The Costs Of Macroprudential Deleveraging In A Liquidity Trap

Author : Mr.Jiaqian Chen,Daria Finocchiaro,Jesper Lindé,Karl Walentin
Publisher : International Monetary Fund
Page : 66 pages
File Size : 47,7 Mb
Release : 2020-06-12
Category : Business & Economics
ISBN : 9781513546803

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The Costs of Macroprudential Deleveraging in a Liquidity Trap by Mr.Jiaqian Chen,Daria Finocchiaro,Jesper Lindé,Karl Walentin Pdf

We examine the effects of various borrower-based macroprudential tools in a New Keynesian environment where both real and nominal interest rates are low. Our model features long-term debt, housing transaction costs and a zero-lower bound constraint on policy rates. We find that the long-term costs, in terms of forgone consumption, of all the macroprudential tools we consider are moderate. Even so, the short-term costs differ dramatically between alternative tools. Specifically, a loan-to-value tightening is more than twice as contractionary compared to loan-to-income tightening when debt is high and monetary policy cannot accommodate.

Author : Jiaqian Chen
Publisher : Unknown
Page : 128 pages
File Size : 42,6 Mb
Release : 2020
Category : Electronic
ISBN : OCLC:1178543512

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The Costs of Macroprudential Deleveraging in a Liquidity Trap by Jiaqian Chen Pdf

Author : Mr. Anton Korinek,Alp Simsek
Publisher : International Monetary Fund
Page : 49 pages
File Size : 43,9 Mb
Release : 2014-07-21
Category : Business & Economics
ISBN : 9781498356398

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Liquidity Trap and Excessive Leverage by Mr. Anton Korinek,Alp Simsek Pdf

We investigate the role of macroprudential policies in mitigating liquidity traps driven by deleveraging, using a simple Keynesian model. When constrained agents engage in deleveraging, the interest rate needs to fall to induce unconstrained agents to pick up the decline in aggregate demand. However, if the fall in the interest rate is limited by the zero lower bound, aggregate demand is insufficient and the economy enters a liquidity trap. In such an environment, agents' exante leverage and insurance decisions are associated with aggregate demand externalities. The competitive equilibrium allocation is constrained inefficient. Welfare can be improved by ex-ante macroprudential policies such as debt limits and mandatory insurance requirements. The size of the required intervention depends on the differences in marginal propensity to consume between borrowers and lenders during the deleveraging episode. In our model, contractionary monetary policy is inferior to macroprudential policy in addressing excessive leverage, and it can even have the unintended consequence of increasing leverage.

Author : Mr. Philippe D Karam,Mikhail Pranovich,Mr. Jan Vlcek
Publisher : International Monetary Fund
Page : 45 pages
File Size : 50,8 Mb
Release : 2021-10-22
Category : Business & Economics
ISBN : 9781589068711

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An Extended Quarterly Projection Model: Credit Cycle, Macrofinancial Linkages and Macroprudential Measures: The Case of the Philippines by Mr. Philippe D Karam,Mikhail Pranovich,Mr. Jan Vlcek Pdf

We extend a modern practical Quarterly Projection Model to study credit cycle dynamics and risks, focusing on macrofinancial linkages and the role of macroprudential policy in achieving economic and financial stability. We tailor the model to the Philippines and evaluate the model’s properties along several dimensions. The model produces plausible dynamics and sensible forecasts. This along with its simplicity makes it useful for policy analysis. In particular, it should help policymakers understand the quantitative implications of responding to changes in domestic financial conditions, along with other shocks, through the joint use of macroprudential and monetary policies.

