Monetary policy and inflation in Spain / edited by José Luis Malo de Molina, José Viñals, and Fernando Gutiérrez for the Research Department, Banco de España.

Format:

Book

Contributor:

Malo de Molina, José Luis.

Viñals, José, 1954-

Gutiérrez, Fernando, 1957-

Banco de España. Servicio de Estudios.

Herbert Arnold Speiser Fund.

Language:

English

Subjects (All):

Monetary policy--Spain.

Monetary policy.

Inflation (Finance).

Spain.

Inflation (Finance)--Spain.

Physical Description:

xviii, 601 pages : illustrations ; 25 cm

Place of Publication:

New York, N.Y. : St. Martin's Press, 1998.

Contents:

The Anti-Inflationary Aim of Monetary Policy 4

Autonomy of the Central Bank 7

The Spanish Experience 8

Structure and Content of the Book 14

1 Monetary Policy and Inflation: From Theory to Practice / Jose Vinals 25

The Costs of Inflation 26

The Main Determinants of Inflation 32

Alternative Monetary Strategies for Fighting Inflation 40

2 Does the Adoption of Inflation Targets Affect Central Bank Behaviour? / Alvaro Almeida, Charles A.E. Goodhart 56

Execution of Monetary Policy 60

Inflation Forecasting and Controllability 90

Credibility of the Inflation Target 102

Part II The Trajectory of Spanish Monetary Policy

3 Trends in the Monetary Policy Strategy in Spain / Juan Ayuso, Jose Luis Escriva 131

1973-83: Standard Monetary Policy Strategy in a Closed Economy 132

1984-9 (June): The Transition to a New Strategy 135

Monetary Policy Strategy within the ERM Framework 141

From 1995: The New One-level Monetary Policy Strategy 153

4 The ALP Long-run Demand Function / Juan Luis Vega 159

ALP Long-run Demand: Cointegration and Stability 162

5 Fiscal Constraints on Central Bank Independence and Price Stability / Matthew B. Canzoneri, Behzad Diba 175

Monetary-dominant (MD) and Fiscal-dominant (FD) Regimes 178

Some Practical Exercises: Changes in Fiscal and Monetary Targets 184

Which Regime is Operative? Can the MD Regime be Assured? 191

Part III Spanish Monetary Policy: Current Situation and Outlook

6 Monetary Policy Following the Law on the Autonomy of the Banco de Espana / Fernando Gutierrez 203

The New Legal Framework of Monetary Policy: Autonomy of the Banco de Espana 204

Why a Direct Inflation Target? 212

The New Spanish Monetary Policy Strategy 222

Recent Spanish Monetary Policy: Assessment and Outlook 229

7 Analysis of Inflation from the Monetary Policy Standpoint / Pilar L'Hotellerie-Fallois 242

Inflation and Variables Providing Information on the Trend of Prices: The Experience of Other Countries 243

Inflation Monitoring and Analysis in Spain 248

Final Considerations 269

Appendix Breakdown of the GDP and Final Demand Deflators 271

8 Measures of the Inflation Process / Luis Julian Alvarez, Maria de los Llanos Matea 278

Core Inflation and Underlying Inflation 279

Measures of Inflation with Limited-influence Estimators 287

Permanent Inflation and Latent Inflation 293

9 Monetary and Credit Aggregates as Indicators of Inflation / Alberto Cabrero Bravo, Jorge Martinez Pages, Maria Perez-Jurado 309

Composition and Treatment of Monetary and Credit Aggregates 311

Monetary and Credit Aggregates as Leading Indicators of Inflation 317

Weighted Monetary Aggregates 327

10 The Yield Curve as a Monetary Policy Indicator / Juan Ayuso, Soledad Nunez 343

Measuring the Term Structure of Interest Rates 343

Term Structure as an Indicator of Expectations About Inflation and Interest Rates 348

11 A BVAR Forecasting Model for the Spanish Economy / Luis Julian Alvarez, Fernando C. Ballabriga, Javier Jareno 368

Brief Description of the BVAR Methodology 369

Selection of the Principal Variables of the Spanish Economy 377

A Forecasting Model for the Spanish Economy 380

Appendix The Prior Distribution Used in the BVAR Model 393

12 Monetary Policy Instrumentation: Current Situation and Outlook / Eloisa Ortega, Gabriel Quiros 400

Basic Aspects of Instrumentation: Functions, Principles and Alternative Models 401

Monetary Policy Instrumentation in Spain 406

Instrumentation in the European Union Compared with that in Spain 426

Outlook 437

Part IV The Monetary Policy Transmission Mechanism

13 The Role of the Banking System in the Monetary Transmission Mechanism / Maria Teresa Sastre de Miguel 449

Basic Features of the Behaviour of Bank Interest Rates 452

Explanatory Features in the Recent Behaviour of Bank Interest Rates 464

Appendix Composite Lending Rate Equations, by Term 484

14 The Impact of Interest Rates on Private Spending in Spain / Angel Estrada, Ignacio Hernando, Javier Valles 489

Theoretical Aspects 490

Quarterly Demand Equations for the Components of Household and Corporate Spending 492

Simulation of the Effects of Changes in Interest Rates 499

The Endogeneity of Changes in Interest Rates 502

Appendix 1 Consumer Expenditure Functions 509

Appendix 2 The Private Productive Investment Function 514

15 The Financial Position of Economic Agents and Monetary Policy / Juan Maria Penalosa 519

General Features of the Financial Positions of Non-financial Sectors 522

The Financial Position of Households 526

The Financial Position of Companies 538

The Financial Position of General Government 549

Appendix Ranges of Values Used to Classify the Criteria Defining the Role of the Financial Position of Sectors in the Monetary Transmission Mechanism 559

16 A Structural Model for the Analysis of the Monetary Policy Transmission Mechanism / Javier Andres, Ricardo Mestre, Javier Valles 564

Monetary Policy Transmission: An Aggregate Supply and Demand Model 565

Monetary Policy Simulations 573.

Notes:

Includes bibliographical references and index.

Local Notes:

Acquired for the Penn Libraries with assistance from the Herbert Arnold Speiser Fund.

ISBN:

031221295X

OCLC:

37770666