Monetary policy, real cost of capital, financial markets and the real economic growth
➤ Gửi thông báo lỗi ⚠️ Báo cáo tài liệu vi phạmNội dung chi tiết: Monetary policy, real cost of capital, financial markets and the real economic growth
Monetary policy, real cost of capital, financial markets and the real economic growth
Journal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthicy, Real Cost of Capital, Financial Markets and the Real Economic Growthloannis N. Kallianiotis1AbstractIn (his paper we deal with the recent (1995-2018) Federal Reserve operated monetary policies, which were two unprecedented and distinct monetary policy regimes. The inflation stabilization era (1 Monetary policy, real cost of capital, financial markets and the real economic growth995-2008) and the zero interest rate era (2008-2015). These different monetary policy regimes provided different outcomes for inflation, interest rateMonetary policy, real cost of capital, financial markets and the real economic growth
s, financial markets, personal consumption, and real economic growth. Some of the important results are that monetary policy appears to be able to affJournal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthh. The Fed's interest rate target was set during these seven years at 0% to 0.25%. We are trying to explain the low level of long-term interest rates and the negative real rate of interest (cost of capital). The evidence suggests that this monetary policy was not very effective; it has created a new Monetary policy, real cost of capital, financial markets and the real economic growth bubble in the financial market, future inflation, and a redistribution of wealth from risk-averse savers to banks and risk-taker speculators. It hasMonetary policy, real cost of capital, financial markets and the real economic growth
increased the risk (RP) by making the real risk-free rate of interest negative. The effects on growth and employment were gradual and small, due to ouJournal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthey and Interest Rates, Financial Markets and the Macro-economy. Production• Economics Finance Department, The Arthur J. Kama School of Management. University of Scranton. Scranton. USAArticle Info: Received'. August 28. 2018. Revised: September 19. 2018Published online : January 1. 201976loannis N. Monetary policy, real cost of capital, financial markets and the real economic growthKaHianiũtis1IntroductionThe idea of a monetary policy regime is somewhat vague. 11 is related lo the stale of the economy, to Fed’s experience, and toMonetary policy, real cost of capital, financial markets and the real economic growth
the idea of a monetary standard. Examples of monetary standards include the classical gold standard that existed in most developed economies between Journal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthd after the abandonment of the Brotton Woods agreement in 1971/ This paper examines two distinct U.S. policy regimes that were adopted to manage a paper money standard. These regimes are defined by the different goals for policy and by the different procedures, the inflation stabilization (moderatio Monetary policy, real cost of capital, financial markets and the real economic growthn) era, 1995-2008 (2% inflation target) and the zero interest rate (7TR) era. 2008-2015 (quantitative casing) used to implement monetary policy decisiMonetary policy, real cost of capital, financial markets and the real economic growth
ons.3The Fed has since 1977 a dual mandate, to promote price stability and maximum sustainable employment.4 * hl practice, price stability is defined Journal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growth. This part of the dual mandate is implemented by following a countercyclical policy, easy (expansionary) policy when the economy is thought to be below its potential level and tight (contractionary) policy when the economy is estimated to be growing above its sustainable long-run trend. In making d Monetary policy, real cost of capital, financial markets and the real economic growthecisions at Federal Open Market Committee (FOMC) meetings, the participants look at everything, but the two most important economic indicators are infMonetary policy, real cost of capital, financial markets and the real economic growth
lation and real gross domestic product (GDP) growth.' Also, the Taylor Rile had been considered by monetary policy circles and in Neo-Keynesian economJournal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthnt, stable prices, and moderate long-term interest rales.2Nominal and Real Effects of Monetary PolicyDifferent monetary policy regimes lead to different equilibrium levels of real interest rales or real GDP. Our most basic theories of money assume the classical dichotomy; real variables are determin Monetary policy, real cost of capital, financial markets and the real economic growthed by real factors and nominal variables areSee. Kallianiotis [28],See. Bindsei I [3], Gavin [16]. and Bullard [4],4 For die Federal Rosene’s Dual ManMonetary policy, real cost of capital, financial markets and the real economic growth
date. See. blips: wuAv.cliicagofcd.orn research dualmandate dual-mandate' See. Taylor |39|. See also. Kallianiotis [25].6 See. Woodford [45]. Bank of Journal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthry policy (money as a veil, money is neutral, money illusion). Even Keynesian models with sticky prices assume that the real effects arc short-lived, a few quarters at most. For monetary policy to have persistent real effects, we have to consider extreme policies or extend the models to include more Monetary policy, real cost of capital, financial markets and the real economic growth realistic features.The most well-known example of extreme monetary policy is hyperinflation that lakes place during war periods. This very high inflaMonetary policy, real cost of capital, financial markets and the real economic growth
tion causes linns to change prices daily and consumers to hold as little currency as possible and spend the rest to buy goods because their prices go Journal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthat is key to equilibrium adjustments and efficiency in marketbased economics.9The current policy regime since 2008 is also extreme because the interest rate policy is not consistent with the 2% inflation objective.10 This policy has led toIn the strict sense, money is not neutral in the short-run (d Monetary policy, real cost of capital, financial markets and the real economic growthue to price stickiness or inertia), that is. classical dichotomy does not hold, since agents tend to respond to changes tn prices and in the quantityMonetary policy, real cost of capital, financial markets and the real economic growth
of money through changing then supply decisions. However, money should be neutral in the long run. and the classical dichotomy should be restored in tJournal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthy consequences. In the long-run. owing to the dichotomy, money is not assumed to be an effective instrument in controlling macroeconomic performance, while in the short-run there is a trade-off between prices and output (or unemployment), but. owing to rational expectations, policymakers cannot expl Monetary policy, real cost of capital, financial markets and the real economic growthoit it in order to build a systematic countercyclical economic policy. See. Galbacs 115].' As follows: y-<7+/T=><7-y-7<0 because ,7> V and i-r^-rr=>r-Monetary policy, real cost of capital, financial markets and the real economic growth
i ,7<() because ÍT > i.During peace periods, hyperinflations rarely persist for too long because the effects are so bad that they bring down governmenJournal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growthorm and control the price level. Inflation is a monetary phenomenon: Mr -ỌP& nt - p (because Ĩ’ and Pare constant). The data show (1995:01-2008:11): pMĨ.C.P! ~ 10.993 and MB >CPI. g \(Tj => .7. and M2 =• .7. rhe direction of causality' is from the monetary instruments ( MB. gw . and M2 ) to the ulti Monetary policy, real cost of capital, financial markets and the real economic growthmate objective variable (CPI and Jĩ). And for the period (2008:12-2015:12), we have: Pỵỉì.cpỉ ~ +0.963 and CPI > mb, (pi =■ nib, CPI > M2, (pi => m2.Monetary policy, real cost of capital, financial markets and the real economic growth
/7 > M2, 7 > g M2; where p = correlation coefficient. => = causality, (pi = hl of CPI. The direction of causality is different, here: it goes from theJournal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary Poli Monetary policy, real cost of capital, financial markets and the real economic growth 11% (1980-based) from the SGS.78ỉoannis X. KãlìianiotisConsumer Inflation - Official vs ShadowStats (1990-Based) AlternateJournal of Applied Finance ci- Banking, vol. 9, no. 1, 2019, 75-118ISSN: 1792-6580 (prim version). 1792-6599 (online)Scienpress Lid. 2019Monetary PoliGọi ngay
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