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Working Paper
Bank lending and economic activity in Japan: did \"financial factors\" contribute to the recent downturn?
In this paper, we examine the role of "financial factors" in Japan and attempt to gauge their recent impact on the Japanese economy. First, we find that proxies for financial factors enter significantly in behavioral equations for loan standards, loan demand and aggregate demand, although these proxies explain only a small amount of the variation in those variables. Second, there is some, albeit inconclusive, evidence that balance-sheet problems of households and firms contributed to Japan's recent recession. We find that exogenous declines in equity prices contributed significantly to the ...
Working Paper
El Nino and world primary commodity prices: warm water or hot air?
This paper examines the historical effects of El Nio on world prices and economic activity. Although the primary focus is on world real non-oil primary commodity prices, the effects on G-7 consumer price inflation and GDP growth are also considered. This paper has several distinct advantages over previous studies. First, several econometric models are estimated using fairly broad measures of prices and economic activity. Second, the models include continuous measures of El Nio intensity (sea surface temperature and sea-level air pressure anomalies in the Pacific Ocean) rather than dummy ...
Working Paper
On the dynamic properties of asymmetric models of real GNP
There is now a substantial body of evidence that suggests business cycles are asymmetric. However, the evidence has been accumulated using a wide array of statistical techniques and, consequently, is based on various definitions of asymmetry. This paper examines several parametric models that have been used to study asymmetries in real GNP. Although these models capture asymmetries in very different ways, their dynamic properties are remarkably similar.
Working Paper
Using measures of expectations to identify the effects of a monetary policy shock
This paper considers an alternative econometric approach to the VAR methodology for identifying and estimating the effects of monetary policy shocks. The alternative approach incorporates available measures of market participants' expectations of economic variables in order to calculate economic innovations to those variables. In general, expectations measures should provide important additional information relative to a standard VAR analysis, since market participants presumably use a much richer information set than that assumed in a typical VAR model. The resulting innovations are easily ...
Journal Article
U.S. international transactions in 1995
In 1995, after three years of substantial increases, the U.S. current account deficit widened only slightly, with some deterioration in the balances on trade and investment income. The current account deficit was counterbalanced by large recorded net capital inflows and a large positive statistical discrepancy.
Working Paper
Are banks market timers or market makers? Explaining foreign exchange trading profits
We analyze the foreign exchange trading earnings of large U.S commercial banks over the past several years. In particular, we use several approaches to try to determine to what extent these profits can be attributed either to position-taking by banks or to the provision of intermediation services to bank customers. The results can be summarized as follows. First, banks appear to generate a substantial portion of their foreign exchange earnings from making markets in conventional spot and forward foreign exchange contracts. In addition, some indirect evidence supports anecdotal reports that ...
Working Paper
When is monetary policy effective?
In this paper, we investigate a number of issues that have not been completely addressed in previous studies regarding the possible asymmetric effects of monetary policy. Overall, we interpret our results as weak evidence in favor of sticky-wage and sticky-price theories and strong evidence against credit-rationing theories. First, we find that models that allow for asymmetries with respect to contractionary/expansionary monetary policy fit the data better than models that allow for asymmetries associated with the state of the business cycle. Second, we find that contractionary monetary ...
Working Paper
Determinants of the 1991-93 Japanese recession: evidence from a structural model of the Japanese economy
The objectives of this paper are to determine the extent to which various factors contributed to the current recession in Japan and to assess whether the recent behavior of the Japanese economy differs from that in previous recessions. Toward that end, we develop a small, structural macroeconometric model of the Japanese economy and estimate it using data from 1971 Q1 through 1991 Q1, the period just prior to the recent downturn. The important results can be summarized as follows. First, the severity of the current recession probably does not reflect structural economic changes. Second, the ...