Macro Prudential Policy In A Fisherian Model Of Financial Innovation

Author : Javier Bianchi,Ms.Emine Boz,Mr.Enrique G. Mendoza
Publisher : International Monetary Fund
Page : 54 pages
File Size : 48,6 Mb
Release : 2012-07-01
Category : Business & Economics
ISBN : 9781475505290

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Macro-prudential Policy in a Fisherian Model of Financial Innovation by Javier Bianchi,Ms.Emine Boz,Mr.Enrique G. Mendoza Pdf

The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification mechanism to study the effects of macro-prudential policy. Financial innovation enhances the ability of agents to collateralize assets into debt, but the riskiness of this new regime can only be learned over time. Beliefs about transition probabilities across states with high and low ability to borrow change as agents learn from observed realizations of financial conditions. At the same time, the collateral constraint introduces a pecuniary externality, because agents fail to internalize the effect of their borrowing decisions on asset prices. Quantitative analysis shows that the effectiveness of macro-prudential policy in this environment depends on the government's information set, the tightness of credit constraints and the pace at which optimism surges in the early stages of financial innovation. The policy is least effective when the government is as uninformed as private agents, credit constraints are tight, and optimism builds quickly.

Author : Mr.Stijn Claessens,Swati R. Ghosh,MissRoxana Mihet
Publisher : International Monetary Fund
Page : 36 pages
File Size : 48,9 Mb
Release : 2014-08-19
Category : Business & Economics
ISBN : 9781498357609

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Macro-Prudential Policies to Mitigate Financial System Vulnerabilities by Mr.Stijn Claessens,Swati R. Ghosh,MissRoxana Mihet Pdf

Macro-prudential policies aimed at mitigating systemic financial risks have become part of the policy toolkit in many emerging markets and some advanced countries. Their effectiveness and efficacy are not well-known, however. Using panel data regressions, we analyze how changes in balance sheets of some 2,800 banks in 48 countries over 2000–2010 respond to specific macro-prudential policies. Controlling for endogeneity, we find that measures aimed at borrowers––caps on debt-to-income and loan-to-value ratios––and at financial institutions––limits on credit growth and foreign currency lending––are effective in reducing asset growth. Countercyclical buffers are little effective through the cycle, and some measures are even counterproductive during downswings, serving to aggravate declines, consistent with the ex-ante nature of macro-prudential tools.

Author : Juan Pablo Medina Guzman,Mr.Jorge Roldos
Publisher : International Monetary Fund
Page : 44 pages
File Size : 55,8 Mb
Release : 2014-02-12
Category : Business & Economics
ISBN : 9781484302897

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Monetary and Macroprudential Policies to Manage Capital Flows by Juan Pablo Medina Guzman,Mr.Jorge Roldos Pdf

We study interactions between monetary and macroprudential policies in a model with nominal and financial frictions. The latter derive from a financial sector that provides credit and liquidity services that lead to a financial accelerator-cum-fire-sales amplification mechanism. In response to fluctuations in world interest rates, inflation targeting dominates standard Taylor rules, but leads to increased volatility in credit and asset prices. The use of a countercyclical macroprudential instrument in addition to the policy rate improves welfare and has important implications for the conduct of monetary policy. “Leaning against the wind” or augmenting a standard Taylor rule with an argument on credit growth may not be an effective policy response.

Author : Alan Finkelstein Shapiro,Andres Gonzalez
Publisher : International Monetary Fund
Page : 48 pages
File Size : 50,5 Mb
Release : 2015-04-03
Category : Business & Economics
ISBN : 9781484320662

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Macroprudential Policy and Labor Market Dynamics in Emerging Economies by Alan Finkelstein Shapiro,Andres Gonzalez Pdf

Emerging economies have high shares of self-employed individuals running owner-only firms who, in contrast to many salaried firms, have little access to formal financing and therefore rely on informal financing (input credit) from other firms. We build a small open economy real business cycle model with labor and financial market frictions where formal credit markets, informal credit, and the structure of the labor market interact. The model successfully replicates the cyclical behavior of sectoral employment, formal credit, and the main macroeconomic aggregates in emerging economies. We show that a countercyclical macroprudential policy that reduces formal credit fluctuations has positive though quantitatively limited effects on consumption and output volatility, but generates larger unemployment fluctuations in response to productivity shocks; the same policy increases labor market and aggregate volatility in response to net worth shocks. The link between input credit and the labor market structure---key for capturing the cyclical dynamics of labor and credit markets in the data---plays a crucial role for these results.