Author : International Monetary,International Monetary Fund. Office of Internal Audit
Publisher : International Monetary Fund
Page : 80 pages
File Size : 53,8 Mb
Release : 2021-11-30
Category : Business & Economics
ISBN : 9781616356187

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Eleventh Periodic Monitoring Report on The Status of Management Implementation Plans In Response To Board-Endorsed IEO Recommendations by International Monetary,International Monetary Fund. Office of Internal Audit Pdf

The Eleventh Periodic Monitoring Report (PMR) on the Status of Management Implementation Plans (MIPs) in Response to Board-Endorsed Independent Evaluation Office (IEO) Recommendations assessed the progress made over the past 18 months on 72 actions contained in 10 MIPs. Significant progress has been made with the implementation of management actions, despite challenges that have arisen from the ongoing COVID-19 pandemic. Overall, 29 of the 72 actions for which implementation progress is assessed in the Eleventh PMR were deemed to have been satisfactorily implemented, while 35 remain open, and eight actions are being reformulated in line with the Board-approved triage framework for long-standing open actions. Despite the effect of reprioritization to make space for the urgent needs of the membership resulting from the pandemic, the pace of implementation observed in the Eleventh PMR, with the 29 actions closed, significantly exceeds the previous trend of about 15 implemented actions per year. Of the 35 open actions, 16 are more than one year past their implementation due dates. The reprioritization of activities owing to the COVID-19 pandemic and resource constraints on account of several years of flat budgets led to delays in the implementation of several actions, partly because of the postponement of important reviews.

Author : Nina Biljanovska,Lucyna Gornicka,Alexandros Vardoulakis
Publisher : International Monetary Fund
Page : 51 pages
File Size : 55,9 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 : International Monetary,International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
Page : 202 pages
File Size : 54,7 Mb
Release : 2024-04-16
Category : Business & Economics
ISBN : 9798400255892

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World Economic Outlook, April 2024 by International Monetary,International Monetary Fund. Research Dept. Pdf

The latest World Economic Outlook reports economic activity was surprisingly resilient through the global disinflation of 2022–23, despite significant central bank interest rate hikes to restore price stability. Risks to the global outlook are now broadly balanced compared with last year. Monetary policy should ensure that inflation touches down smoothly, while a renewed focus on fiscal consolidation is needed to rebuild room for budgetary maneuver and to ensure debt sustainability. Structural reforms are crucial to revive medium-term growth prospects amid constrained policy space.

Author : John B. Taylor,Harald Uhlig
Publisher : Elsevier
Page : 2744 pages
File Size : 52,6 Mb
Release : 2016-11-12
Category : Business & Economics
ISBN : 9780444594884

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Handbook of Macroeconomics by John B. Taylor,Harald Uhlig Pdf

Handbook of Macroeconomics Volumes 2A and 2B surveys major advances in macroeconomic scholarship since the publication of Volume 1 (1999), carefully distinguishing between empirical, theoretical, methodological, and policy issues, including fiscal, monetary, and regulatory policies to deal with crises, unemployment, and economic growth. As this volume shows, macroeconomics has undergone a profound change since the publication of the last volume, due in no small part to the questions thrust into the spotlight by the worldwide financial crisis of 2008. With contributions from the world’s leading macroeconomists, its reevaluation of macroeconomic scholarship and assessment of its future constitute an investment worth making. Serves a double role as a textbook for macroeconomics courses and as a gateway for students to the latest research Acts as a one-of-a-kind resource as no major collections of macroeconomic essays have been published in the last decade Builds upon Volume 1 by using its section headings to illustrate just how far macroeconomic thought has evolved

Author : M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara
Publisher : World Bank Publications
Page : 403 pages
File Size : 41,8 Mb
Release : 2021-03-03
Category : Business & Economics
ISBN : 9781464815454

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Global Waves of Debt by M. Ayhan Kose,Peter Nagle,Franziska Ohnsorge,Naotaka Sugawara Pdf

The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.

Author : Ms.Valerie Cerra,A. Fatas,Ms.Sweta Chaman Saxena
Publisher : International Monetary Fund
Page : 50 pages
File Size : 41,5 Mb
Release : 2020-05-29
Category : Business & Economics
ISBN : 9781513536996

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Hysteresis and Business Cycles by Ms.Valerie Cerra,A. Fatas,Ms.Sweta Chaman Saxena Pdf

Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.

