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Purpose: The idea of this study is to provide a solid Financial Condition Index (FCI) that allows the monetary transmission policy to be monitored in a country which in recent decades has suffered from major financial and monetary crises. Design/methodology/approach: The authors construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime. Using monthly data from 1995 to 2017, the authors estimate FCIs with two different methodologies and build the index by taking into account the mechanism of transmission of monetary policy and incorporating the most relevant financial variables. Findings: This study's results show that, likewise for developing countries as Mexico, an FCI could be a useful tool for managing monetary policy in reducing macroeconomic fluctuations. Originality/value: Apart from building a predictor of possible financial stress, the authors construct an FCI for a central bank that pursues inflation targeting and to analyse the role of financial asset prices in formulating monetary policy. Highlights: We construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime. The FCIs are based on (1) a vector autoregression model (VAR); (2) an autoregressive distributed lag model (ARDL) and (3) a factor-augmented vector autoregression model (FAVAR). FCI could become a new target for monetary policy within a hybrid inflation-targeting framework. FCI could be a good tool for managing monetary policy in developing countries with a low-inflation environment. [ABSTRACT FROM AUTHOR]

Pivoting on the idea that differences in production and financial systems may affect monetary transmission mechanisms, a global vector autoregressive (GVAR) model is built and the effectiveness of monetary policy on the real economy in the Italian regions in the period 2000–16 is tested, also taking interaction effects into account. The results show that regional gross domestic product responds positively, but asymmetrically to an expansionary monetary policy, while prices fall in the short run. It is also shown that short- and long-term interest rates react in accordance with theory. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to analyse the long-term nature of the interrelationship between interest rate and exchange rate. Design/methodology/approach: By employing Mexican data, the authors estimate a non-linear autoregressive distributed lags (NARDL) model to investigate the nature of the changes and the interaction between interest rate and exchange rate in response to monetary authorities' actions. Findings: The results show that, contrary to simplistic predictions, the real exchange rate causes the real interest rate in an asymmetric way. The bounds testing approach of the NARDL models suggests the presence of co-integration among the variables and the exchange rate variations appear to have significant long-run effects on the interest rate. Most importantly, these effects are asymmetric and positive variations in the exchange rate have a lower impact on the interest rate. It is also interesting to report that the reverse is not true: the interest rate in the long-run exerts no statistical significant impact on the exchange rate. Practical implications: The asymmetric long-term relationship between real exchange rate and real interest rate is evidence of why monetary authorities are reluctant to free float exchange rate. In Mexico, as in most developing countries, monetary policy strongly responds to exchange rate movements because these have relevant effects on commercial trade. Moreover, in dollarized economies these effects are stronger because of pass-through impacts to inflation, income distribution and balance-sheet equilibrium (the well-known "original sin"). Originality/value: Under inflation targeting and flexible exchange rate regime, despite central banks pursue the control of short-term interest rate, in the long-run one could observe that it is the exchange rate that influences the interest rate, and that this reverse causality is stronger in emerging economies. This paper contributes by analysing the asymmetric relationship between the variables. [ABSTRACT FROM AUTHOR]

In this paper, a panel analysis is employed to investigate the effects of fiscal policies on stock market indexes in 11 members of the Eurozone. Many studies have focused on the effects of monetary policy on the stock market, whereas the number of contributions studying the effects of fiscal policy on the stock market is surprisingly limited. Therefore, we know little, if any, on the sign and stability of the stock market reaction to fiscal policies. Our results show that fiscal policies influence the stock market and that, following an increase (decrease) in public deficit, stock market indexes go down (up). Nevertheless, further analysis shows that the signs of the estimated stock market reactions are not constant over time and that they change according to the surrounding macroeconomic scenario. [ABSTRACT FROM AUTHOR]

Money demand stability is a crucial issue for monetary policy efficacy, and it is particularly endangered when substantial changes occur in the monetary system. By implementing the ARDL technique, this study intends to estimate the impact of money demand determinants in Italy over a long period (1861-2011) and to investigate the stability of the estimated relations. We show that instability cannot be excluded when a standard money demand function is estimated, irrespectively of the use of M1 or M2. Then, we argue that the reason for possible instability resides in the omission of relevant variables, as we show that a fully stable demand for narrow money ( M1) can be obtained from an augmented money demand function involving real exchange rate and its volatility as additional explanatory variables. These results also allow us to argue that narrower monetary aggregates should be employed in order to obtain a stable estimated relation. [ABSTRACT FROM AUTHOR]