Author : Mr.Mahinder Singh Gill,Mr.Paul Louis Ceriel Hilbers,Mr.Alfredo Mario Leone,Mr.Owen Evens
Publisher : INTERNATIONAL MONETARY FUND
Page : 0 pages
File Size : 47,5 Mb
Release : 2000-04-15
Category : Business & Economics
ISBN : 1557758913

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Macroprudential Indicators of Financial System Soundness by Mr.Mahinder Singh Gill,Mr.Paul Louis Ceriel Hilbers,Mr.Alfredo Mario Leone,Mr.Owen Evens Pdf

Following the severe financial crises of the 1990s, identifying and assessing financial sector vulnerabilities has become a key priority of the international community. The costly disruptions in global markets underscored the need to establish a set of monitorable variables for evaluating strengths and weaknesses in financial institutions and to alert authorities of impending problems. These variables, indicators, of financial system health and stability known collectively as macroprudential indicators, are the subject of this Occasional Paper by the Monetary and Exchange Affairs Department and the Statistics Department. Macroprudential indicators take measures at both the level of aggregated financial institutions and at the macroeconomic level; financial crises often occur when weaknesses are identified in both. The authors provide a breakdown and explanations of these indicators and a review of the theoretical and empirical work done thus far. Work at other international and multilateral institutions is included as well as the experiences of several national central banks and supervisory agencies. This paper provides a valuable reference source of current knowledge about macroprudential indicators and issues related to their analysis, identification, measurement, and possible dissemination.

Author : Anonim
Publisher : Elsevier
Page : 370 pages
File Size : 40,8 Mb
Release : 2022-04-07
Category : Business & Economics
ISBN : 9780323957731

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Handbook of International Economics by Anonim Pdf

Handbook of International Economics, Sixth Edition provides a definitive reference for researchers and advanced graduate students. The book includes self-contained surveys of the current state of a branch of economics in the form of chapters prepared by leading specialists. These surveys summarize not only received results but also newer developments from journal articles and discussion papers. Chapters cover The Global Financial Cycle, Dominant Currency Paradigm: a review, Rethinking exchange rate regimes, CIP deviations, the dollar, and frictions in international capital markets, International macroeconomics with imperfect financial markets, The prudential use of capital controls and foreign currency reserves, and Financial crises: a survey. Provides the authority and expertise of leading contributors from an international board of authors Presents the latest release in the Handbook of International Economics series Includes self-contained surveys of the current state of a branch of economics in the form of chapters prepared by leading specialists

Author : Ms. Mitali Das,Ms. Gita Gopinath,Şebnem Kalemli-Özcan
Publisher : International Monetary Fund
Page : 54 pages
File Size : 50,6 Mb
Release : 2022-01-07
Category : Business & Economics
ISBN : 9781616358341

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Preemptive Policies and Risk-Off Shocks in Emerging Markets by Ms. Mitali Das,Ms. Gita Gopinath,Şebnem Kalemli-Özcan Pdf

We show that “preemptive” capital flow management measures (CFM) can reduce emerging markets and developing countries’ (EMDE) external finance premia during risk-off shocks, especially for vulnerable countries. Using a panel dataset of 56 EMDEs during 1996–2020 at monthly frequency, we document that countries with preemptive policies in place during the five year window before risk-off shocks experienced relatively lower external finance premia and exchange rate volatility during the shock compared to countries which did not have such preemptive policies in place. We use the episodes of Taper Tantrum and COVID-19 as risk-off shocks. Our identification relies on a difference-in-differences methodology with country fixed effects where preemptive policies are ex-ante by construction and cannot be put in place as a response to the shock ex-post. We control the effects of other policies, such as monetary policy, foreign exchange interventions (FXI), easing of inflow CFMs and tightening of outflow CFMs that are used in response to the risk-off shocks. By reducing the impact of risk-off shocks on countries’ funding costs and exchange rate volatility, preemptive policies enable countries’ continued access to international capital markets during troubled times.

Author : Deepal Basak,Mr.Yunhui Zhao
Publisher : International Monetary Fund
Page : 41 pages
File Size : 47,9 Mb
Release : 2018-05-31
Category : Business & Economics
ISBN : 9781484357996

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Does Financial Tranquility Call for Stringent Regulation? by Deepal Basak,Mr.Yunhui Zhao Pdf

Consistent with the Minsky hypothesis and the “volatility paradox” (Brunnermeier and Sannikov, 2014), recent empirical evidence suggests that financial crises tend to follow prolonged periods of financial stability and investor optimism. But does financial tranquility always call for more stringent regulation over time? We examine this question using a simple portfolio choice model that features the interaction between learning and externality. We evaluate the potential of a macroprudential policy to restore efficiency, and characterize the necessary and sufficient condition for the countercyclicality of the optimal regulation/macroprudential policy. Our paper implies that policymakers should not only consider the cyclical indicators “on the surface” (for example, credit growth), but also closely examine the deep structural change of the resilience of the system. The paper also highlights the importance of assigning the macroprudential policy function to independent agencies with technical expertise.

