Essays on Banking Regulation, Macroeconomic Dynamics and Financial Volatility PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Essays on Banking Regulation, Macroeconomic Dynamics and Financial Volatility PDF full book. Access full book title Essays on Banking Regulation, Macroeconomic Dynamics and Financial Volatility by Roy Zilberman. Download full books in PDF and EPUB format.
Author: Roy Zilberman
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Author: Roy Zilberman
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Author: Lulei Song
Publisher:
ISBN:
Category :
Languages : en
Pages : 145
Get Book Here
Book Description
My dissertation covers three loosely connected topics in Macroeconomics and Banking. The first chapter, titled Effect of Failed Bank Mergers During the Crisis on Cost Efficiency, examines the effect of merging with failed banks during the crisis period on the acquiring banks' cost X-efficiency. Between December 31, 2006, and Decem- ber 31, 2010, the number of U.S. commercial banks and savings institutions declined significantly because of failures. The majority of failed banks were acquired by the existing banks. I utilize the Fourier flexible cost function form to estimate the cost X-efficiency, and find out that merging with failed banks does negatively affect the cost X-efficiency of the acquiring bank. Although the local market concentration does not change much after the merger, the decrease in cost X-efficiency may still indicate the increase of market power for acquiring banks. With the evolving technology, the cost of obtaining banking service from distant providers fell a lot compared with 30 or 40 years ago. Local market concentration may no longer be a good measure of market competitiveness, and the FDIC may need to develop other more relevant measures regarding merger regulations. The second chapter, titled Financial Regulation and Stability of the Banking System, builds a dynamic stochastic general equilibrium model which includes both regulated and unregulated banks to study the effect of the capital requirement, which is imposed only on regulated banks, on the stability of the financial system. One of the most distinctive features of the recent financial crisis is the turmoil of the financial market. Financial institutions with high leverage were the first to bear the brunt, and the chain effect caused by their bankruptcy led the economy into a prolonged depression. In order to stabilize the financial market and prevent financial institutions from taking excessive risks, the government imposed capital requirements on the regulated banks. However, a large number of financial institutions, which perform similar functions as regulated banks, are not under government regulation. In this paper, I build a model which includes both regulated banks, referred to as commercial banks, and unregulated banks, referred to as shadow banks, to study and quantify the effects of capital requirements on the stability of the financial system. I find that when the capital requirement is high enough to help commercial banks to survive the bank runs, it does help to alleviate the negative impact of the crisis. However, if the capital requirement is not high enough, increasing capital requirements only causes decreased net output but does not help to stabilize consumption and capital price during the crisis. The third chapter is titled The Effect of Monetary Policy on Asset Price Volatility: Evidence from Time-Varying Parameter Vector Autoregression Approach. The great financial recession in 2007 - 2009 reactivated the discussion of the effect and the focus of monetary policies. Some researchers argue that whether the monetary authority should take action to fight against the asset price bubbles prior to 2007 aside from targeting inflation and GDP gap. However, one important fact that often get ne- glected is that the volatility of the financial market is also closely related to monetary policy shocks, and it has an important impact on economic output and unemployment in the economy. This paper utilizes two empirical methods, constant parameter structural vector auto-regression and time-varying parameter vector auto-regression, to study the relationship between monetary policy and financial market volatility. I find that under these two different methods, the financial market volatility responds differently to the monetary policy shocks.
