This paper should not be reported as representing the views of the European Central Bank (ECB). T... more This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.
International Review of Economics & Finance, Sep 1, 2017
This paper should not be reported as representing the views of the European Central Bank (ECB). T... more This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.
[Concluding remarks] The financial crisis has rendered conventional monetary policy (of major cen... more [Concluding remarks] The financial crisis has rendered conventional monetary policy (of major central banks) powerless. Unconventional monetary policy, in the form of forward guidance and quantitative easing, has taken center stage. Recent moves in financial markets have challenged the notion that forward guidance can be separated from the unwinding of quantitative easing and also shown that forward guidance can have perverse effects on market expectations. Nonetheless, forward guidance, as is currently formulated in practice, may be ineffective in managing market expectations not because central banks are powerless, but because they are too cautious, resulting in ambiguity in policy communication. Vagueness in communication is manifested by the insertion of conditionality and/or by the expression of intent, belief etc., to maintain accommodative policy on a certain course. Setting aside whether caution is warranted or not, the fact is that such vagueness is driven mainly by central banks' unwavering commitment to price stability, a commitment which is credible owing to their hard-won reputation. Financial markets are aware of this commitment. Saying that, the remark in January 2000 by Ben Bernanke that 'far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution,' is still relevant now, as it was back then.
[Concluding remarks] The financial crisis has rendered conventional monetary policy (of major cen... more [Concluding remarks] The financial crisis has rendered conventional monetary policy (of major central banks) powerless. Unconventional monetary policy, in the form of forward guidance and quantitative easing, has taken center stage. Recent moves in financial markets have challenged the notion that forward guidance can be separated from the unwinding of quantitative easing and also shown that forward guidance can have perverse effects on market expectations. Nonetheless, forward guidance, as is currently formulated in practice, may be ineffective in managing market expectations not because central banks are powerless, but because they are too cautious, resulting in ambiguity in policy communication. Vagueness in communication is manifested by the insertion of conditionality and/or by the expression of intent, belief etc., to maintain accommodative policy on a certain course. Setting aside whether caution is warranted or not, the fact is that such vagueness is driven mainly by central banks' unwavering commitment to price stability, a commitment which is credible owing to their hard-won reputation. Financial markets are aware of this commitment. Saying that, the remark in January 2000 by Ben Bernanke that 'far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution,' is still relevant now, as it was back then.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. www.econstor.eu Working Paper Series Threshold effects of financial stress on monetary policy rules: a panel data analysis Danvee Floro, Björn van Roye Disclaimer: This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.
Using a comprehensive and unique database of Philippine financial intermediaries from 2001- 2009,... more Using a comprehensive and unique database of Philippine financial intermediaries from 2001- 2009, we examine how the bank capital position influences the management of loan-loss provisioning. The results show evidence of capital management through loan-loss provisioning. We also find a procyclical behavior of banks in loan loss provisioning but such a link is influenced in a non-linear way by bank capitalization: both low-capitalized and well- capitalized banks provision by less (more) during an economic expansion (downturn).
Using a comprehensive and unique database of Philippine financial intermediaries from 2001-2009, ... more Using a comprehensive and unique database of Philippine financial intermediaries from 2001-2009, we examine how the bank capital position influences the management of loan-loss provisioning. The results show evidence of capital management through loan-loss provisioning. We also find a procyclical behavior of banks in loan loss provisioning but such a link is influenced in a non-linear way by bank capitalization: both low-capitalized and wellcapitalized banks provision by less (more) during an economic expansion (downturn).
Monetary policy surprises and firm-level stock return predictability: evidence from a new panel-based approach
Applied Economics Letters, 2018
We employ a new panel-based testing procedure that is robust to the uncertain persistence of regr... more We employ a new panel-based testing procedure that is robust to the uncertain persistence of regressors, time-varying volatility and cross-sectional error dependence in studying the predictive dynamics between conventional US monetary policy surprises and firm-level stock returns. We find that accounting for cross-sectional dependence by means of (estimated) factors considerably alters the predictive significance of monetary policy surprises depending on the sample period being studied. Concretely, during the period 1990–2000, monetary policy has no influence on future stock returns when cross-sectional dependence is accounted for by means of common factor augmentation. By contrast, the predictive power of monetary policy is even boosted when introducing common factors into the model when the period of analysis covers 2002–2007.
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