Essays in international macroeconomics and monetary policy [Elektronische Ressource] / vorgelegt von Qianying Chen

Qianying Chen

Informations

• Publié par: goethe_universitat_frankfurt_am_main
• Publié le: 01 janvier 2010
• Nombre de lectures: 19
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

Essays in International
Macroeconomics and Monetary
Policy
Inaugural-Dissertation
zur Erlangung des Doktorgrades
des Fachbereichs Wirtschaftswissenschaften
der Johann Wolfgang Goethe-Universit?t
Frankfurt am Main
vorgelegt von
Qianying Chen
aus Hong Kong
October 2010List of Original Working Papers
1. On the E⁄ects of Monetary Policy Shocks on Exchange
Rates
-Co-authored by Michael Binder and Xuan Zhang,
in CESifo Working Paper Series 3162, CESifo Group Munich.
2. ExchangeRateDynamics,Expectations,andMonetaryPol-
icy Fundamentals
3. InternationalTransmissionofBankandCorporateDistress
-Co-authored by Dale Gray, Papa N Diaye, Hiroko Oura and Natalia Tamirisa,
in IMF Working Papers 10/124, International Monetary Fund.
4. Monetary Policy and the Interest Rate Channel in China
-Co-authored by Stefan Gerlach
iiAbstract
This thesis consists of four chapters. Each chapter covers a topic in international macro-
economics and monetary policy. The ?rst chapter investigates the impact of unexpected
monetary policy shocks on exchange rates in a multi-country econometric model. The sec-
ond chapter examines the linkage between macroeconomic fundamentals and exchange rates
through the monetary policy expectation channel. The third chapter focuses on the interna-
tional transmission of bank and corporate distress. The last chapter unfolds the interest rate
channel of monetary policy transmission in an emerging economy, China, where regulations
and market forces co-exist in this transmission.
iiiAcknowledgements
IamdeeplygratefultoProfessorMichaelBinder,forhisinvaluableguidance,supervision,and
support; and to Professor Thomas Laubach, for his incredible guidance and encouragement.
I am specially grateful to Professor Stefan Gerlach, for his advice and comments.
Moreover, I thank specially Alex Ho, Marcel Bluhm, Xuan Zhang, Georgios Georgiadis,
Bj‰orn Hilberg, for their helpful discussions, and for their support at the ?nal stage of my
study. In addition, I thank Bj‰orn Kraaz and Pei Kuang for their insightful comments. I
would also like to thank Xiaojian Zhao for his in uence on my attitude towards life, his help
and encouragement through out my graduate study. I also acknowledge the support from
Hong Kong institute for monetary research.
Finally, I am gratefully to my parents for their constant support and understanding.
ivContents
1 On the E⁄ects of Monetary Policy Shocks on Exchange Rates 1
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Review of the Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.2.1 Methodology of Eichenbaum and Evans (1995) . . . . . . . . . . . . . 6
1.2.2 Further Empirical Work . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.3 Multilateral Models: Motivation . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.4 An Empirical Multilateral Model . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.4.1 A Global Vector Error Correction Model (GVECM) . . . . . . . . . . 17
1.4.2 GVECM Variables and Data . . . . . . . . . . . . . . . . . . . . . . . 21
1.5 Measuring Monetary Policy Shocks . . . . . . . . . . . . . . . . . . . . . . . . 22
1.5.1 Monetary Policy Indicators . . . . . . . . . . . . . . . . . . . . . . . . 22
1.5.2 Identi cation of Monetary Policy Shocks in the Global Vector Error
Correction Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
1.6 Empirical Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
1.7 Model Comparisons and Counterfactual Analysis . . . . . . . . . . . . . . . . 48
1.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
1.9 Appendix 1.1 : Data De nitions and Sources . . . . . . . . . . . . . . . . . . 64
1.10 Appendix 1.2: Cointegrating Relations for the United States, and Tests for
Long-Run Uncovered Interest and Purchasing Power Parity for All Countries 67
2 Exchange Rate Dynamics, Expectations, and Monetary Policy Fundamen-
tals 69
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
2.2 The Exchange Rate Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
v2.2.1 Decomposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
2.2.2 Treatment in the Existing Literature . . . . . . . . . . . . . . . . . . . 75
