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Abstract

Evidence from the global financial crisis (2007–2008) and the Asian financial crisis (1997) have taught policymakers valuable lessons. The contagious effects of these crises have proven unavoidable and have led to negative economic development. However, South Korea, unlike other countries, has recovered remarkably from both episodes of financial turmoil and proved their ability to maintain positive growth throughout the two periods. This study investigates the correlation between the evolution of South Korean banking and corporate sector before, during and after these crises. A VAR model was employed to test the effectiveness of the South Korean government's policies, in response to the financial crisis from 1997 to 2017, using macroeconomic variables as proxies for newly introduced policies, and non-performing loans for controlled risks. The empirical results indicate impulse response functions which suggest that changes in macroeconomic variables as a representation for the policies resulted in a reduction of non-performing loans. This implies successful risk reduction and an overall economic recovery.

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This study explores cross-country variations in the size of the effects of a monetary policy shock on output using the sample of 48 developed and developing countries. The structural vector autoregression model is used to estimate monetary policy effects for each country separately. Based on the estimated impulse responses, we construct a measure of the short-run monetary policy effect on output, which is used as the dependent variable in a cross-country regression. Our results suggest that the effects of monetary policy shock on output are significantly influenced by trade openness, exchange rate regime, correlation with the US and for European countries with the German economy, and the development of the banking sector.

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This article examines the effects of inflation targeting (IT) policy on inflation and output performance. I employ the propensity score matching method for the sample of CEE countries from 1990 to 2010. The evidence suggests that the IT regime does not have a significant effect on the inflation level or the inflation volatility; however, the IT framework can help to increase GDP per capita. The effects on inflation indicators are inconsistent with previous studies. The results are robust to different methodologies.

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In our paper we focus on situations when central banks have to conduct monetary policy in a world in which they cannot rely fully on what is regarded the best practice and they have to cope with financial system inherent tendency to be unstable. Both phenomena are rooted in János Kornai’s intellectual heritage highlighting that economy tends to divert from equilibrium and that soft budget constraint erodes economic actors’ behavior.

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This paper addresses the experiences and challenges of Hungary’s monetary policy during the period 1995–2000 and in view of the progress toward EU and EMU membership. The structure of relative prices changed markedly in the past and is expected to continue to change in the future. The reason, in addition to a possible Balassa–Samuelson effect, was the elimination of subsidies and introduction of turnover taxes in the past, and a future convergence toward a price structure prevalent in the EU. In the 1995–2000 period, the resulting gap between CPI and PPI led to massive foreign capital inflows. While the policy of sterilised interventions by the National Bank of Hungary was probably the right answer, it was inevitably costly, and was made costlier than necessary by the way it was carried out. Continued adjustments in the price structure in the future will confront monetary policy with the same dilemmas and, resulting in an inflation floor, will complicate the country’s conditions of joining EMU within a reasonable time frame after EU accession.

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The paper provides a general evaluation of inflation targeting in Poland with some reference to challenges faced by major central banks. First, it argues that inflation targeting has proved to be relatively successful in Poland and attributes this success to a bias towards the aggressive mitigation of inflationary risks, whenever they have arisen. Second, it briefly explains why the National Bank of Poland does not need to search for an alternative to inflation targeting. Then, it presents the negative aspects of the price level targeting and nominal GDP targeting. Third, it refers to the post- EU accession experience of Poland as being supportive for the “leaning against the wind” approach to monetary policy conducting. Fourth, it argues that such an approach is supported by evidence on the effects of the crisis’ outburst and aggressive interest rate cuts on trust in central banks. Fifth, it indicates the determinants of slow post-crisis restructuring and persistently high uncertainty as desired priorities in the research agenda in central banks.

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Abstract

We explore to what extent official interest rate changes can potentially in a procyclical manner impact different financial cycle indicators (credit/GDP, debt service ratio, house prices and stock market indices). We test this on data covering 1995−2016 in 21 countries and the euro area using the Concordance index and Monetary policy procyclicality ratio. Results show that this was not a widespread phenomenon, but there was significant heterogenenity across countries. The procyclicality of interest rate changes was usually higher when financial cycle gaps were increasing and lower when they were decreasing. On average, central banks in several larger economies were running potentially less procyclical monetary policy than those in the smaller ones. The resulting propensity of conflicts between achieving price and financial stability by central banks was low, as only in 10% of the cases the objectives were conflicting (usually when inflation was below the target and the credit cycle was in an expansion phase).

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Abstract

Deflation is widely feared and opposed. This paper provides arguments to explain the anti-deflationary bias. It is argued that governments favour inflation, that the main deflation theories have influenced negatively the public opinion on deflation, and that rent-seeking behaviour and group formation explains why the opposition to deflationary redistribution is stronger than the opposition to inflationary redistribution. Moreover, psychological concepts, such as anchoring, the endowment effect or the availability heuristic have contributed to the fear of deflation by causing a money illusion and a equalisation of deflation and recession.

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This paper proposes a new measure of central bank credibility — the credibility index calculated on the basis of the key determinants of central bank credibility. The index is compiled for 9 countries: the Czech Republic, Hungary, Slovakia, Poland, Chile, Brazil, Turkey, United Kingdom and Sweden , for the years 1999–2007. The results are cross-checked with other credibility measures based on inflation expectations of two groups of economic agents. The analysis demonstrates that the credibility index may be considered a relevant and consistent credibility measure.

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In this paper I use a New Keynesian model with unemployment and estimate it for the Romanian economy using Bayesian techniques. I use the estimated model to derive an estimation of the Okun coefficient. I alternatively estimate the Okun coefficient using the Bayesian linear regression. The results show that the Okun coefficient is high in the Romanian economy implying that the current crisis will have a severe impact on the labour market as well as important social effects.

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