Author : Hasan Dincer,Ümit Hacioglu
Publisher : Springer Science & Business Media
Page : 275 pages
File Size : 55,9 Mb
Release : 2013-11-23
Category : Business & Economics
ISBN : 9783319011257

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Globalization of Financial Institutions by Hasan Dincer,Ümit Hacioglu Pdf

This peer-reviewed volume from the Society for the Study of Business and Finance, discusses current issues in globalization and financial system from an international political and economic perspective. Contemporary instruments and actors in the global financial system are specially analyzed and the discussion of managerial and financial issues of the global financial strategies offers novelty to readers and researchers in the field.

Author : Mr.Gian Milesi-Ferretti,Assaf Razin
Publisher : International Monetary Fund
Page : 45 pages
File Size : 42,9 Mb
Release : 1998-06-01
Category : Business & Economics
ISBN : 9781451952421

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Current Account Reversals and Currency Crises by Mr.Gian Milesi-Ferretti,Assaf Razin Pdf

This paper studies large reductions in current account deficits and exchange rate depreciations in low- and middle-income countries. It examines which factors help predict the occurrence of a reversal or a currency crisis, and how these events affect macroeconomic performance. Both domestic factors, such as the low reserves, and external factors, such as unfavorable terms of trade, are found to trigger reversals and currency crises. The two types of events are, however, distinct; an exchange rate crash is associated with a fall in output growth and a recovery thereafter, while for reversals there is no systematic evidence of a growth slowdown.

Author : International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
Page : 17 pages
File Size : 55,9 Mb
Release : 2012-09-27
Category : Business & Economics
ISBN : 9781475510867

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IMF Research Bulletin, September 2012 by International Monetary Fund. Research Dept. Pdf

The research summaries in the September 2012 issue of the IMF Research Bulletin are "Surges in Capital Flows: Why History Repeats Itself" (by Mahvash S. Qureshi) and "The LIC-BRIC Linkage: Growth Spillovers" (by Issouf Samake, Yongzheng Yang, and Catherine Pattillo). The Q&A covers "Seven Questions on Monetary Transmission in Low-Income Countries" (by Prachi Mishra and Peter Montiel). "Conversations with a Visiting Scholar" features an interview with IMF Fellow Olivier Coibion. Also included in this issue are details on the IMF Fellowship Program, visiting scholars at the IMF, a listing of recently published IMF Working Papers and Staff Discussion Notes, and an announcement on IMF Economic Review's first Impact Factor.

Author : Anonim
Publisher : Unknown
Page : 680 pages
File Size : 50,9 Mb
Release : 2012
Category : Commerce
ISBN : MINN:31951P010525027

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IMF Economic Review by Anonim Pdf

Author : Nina Biljanovska,Lucyna Gornicka,Alexandros Vardoulakis
Publisher : International Monetary Fund
Page : 51 pages
File Size : 42,7 Mb
Release : 2019-08-30
Category : Business & Economics
ISBN : 9781513512662

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Optimal Macroprudential Policy and Asset Price Bubbles by Nina Biljanovska,Lucyna Gornicka,Alexandros Vardoulakis Pdf

An asset bubble relaxes collateral constraints and increases borrowing by credit-constrained agents. At the same time, as the bubble deflates when constraints start binding, it amplifies downturns. We show analytically and quantitatively that the macroprudential policy should optimally respond to building asset price bubbles non-monotonically depending on the underlying level of indebtedness. If the level of debt is moderate, policy should accommodate the bubble to reduce the incidence of a binding collateral constraint. If debt is elevated, policy should lean against the bubble more aggressively to mitigate the pecuniary externalities from a deflating bubble when constraints bind.

Author : Mr.Stijn Claessens,Mr.Ayhan Kose
Publisher : International Monetary Fund
Page : 66 pages
File Size : 50,5 Mb
Release : 2013-01-30
Category : Business & Economics
ISBN : 9781475561005

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Financial Crises Explanations, Types, and Implications by Mr.Stijn Claessens,Mr.Ayhan Kose Pdf

This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

Author : R. Barwell
Publisher : Springer
Page : 544 pages
File Size : 49,8 Mb
Release : 2013-05-07
Category : Business & Economics
ISBN : 9781137274465

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Macroprudential Policy by R. Barwell Pdf

The financial crisis of 2008 is probably the single most important economic event in post-war history. Macroprudential policy is the response to that crisis – a determined attempt to stabilize the financial system. This book explains why it is necessary, who will be responsible for executing this responsibility and how they will go about doing it.