Ronny Mazzocchi - Academia.edu (original) (raw)

Papers by Ronny Mazzocchi

Research paper thumbnail of Monetary Policy When the NAIRI is Unknown: The Fed and the Great Deviation

Social Science Research Network, 2013

ABSTRACT The outbreak of the financial crisis of 2007 has generated a lively debate on the real o... more ABSTRACT The outbreak of the financial crisis of 2007 has generated a lively debate on the real or alleged faults of the Federal Reserve (Fed). Some economists argue that in the period 2002-2005 the U.S. central bank has taken its target interest rate below the level implied by monetary pricinciples that had been followed for the previous 20 years. One can characterize this decision as a deviation from a policy rule such as a Taylor rule. This behavior determined the end of the Great Moderation and gave birth to the Great Recession. In this paper I challenge this view. I show how the deviations from the Taylor-ruleÕs hypothetical interest rate can be explained by the ambiguity on inflation indicators to use. I also explain how the Great Deviation was instead caused by an error in the estimate of one of the fundamental components of the Taylor rule, i.e. the natural rate of interest. Too expansionary mone- tary policy of the Fed was therefore not due to discretionary choices, but to a structural problem of the Taylor rule. Finally, I show how an adaptive rule based only on observable variables would have avoided the huge gap between short-term rates and natural rates

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Research paper thumbnail of Beyond DSGE: A Macrodynamic Model with Intertemporal Coordination Failure

Social Science Research Network, 2010

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Research paper thumbnail of Investment-Saving Imbalances with Endogenous Capital Stock

Social Science Research Network, 2013

The current consensus in macroeconomics, or New Neoclassical Synthesis (NNS), is based on dynamic... more The current consensus in macroeconomics, or New Neoclassical Synthesis (NNS), is based on dynamically stochastic general equilibrium (DSGE) modeling with a RBC core to which nominal rigidities are added by way of imperfect competition. The strategy is to minimize the frictions that are required to reproduce both persistent real effects of monetary policy and interaction of interest and prices in a rigorous framework with intertemporal optimization, forward-looking behavior and continuously clearing markets. Unfortunately this A¢â‚¬AiAƒâ€žAƒÂ¶A¢E†AiAƒâ€˜A¢E†AiA¢E†Â«equi- libriumA¢â‚¬AiAƒâ€žAƒÂ¶A¢E†AiAƒâ€˜A¢E†AiA € framework do not allow to discuss the effects and the rela- tions between financial markets and real economy, which were the core of the economic crisis of 2008. This paper presents a dynamic model with endogenous capital stock whereby it is possible to assess, and hopefully clarify, some basic issues concerning the macroeconomics of saving-investment imbalances.

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Research paper thumbnail of Current Account Imbalances and the Euro Area. Alternative Views

Social Science Research Network, 2019

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Research paper thumbnail of Scope and Flaws of the New Neoclassical Synthesis

Social Science Research Network, 2013

The current consensus in macroeconomics represented by the New Neoclassical Synthesis (NNS) is ba... more The current consensus in macroeconomics represented by the New Neoclassical Synthesis (NNS) is based on dynamically stochastic general equilibrium (DSGE) modeling with Real Business Cycle (RBC) core to which nominal rigidities are added by way of imperfect competition. The claim is that the NNS model is capable of rigorously reproducing observable phenomena and is able to provide a microeconomically well-founded basis for the design of optimal policy rules, since it is amenable to welfare analysis. Nevertheless these results come at the price of many ad-hocery and other shortcomings which are indispensable for intertemporal equilibrium modelling of the current kind. Moreover the NNS did not let us think about the financial crisis and the macroeconomic imbalances that were forming in the years of the Great Moderation.

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Research paper thumbnail of Current account imbalances and the Euro Area. Controversies and policy lessons

Economia Politica, Jan 25, 2021

The crucial role of current account imbalances (CAI) is widely acknowledged in the consensus narr... more The crucial role of current account imbalances (CAI) is widely acknowledged in the consensus narrative of the European crisis that followed the Great Recession. On the basis of this interpretation, CAI play a prominent role in the EU Macroeconomic Imbalances Procedure (MIP), which broadens the EU economic governance framework to include the surveillance of unsustainable macroeconomic trends. Although the widening of the CAI in the Euro Area before the crisis is a matter of fact, and the consensus narrative contains elements of truth, alternative views have been put forward on three main issues: (i) the relevance of CAI, (ii) their causes and connection with the crisis, and (iii) their policy implications. The aim of this paper is to examine these controversial points about the causes, meaning and consequences of CAI, and discuss the alternative policy prescriptions that emerge.