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Stability of money demand is a crucial issue for the efficacy of monetary policy. This is particularly true in the presence of significant exogenous shocks to the monetary system. By implementing the most recent econometric testing procedures, this article intends to investigate the consistency of the stability of money demand in Italy, one of the larger European Monetary Union (EMU) countries, before and after the EMU. Among others, the objective is, indeed, to ascertain the effect of a change in the currency regime on the monetary aggregates and to provide a valid empirical model which is a viable tool for policy performance. [ABSTRACT FROM PUBLISHER]

Dow S., Montagnoli A. and Napolitano O. Interest rates and convergence across Italian regions, Regional Studies. The purpose of this paper is to investigate the evidence for economic convergence across Italian regions using trends in interest rate spreads and premia as indicators of regional credit conditions. The results indicate the presence of persistent interest rate differentials, and thus an absence of convergence across the twenty political regions, but a high degree of convergence is observed within the four macroeconomic areas. Dow S., Montagnoli A. and Napolitano O. 意大利区域的利息率与收敛，区域研究。使用利率差以及风险溢价作为区域信用状况的指标，本文考察了意大利区域经济收敛相关的证据。结果表明存在着持续的利率差，也因此在20个政区之间没有出现经济收敛，但在四个宏观经济区之间发现了了较高程度的经济收敛。 利率 单根 面板数据 收敛 意大利 Dow S., Montagnoli A. et Napolitano O. Les taux d'intérêt et la convergence à travers les régions italiennes, Regional Studies. A partir des tendances des marges d'intérêt sur les crédits et des primes sur les taux d'intérêt comme indicateurs des conditions de crédit régionales, cet article cherche à examiner les raisons en faveur de la convergence à travers les régions italiennes. Les résultats laissent voir la présence des différentiels de taux d'intérêt et, par la suite, un manque de convergence à travers les vingt régions administratives, mais on constate un niveau élevé de convergence au sein des quatre zones macro-économiques. Taux d'intérêt Racine unitaire Echantillon permanent Convergence Italie Dow S., Montagnoli A. und Napolitano O. Zinssätze und Konvergenz in italienischen Regionen, Regional Studies. In diesem Beitrag untersuchen wir anhand der Trends bei den Zinsspannen und Prämien als Indikatoren der regionalen Kreditbedingungen die Belege für eine wirtschaftliche Konvergenz in den italienischen Regionen. Die Ergebnisse lassen auf die Präsenz von persistierenden Differenzialen bei den Zinssätzen und somit auf die Abwesenheit einer Konvergenz innerhalb der 20 politischen Regionen schließen, wohingegen innerhalb der vier makroökonomischen Gebiete ein hohes Maß an Konvergenz beobachtet wird. Zinssätze Einheitswurzel Paneldaten Konvergenz Italien Dow S., Montagnoli A. y Napolitano O. Tipos de interés y convergencia en las regiones italianas, Regional Studies. La finalidad de este artículo es investigar las evidencias de la convergencia económica en las regiones italianas a partir de las tendencias en los diferenciales del tipo de interés y las primas como indicadores de las condiciones del crédito regional. Los resultados indican la presencia de diferenciales persistentes del tipo de interés y, por tanto, una ausencia de convergencia en las veinte regiones políticas, aunque se observa un alto grado de convergencia en las cuatro áreas macroeconómicas. Tipos de interés Raíz unitaria Datos de panel Convergencia Italia [ABSTRACT FROM AUTHOR]

The paper proposes an explanation for the 1992 currency crisis as the result of monetary policy behaviour and private agents' speculation. Our analysis reveals how speculators' expectations and the behaviour of the monetary policy authority were formed on the widespread beliefs about the future value of income. We show that the real effects of monetary policy measures represent the link between the action of the central bank and speculation. [ABSTRACT FROM AUTHOR]

The aim of this paper is to investigate whether the 2002 crisis in Argentina was, at least to some extent, self-fulfilling. The theoretical basis we refer to is the so-called “second-generation” models. We use a Markov-switching model that allows us to empirically estimate the role played by fundamentals and/or shifts in devaluation expectations. Our results suggest that shifts in expectations have induced the crisis. However, because deteriorating fundamentals are also significant, we conclude that the collapse of the peg has been partly driven by adverse fundamentals and that abrupt shifts in devaluation expectations have forced a premature exit. [ABSTRACT FROM AUTHOR]