Author : Callum Jones,Virgiliu Midrigan,Mr.Thomas Philippon
Publisher : International Monetary Fund
Page : 51 pages
File Size : 48,8 Mb
Release : 2018-08-30
Category : Business & Economics
ISBN : 9781484374986

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Household Leverage and the Recession by Callum Jones,Virgiliu Midrigan,Mr.Thomas Philippon Pdf

We evaluate and partially challenge the ‘household leverage’ view of the Great Recession. In the data, employment and consumption declined more in states where household debt declined more. We study a model where liquidity constraints amplify the response of consumption and employment to changes in debt. We estimate the model with Bayesian methods combining state and aggregate data. Changes in household credit limits explain 40 percent of the differential rise and fall of employment across states, but a small fraction of the aggregate employment decline in 2008-2010. Nevertheless, since household deleveraging was gradual, credit shocks greatly slowed the recovery.

Author : Laurent Ferrara,Ignacio Hernando,Daniela Marconi
Publisher : Springer
Page : 298 pages
File Size : 55,9 Mb
Release : 2018-06-13
Category : Business & Economics
ISBN : 9783319790756

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International Macroeconomics in the Wake of the Global Financial Crisis by Laurent Ferrara,Ignacio Hernando,Daniela Marconi Pdf

This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.

Author : Viral V. Acharya,Matthew Richardson,Stijn van Nieuwerburgh,Lawrence J. White
Publisher : Princeton University Press
Page : 233 pages
File Size : 48,7 Mb
Release : 2011-03-14
Category : Business & Economics
ISBN : 9781400838097

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Guaranteed to Fail by Viral V. Acharya,Matthew Richardson,Stijn van Nieuwerburgh,Lawrence J. White Pdf

Why America's public-private mortgage giants threaten the world economy—and what to do about it The financial collapse of Fannie Mae and Freddie Mac in 2008 led to one of the most sweeping government interventions in private financial markets in history. The bailout has already cost American taxpayers close to $150 billion, and substantially more will be needed. The U.S. economy--and by extension, the global financial system--has a lot riding on Fannie and Freddie. They cannot fail, yet that is precisely what these mortgage giants are guaranteed to do. How can we limit the damage to our economy, and avoid making the same mistakes in the future? Guaranteed to Fail explains how poorly designed government guarantees for Fannie Mae and Freddie Mac led to the debacle of mortgage finance in the United States, weighs different reform proposals, and provides sensible, practical recommendations. Despite repeated calls for tougher action, Washington has expanded the scope of its guarantees to Fannie and Freddie, fueling more and more housing and mortgages all across the economy--and putting all of us at risk. This book unravels the dizzyingly immense, highly interconnected businesses of Fannie and Freddie. It proposes a unique model of reform that emphasizes public-private partnership, one that can serve as a blueprint for better organizing and managing government-sponsored enterprises like Fannie Mae and Freddie Mac. In doing so, Guaranteed to Fail strikes a cautionary note about excessive government intervention in markets.

Author : Germán Gutiérrez,Callum Jones,Mr.Thomas Philippon
Publisher : International Monetary Fund
Page : 43 pages
File Size : 49,9 Mb
Release : 2019-11-01
Category : Business & Economics
ISBN : 9781513519616

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Entry Costs and the Macroeconomy by Germán Gutiérrez,Callum Jones,Mr.Thomas Philippon Pdf

We combine a structural model with cross-sectional micro data to identify the causes and consequences of rising concentration in the US economy. Using asset prices and industry data, we estimate realized and anticipated shocks that drive entry and concentration. We validate our approach by showing that the model-implied entry shocks correlate with independently constructed measures of entry regulations and M&As. We conclude that entry costs have risen in the U.S. over the past 20 years and have depressed capital and consumption by about seven percent.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 85 pages
File Size : 40,9 Mb
Release : 2011-10-01
Category : Business & Economics
ISBN : 9781463922603

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Macroprudential Policy by International Monetary Fund Pdf

This paper provides the most comprehensive empirical study of the effectiveness of macroprudential instruments to date. Using data from 49 countries, the paper evaluates the effectiveness of macroprudential instruments in reducing systemic risk over time and across institutions and markets. The analysis suggests that many of the most frequently used instruments are effective in reducing pro-cyclicality and the effectiveness is sensitive to the type of shock facing the financial sector. Based on these findings, the paper identifies conditions under which macroprudential policy is most likely to be effective, as well as conditions under which it may have little impact.