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Research paper thumbnail of A Critical Remark on the Determinacy of Equilibrium in Woodford’s 'Interest and Prices

Social Science Research Network, 2010

ABSTRACT The New Neoclassical Synthesis (NNS) epitomized by Michael Woodford's Interest a... more ABSTRACT The New Neoclassical Synthesis (NNS) epitomized by Michael Woodford's Interest and Prices (2003) is based on a system of three equations that determines the short-run dynamics of output, inflation and interest-rates. Using a feedback-rule of the interest rate to change in inflation and output gaps, Woodford is able to show that the model converges to the equilibrium. But the mathematical procedure he uses to achieve this important result is formally allowable but logically not correct. This paper presents a brief critique of the Woodford’s strategy and shows that applying the ”classical criteria” for the determinacy of an equilibrium do not alter the main conclusion of Woodford’s framework.

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Research paper thumbnail of Intertemporal Coordination Failure and Monetary Policy

Social Science Research Network, 2013

The turn of century long period of sustained growth with low and stable inflation let the economi... more The turn of century long period of sustained growth with low and stable inflation let the economic profession and the public opinion to think that the right theoretical foundation for macroeconomic policy had been found. However the Great Crisis of 2008 indicates a spectac- ular failure of this framework in dealing with sources of macroeconomic instability and providing policy advise. Financial instability is the new challenge for monetary policy. Most of the recent research indicates that financial crises follow prolonged unwinding of investment-saving imbalances which are not contemplated by the standard theoretical framework. This paper draws a dynamic model where investment- saving imbalances are allowed to develop. It introduces different types of feedback interest-rate rules in order to provide some preliminary indications for the conduct of monetary policy.

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Research paper thumbnail of “The price is right”: using auction theory to enhance competition in the NPL market

Journal of Banking Regulation, May 29, 2018

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Research paper thumbnail of Competition in the Banking Sector and Economic Growth: Panel-Based International Evidence

Social Science Research Network, 2014

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Research paper thumbnail of Dal trattato di Maastricht alla crisi dell’euro: cosa abbiamo imparato?

L’Unione monetaria europea è un progetto ambizioso ma risente di una intrinseca debolezza. Ai dub... more L’Unione monetaria europea è un progetto ambizioso ma risente di una intrinseca debolezza. Ai dubbi tradizionali sul fatto che i paesi aderenti costituissero un’area valutaria ottimale, si aggiunge un difetto di governance dovuto sia all’architettura istituzionale sia alle scelte di politica macroeconomica degli ultimi anni. La crisi ha messo in luce in modo drammatico tale inadeguatezza, e la risposta delle politiche di austerità e della deflazione salariale, lungi dal trovare una soluzione alla crisi, l’hanno aggravata e possono compromettere la sopravvivenza della stessa moneta unica. Solo una revisione profonda delle sue istituzioni può mettere l’eurozona su un sentiero di sostenibilità

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Research paper thumbnail of The Price Is Rightt. Using Auction Theory to Enhance Competition in the NPL Market

Social Science Research Network, 2017

Almost a decade after the onset of the global financial crisis, a huge stock of nonperforming loa... more Almost a decade after the onset of the global financial crisis, a huge stock of nonperforming loans (NPLs) still represents a major burden for European banks’ profitability and a severe headwind for credit growth at an area-wide level. While a great deal has been done to establish stricter supervisory rules and more robust insolvency frameworks, the development of an efficient secondary market for impaired assets is currently lagging behind, especially in the countries where the level of troubled loans is more worrisome. To address this problem, the European Banking Authority has recently proposed to set up an EU-backed asset management company (AMC) for the exchange of NPLs. In addition to the difficulties associated to a full compliance of a public AMC with EU State aid rules, we argue that such a vehicle might be useful in solving just one of the three failures typically affecting the market for NPLs, that is the information asymmetry between buyers and sellers. To successfully tackle the other two – namely, market power and collusion – a correct design of the market is crucial. From this point of view, auction theory can be of great help.

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Research paper thumbnail of Current account imbalances and the Euro Area. Controversies and policy lessons

Economia Politica

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Research paper thumbnail of Monetary Policy, Rational Confidence, and Neo-Fisherian depressions

SSRN Electronic Journal

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Research paper thumbnail of Current Account Imbalances and the Euro Area. Alternative Views

SSRN Electronic Journal

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Research paper thumbnail of “The price is right”: using auction theory to enhance competition in the NPL market

Journal of Banking Regulation

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Research paper thumbnail of Monetary policy, de-anchoring of inflation expectations, and the "new normal

Journal of Macroeconomics

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Research paper thumbnail of The Price Is Rightt. Using Auction Theory to Enhance Competition in the NPL Market

SSRN Electronic Journal

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Research paper thumbnail of The Two Triangles: What Did Wicksell and Keynes Know About Macroeconomics that Modern Economists Do Not (Consider)?

