- Matteo Fragetta added an answer:Error message "Log of non positive number" in EViews?Using VAR lag order selection criteria, if I put this in cointegration I receive the above error. Why?
I am not sure i understand correctly. However, see if you have tried to do the log of negative numbers which is not possible. What do you mean for I put the lag selected in the cointegration? Cointegration are static long run relationships.Following
- Sheriffdeen A. Tella added an answer:Are there any reliable sources of information for the composition of foreign reserves held on a country by country basis?
I am writing a paper on the potential for the shift away from the USD as the world reserve currency and thus far I can only find general data on global reserves via the IMF COFER reports. I am hoping to be able to establish historical shifts, but then to continue to report on the topic.
The best source for your data is World Bank or IMF data base. Between them they have reserves figures for every member country. Also, they have write-up from their staff and consultants. The papers can assist you in literature review and appropriate methodology for your study.Following
- Amit Mittal added an answer:How to determine the impact of a negative shock to lending rates via the impulse response function?
VAR models have become increasingly popular in recent decades. VAR provides empirical evidence on the response of macroeconomic variables to various exogenous shocks or impulses. Within the framework of a Vector Auto-regressive model (VAR), I want to conduct a robustness test. Specifically, I want to study the impact of policy rate on lending rates and examine the impact of a positive and negative shock on lending rates.
A positive shock (e.g. increase in policy rate) can only allow me to see the impact of a contractionary monetary policy on lending rates. But, I am more interested to look at the impact of a negative shock (e.g. decrease in policy rate or expansionary monetary policy) on lending rates.
So, how to determine the impact of a negative shock via the ‘Impulse Response Function’ using Eviews or other statistical packages?
Isolating impact would be especially complicated by the delay in transmission of any change in lending rates and a prelim study to select the period of delay that has significance could probably be a first milestone? Also study only negative impact may thus make any data trend invisible as the inelastic market means the change in lending rates is probably much smaller..Following
- D. Torre added an answer:What was the major economic event in 1950s which caused Europe to switch to a monetary collaboration?
Was it the second world war, disagreement with Bretton woods with US Dollar dominance or the aftermath of 1929 great depression?
During the 1950s, the objective was initially to collaorate econonomically (there was also the objective from Federalists firm Benelux, Germany or Italy to collaborate politically), but not so much the objective to have a common curency. This objective cam later, afetr Bretton Woods collapse, during the early 1970s, when European currencies distributed between strong currencies (DM and Florin) with low inflation rates and weak ones (roughlky speaking the other ones including FF and £) with hight and variable inflation rates. Next steps (including the intermeduate regimes tested during the 1970s, 1980s, and early 1990s) where unsuccesfull attemp to stabilize the internal fluctuations of European currencies, considered at this time as an obstable to development and exchange synergies. Adoption of Euro has been successfull: from a monetary point of view: Europe has now a striong currency... and no growth :-(Following
- Philip Kofi Adom asked a question:Under what condition(s) will the effect of crude oil price on domestic inflation under high crude oil price episodes be negative?In a domestic inflation model, the effects of different oil price episodes are analysed. The effect of the high crude oil price episode on domestic inflation is negative while that of low crude oil price episode is positive. The high oil price episodes coincides with the economy's adoption of monetary policy management. Could the monetary policy regime explain this?Following
- Parineeta Pandoo added an answer:What is the best method to compare the Nelson-Siegel model and the Svensson model (an extension of the Nelson-Siegel model)?I have seen many authors making use of the Root Mean Squared Error. Are there any other reliable and efficient methods that can be used to make comparisons?Thanks James I used the individual coefficient test which is simply the t-test and the overall significance test,the F-test to test both models.Following
- Siba Sankar Mohanty added an answer:Does monetary policy work?Is there evidence of addressing economic shocks successfully through monetary policies? Viz., In order to combat inflation, the monetary authorities in last several years have largely depended on monetary route, but in vain. Are there some success stories of having effective monetary policy in any country that could curb economic fluctuations? Kindly give some examples and some explanation on how it worked.@ Sukla Sir, Thank you very much for your response.My arguments are as under.
In a typical Mundell-Fleming framework, monetary policy is the only sound policy as far as efforts towards stabilisation in a flexible exchange rate regime is concerned. I just want to give a couple of examples of how such a policy premise fails to work.
