What killed the Phillips curve?

Machine learning models of inflation during different crisis periods

I urval från Stockholms universitets publikationsdatabas

• Pass-through with volatile exchange rates and inflation targeting

  2023. Annika Alexius, Mikaela Holmberg. Review of World Economics

  Artikel

  As central banks struggle against high inflation in the aftermath of the Covid-19 pandemic and the war in the Ukraine, it is essential to understand the open economy aspects of inflation determination. Using a Bayesian VAR with time-varying parameters and stochastic volatility, we analyze the behavior of pass-through across time and in relation to macroeconomic variables. Pass-through increases with the size of the volatility of the exchange rate and the level, variance and persistence of shocks to domestic prices, which is in line with theory. The persistence of exchange rate shocks is associated with higher pass-through only for observations with low inflation. Furthermore, the effect of inflation persistence on pass-through is much higher for exchange rate appreciations than for depreciations. 

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• Stock prices and GDP in the long run

  2018. Annika Alexius, Daniel Spång. Journal of Applied Finance and Banking 8 (4), 107-126

  Artikel

  Previous studies have documented long run equilibrium relationships between either stock prices and labour income or dividends and consumption. In a general equilibrium stochastic growth model, these variables are related in the long run because they are all driven by the same stochastic trend - the fundamental development of productivity. We show that national stock price indices are cointegrated with domestic and foreign GDP in the G7 countries. Higher domestic productivity increase both domestic GDP and domestic stock prices. In the panel, countries with favorable GDP developments also have higher stock prices. The relationship between relative GDP and relative stock prices is stronger for countries with markedly different GDP growth compared to their trading partners.

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• The interbank market risk premium, central bank interventions, and measures of market liquidity

  2014. Annika Alexius, Helene Birenstam, Johanna Eklund. Journal of International Money and Finance 48, 202-217

  Artikel

  When the interbank market risk premium soared during the financial crisis, it created a wedge between interest rates actually paid by private agents and the rapidly falling policy rates. Many central banks attempted to improve the situation by supplying liquidity to the domestic interbank market. This paper studies the Swedish interbank market risk premium using a unique data set on traded volume between banks and between banks and the Riksbank. We find that the main determinants of the Swedish interbank premium are international variables, such as US and EURO area risk premia. International exchange rate volatility and the EURO/USD deviations from CIP also matters, while standard measures of domestic market liquidity and domestic credit risk have insignificant effects. Nonlinear smooth transition (STR) models show that U.S. financial variables are more important in times of a rising U.S. risk premium. Our measure of actual turnover in the interbank market is associated with a significant reduction of the interbank market risk premium, as are credit provisions by the central bank.

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• Exchange Rates and Long-Term Bonds

  2012. Annika Alexius, Peter Sellin. Scandinavian Journal of Economics 114 (3), 974-990

  Artikel

  There is tentative evidence to suggest that the well-documented empirical failure of uncovered interest parity (UIP) is confined to short-term interest rates. However, tests of UIP for long-term bonds are thwarted by various data problems. These data problems can be avoided by focusing on short investments in long-term bonds. This paper concerns the relationship between changes in the US dollar-Deutsche Mark exchange rate and returns to short investments in US and German long-term government bonds. The hypothesis that expected returns to investments in bonds denominated in the two currencies are equal is not rejected, and the estimated slope coefficients are positive. For corresponding short-term interest rates, the typical finding of negative and large Fama coefficients is confirmed. We conclude that it is the maturity of the asset, rather than the investment horizon, that matters for the results.

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• Monetary policy and Swedish Unemployment Fluctuations

  2008. Annika Alexius, Bertil Holmlund. Economics - The Open-Access Open-Assessment E-Journal

  Artikel

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• Production Function Residuals, VAR Technology Shocks, and Hours Worked: Evidence From Industry Data

  2007. Annika Alexius, Mikael Carlsson. Economics Letters

  Artikel

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• Can Endogenous Monetary Policy Explain the Deviations from UIP?

  2002. Annika Alexius, David Kjellberg.

  Rapport

  The co-movements of nominal exchange rates and short-term interest rates as the economy is hit by shocks is a potential source of ex post deviations from uncovered interest rate parity. This paper investigates whether an established model of endogenous monetary policy in an open economy is capable of explaning the exchange rate risk premium puzzle. Time series on interest differentials and exchange rate changes are generated from the Svensson (2000) model. Uncovered interest rate parity is tested on the simulated data and the b-coefficients are investigated. For most realistic choices of parameter values, the b-coefficients are positive but much smaller than the unity value expected from UIP. It is however also possible to obtain large, negative b-coefficients if the central bank is engaged in interest rate smoothing.

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