Petra Gerlach-Kristen

Monetary Policy Regimes and Macroeconomic Outcomes: Hong Kong and Singapore

This paper studies the relationship between macroeconomic behaviour and the monetary policy regime in Hong Kong and Singapore, using data for 1984-2004. We estimate an econometric model, comprising a Phillips curve, an IS curve and an equation for changes in the nominal effective exchange rate (NEER), which, in the case of Singapore, can be interpreted as a policy reaction function. The parameter estimates differ in two regards: the NEER responds to inflation in Singapore but not in Hong Kong, and the autoregressive parameter for the output gap in Singapore is smaller than in Hong Kong. Overall, the variability of inflation has been lower in Singapore, but the volatility of real economic activity has been similar in the two economies.

Estimates of Real Economic Activity in Switzerland, 1885-1930

This paper uses annual data spanning 1870 to 1930 on a set of variables correlated with business conditions to construct an index of real economic activity in Switzerland. We extract an estimate of the common component of the data series using principal components analysis and the unobservable variables approach proposed by Stock and Watson (1989, 1991). The resulting index is similar to that constructed by Andrist et al. (2000) but displays more variation over time and is available for a longer time period. Moreover, it is less volatile and covers a longer time period in the 20th century than the estimate by Ritzmann-Blickenstorfer (1996).

Monetary Policy Decisions - Comparing Theory and 'Inside' Information from MPC Members

How do monetary policy committee (MPC) members form their views about the appropriate interest rate? To what extent do they change their minds during the deliberations in the interest rate meeting? How important is the Chairman? The theoretical literature makes assumptions about these issues. We have asked actual MPC members in Sweden and Norway. This paper reports the results from this unique survey and discusses how well existing theories on monetary policy by committee capture the reality.

A Two-Pillar Phillips Curve for Switzerland

SummaryMonetary aggregates have historically been important in Swiss monetary policy. The Swiss National Bank used money growth targets until 1999. The new policy framework introduced in 2000 focuses on an inflation forecast that relies on money growth as an indicator. How useful is money growth for explaining inflation in Switzerland? Using data spanning 1979 to 2007, we estimate a Phillips curve model that incorporates a measure of “trend” money growth and find that it impacts on inflation if one takes the downward shift in nominal interest rates over the sample into account. Including money growth reduces the in-sample forecasting errors by 15%.

Determinants of mortgage arrears in Europe: evidence from household microdata

In purely economic terms, mortgage arrears can pose a risk to the stability of banks and limit households’ future access to credit. Moreover, arrears have social ramifications: they reduce aspects of households’ well-being and health, and addressing such negative effects can lead to a requirement for higher social spending by governments. It is therefore important to identify the drivers of arrears and design policies to reduce them. We use a European household data-set to analyse what drives arrears. Controlling for household characteristics such as age and education, we find that affordability problems, such as unemployment, low income and high mortgage payments, matter. Households facing the dual trigger of affordability problems and negative equity are more likely to go into longer- term arrears. We also find that households in Cyprus and Greece are particularly prone to miss mortgage payments, while those in the United Kingdom and Belgium are very unlikely to do so. Generally, arrears tend to be higher in poor countries and where investors’ rights are poorly protected.

Inflation Expectations, Central Bank Credibility and the Global Financial Crisis

SummaryLong-run inflation expectations should not respond to economic news if the central bank is seen as credibly committed to stabilising inflation. In this paper we find that since the onset of the global financial crisis, medium and long-term inflation expectations implied by inflation swaps in the euro area, United Kingdom and United States have become less responsive to actual inflation and changes in oil and food prices. This suggests that the credibility of the central banks in these economies remains intact, despite large increases in their balance sheets due to unconventional monetary policy measures and the introduction of explicit forward guidance at the zero lower bound. We also find an increase in autocorrelation of inflation expectations, which suggests that shocks have a longer-lasting impact than before the financial crisis.