(1) During the global financial crisis, authorities in many countries of the crisis ridden regions of the developed world tried to increase liquidity and to motivate induced investment through lowering the interest rate. It never worked. What really worked was the bail out packages that largely falls under the fiscal premise. One may refer to the discussions around Occupy Wall street movement. So, monetary policy did not work there.
(2) In India (developing world) the authorities have made several efforts including hiking the bank rate and other monetary routes with a frequency as high as more than 100 instances over last decade. Still the inflationary pressures are not subsiding. In extreme cases government had adopted tax cuts on imports only to keep the prices cool.
What I am interested in knowing is whether there are countries where crises of different types had ever been controlled through the monetary route. Kindly name a crisis and country and the type of monetary intervention that guided the economy to normalcy.
@ Dr. Sergiy Thank you very much Sir for sharing the Speech. It is an interesting read. I have some responses although I am unable to frame those at the moment. Shall be up in due time. I have to read it again with a calm mind.Following
- Per L. Bylund added an answer:Boehm-Bawerk suggested that rounding about can enhance productivity. Does this make sense?Roundaboutness produces capital goods, and hence productivity.Sure, B-B's roundaboutness in production is perhaps a "banal," "misleading" observation and "impoverished metaphor" if from a production point of view. Man has used tools and machinery for ages. But that's an unfair assessment (partly, I admit, caused by the original question in this thread); B-B's object was to develop a theory of interest (after first critiquing then-existing theories), not a theory of production.
In fact, his interest theory (see his 3-volume work in the 1880s) was intended to explain how interest determines production structure choices (and therefore the roundaboutness of an economy's overall production and, therefore, the development of capital) rather than, as was then commonly asserted, interest being a phenomenon of (as in "caused by") productivity. He was highly successful in his critique (vol 1), but unfortunately included some productivity aspects when developing his own theory. The latter error was not corrected until well into the 20th century in what has become known as the "pure time preference theory" of interest ("pure" of course referring to the correction of B-B).Following
- Mark Hahn added an answer:Could so called "bitcoins" or digital currency reduce payment costs of companies based on transaction cost theory?In consideration of uncertainty with foreign exchange rate changeBitcoin's purpose is indeed exchange of value (payment), and for that it is revolutionary. This has little to do with ForEx, since it just records Btc payments: who and now much, not why. A market (whether grocery or ForEx) would need a way of recording not just that a number of Btc went from one wallet to another, but what the countering exchange of goods was.Following
- Usama Al-qalawi added an answer:Is there any relation between internal public debt and money supply?I wonder if there is a theory that supports a relationship between internal public debt and money supply?Thank u all for your contribution.Following
- Kedar Marulkar added an answer:Will the bitcoin be the largest currency of doing the world trade transactions in the near future?I don't think soBitcoin may get momentum for now. But talking about long term sustainability, Bitcions may not be promising. It doesn't have the characteristics of being used as money. Further, the regulations in respective countries may not allow the applicability. Hence, it may lead to be used as parallel currency. But, it may not last long.Following
- Errol Lindsay Thompson asked a question:Has the Bank of England understood how money is created and why it is important?The Bank of England has just released a new report on how money is created. Have they got it right and what are the consequences?
- Jacky Mallett added an answer:Is there a difference between any goods, any products, and money at all?Physically there seems to be NO difference at all between any kind of goods and money. Both can have a physical (matter based) body or can be an electronical set of data. In principle all kind of goods can be used as money. This is valid for each form of money in history. Even living animals like goats and cows could be put into both definitions. I really see a problem to define the difference in physical terms. It is nothing but a simple convention - which can vary from one moment to another?Olaf - yes, you're pretty much right about money. It only really makes sense as a token of exchange, and your earlier comment about it being invalid as a unit of measurement within the sub-system is spot on. The knot that monetary economics has historically tied itself in trying to use money to establish absolute value appears to be more based on a desire to impose on the world an order that simply isn't there, than any underlying physical reality.
