Latest documents http://publikationen.ub.uni-frankfurt.de/index/index/ Fri, 23 Feb 2007 18:06:20 +0100 Fri, 23 Feb 2007 18:06:20 +0100 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1606 We focus on a quantitative assessment of rigid labor markets in an environment of stable monetary policy. We ask how wages and labor market shocks feed into the inflation process and derive monetary policy implications. Towards that aim, we structurally model matching frictions and rigid wages in line with an optimizing rationale in a New Keynesian closed economy DSGE model. We estimate the model using Bayesian techniques for German data from the late 1970s to present. Given the pre-euro heterogeneity in wage bargaining we take this as the first-best approximation at hand for modelling monetary policy in the presence of labor market frictions in the current European regime. In our framework, we find that labor market structure is of prime importance for the evolution of the business cycle, and for monetary policy in particular. Yet shocks originating in the labor market itself may contain only limited information for the conduct of stabilization policy. JEL Classification: E32, E52, J64, C11 Kai Philipp Christoffel; Keith Küster; Tobias Linzert workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1606 Fri, 23 Feb 2007 18:06:20 +0100 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1724 We focus on a quantitative assessment of rigid labor markets in an environment of stable monetary policy. We ask how wages and labor market shocks feed into the inflation process and derive monetary policy implications. Towards that aim, we structurally model matching frictions and rigid wages in line with an optimizing rationale in a New Keynesian closed economy DSGE model. We estimate the model using Bayesian techniques for German data from the late 1970s to present. Given the pre-euro heterogeneity in wage bargaining we take this as the first-best approximation at hand for modelling monetary policy in the presence of labor market frictions in the current European regime. In our framework, we find that labor market structure is of prime importance for the evolution of the business cycle, and for monetary policy in particular. Yet shocks originating in the labor market itself may contain only limited information for the conduct of stabilization policy. JEL - Klassifikation: J64 , E32 , C11 , E52 Kai Philipp Christoffel; Keith Küster; Tobias Linzert workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1724 Mon, 29 Jan 2007 13:29:08 +0100 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1730 This paper employs individual bidding data to analyze the empirical performance of the longer term refinancing operations (LTROs) of the European Central Bank (ECB). We investigate how banks’ bidding behavior is related to a series of exogenous variables such as collateral costs, interest rate expectations, market volatility and to individual bank characteristics like country of origin, size, and experience. Panel regressions reveal that a bank’s bidding depends on bank characteristics. Yet, different bidding behavior generally does not translate into differences concerning bidder success. In contrast to the ECB’s main refinancing operations, we find evidence for the winner’s curse effect in LTROs. Our results indicate that LTROs do neither lead to market distortions nor to unfair auction outcomes. JEL classification: E52, D44 Tobias Linzert; Dieter Nautz; Ulrich Bindseil workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1730 Mon, 29 Jan 2007 11:45:47 +0100 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1729 A distinguishing feature of the ECB’s monetary policy setup is the preannouncement of a minimum bid rate in its weekly repo auctions. However, whenever interest rates are expected to decline, the minimum bid rate is viewed as too high and banks refrain from bidding, severely impeding the ECB’s money market management. To shed more light on banks’ underbidding, we perform a panel analysis of the bidder behavior in the repo auctions of the Bundesbank where no minimum bid rate was set. Our results indicate that neither bank’s participation nor the submitted bid amount is significantly affected by an expected rate cut. This suggests that abandoning the minimum bid rate might increase the efficiency of the ECB’s money market management. JEL-Classification : C23, D44, E52 Tobias Linzert; Dieter Nautz; Jörg Breitung workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1729 Mon, 29 Jan 2007 11:10:41 +0100