Examinando por Autor "Eleftheriou, Maria"

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Beyond GDP: Is Okun's Law still t?
(2024-12-27) Miquel Burgos, Ana Belén; Dimakou, Ourania; Eleftheriou, Maria
This paper challenges the role of GDP, as a measure of economic activity, in the regu- larity and universality of Okun's Law. Numerous empirical studies verify the stability and robustness of Okukn's law, despite quantitative and methodological discrepancies. At the same time, a large body of the literature is exposing the limitations of GDP as a measure of economic welfare or di erent aspects of economic activity. Our paper ques- tions whether and to what extent Okuns law empirical regularity is `GDP-contingent'. Is the \Law" as stable when a di erent measure is used? Our work draws on adjusted disposable income to answer that. We demonstrate that, over a three decade span and for more than 20 OECD countries, the stylised fact described by Okun law is less ro- bust and stable when GDP is substituted by adjusted disposable income: for a subset of countries in our sample, the relationship turns insigni cant or even positive. This apparently broken, for being GDP contingent, relationship opens a broad discussion with diverse implications regarding economic policies and their socioeconomic impact.
Did the Bundesbank react to the US dollar exchange rate?
(Elsevier Inc., 2017-09) Eleftheriou, Maria
This study explores monetary policy conduct by the German Central Bank just after switching to floating exchange rates and before adopting the European single currency. With the world economy going through the ‘great inflation’ first, and the ‘great moderation’ then, the focus is on the DM/US dollar exchange rate, as a proxy of external constraints. A Taylor-type interest rate rule with a sufficiently high inflation coefficient emerges as an equilibrium relation in a Vector Error Correction model, and operates as a reaction function. The exchange rate enters significantly and the dynamics generated are consistent with the derived rule and the macroeconomic theory. Hence, I argue that the Bundesbank kept an eye on the exchange rate and remained devoted to the long-standing policy of price stability.
Monetary policy in Germany: A cointegration analysis on the relevance of interest rate rules
(Elsevier, 2009-09) Eleftheriou, Maria
The paper attempts to identify an empirical relationship that characterizes the way the Bundesbank adjusted its short-term rate with respect to various objectives. By building on a careful exploration of the properties of the variables involved, it is established that interest rate rules —often remarkably similar to the Taylor rule— remain valid and relevant in a Vector Error Correction framework, and thereby proposing a distinctive interpretation of German monetary policy during the period 1975–1998.
Monetary policy rules and inflation control in the US
(Elsevier, 2022) Eleftheriou, Maria; Kouretas, Georgios P.
The interplay between policy-setting by the Federal Reserve and inflation is explored during a period with significant and diverse episodes from 1979 onwards. Our unrestricted estimates reveal a stable target path for the policy rate with a strong response to inflation and an effective control over it. We identify moments of discretionary and rule-based policy-making throughout three different chairmanships and quantify the degree of policy inertia. Including the ‘great recession’ and the first years after the crisis leaves the above-mentioned characteristics unchanged and shows that the adjustment to deviations from the target path becomes less gradual. Replacing the federal funds rate with a shadow rate yields ineffective inflation control, indicating that the dynamic behaviour of inflation is affected by the implementation of unconventional policy when the zero lower bound applies.
MONETARY POLICY RULES IN THE PRE-EMU ERA IS THERE A COMMON RULE?
(European Central Bank, 2006, 2006-07) Eleftheriou, Maria; Gerdesmeier, Dieter; Roffia, Barbara
Despite the great importance and final success of the convergence process that led to the establishment of the European Monetary Union, there is no clear agreement regarding the monetary policy pursued in the member countries during the convergence process. This paper contributes to the literature with an empirical analysis of the period from 1993 to 1998 that encompasses eleven EMU countries. In particular, Taylor-type interest rate rules are estimated with monthly national data to find that, despite certain similarities and exceptions, the rule followed by each country is distinct and differs substantially from the standard Taylor rule. However, for most countries, the parameter estimates reflect the principles proclaimed by the monetary policy authorities and, in addition, it is shown that in most cases the estimated rules reproduce the policy setting quite closely.
Price level convergence and purchasing power divergence
(Wiley, 2018) Eleftheriou, Maria; Müller-Plantenberg, Nikolas A.
We construct four large data sets of bilateral real exchange rates based on traded good prices (food and clothing, respectively) and broader price indices (consumer price index, CPI, and wholesale price index, WPI). On these data sets, we run non-parametric regressions to examine how the real exchange rate, the price differential, and the nominal exchange rate react to an overvalued real exchange rate over time. In line with the theory we develop, our regressions show the following: First, real exchange rates are mean-reverting. Second, prices converge. Third, price convergence implies purchasing power divergence and thus does not contribute to real exchange rate convergence. Indeed, when price adjustment is fast (as for our traded good price data sets), we even observe diverging nominal exchange rates. Our findings suggest that movements both away from and towards PPP may be less related to traded good price movements than is commonly thought.
The Purchasing Power Parity Fallacy: Time to Reconsider the PPP Hypothesis
(Springer Science+Business Media, 2018) Eleftheriou, Maria; Mueller-Plantenberg, Nikolas A.
Traded good prices affect the real exchange rate first through their effect on the overall price level and second through their effect on the nominal exchange rate. Whereas the price level effect, which is positive in sign, is universally recognized, the nominal exchange rate effect, which is negative in sign, is routinely ignored. We calculate to which extent real exchange rate changes are accounted for by traded good prices and other components of the real exchange rate. We find that the nominal exchange rate effect neutralizes the price level effect entirely, suggesting that, contrary to popular belief, good market arbitrage is not conducive to purchasing power parity (the purchasing power parity fallacy). Rather than traded or non-traded good prices, the main driving force behind the real exchange rate is currency market pressure, a variable that, as we argue, is largely determined by the cumulative trade and capital flows of a country.