I think the problem there is they're trying to solve too many problems with the same approach. Money works well as essentially a form of information transmission in the distributed system that we loosely term our economy. From that perspective it's a means of providing organisational structure towards an end. Where it really doesn't work is as a measurement, because price is a direct function of money and an inverse function of production, and so it's not possible to know purely from a price measurement which is varying. Energy input, or at actual physical output probably makes more sense to measure, and 19th century economists seemed to do that more - the statistical yearbook of the 19th century German Empire seems to have taken that approach for example. (Statistisches Jahrbuch für das Deutsche Reich - it's online)
With respect to your last point - if you take the role of money as being a packet of information - then one way to regard money is analogous to water flowing through a water wheel to drive a mill. The water flow is controlling the rate of output of the mill - and by diverting the flow we can drive other mills to control other machinery. Teachers, military, police (we can debate the role of the priest) in this context are a necessary administrative/maintenance overhead that the system needs in order to maintain its function. This is again very similar to what we see in other distributed systems - the operating system, the network your computer uses necessarily all take cpu away from the total amount theoretically available - in order to provide support for the applications you're actually using. While administrative overhead is necessary though, it's important to make sure it's also strictly limited - especially in networks there are several pathological cases where it can take over an increasingly large amount of resources, and drive actual 'goodput' to zero.Following
- Liviu Catalin Andrei added an answer:What is the specificity of the EU’s monetary approach ?The EU’s monetary approach is specific and complex equally in the historical sense of including the previous ‘monetary snake’ (1971-1979) and (especially) ‘European Monetary System’ (EMS 1979-1999) phases. In such an order, the common currency wouldn’t be able to arrive without such precedents. And since admitting this, other aspects come up to change a bit old judgments about the European integration: (1) the (economic and) monetary union phase rejects the old Balassa’s model view through finding a longer time strategy approaching (1971-2002); (2) the common-unique market also stops being an ‘intermediary’ phase, by becoming a real ‘trunk’ of a larger second phase, that is the ‘advanced integration’; (3) the last, as distinct from the earlier or ‘incipient’ integration phase and both ‘incipient’ and ‘advanced’ integration phases in junction make the real difference between the European (EU) and all the other integration States formations there currently are and were so far existing world-wide.Hi, John, welcome back and I very appreciate your current contribution after a while. When reading your last text I just remember I was once appointed by the so-called European Institute of Romania, that is something doing diverse works especially for a country that was working hard to join the EU at that time, in 2001-2002. When my relationships with the managing director were becoming not so pleasant on both sides, the man (i.e. I can’t call him a gentleman) asked me to write a study about the Euro currency. Then I’ve got to work because, despite his appreciation, this always was what I liked to. So, I’ve got it in a number of weeks. Nevertheless, my time wasn’t his time, because he called me once (I remember it was just a Monday morning) and told me that we had to ‘stop our working together’, so I don’t have to translate any of that into any language. Then I just asked nothing, but: ‘…ánd the paper I’m working on and will be finished in a few days ?’ He promised me that it would be published in a “honorable way”. Of course, he then didn’t cooperate with me on that, except for that he let me take the paper with me when leaving the institute.
What I mean is that it was in early 2002. My study was turning into a book that I could find a publisher for that summer, but then this one hardly did publish it the next Summer, after about one year, in mid 2003. The publisher isn’t likely to provide electronic forms, plus it is in Romanian (I mean I can’t put it on RG). It is entitled just ‘Ëuro’ and there currently are two editions of it already(2003 and 2007). But, what is the real meaning of that episode ? I mean the text is just what I had written on at that time, in January-February 2002 and even earlier, in late 2001, for being published nearly one and a half years later. It was nothing more than that for 2003, plus the issue of 2007 had not too much to be added to.
Do you understand, John ? If not, let me explain. First, that man of the Institute have done to me much better than he could ever have thought – who could prefer to have a poor study under the cover of an Institute, as just a paper required by the boss some ten or eleven years ago, instead of having his/her own book published ? So, forget about this even vulgar aspect for getting to the real history of Europe. Think about that when I have started working and having the first notes about this subject Euro wasn’t even effective money. Then, a real schedule was in place with its paces and phases. That complex undertaking could have met dysfunctions all time and even could fail. So I was writing what was just scheduled and then, after one and a half years the same text was published, as already done. Events could have changed and my book published could encounter a much different reality than what had been scheduled some years ago. Could that be a drama ? Of course, but could it be a drama for me – for having lost a book published on my name – or, as compared to such an eventuality, could that be really catastrophic for a whole Europe that would fail its project for some hundreds of millions of its inhabitants ?!
Then, it wasn’t any catastrophe, but on the contrary, the Union did make it. It was a performance that the same countries have really demonstrated to the whole world. There was no scheduled point missed, facts were exactly alike, plus my little book was well reflecting the one year after reality, and of course not for any merit of mine – I am far from any prophetic capacity.
