSA are to be theoretically consistent.

This study empirically incorporates the dissimilarities in exchange rate regimes in a panel framework and study the links between exchange rates and monetary fundamentals. The focus on how exchange rate regimes might alter the equilibrium relationships between exchange rates and monetary fundamentals in SSA is a pioneering experiment.

The assignment of targets to instruments in developing countries cannot satisfactorily follow any simple universal rule. Which approach is appropriate is influenced by whether the economy is dominated by primary exports, by the importance of the domestic bond market and bank credit, by the extent of existing restriction in foreign exchange and financial markets, by the presence or absence of persistent high inflation, and by the existence or non‐existence of an active international market in the country's currency. Eighteen observations and maxims on stabilisation policy are tentatively drawn (pp. 64–8) from the material reviewed, and the maxims are partly summarised (pp. 69–71) in a schematic assignment, with variations, of targets to instruments.

The purpose of this paper is to investigate the empirical relationships between changes in OECD output, commodity prices, the real exchange rate, real money supply, unit labour costs and manufacturing in South Africa. In particular, to test a version of the Dutch disease argument that increases in the prices of South Africa’s main commodity exports have had a negative effect on domestic manufacturing against the alternative hypothesis that there is a positive relationship between such changes in commodity prices and domestic manufacturing output.

Construction of a model including real manufacturing output in South Africa as the dependent variable and the following independent variables: OECD output, an international real metals price index, a real effective exchange rate index, real M3 money supply and manufacturing unit labour costs. The time series sample data comprise 124 quarterly observations for the period 1980-2010. The model equation was tested and estimated using a Johansen cointegration approach.

The main findings are: OECD output is the single most important determinant of domestic manufacturing output; while the real exchange rate has the predicted negative sign, rising commodity prices are associated with increases rather than decreases in domestic manufacturing and; large increases in unit labour costs since the early 1980s have dragged down manufacturing over the sample period.

The finding of a positive relationship between commodity prices and domestic manufacturing means that the Dutch disease argument must be revised when applied to South Africa. While rising commodity prices may lead to a negative exchange rate effect on manufacturing competitiveness, this is more than offset by the positive growth effects associated with upswings in the commodity price cycle.

The paper aims to examine the effects of exchange rate fluctuations on real output, the price level, and the real value of components of aggregate demand in Egypt and Turkey.

Building on a theoretical model that decomposes movements in the exchange rate into anticipated and unanticipated components, the empirical investigation traces the effects through demand and supply channels.

In Turkey, anticipated exchange rate appreciation has significant adverse effects, contracting the growth of real output and the demand for investment and exports, while raising price inflation. Random fluctuations in Turkey have asymmetric effects that highlight the importance of unanticipated depreciation in shrinking output growth and the growth of private consumption and investment, despite an increase in export growth. In Egypt, anticipated exchange rate appreciation decreases export growth. Given asymmetry, the net effect of unanticipated exchange rate fluctuations, in Egypt, decreases real output and consumption growth and increases export growth, on average, over time.

In light of the country‐specific evidence, future research should extend the investigation using panel estimation, incorporating various demand and supply shocks along with exchange rate fluctuations, to establish the relative importance of various shocks on macroeconomic performance across MENA countries.

While adhering to a flexible exchange rate policy to boost competitiveness, managing fundamentals to reduce excessive volatility impinging on the economic system over time should top the policy agenda.

Excessive volatility in the real effective exchange rate could be detrimental to real growth, over time, as the evidence for Turkey and Egypt illustrates.

Using quarterly data for a sample of 17 industrial countries, the purpose of this paper is to study asymmetry in the face of monetary shocks compared to government spending shocks.

The paper outlines demand and supply channels determining the asymmetric effects of monetary and fiscal policies. The time‐series model is presented and an analysis of the difference in the asymmetric effects of monetary and fiscal shocks within countries is presented. There then follows an investigation of the relevance of demand and supply conditions to the asymmetric effects of monetary and fiscal shocks. The implications of asymmetry are contrasted across countries.

Fluctuations in real output growth, price inflation, wage inflation, and real wage growth vary with respect to anticipated and unanticipated shifts to the money supply, government spending, and the energy price. The asymmetric flexibility of prices appears a major factor in differentiating the expansionary and contractionary effects of fiscal and monetary shocks. Higher price inflation, relative to deflation, exacerbates output contraction, relative to expansion, in the face of monetary shocks. In contrast, larger price deflation, relative to inflation, moderates output contraction, relative to expansion in the face of government spending shocks. The growth of output and the real wage decreases, on average, in the face of monetary variability in many countries. Moreover, the growth of real output and the real wage increases, on average, in the face of government spending variability in many countries. Asymmetry differentiates the effects of monetary and government spending shocks within and across countries. The degree and direction of asymmetry provide a new dimension to differentiate between monetary and fiscal tools in the design of stabilization policies.

The paper's evidence sheds light on the validity of theoretical models explaining asymmetry in the effects of demand‐side stabilization policies. Moreover, the evidence should alert policy makers to the need to relax structural and institutional constraints to maximize the benefits of stabilization policies and minimize the adverse effects on economic variables.

In this chapter, using a combination of long-run and sign restrictions to identify aggregate monetary and productivity factors, I find that the monetary factor is responsible for long swings in nominal variables but has little effect on fluctuations in output, real wage, or labor input growth. The productivity factor in addition to increasing output growth and real wage growth in the short and long run, also results in increases in labor input and decreases in prices, but the quantitative effect of the productivity factor on labor input is relatively small. These results are robust to the number of factors included in the model and to alternative priors about the short-run effects of the monetary factor, and to the inclusion of oil prices. Oil prices, in fact, appear to be largely driven by the other aggregate factors.