Great Moderation

The quantity theory of money, 1870-2020

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火曜日, 5月 28, 2024

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Working Paper Series

Key Points:

Working Paper Series
Alexander Jung
The quantity theory of money,
1870-2020

No 2940

Disclaimer: This paper should not be reported as representing the views of the European Central Bank
(ECB).
Abstract
This study re-assesses the validity of the quantity theory of money (QTM) for the very long sample,
1870 to 2020, for 18 industrial countries using the dataset from Jord? et al.
ECB Working Paper Series No 2940
1

Non-technical summary
The quantity theory of money (QTM) is a central tenet of monetary economics.
Second, panel regressions confirm the presence of long and variable lags in the monetary policy
transmission, as predicted by Milton Friedman.
Introduction
The quantity theory of money (QTM) is a central tenet of monetary economics and became the
workhorse model of the Monetarist school in the 20th century.
1 It postulates a stable long-run link
between the quantity of money and prices and implies that money growth is a key driver of inflation
over longer horizons.
Lucas (2006) emphasized that the monetary pillar of central bank policy decisively
contributed to reducing inflation when it was too high.
In the 1970s and 1980s, central bankers and
researchers paid much attention to the quantity equation, and many countries pursued monetary targeting
as their monetary policy strategy (see Table 1).
Towards the end of the 20th century, severe velocity
shocks occurred, thus violating the constant money velocity assumption of the quantity theory.
*** insert Table 1 here ***
This study provides a reassessment of QTM based on panel approaches and using the dataset from
Jord? et al.
(2017) for 18 industrial countries that allow to conduct tests for the very long sample from
1870 to 2020.
The results show that an I(2) modeling strategy is not
indicated (Juselius, 2021; Assenmacher and Beyer, 2020; Jung and Carcel Villanova, 2020).
Within this
approach, I examine time variation by estimating the regressions for different subsamples and providing
rolling window regressions of the CCEPMG estimator.
Second, panel regressions confirm the presence of long and variable lags in the monetary policy
transmission, as predicted by Milton Friedman.
Notable exceptions are studies based on
country approaches for the United States and the United Kingdom (e.g., Benati, 2005; Sargent and
Surico, 2008).
Section 4 provides empirical results on the long-run link between excess
money growth and inflation and section 5 concludes.
A well-known implication of the quantity theory is that in the long run (i.e., if V and Yr are fixed),
the price level is proportional to the money stock, and there is no link between money growth and real
variables.
The empirical literature has focused on the point that ?a given change in the quantity of money
induces ? an equal change in the rate of price inflation? (Lucas, 1980).
The literature suggests that excess money growth, i.e., nominal money in excess of real GDP, is
more closely related to inflation.
Lucas (1980 and 1996) suggested that the link between money growth and inflation may not be
found in the data owing to statistical noise.
Chart 2 illustrates the long-run comovement between money growth and
inflation for 18 industrial countries between 1900 and 2000.
whether a given change in the quantity of money induces
an equal change in nominal rates of interest.
McCandless and Weber (1995) also examined the link between money
growth and real GDP growth and found no correlation.
Testing the validity of the quantity theory may also face some limitations concerning the correct
measurement of money growth or inflation.
Famous researchers have argued that the Divisia approach to calculating monetary aggregates
would be best suited to test the quantity theory (Barnett, 1980; Lucas, 2000).
Long-run Evidence on the Quantity Theory of Money.
The quantity theory of money: Its historical evolution and role in policy debates.
Two illustrations of the quantity theory of money.
), A journey
from theory to practice ? an ECB colloquium held in honour of Otmar Issing, 16-17 March 2006, 168171.
Two illustrations of the quantity theory of money: breakdowns and revivals.
The dashed line illustrates a coefficient of 1, as stipulated by the quantity theory of money; for
broad money, no data for Belgium was available until 1980.

Isabel Schnabel: The future of inflation (forecast) targeting

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木曜日, 4月 18, 2024

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Stock market development and familiarity (language and distance) are considered key determinants for home bias.