SSRN Electronic Journal, 2000

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Research paper thumbnail of Wicksell, Keynes, and the New Neoclassical Synthesis: What Can We Learn for Monetary Policy?

Economic Notes, 2014

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Research paper thumbnail of Monetary Policy When the NAIRI is Unknown: The Fed and the Great Deviation

Social Science Research Network, 2013

ABSTRACT The outbreak of the financial crisis of 2007 has generated a lively debate on the real o... more ABSTRACT The outbreak of the financial crisis of 2007 has generated a lively debate on the real or alleged faults of the Federal Reserve (Fed). Some economists argue that in the period 2002-2005 the U.S. central bank has taken its target interest rate below the level implied by monetary pricinciples that had been followed for the previous 20 years. One can characterize this decision as a deviation from a policy rule such as a Taylor rule. This behavior determined the end of the Great Moderation and gave birth to the Great Recession. In this paper I challenge this view. I show how the deviations from the Taylor-ruleÕs hypothetical interest rate can be explained by the ambiguity on inflation indicators to use. I also explain how the Great Deviation was instead caused by an error in the estimate of one of the fundamental components of the Taylor rule, i.e. the natural rate of interest. Too expansionary mone- tary policy of the Fed was therefore not due to discretionary choices, but to a structural problem of the Taylor rule. Finally, I show how an adaptive rule based only on observable variables would have avoided the huge gap between short-term rates and natural rates

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Beyond DSGE: A Macrodynamic Model with Intertemporal Coordination Failure

Social Science Research Network, 2010

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Investment-Saving Imbalances with Endogenous Capital Stock

Social Science Research Network, 2013

The current consensus in macroeconomics, or New Neoclassical Synthesis (NNS), is based on dynamic... more The current consensus in macroeconomics, or New Neoclassical Synthesis (NNS), is based on dynamically stochastic general equilibrium (DSGE) modeling with a RBC core to which nominal rigidities are added by way of imperfect competition. The strategy is to minimize the frictions that are required to reproduce both persistent real effects of monetary policy and interaction of interest and prices in a rigorous framework with intertemporal optimization, forward-looking behavior and continuously clearing markets. Unfortunately this A¢â‚¬AiAƒâ€žAƒÂ¶A¢E†AiAƒâ€˜A¢E†AiA¢E†Â«equi- libriumA¢â‚¬AiAƒâ€žAƒÂ¶A¢E†AiAƒâ€˜A¢E†AiA € framework do not allow to discuss the effects and the rela- tions between financial markets and real economy, which were the core of the economic crisis of 2008. This paper presents a dynamic model with endogenous capital stock whereby it is possible to assess, and hopefully clarify, some basic issues concerning the macroeconomics of saving-investment imbalances.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Current Account Imbalances and the Euro Area. Alternative Views

Social Science Research Network, 2019

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Scope and Flaws of the New Neoclassical Synthesis

Social Science Research Network, 2013

The current consensus in macroeconomics represented by the New Neoclassical Synthesis (NNS) is ba... more The current consensus in macroeconomics represented by the New Neoclassical Synthesis (NNS) is based on dynamically stochastic general equilibrium (DSGE) modeling with Real Business Cycle (RBC) core to which nominal rigidities are added by way of imperfect competition. The claim is that the NNS model is capable of rigorously reproducing observable phenomena and is able to provide a microeconomically well-founded basis for the design of optimal policy rules, since it is amenable to welfare analysis. Nevertheless these results come at the price of many ad-hocery and other shortcomings which are indispensable for intertemporal equilibrium modelling of the current kind. Moreover the NNS did not let us think about the financial crisis and the macroeconomic imbalances that were forming in the years of the Great Moderation.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Current account imbalances and the Euro Area. Controversies and policy lessons

Economia Politica, Jan 25, 2021

The crucial role of current account imbalances (CAI) is widely acknowledged in the consensus narr... more The crucial role of current account imbalances (CAI) is widely acknowledged in the consensus narrative of the European crisis that followed the Great Recession. On the basis of this interpretation, CAI play a prominent role in the EU Macroeconomic Imbalances Procedure (MIP), which broadens the EU economic governance framework to include the surveillance of unsustainable macroeconomic trends. Although the widening of the CAI in the Euro Area before the crisis is a matter of fact, and the consensus narrative contains elements of truth, alternative views have been put forward on three main issues: (i) the relevance of CAI, (ii) their causes and connection with the crisis, and (iii) their policy implications. The aim of this paper is to examine these controversial points about the causes, meaning and consequences of CAI, and discuss the alternative policy prescriptions that emerge.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of A Critical Remark on the Determinacy of Equilibrium in Woodford’s 'Interest and Prices