2.3 Expectation Formation Process (EFP) of Monetary Policy Stance . . . . . . . 77
2.3.1 Consensus Interest Rate Forecasts . . . . . . . . . . . . . . . . . . . . 79
2.3.2 VAR Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
2.3.3 Properties of the Market EFP . . . . . . . . . . . . . . . . . . . . . . . 82
2.4 Explanatory Power of the Monetary Policy Expectations . . . . . . . . . . . . 92
2.5 Predictive Power of the Monetary Policy Expectations . . . . . . . . . . . . . 100
2.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
2.7 Appendix 2.1: Data Description. . . . . . . . . . . . . . . . . . . . . . . . . . 102
3 International Transmission of Bank and Corporate Distress 107
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
3.2 Methodology and Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
3.2.1 Structure of the GVAR Model . . . . . . . . . . . . . . . . . . . . . . 109
3.2.2 Sample, Variables and Weights . . . . . . . . . . . . . . . . . . . . . . 112
3.2.3 Impulse Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
3.3 Transmission of Bank and Corporate Distress . . . . . . . . . . . . . . . . . . 116
3.3.1 Domestic Impact of Bank and Corporate Distress . . . . . . . . . . . . 116
3.3.2 International Propagation of Bank and Corporate Distress . . . . . . . 118
3.3.3 Robustness Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
3.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
3.5 Appendix 3.1: Data Description. . . . . . . . . . . . . . . . . . . . . . . . . . 137
3.6 Appendix 3.2. Contingent Claims Analysis and Estimating Default Probabil-
ities for Corporates and Banks . . . . . . . . . . . . . . . . . . . . . . . . . . 166
4 Monetary Policy and the Interest Rate Channel in China 171
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
4.2 Implementing Monetary Policy in China . . . . . . . . . . . . . . . . . . . . . 173
4.3 The Theoretical Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
4.3.1 Model Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
4.3.2 The Impact on Interbank Rate and Loans . . . . . . . . . . . . . . . . 179
4.4 Selected Monetary Policy Episodes . . . . . . . . . . . . . . . . . . . . . . . . 187
vi4.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
4.6 Appendix 4.1: Proof of Propositions . . . . . . . . . . . . . . . . . . . . . . . 193
4.6.1 Proof of Proposition 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
4.6.2 Proof of proposition 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Bibliography 198
Deutsche Zusammenfassung 215
viiList of Tables
2.1 Comparison between the U.S. Interest Rate Forecast from Best- t VAR and
Consensus in Pre-euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
2.2 ComparisonbetweentheU.S.InterestRateForecastfromBest- tFAVARand
Consensus in Pre-euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
2.3 Comparison between the U.S. Interest Rate Forecast from VARs and Consen-
sus in Pre-euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
2.4 Comparison between the German Interest Rate Forecast from Best- t VAR
and Consensus in Pre-euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . 85
2.5 Comparison between the German Interest Rate Forecast from VAR and Con-
sensus in Pre-euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
2.6 Statstical Properties of Short-term Interest Rates in Pre-euro Era . . . . . . . 87
2.7 Properties of Short-term Interest Rates in Era . . . . . . . 88
2.8 Comparison between the U.S. Interest Rate Forecast from Best- t VAR and
Consensus in Euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
2.9 Comparison between the U.S. Interest Rate Forecast from VARs and Consen-
sus in the Euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
2.10 Comparison between the German Interest Rate Forecast from Best- t VAR
and Consensus in the Euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . 90
2.11 Comparison between the German Interest Rate Forecast from VARs and Con-
sensus in the Euro Era) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
2.12 Model Comparison to Mark (2009) and Engel and West (2006) -Pre-euro Era 93
2.13 Properties of Model Implied Exchange Rate Return with Market Participants
Expectation-Euro Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
2.14 RMSE Ratio Relative to Driftless Random Walk . . . . . . . . . . . . . . . . 101
viii3.1 De nitions and Sources of Variables . . . . . . . . . . . . . . . . . . . . . . . 137
3.2 Number of Firms . . . . . . . . . . . . . . .