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Stock market development and familiarity (language and distance) are considered key determinants for home bias.
The literature neglects however that investors often invest in foreign funds domiciled in financial centers.

Consumer participation in the credit market during the COVID-19 pandemic and beyond

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火曜日, 4月 2, 2024

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We find that credit demand is highest when

Key Points:

We find that credit demand is highest when
the first lockdown ends and it drops when supportive monetary compensation schemes are implemented.
Credit is more likely to be
accepted under favourable borrowing conditions and after the approval of national recovery plans.
We also find
that demographic, economic factors, perceptions and expectations are associated with the demand for credit and
the credit grant.
First, it adds to a rapidly growing literature on household
borrowing behaviour during the COVID-19 pandemic; see, for example, Ho et al.
We provide evidence that credit applications and credit acceptances display a different pattern over
time.
Credit is more likely to be accepted under favourable borrowing conditions and after the
approval of national recovery plans.
In almost all countries
households are significantly less likely to apply and to get their credit approved than in Germany.
In line with literature, we show that
demographic and economic factors affect the probability for credit applications and credit approval.
In addition,
the paper shows that consumer perceptions and expectations matter when they decide to apply for credit.
Introduction
The participation of households in the credit market receives wide attention in the consumer finance literature
because consumer credit enters the monetary policy transmission mechanism through the so-called ?credit
channel?: changes in credit demand and supply have an effect on consumers' spending and investment, which in
turn affect economic growth.
We use microdata from the ECB?s Consumer Expectations Survey (hereinafter CES), a survey that
measures consumer expectations and behaviour in the euro area.
Its panel dimension allows for an assessment of
how consumer behaviour changes over time and how consumers respond to critical economic shocks.
This way we can gauge how credit applications and credit acceptances change under different, almost
opposite, borrowing conditions.
We also distinguish between the demand for long-term secured loans (mortgages) and for short-term
uncollateralized loans (consumer loans).
ECB Working Paper Series No 2922
3

We use probit models to estimate the probability of the consumer to apply for credit and the credit being granted.
The rate peaks in 2020Q3 which reflects the rebound in the demand for loans when the first lockdown ended.
In almost all countries households are significantly less likely
to apply and to get their credit approved than in Germany.
However,
when it comes to credit acceptance, we observe that the two groups of households are more similar.
Finally, we find some heterogeneity with respect to the type of credit, particularly between secured and unsecured
debt.
The demand for
consumer credit is insignificant for liquid households and decreases significantly for constrained households in
the last two quarters of our timespan.
The first consists of a recently growing literature which
explores consumer behaviour in the credit market during the COVID-19 pandemic, mostly in the United States.
Sandler and Ricks (2020) show that consumers did not use credit card debt for financial liquidity in the early stage
of the COVID-19 pandemic.
(2020) report that credit card applications and new mortgage loans
declined during the first months of the pandemic in regions with more unemployment insurance claims.
Lu and
Van der Klaauw (2021) show that there was a sharp drop in consumer credit demand, especially for credit cards.
(2022) document that there was a substantial decrease in the usage of credit cards and home equity lines
of credit by Canadian consumers.
Our paper is also consonant with studies on the association between financial and demographic factors and
consumers? participation in the credit market as well as on the demand for specific types of credit.
January 2020 ? October 2020 - The two main events are the outbreak of the COVID-19 pandemic and the
consequential lockdowns in the euro area.
4 If the
respondent has applied for more than one type of credit, she is asked to refer to the most recent credit application.
Between 2021Q3 and 2022Q3 the acceptance
rate stays above the average values, mirroring the easing of credit standards for consumer credit and other lending
to households during this period.
Second, we can investigate the presence of nonlinearities in how liquidity and the credit type interact in explaining credit applications.
(2023) ? who show that in the United States the local pandemic severity had a strong
negative effect on credit card spending early in the pandemic, which diminished over time.
First, we select mortgages and consumer credit as the two mostly reported categories for secured and
13