Social Science Research Network, 2010

ABSTRACT The New Neoclassical Synthesis (NNS) epitomized by Michael Woodford's Interest a... more ABSTRACT The New Neoclassical Synthesis (NNS) epitomized by Michael Woodford's Interest and Prices (2003) is based on a system of three equations that determines the short-run dynamics of output, inflation and interest-rates. Using a feedback-rule of the interest rate to change in inflation and output gaps, Woodford is able to show that the model converges to the equilibrium. But the mathematical procedure he uses to achieve this important result is formally allowable but logically not correct. This paper presents a brief critique of the Woodford’s strategy and shows that applying the ”classical criteria” for the determinacy of an equilibrium do not alter the main conclusion of Woodford’s framework.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Intertemporal Coordination Failure and Monetary Policy

Social Science Research Network, 2013

The turn of century long period of sustained growth with low and stable inflation let the economi... more The turn of century long period of sustained growth with low and stable inflation let the economic profession and the public opinion to think that the right theoretical foundation for macroeconomic policy had been found. However the Great Crisis of 2008 indicates a spectac- ular failure of this framework in dealing with sources of macroeconomic instability and providing policy advise. Financial instability is the new challenge for monetary policy. Most of the recent research indicates that financial crises follow prolonged unwinding of investment-saving imbalances which are not contemplated by the standard theoretical framework. This paper draws a dynamic model where investment- saving imbalances are allowed to develop. It introduces different types of feedback interest-rate rules in order to provide some preliminary indications for the conduct of monetary policy.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of “The price is right”: using auction theory to enhance competition in the NPL market

Journal of Banking Regulation, May 29, 2018

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Competition in the Banking Sector and Economic Growth: Panel-Based International Evidence

Social Science Research Network, 2014

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Dal trattato di Maastricht alla crisi dell’euro: cosa abbiamo imparato?

L’Unione monetaria europea è un progetto ambizioso ma risente di una intrinseca debolezza. Ai dub... more L’Unione monetaria europea è un progetto ambizioso ma risente di una intrinseca debolezza. Ai dubbi tradizionali sul fatto che i paesi aderenti costituissero un’area valutaria ottimale, si aggiunge un difetto di governance dovuto sia all’architettura istituzionale sia alle scelte di politica macroeconomica degli ultimi anni. La crisi ha messo in luce in modo drammatico tale inadeguatezza, e la risposta delle politiche di austerità e della deflazione salariale, lungi dal trovare una soluzione alla crisi, l’hanno aggravata e possono compromettere la sopravvivenza della stessa moneta unica. Solo una revisione profonda delle sue istituzioni può mettere l’eurozona su un sentiero di sostenibilità

Bookmarks Related papers MentionsView impact

Research paper thumbnail of The Price Is Rightt. Using Auction Theory to Enhance Competition in the NPL Market

Social Science Research Network, 2017

Almost a decade after the onset of the global financial crisis, a huge stock of nonperforming loa... more Almost a decade after the onset of the global financial crisis, a huge stock of nonperforming loans (NPLs) still represents a major burden for European banks’ profitability and a severe headwind for credit growth at an area-wide level. While a great deal has been done to establish stricter supervisory rules and more robust insolvency frameworks, the development of an efficient secondary market for impaired assets is currently lagging behind, especially in the countries where the level of troubled loans is more worrisome. To address this problem, the European Banking Authority has recently proposed to set up an EU-backed asset management company (AMC) for the exchange of NPLs. In addition to the difficulties associated to a full compliance of a public AMC with EU State aid rules, we argue that such a vehicle might be useful in solving just one of the three failures typically affecting the market for NPLs, that is the information asymmetry between buyers and sellers. To successfully tackle the other two – namely, market power and collusion – a correct design of the market is crucial. From this point of view, auction theory can be of great help.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Current account imbalances and the Euro Area. Controversies and policy lessons

Economia Politica

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Monetary Policy, Rational Confidence, and Neo-Fisherian depressions

SSRN Electronic Journal

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Current Account Imbalances and the Euro Area. Alternative Views

SSRN Electronic Journal

Bookmarks Related papers MentionsView impact

Research paper thumbnail of “The price is right”: using auction theory to enhance competition in the NPL market

Journal of Banking Regulation

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Monetary policy, de-anchoring of inflation expectations, and the "new normal

Journal of Macroeconomics

Bookmarks Related papers MentionsView impact

Research paper thumbnail of The Price Is Rightt. Using Auction Theory to Enhance Competition in the NPL Market

SSRN Electronic Journal

Bookmarks Related papers MentionsView impact

Research paper thumbnail of The Two Triangles: What Did Wicksell and Keynes Know About Macroeconomics that Modern Economists Do Not (Consider)?

SSRN Electronic Journal, 2000

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Wicksell, Keynes, and the New Neoclassical Synthesis: What Can We Learn for Monetary Policy?

Economic Notes, 2014

Bookmarks Related papers MentionsView impact