Georgios Chortareas - Academia.edu (original) (raw)

Papers by Georgios Chortareas

The Manchester School, 2003

The processes of financial liberalization and international integration have contributed to signi... more The processes of financial liberalization and international integration have contributed to significant changes in the banking sectors of many developing countries. In Latin America, banking sectors have experienced an accelerated process of consolidation. Enhanced consolidation has been accompanied by a significant increase in the degree of market concentration in the banking industry. A direct effect of such measures has been the inflow of foreign capital which, although necessary for recapitalizing the financial system, increases the market concentration of the sector. A number of current concerns about the implications of market concentration on competitiveness in the banking industry and its possible impact in the economy exist. The banking sector seems to be highly concentrated in many countries in Latin America and therefore studying the sector and identifying the impact of the enhanced degree of concentration and its potential collusion effects seems an appropriate task. For example, some of the collusion effects that may have been driven by a highly concentrated banking sector may include high commercial lending rates, credit rationing and low deposit rates.

Social Science Research Network, 2004

Recent advances in testing for the validity of Purchasing Power Parity (PPP) focus on the time se... more Recent advances in testing for the validity of Purchasing Power Parity (PPP) focus on the time series properties of real exchange rates in panel frameworks. One weakness of such tests, however, is that they fail to inform the researcher as to which cross-section units are stationary. As a consequence, a reservation for PPP analyses based on such tests is that a small number of real exchange rates in a given panel may drive the results. In this paper we examine the PPP hypothesis focusing on the stationarity of the real exchange rates in up to 25 OECD countries. We introduce a methodology that when applied to a set of established panel-unit-root tests, allows to identify the real exchange rates that are stationary and poolable without trading-off any test power. We apply procedures that account for cross-sectional dependence. Our results reveal evidence of mean-reversion that is significantly stronger as compared to those obtained by the existing literature, strengthening the case for PPP. Moreover, our approach allows to provide half-lives estimates for the mean-reverting real exchange rates and so find that the half-lives are shorter than the literature consensus and therefore that the PPP puzzle is less pronounced than initially thought.

Oxford Bulletin of Economics and Statistics, Feb 1, 2004

The empirical literature that tests for purchasing power parity (PPP) by focusing on the stationa... more The empirical literature that tests for purchasing power parity (PPP) by focusing on the stationarity of real exchange rates has so far provided, at best, mixed results. The yen real exchange rate behavior, as compared to other major currencies, has most stubornly challenged the PPP hypothesis and deepened this puzzle. This paper contributes to this discussion by providing new evidence on the stationarity of bilateral yen real exchange rates. We employ a non-linear version of the Augmented Dickey-Fuller test, based on an exponentially smoothtransition autogregressive model (ESTAR) that enhances the power of the tests against mean-reverting nonlinear alternative hypotheses. Our results suggest that the bilateral yen real exchange rates against the other G7 and Asian currencies were mean reverting during the post-Bretton Woods era. Thus, the real yen behavior may not be so di¤erent after all but simply perceived to be so due to the use of a restrictive alternative hypothesis in previous tests.

Edward Elgar Publishing eBooks, Nov 25, 2005

Beginning with an assessment of new thinking in macroeconomics and monetary theory, this book sug... more Beginning with an assessment of new thinking in macroeconomics and monetary theory, this book suggests that many countries have adopted the New Consensus Monetary Policy since the early 1990s in an attempt to reduce inflation to low levels. It goes on to illustrate that the explicit control of the money supply, which was fashionable in the 1970s and 1980s in the UK, US, Europe and elsewhere, was abandoned in favour of monetary rules that focus on interest rate manipulation by the central bank. The objective of these rules is to achieve specific, or a range of, inflation targets.

Economic Inquiry, Apr 29, 2019

We explore the impact of inflation and its variability on the output-inflation trade-off using a ... more We explore the impact of inflation and its variability on the output-inflation trade-off using a unified single-step approach in a panel data context. A limitation of earlier empirical approaches is that they focus to either crosscountry or country-by-country time-series analyses. This paper employs a dynamic heterogeneous panel data specification and uses an all-encompassing estimation framework that accounts for parameter heterogeneity, cross-sectional dependence, dynamics, and nonstationarity. Our sample covers 60 countries from 1970 to 2010. While inflation variability reduces the trade-off for specific periods and country groups, an unambiguous and more pronounced negative relation emerges between the inflation rate and the responsiveness of real output to nominal shocks. The findings are in line with the New Keynesian view of a negative association between the rate of inflation and the output-inflation trade-off, as well as with the observed flattening of the Phillips curve over the past decades.

Edward Elgar Publishing eBooks, Jan 29, 2016

Metroeconomica, Nov 1, 2008

We characterize central bank behavior in the euro area during the run-up to the European Economic... more We characterize central bank behavior in the euro area during the run-up to the European Economic and Monetary Union (EMU) era by estimating Taylor rule-type reaction functions at both the individual and aggregate level. We focus on whether national monetary policies during the run-up to the EMU were responding to economic developments according to their own policy rules or to a broader, euro area-wide, policy rule. To consider the last possibility we examine whether national monetary policies were responding to German interest rates. Finally, we compare the performance of the estimated with imposed policy rules. * This paper has benefited enormously from the comments of Peter Westaway to whom I am grateful. I also thank an anonymous referee, Andrew Bailey, Francesco Giavazzi, Stephen M. Miller and Thomas Palley for valuable comments on earlier drafts as well as participants at the 2002 Post Keynesian Economics Study Group (PKSG) Conference in Cambridge. Of course, any remaining errors are the sole responsibility of the author.