Author: Franco Bruni
Publisher: Springer Science & Business Media
ISBN: 146131271X
Category : Business & Economics
Languages : en
Pages : 374
Get Book Here
Book Description
intense competition on banks and other financial institutions, as a period of oligopoly ends: more rather than less innovation is needed to help share undi versifiable risks, with more attention to correlations between different risks. Charles Goodhart of the London School of Economics (LSE), while ques tioning the idea that volatility has increased, concludes that structural changes have made regulation more problematic and calls for improved information availability on derivatives transactions. In a thirteen country case study of the bond market turbulence of 1994, Bo rio and McCauley of the BIS pin the primary causes of the market decline on the market's own dynamics rather than on variations in market participants' apprehensions about economic fundamentals. Colm Kearney of the Univer sity of Western Sydney, after a six country study of volatility in economic and financial variables, concludes that more international collaboration in man aging financial volatility (other than in foreign exchange markets) is needed in Europe. Finally, Stokman and Vlaar of the Dutch central bank investigate the empirical evidence for the interaction between volatility and international transactions in real and financial assets for the Netherlands, concluding that such influence depends on the chosen volatility measure. The authors sug gest that there are no strong arguments for international restrictions to reduce volatility. INSTITUTIONAL ISSUES AND PRACTICES The six papers in Part C focus on what market participants are doing to manage risk.
Author: Zhao Yang
Publisher:
ISBN:
Category :
Languages : en
Pages : 141
Get Book Here
Book Description
Author: Pablo Garcia Sanchez
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
The 2008 crisis and the ensuing Great Recession shook the consensus on how to run economic policy. They reminded us that financial imbalances could significantly derail economic activity. In addition, they showed that existing policy tools did not guarantee macro-financial stability; thereby leading to a rethink of monetary policy and financial regulation. Such a reevaluation has prompted a call for macroprudential tools, i.e., those tools intended for limiting systemic risk and ensuring the resilience of the financial sector. Besides, it has raised new questions about monetary policy and its effects on the risk taking behavior of economic agents - the so-called risk taking channel. A decade from the beginning of the crisis, the contours of a new policy framework for economic and financial stability are still very unclear. Knowledge on which regulatory instruments and how to employ them to curb the buildup of imbalances is limited. Neither is much known about the costs of those instruments.Regulatory intervention constraints some behaviors and distorts the allocation of resources. Consequently, the risk of imposing insidious costs on economic growth must not be underestimated. Likewise, very little is known about the relationship between monetary policy and the perception and pricing of risk by market participants. Nonetheless, it is natural to think that the monetary policy stance may affect the risk taking behavior of economic units, by influencing the attitudes towards risk and the assessment of risks. If so, failure by monetary authorities to consider this phenomenon could exacerbate boom bust patterns. The aim of this thesis is to explore the path towards macroeconomic and financial stability. I have basedmy work on the modern dynamic macroeconomic methods and techniques. Specifically, the first essay develops a canonical real business cycle model to assess the macroeconomic consequences of bank capital requirements, arguably the most used prudential tool. The second essay zooms in on the banking sector, and proposes a structural dynamic model with a large number of heterogeneous banks. The model is employed to study the effectiveness of interbank exposure limits. Having analyzed regulatory intervention, the last essay uses time series econometrics to shed some light on the risk taking channel of monetary policy. It is my firm belief that macroeconomics models for financial stability analysis should consider nonlinear patterns such as state dependence, asymmetries and amplification effects. Under unusual conditions like financial booms or credit crunches, economic agents behave differently than during normal times. In other words, the inner workings of the macroeconomy become essentially nonlinear under abnormal circumstances. Therefore, local behavior around the long run equilibrium of the economy is unlikely to contain relevant information about what may happen in exceptional events. In consequence, I study macroeconomic policy exclusively through the lens of nonlinear frameworks and techniques. Regarding the main results, this thesis makes a strong case in favor of macroprudential regulation. I provide clear evidence suggesting that regulatory intervention can be a powerful tool to strengthen financial resilience, reduce economic volatility and smooth business cycles. In addition, this thesis shows that accommodative monetary policy can produce overconfidence among market participants; thereby increasing risk taking and contributing to the buildup of imbalances. In other words, it provides empirical evidence for the existence of a risk taking channel of monetary policy.
