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Working paper No. 287: The Cost Channel Effect of Monetary Transmission: How Effective is the ECB’s Low Interest Rate Policy for Increasing Inflation?

PublicationWorking paper
Andreas Stephan, Företagandets villkor, Inflation, Nationalekonomi, Valuta
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Abstract

We examine whether monetary transmission during the financial and sovereign debt crisis was dominated by the cost channel or by the demand-side channel effect. We use two approaches to track down the potential pass-through of changes in the monetary policy rate to those in consumer prices. First, we utilize panel data from the German manufacturing industry. Second, we conduct time series analyses for Germany, Italy, and Spain. We find that when manufacturing firms’ interest costs drop, the changes in their respective industry’s price index are smaller one year later. This finding is consistent with the cost channel theory. Taken together, the results of both panel data and time series analyses imply that the ECB’s low interest rate policy has worked better for boosting inflation in Italy and Spain than in Germany.

Schäfer, D., Stephan, A., & Trung Hoang, K. (2017). The Cost Channel Effect of Monetary Transmission: How Effective is the ECB’s Low Interest Rate Policy for Increasing Inflation? Ratio Working Paper No. 287. Stockholm: Ratio.

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Working paper No. 287: The Cost Channel Effect of Monetary Transmission: How Effective is the ECB’s Low Interest Rate Policy for Increasing Inflation?
Working paperPublication
Schäfer, D, Stephan, A Trung Hoang, K
Publication year

2017

Published in

Ratio Working Paper

Abstract

We examine whether monetary transmission during the financial and sovereign debt crisis was dominated by the cost channel or by the demand-side channel effect. We use two approaches to track down the potential pass-through of changes in the monetary policy rate to those in consumer prices. First, we utilize panel data from the German manufacturing industry. Second, we conduct time series analyses for Germany, Italy, and Spain. We find that when manufacturing firms’ interest costs drop, the changes in their respective industry’s price index are smaller one year later. This finding is consistent with the cost channel theory. Taken together, the results of both panel data and time series analyses imply that the ECB’s low interest rate policy has worked better for boosting inflation in Italy and Spain than in Germany.

Working paper No. 287: The Cost Channel Effect of Monetary Transmission: How Effective is the ECB’s Low Interest Rate Policy for Increasing Inflation?
Working paperPublication
Schäfer, D, Stephan, A Trung Hoang, K
Publication year

2017

Published in

Ratio Working Paper

Abstract

We examine whether monetary transmission during the financial and sovereign debt crisis was dominated by the cost channel or by the demand-side channel effect. We use two approaches to track down the potential pass-through of changes in the monetary policy rate to those in consumer prices. First, we utilize panel data from the German manufacturing industry. Second, we conduct time series analyses for Germany, Italy, and Spain. We find that when manufacturing firms’ interest costs drop, the changes in their respective industry’s price index are smaller one year later. This finding is consistent with the cost channel theory. Taken together, the results of both panel data and time series analyses imply that the ECB’s low interest rate policy has worked better for boosting inflation in Italy and Spain than in Germany.

Ratio Working Paper No. 349: Industrial conflict in essential services in a new era – Swedish rules in a comparative perspective
Working paperPublication
Karlson, N.
Publication year

2021

Published in

Ratio Working Paper

Abstract

This paper examines whether the Swedish regulatory system of dealing with industrial conflicts that affect essential services need an update or reform. Are the existing rules effective in a world where many essential services are upheld by many interdependent agents in complex systems where every single node becomes critical for the functioning of the system, and where the essential service activities could be either private or public? A comparative study is conducted with the corresponding regulatory systems of the United Kingdom, Germany, and Denmark.
The conclusion is that Sweden is a special case. The Swedish protection against and readiness in dealing with societally harmful industrial conflicts in essential services is weaker than in the countries of comparison. Just as in relation to other threats to essential services, it is not sustainable to claim that just because such a threat is not currently present, there would be no need for preparedness.
There are many alternative ways to handle this. Desirable methods should both prevent harmful conflicts from erupting and end conflicts that have grown harmful to society at a later stage. The labour market organisations should have a mutual interest in reforming the rules.

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