Journal of Economic Behavior and Organization, Mar 1, 2021

Abstract This paper investigates the implications of strategic fiscal-monetary policy interaction... more Abstract This paper investigates the implications of strategic fiscal-monetary policy interactions on the policy mix and coordination in a monetary union under imperfect policy instrument substitutability. We develop a model that incorporates the key features of the New-Keynesian framework augmented by a cost channel of monetary policy. Both policy instruments can directly affect inflation, hence having supply-side effects, too. We consider alternative strategic and fiscal regimes. We show that relative policy effectiveness and the cost-channel effect together define policy-mix outcomes, policies’ cyclicality, and coordination problems. The cost channel limits union-wide demand shocks’ stabilization, the monetary authority can no longer manage the cycle, and cooperation and commitment irrelevance do not hold anymore. The lead authority reacts to the follower authority's reaction parameter, hence to the follower's preference parameter, while it might choose not to trade-off its objectives. In the leadership strategic regimes for demand-side policy instruments, the leader reacts positively/negatively to the follower's preference parameter, if its instrument is more/less effective in stabilizing inflation (relative to aggregate demand) than the follower's policy instrument.

Journal of International Money and Finance, Mar 1, 2023

Economic Modelling, Apr 1, 2016

We consider the ability of monetary policy to fully stabilize pure demand shocks in a monetary un... more We consider the ability of monetary policy to fully stabilize pure demand shocks in a monetary union with strategically acting fiscal authorities. We show that when one national fiscal authority enjoys a strategic advantage over the other and fiscal policy can directly affect inflation, monetary policy cannot fully stabilize pure demand shocks at the union level, unless they are common. Moreover, we characterize a situation where country-specific fiscal policies diverge, being counter-cyclical for one country and pro-cyclical for the other, for high enough values of the direct effect of fiscal policy on the inflation parameter. The coordination of national fiscal policies becomes desirable for the union central bank.

Social Science Research Network, 2001

These views were expressed by Josef Tos ∨ ovskỳ, who was at that time Governor of the Czech Natio... more These views were expressed by Josef Tos ∨ ovskỳ, who was at that time Governor of the Czech National Bank. His views, and those of various other central bank governors, are contained in Mahadeva and Sterne (2000, pp. 186-205). For a discussion of policy-related arguments for transparency in monetary policy, see Blinder et al. (2001). 8 This result is consistent with the results of the more general model of policymaking by Morris and Shin (2001).

Review, 2002

Social Science Research Network, 2010

ABSTRACT This paper follows a novel method recently proposed by Chowdhry, Roll and Xia (CRX) (200... more ABSTRACT This paper follows a novel method recently proposed by Chowdhry, Roll and Xia (CRX) (2005) to extract an inflation measure from stock returns and re-examines the short run purchasing power parity. CRX argue that the extracted series contains simultaneous information from financial markets and its volatility is closer to that of exchange rates. They find strong evidence supporting relative PPP in short run for the U.S. against Japan, UK and Germany. Using the same methods, this study tests the PPP relation for four different countries against the United States from 1983 to 2006. The results show that only half of the cases provide supportive evidence for short run PPP. Thus the new method might not be a general approach to solve the PPP puzzle and might be data sensitive.

International Advances in Economic Research, May 1, 1998

ABSTRACT Without Abstract

Journal of Post Keynesian Economics, Sep 23, 2013

This paper reviews some aspects of the literature on the design of fiscal policy rules in monetar... more This paper reviews some aspects of the literature on the design of fiscal policy rules in monetary unions. We consider the theoretical rationale that motivates the need for imposing fiscal policy rules in the context of a monetary union. Then we analyze mechanisms (other than rules) that can potentially enhance fiscal discipline. We discuss the recent thinking and practice on numerical fiscal policy rules and on fiscal policy rules as they emerge from the optimizing behavior of fiscal and monetary authorities in a monetary union.

European Journal of Political Economy, Mar 1, 2017

We consider the strategic interactions between fiscal and monetary policies in a monetary union w... more We consider the strategic interactions between fiscal and monetary policies in a monetary union when a fiscal authority enjoys a strategic advantage. In particular we depart from the standard literature on strategic interactions in monetary unions in that we solve a threestage game, where the two national fiscal authorities do not play simultaneously. We find that there is always an incentive for the leader fiscal authority to play a three-stage game, which leaves the other fiscal authority worse off under demand shocks. This choice leads to more (less) volatile union-wide fiscal stance for demand (supply) shocks compared to the standard narrow-coordination case. This volatility is positively related to demand shocks' asymmetries.

Economics Letters, Nov 1, 2002