The full estimation results are reported in Table 3.
The right-hand side panel of Figure 6 shows that the demand for consumer credit is insignificant for both liquid
and illiquid households.
It also shows that
subjective perceptions of credit access, financial concerns and expectations on interest rates matter for the demand
for credit.
In Bertola, G., Disney
R., and Grant, C. (eds) The Economics of Consumer Credit, Cambridge MA, MIT Press.
Horvath, A., Kay, B. and Wix, C. (2023) The COVID-19 shock and consumer credit: Evidence from credit card
data.
Magri, S. (2007) Italian households? debt: The participation to the debt market and the size of the loan.

Modere Appoints Greg Gittens as Chief Financial Officer

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月曜日, 11月 13, 2023

Health, Luxury, Cosmetics, Retail, Fitness & Nutrition, Beauty, Growth, Ralph Lauren Corporation, The Estée Lauder Companies, Multimedia, CFO, Partner, Original brand manufacturer, Management, Great Moderation

Modere (or the “Company”), a global, clean lifestyle, health & wellness brand of household, and beauty & personal care products, today announced the appointment of Greg Gittens as Chief Financial Officer (“CFO”), effective immediately.

Key Points:

Modere (or the “Company”), a global, clean lifestyle, health & wellness brand of household, and beauty & personal care products, today announced the appointment of Greg Gittens as Chief Financial Officer (“CFO”), effective immediately.
Prior to joining Modere, Mr. Gittens served as a Partner at Emil Capital Partners since 2022, where he provided senior advisory services on financial strategies and business initiatives, contributing to profitable financial results across the company’s diverse portfolio.
Before his role at Emil Capital Partners, Mr. Gittens served as CFO for Stila Cosmetics, LLC, where he provided financial leadership and directed the company’s long-range strategic and financial operating plan.
“I am honored to join the talented Modere team at such an exciting time for the Company,” Mr. Gittens said.

Modere Appoints Industry Veteran Katherine Zanotti to Board of Directors

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水曜日, 10月 11, 2023

Online Retail, Cosmetics, Retail, Health, Other Consumer, Consumer, Fitness & Nutrition, Multimedia, Senior, McDonald's, Marketing, Arbonne International, Procter & Gamble, Macdonald, Management, Great Moderation

Modere (or the “Company”), a global, clean lifestyle, health & wellness brand of household, and beauty & personal care products, today announced the appointment of Katherine (“Kay”) Zanotti to its Board of Directors, marking a decisive strategic step toward future success.

Key Points:

Modere (or the “Company”), a global, clean lifestyle, health & wellness brand of household, and beauty & personal care products, today announced the appointment of Katherine (“Kay”) Zanotti to its Board of Directors, marking a decisive strategic step toward future success.
View the full release here: https://www.businesswire.com/news/home/20231011739521/en/
Ms. Zanotti is already serving as a senior consultant to Modere, and her appointment to the Board is a natural next step as she works with the Company to improve product development, go-to-market strategy and customer engagement.
“I look forward to working more closely with the entire Modere team,” Ms. Zanotti said.
I am thrilled to contribute my knowledge and insights to the Board and management team as the Company continues to deliver on their business goals.”

Backcasting real interest rates and inflation expectations – combining market-based measures with historical data for related variables

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木曜日, 3月 30, 2023

= Backcasting real rates and inflation expectations – combining market-based measures with historical data for related variables =

Key Points:

