Oliver Hülsewig

The BMW Model: A New Framework for Teaching Monetary Macroeconomics in Closed and Open Economies

While the IS/LM-AS/AD model is still the central tool of macroeconomic teaching it has been criticised by several economists. The model is unable to deal with a monetary policy that uses the interest rate as its operating target ( Romer [2000]). Walsh [2002] has criticised that it is not suited for an analysis of inflation targeting. We present the BMW model as an alternative framework, which develops the Romer approach into a simple macroeconomic model. It can deal with issues like inflation targeting, monetary policy rules, and central bank credibility. Our open-economy version is a powerful alternative to the IS/LM-based Mundell-Fleming (MF) model. The main advantage of the open-economy BMW model is its ability to discuss the role of inflation and the determination of flexible exchange rates while the MF model is based on fixed prices and constant exchange rates.

Financial Frictions and Inflation Differentials in a Monetary Union

This paper presents a stylized New Keynesian dynamic stochastic general equilibrium (DSGE) model for a monetary union to analyze whether cyclical inflation differentials can be explained by cross-country differences concerning the characteristics of financial markets. Our results suggest that empirically plausible degrees of heterogeneity with respect to two important credit market characteristics, i.e. the access to credit and the fraction of households holding debt, are a relevant source of inflation dispersion across European Monetary Union (EMU) member countries.

Bank Lending and Monetary Policy Transmission: A VECM Analysis for Germany / Bankkredite und geldpolitische Transmission: Eine VECM Analyse für Deutschland

Summary This paper explores the existence of the credit channel in the transmission of monetary policy in Germany on the basis of a structural analysis of aggregate bank loan data. The empirical analysis is carried out in a vector error correction model (VECM), which allows to identify long-run cointegration relationships that can be interpreted as loan supply and loan demand equations. In this way, the fundamental identification problem inherent in reduced form approaches based on aggregate data is explicitly adressed. The short-run dynamics of the VECM is investigated by means of impulse response analysis, which sets out the impact of a monetary policy shock on the variables in the system. Empirical evidence consistent with the existence of a credit channel operating in Germany alongside the interest rate channel can be reported. Zusammenfassung Der Beitrag untersucht die Existenz des Kreditkanals in der geldpolitischen Transmission in Deutschland auf Basis einer strukturellen Analyse aggregierter Bankkreditdaten. Die empirische Untersuchung wird im Rahmen eines Vektorfehlerkorrekturmodells (VECM) durchgeführt, in dem die Identifizierung von langfristigen Angebots- und Nachfragebeziehungen im Markt für Bankkredite durch die Wahl von Restriktionen auf Kointegrationsvektoren erfolgt. Auf diese Weise wird das fundamentale Identifikationsproblem, das bei Schätzung einer reduzierten Form auftritt, explizit angegangen. Die Analyse der kurzfristigen Dynamik des VECM wird anhand von Impuls-Antwort-Funktionen durchgeführt, die den Einfluss geldpolitischer Schocks auf die Variablen des Systems darstellen. Die empirischen Ergebnisse deuten auf die Relevanz eines Kreditkanals in Deutschland, der zusätzlich zum Zinskanal wirkt, hin.

Bank Lending and the Transmission of Monetary Policy: A VECM Analysis for Germany

This paper addresses the relevance of the bank lending channel in the transmission of monetary policy in Germany on the basis of a structural vector error correction model (VECM). In order to deal with the fundamental problem of identification we use restriction tests on cointegration vectors to identify long-run supply and demand relationships in the market for bank loans. We find empirical evidence that is consistent with a bank lending channel in Germany. To our knowledge, this analysis is the first study that looks at the German loan market in the context of monetary transmission by applying such a structural approach to aggregate data.