But, once more, what is the real meaning of all these ? The meaning was that I could have two editions of my same book at the four years interval due to that not too much has changed during the first decade of the common currency’s lifetime. Euro was strong, so was the EU’s economy, even when dynamics were here a little lower than worl-wide.
I recently thought about trying a “Éuro II” volume. It was just an idea, but this time the publisher refused to talk about it with me. It would be much different this time and a real challenge. Don’t you think…?!Following
- Is Mundell's optimal currency area malfunctioning in Europe? The Euro was created based on Mundell's model, but smaller countries experienced solvency crises after they had joint the zone. Had Mundell forgot something when he contemplated his theory?@John. Bankruptcy is default, declining responsibility or liability!Following
- Olaf Schilgen added an answer:Is the quantity equation still valid? If not, why?The quantity equation is in general accepted, but seems to be not always valid. Why is this the case? What is causing the failure?Dear John, yes, it is the same question, i agree.
but - given the case that there is an answer for the (for now) "unanswered" question of a measurable definition of an economy - then the quantity equation would quite easily get a new answer ...
And for the question of "standard of value" - i totally agree that the hunt for "one piece" (common good, or whatever) with a given standard value ... is not possible to solve.
The most important point to highlight here is: Value is not constant. Value is always changing - and value is NOT at all a characteristic of any kind of product itself. One given value is always nothing more than one moment of continuously changing values.
A value of one thing is not coming from the "thing" itself - it is always coming from external thinking, from human thinking - it is not at all a real characteristic of one good. And that is true for gold, silver, artwork, oldtimer cars, whatever ... it is true for everything.
The average value for one thing can be decribed quite precisely if this one product is traded quite often ... but it is still never a real value of anything.
But one thing is for sure: Value is always relative.
And the question is: Relative to what?
And that is the question where you find the final answer - the solution IS there.
The is an answer to the relativity of value - it is quite easy. I described it already in my paper.
If you have a unit to measure the total size of an economy - you have the "what" as a measurable size.
The question of "relative to what?" can be answered. And the Answer is, that it is the total energy you use to produce ALL products in total. Therefore i wrote the very short paper "Energy as the numéraire of any given economy".
There is nothing in an economy happening without energy, because everything which is happening needs energy in general.
Money is not necessary to run an economy, but energy is. And the amount of energy you have to produce goods is the limit of every production. Efficiency will change the number of goods in a given limit - but never the total value of all goods. A rising number of one good forces a lower price by competition inside of a given limit.
Technology changes the nature and the character of goods - in a given limit the total value stays the same, the economy stays steady size.
Or technology enables the more intense grap into external forms of stored energy to produce more goods in total. The economy grows.
There are more questions to be answered, that is for sure, but this approach is quite interesting to think about - I think it is a posible answer ...Following
- Do central banks make money? The ECB, for one, claims to have earned money, and distributes the earning to its shareholders, among them Germany is the biggest. If it does not make money, it has no right to print money and embezzle it for Germany.@Merijn. It's propaganda.Following
- Is optimal inflation not an optimal bad theory? Phelps (1973) advocated this idea to help others to print money.@John. Thank you for your confusing arithematics.Following
- Does anyone understand what the credit squeeze is, one that is happening in China? China has absolute control over its money seigniorage, but it refuses to print money to bail out its subordinates, local governments and state enterprises. What is the story behind the scene?@Peter. And you still want to repay them "the 1% of the population of the planet"?Following
- John Ryding added an answer:How can we measure the effect of banking regulation policy on the effectiveness of an expansionary monetary policy?When banking supervision is enhanced, banks might find it difficult to grant loans. Does this policy affect the effectiveness of an expansionary monetary policy?There is a clear tension in the U.S. between the Fed with its monetary policy hat on and the Fed with its regulatory hat. Let's take the case of mortgage lending, where QE by direct purchases of Treasuries and Agency MBS is trying to hold down mortgage rates to boost the housing market. With its other hat, the Fed and other bank regulators are trying to reduce the risk of lending. As a result, many borrowers cannot get into the mortgage market. The result of this is the buy-to-let model, where households are renting a house for more than it would cost them to buy because they cannot qualify for a mortgage. We are in a period of regulatory overzealousness and it would be simpler if the Fed and other regulators (and ultimately Congress) set high capital standards and then let banks be banks.Following