Author: Juliane Begenau
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This dissertation consists of three separate contributions to the field of macroeconomics and finance. In the first chapter, I present a quantitative dynamic general equilibrium model for the purpose of determining the optimal capital requirement for banks. Banks play two roles in this model: They contribute to the production of a final good and they provide liquidity in the form of bank debt, which households value. Banks also benefit from an implicit bailout guarantee from the government, which motivates them to take on excessive risk. I quantify this model using data from NIPA and the FDIC. Higher capital requirements lower risk-taking and increase consumption, but they also reduce the supply of bank debt. The reduction in bank debt leads to a lower interest rate on bank debt through a general equilibrium effect. This reduces the overall funding costs of banks and allows them to grow larger, which increases the capital stock and, consequently, production as well as consumption. The optimal capital requirement weighs the reduction in economic volatility and the increase in consumption against the reduction in liquidity. Welfare is maximized at 14%. The second chapter is coauthored with Juliana Salomao. Therein, we study how firms finance themselves over the business cycle. Using Compustat data, we first document that large firms substitute between debt and equity financing over the business cycle whereas small firms increase the amount of funds raised, using both debt and equity financing, in good times and reduce it in bad. We propose a mechanism that explains this empirical feature in a heterogeneous firm optimization model. Our mechanism is based on two main features. First, small firms are growing and therefore have higher funding needs compared to large firms. Second, the cost of debt financing depends endogenously on the default probability of the rm as well as on the recuperation value of the bond. This model can account for the cyclical relationships we see in the data. The third chapter is co-written with Monika Piazzesi and Martin Schneider. It studies US banks' exposure to interest rate and default risk. We exploit the factor structure in interest rates to represent many bank positions as portfolios in a small number of bonds. This approach makes exposures comparable across banks and across the business segments of an individual bank. We also propose a strategy to estimate exposure due to interest rate derivatives from regulatory data on notional and fair values together with the history of interest rates.
Author: Linda Kirschner
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
The financial crisis was, at its core, a banking crisis, which affected the real economy through a rapid reduction in credit supply. This dissertation combines three essays on policy changes after the financial crisis. The first two chapters focus on regulatory rules proposed to avoid future credit crunches and the resulting contractionary effects on the real economy. In the first chapter, I introduce two different proposals for countercyclical capital buffers and compare their effectiveness in reducing macroeconomic fluctuations. The Basel III capital buffer is attuned to early warning signals of systemic risk, while dynamic loan loss provisions are set aside to cover expected losses. I show that the systemic risk buffer is more effective in reducing macroeconomic volatility in times of excessive lending booms and crunches. The second paper examines the effectiveness of the Basel III buffer more closely by considering different shocks to the economy and the banking sector. At the heart of the recent banking crisis were bank's difficulties to receive both equity and debt funding. I show that the macroeconomic implications of financial shocks are particularly serious if banks have only restricted access to deposits. These disturbances on the supply side of credit have more distressing consequences than comparable shocks to the credit demand side. Interestingly, I find that the Basel III buffer is most effective in dealing with these supply side shocks. The third chapter analyses the Eurozone crisis as a triple crisis of fiscal solvency, banking sector instability, and stagnant growth. Given negative feedback loops, and starting from bad initial conditions, Italy remains vulnerable to adverse economic shocks originating at home and abroad. Furthermore, we contrast the two cases of continued membership or exit from the Eurozone and find exiting will severely delay Italy's economic recovery at least in the long run.
Author: El Bachir Boukherouaa
Publisher: International Monetary Fund
ISBN: 1589063953
Category : Business & Economics
Languages : en
Pages : 35
Get Book Here
Book Description
This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
Author: Mr.Kangni R Kpodar
Publisher: International Monetary Fund
ISBN: 1498304907
Category : Business & Economics
Languages : en
Pages : 35
Get Book Here
Book Description
This paper contributes to the literature by looking at the possible relevance of the structure of the financial system—whether financial intermediation is performed through banks or markets—for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience. With low-income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock-absorber in poor countries, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock-absorber nor a shock-amplifier for most economies. These findings are consistent across a range of econometric estimators, including fixed effect, system GMM and local projection estimates.
Author: Board of Governors of the Federal Reserve System
Publisher:
ISBN: 9780894991967
Category : Banks and Banking
Languages : en
Pages : 0
Get Book Here
Book Description
Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.