= Backcasting real rates and inflation expectations – combining market-based measures with historical data for related variables =
Published as part of the ECB Economic Bulletin, Issue 2/2023.
Markets for financial products linked to inflation in the euro area offer valuable insights into market participants’ expectations for inflation and real interest rates, but these financial instruments have only been available since the early 2000s.
The yields on inflation-linked bonds (ILBs) and the interest rates on inflation-linked swaps (ILSs) incorporate market participants’ expectations for inflation and real interest rates over periods from one to 30 years.
These longer time series are constructed by estimating the relationship between ILS rates or market-implied real rates and longer time series of statistical data for variables such as inflation or indicators of economic activity.
The starting point for the backcasting exercise is a set of 108 variables, dating back to at least 1992, that may provide information about inflation compensation and real rates.
The backcasted series indicate the broad contours of inflation compensation and real rates for various maturities over a period where real-time market-based measures were not yet available.
The shaded areas mark the period for which euro area ILS rates and real rates have been backcasted (January 1992 to March 2005).
Here too, shorter maturities are broadly in line with measures of inflation expectations obtained from survey data in combination with nominal yield data.
Notes: The shaded areas mark the sample for which euro area ILS rates and real rates have been backcasted (January 1992 to March 2005).
Notes: The shaded area marks the sample for which euro area ILS rates and real rates have been backcasted (January 1992 to March 2005).

MUFG issues capital markets outlook for 2023--'The New Macro Supercycle'

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月曜日, 1月 23, 2023

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"The 'Great Moderation' of low inflation and volatility during the past 40 years is over," says Tom Joyce, head of Capital Markets Strategy .

Key Points:

"The 'Great Moderation' of low inflation and volatility during the past 40 years is over," says Tom Joyce, head of Capital Markets Strategy .
"Following the 'polycrisis' of 2022 stemming from concurrent geopolitical, energy and economic shocks, we have entered a more clearly defined period for economies and markets."
Against this backdrop, the team believes that pre-funding strategies are especially important in 2023.
The full report can be accessed here or by using the following link:

Modere Appears in Top Five on the 50 Fastest Growing Women-Owned/Led Companies™ List for Third Consecutive Year

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金曜日, 5月 6, 2022

Modere debuted at #3 on the prestigious list in 2020 and topped the ranking at #1 in 2021.

Key Points:

Modere debuted at #3 on the prestigious list in 2020 and topped the ranking at #1 in 2021.
Modere CEO Asma Ishaq accepted the award yesterday at the WPOs 25th annual conference in Montreal, Quebec.
Since inception, Modere has been dedicated to providing exceptionally effective, clean lifestyle essentials that are safe for people and the planet, said Ms. Ishaq.
This year marks the 15th anniversary of the 50 Fastest Growing Women-Owned/Led Companies.

Modere Appoints Christopher Beck as Chief Technology Officer

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木曜日, 4月 7, 2022

Modere, a global, live-clean lifestyle essentials brand, today announced the appointment of Christopher Beck as the companys Chief Technology Officer (CTO).

Key Points:

Modere, a global, live-clean lifestyle essentials brand, today announced the appointment of Christopher Beck as the companys Chief Technology Officer (CTO).
In addition to Harrys, Mr. Beck has deployed and directed enterprise-level IT systems for Tapestry (Coach, Stuart Weitzman, Kate Spade) and Merrill Lynch.
We are excited to welcome Christopher to the Modere team as we continue executing our strategic growth plan, meeting our customers where they are and further strengthening our market leadership.
Mr. Beck said, Ive been impressed by the depth of customer-first focus at all levels of the Modere organization.

Modere CEO Asma Ishaq Joins Lineup of Global Retail Leaders Speaking at The Retail Summit 2022 in Dubai

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木曜日, 2月 24, 2022

Modere, a worldwide, live-clean lifestyle essentials brand, today announced that Chief Executive Officer Asma Ishaq is an invited speaker at The Retail Summit 2022, the fourth annual meeting of global retailers.

Key Points:

Modere, a worldwide, live-clean lifestyle essentials brand, today announced that Chief Executive Officer Asma Ishaq is an invited speaker at The Retail Summit 2022, the fourth annual meeting of global retailers.
The event will be held March 14-15, 2022, at the all-new, state-of-the-art Dubai Exhibition Centre in Dubai.
The event features inspirational leaders in the industry discussing trends and sharing best practices in the new retail landscape.
It has never been more important in retail to bring products directly to customers, said Ms. Ishaq.