- Kushneel Prakash added an answer:The relationship between remittances and the real exchange rate?I have read in many papers that remittances can lead to domestic currency appreciation. However, I am more interested if someone can point out balanced theories and arguments of how inflow of remittances can cause currency depreciation aside from only appreciation.Thanks Dr. Paul for this..Following
- Hak Choi asked a question:How can we compare Mundell's optimal currency area theory with the optimal seigniorage theory?Joshua Aizenman produced two papers on optimal seigniorage in 1992.Following
- Roman Maltsev added an answer:What does this crisis for the EU economic integration project mean?(1) That it has gone bankrupt or (2) that it is for going on to see it honorably ending ?Most frequently, the Soviet system is blamed by those who were capitalists before revolution. They don't like to work but prefer to live on rent. But the revolution put the end on that, and they had to work for a living, just as others, at least as managers of government companies. Being owners of companies in the past, they were good in economics. And they helped their children to learn economy. Capitalistic economy was not studied much in soviet universities, so that's exactly an example of when "secret" knowledge (unaccessible to common peasants) is inherited through generations -- exactly, the way people get education in capitalistic countries: in capitalism, lawyers grow lawyers, engineers grow engineers, doctors grow doctors, and peasants grow uneducated people, because they can't pay for education. I think, this is exactly the key, the true reason why most ex-ussr economists hate soviet union and compare socialism with fascism.Following
- Petro Kurmaiev added an answer:Electronic money and economic growth?Is there anyone specialized in this field? I'd like to read something more about the relation between electronic money and economic growth.
All the contributions are welcome.Hi
Some answers to your questions can be found here:
Benjamin M. Friedman The Future of Monetary Policy (http://www.nber.org/papers/w7420)
Benjamin M. Friedman Does Monetary Policy Affect Real Economic Activity
E-money revisited (http://www.economist.com/node/6927)
Development of Electronic Money and Its Impact
on the Central Bank Role and Monetary Policy (http://iisit.org/Vol6/IISITv6p339-349Al-Laham589.pdf)Following
- Haruki Seitani added an answer:What conditions should be in place for a dollarized country to successfully issue treasury bills in dollars?Dollarization and issuance of tresury billsHere is Sims(1999) argument.Following
- M.Thomas Paul added an answer:Which economic slow down is more critical at present: India's or China's?Indian economy is at a slow down with economic growth near 5% only now and it's currency has sharply depreciated with a huge current account deficits. India was too sloth in building a big foreign exchange reserve while it was in good times, when a lot of foreign money was coming into India post 2008. Instead, the Indian policy makers allowed the Indian Rupee to appreciate in value then. Its policy makers even blamed China for building an idle huge trillion dollar foreign exchange reserve and following cheap money, credit and exchange rate policy.
Now, India is in a fire fighting mode of arresting the fall of the Indian Rupee. But Indian policy makers, especially the Reserve Bank Of India, are jacking up the interest rates and sucking away all liquidity to defend the Indian Rupee. Are those measures counter productive in an economy already suffering the slow down mode? Instead, is it better that they try to raise the 'sovereign bond issue' or approach the IMF or its own non resident Indians to bail out India?
China is not in a foreign exchange crisis; but its economy is also slowing down. Prof. Paul Krugman argues that China's investment rate to GDP has reached 70% and there is no increase in consumption much and hence the Chinese economy has been showing all signs of the 'classic diminishing returns'. Is that analysis really true for China? Or because unlike India, China followed a cheap money and credit and exchange rate policy, can now it focus on increasing the consumption standards of the vast majority of the Chinese people now? If it is latter, it will be good for the rest of the world also.I agree with the views of my colleague from Estonia that for the world the Chinese slow down / recovery is more important. because of the huge size of the GDP.But the very recent reports suggest that there is some recovery for China from the slow down mode; but the dimension is not sure. The assessment that China still needs the growth in the export sector to improve upon its consumption growth is also valid, and in fact that is the reason China can not allow to appreciate too much its currency against all the US and the IMF persuasions. On the other hand, India fell into that propaganda trap of the IMF to determine its currency purely by the market , when lot of foreign capital was flowing into India, for which India is now paying a heavy price. For the China, as pointed out by my friend from Estonia, to graduate into the higher value added production, its growing highly educated skilled labor may perhaps contribute in course of time .Following
About Monetary Economics
Monetary economics provides a framework for analyzing money in its functions as a medium of exchange, store of value, and unit of account. It considers how money, for example fiat currency, can gain acceptance purely because of its convenience as a public good.