Leaning Against the Wind and the Timing of Monetary Policy 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 Leaning Against the Wind and the Timing of Monetary Policy PDF full book. Access full book title Leaning Against the Wind and the Timing of Monetary Policy by Mr.Itai Agur. Download full books in PDF and EPUB format.
Author: Mr.Itai Agur
Publisher: International Monetary Fund
ISBN: 1484394577
Category : Business & Economics
Languages : en
Pages : 29
Get Book
Book Description
If monetary policy is to aim also at financial stability, how would it change? To analyze this question, this paper develops a general-form framework. Financial stability objectives are shown to make monetary policy more aggressive: in reaction to negative shocks, cuts are deeper but shorter-lived than otherwise. By keeping cuts brief, monetary policy tightens as soon as bank risk appetite heats up. Within this shorter time span, cuts must then be deeper than otherwise to also achieve standard objectives. Finally, we analyze how robust this result is to the presence of a bank regulatory tool, and provide a parameterized example.
Author: Mr.Itai Agur
Publisher: International Monetary Fund
ISBN: 1484394577
Category : Business & Economics
Languages : en
Pages : 29
Get Book
Book Description
If monetary policy is to aim also at financial stability, how would it change? To analyze this question, this paper develops a general-form framework. Financial stability objectives are shown to make monetary policy more aggressive: in reaction to negative shocks, cuts are deeper but shorter-lived than otherwise. By keeping cuts brief, monetary policy tightens as soon as bank risk appetite heats up. Within this shorter time span, cuts must then be deeper than otherwise to also achieve standard objectives. Finally, we analyze how robust this result is to the presence of a bank regulatory tool, and provide a parameterized example.
Author: Itai Agur
Publisher:
ISBN:
Category :
Languages : en
Pages : 13
Get Book
Book Description
Author: Mr.Luis Brandao-Marques
Publisher: International Monetary Fund
ISBN: 1513549650
Category : Business & Economics
Languages : en
Pages : 59
Get Book
Book Description
This paper takes a new approach to assess the costs and benefits of using different policy tools—macroprudential, monetary, foreign exchange interventions, and capital flow management—in response to changes in financial conditions. The approach evaluates net benefits of policies using quadratic loss functions, estimating policy effects on the full distribution of future output growth and inflation with quantile regressions. Tightening macroprudential policy dampens downside risks to growth stemming from loose financial conditions, and is beneficial in net terms. By contrast, tightening monetary policy entails net losses, calling for caution in the use of monetary policy to “lean against the wind.” These findings hold when policies are used in response to easing global financial conditions. Buying foreign-exchange or tightening capital controls has small net benefits.
Author: Mr.Itai Agur
Publisher: International Monetary Fund
ISBN: 1484378385
Category : Business & Economics
Languages : en
Pages : 29
Get Book
Book Description
If monetary policy is to aim also at financial stability, how would it change? To analyze this question, this paper develops a general-form framework. Financial stability objectives are shown to make monetary policy more aggressive: in reaction to negative shocks, cuts are deeper but shorter-lived than otherwise. By keeping cuts brief, monetary policy tightens as soon as bank risk appetite heats up. Within this shorter time span, cuts must then be deeper than otherwise to also achieve standard objectives. Finally, we analyze how robust this result is to the presence of a bank regulatory tool, and provide a parameterized example.
Author: Mr.Lars E. O. Svensson
Publisher: International Monetary Fund
ISBN: 1498310737
Category : Business & Economics
Languages : en
Pages : 76
Get Book
Book Description
“Leaning against the wind” (LAW) with a higher monetary policy interest rate may have benefits in terms of lower real debt growth and associated lower probability of a financial crisis but has costs in terms of higher unemployment and lower inflation, importantly including a higher cost of a crisis when the economy is weaker. For existing empirical estimates, costs exceed benefits by a substantial margin, even if monetary policy is nonneutral and permanently affects real debt. Somewhat surprisingly, less effective macroprudential policy and generally a credit boom, with resulting higher probability, severity, or duration of a crisis, increases costs of LAW more than benefits, thus further strengthening the strong case against LAW.
Author: John B. Taylor
Publisher: University of Chicago Press
ISBN: 0226791262
Category : Business & Economics
Languages : en
Pages : 460
Get Book
Book Description
This timely volume presents the latest thinking on the monetary policy rules and seeks to determine just what types of rules and policy guidelines function best. A unique cooperative research effort that allowed contributors to evaluate different policy rules using their own specific approaches, this collection presents their striking findings on the potential response of interest rates to an array of variables, including alterations in the rates of inflation, unemployment, and exchange. Monetary Policy Rules illustrates that simple policy rules are more robust and more efficient than complex rules with multiple variables. A state-of-the-art appraisal of the fundamental issues facing the Federal Reserve Board and other central banks, Monetary Policy Rules is essential reading for economic analysts and policymakers alike.
Author: Paula A. Tosini
Publisher: Princeton, N.J. : International Finance Section, Department of Economics, Princeton University
ISBN:
Category : Business & Economics
Languages : en
Pages : 44
Get Book
Book Description
Author: Eric Monnet
Publisher: International Monetary Fund
ISBN: 1498320473
Category : Business & Economics
Languages : en
Pages : 48
Get Book
Book Description
This paper explores what history can tell us about the interactions between macroprudential and monetary policy. Based on numerous historical documents, we show that liquidity ratios similar to the Liquidity Coverage Ratio (LCR) were commonly used as monetary policy tools by central banks between the 1930s and 1980s. We build a model that rationalizes the mechanisms described by contemporary central bankers, in which an increase in the liquidity ratio has contractionary effects, because it reduces the quantity of assets banks can pledge as collateral. This effect, akin to quantity rationing, is more pronounced when excess reserves are scarce.
Author: Mr.Itai Agur
Publisher: International Monetary Fund
ISBN: 1513545337
Category : Business & Economics
Languages : en
Pages : 23
Get Book
Book Description
How does monetary policy impact upon macroprudential regulation? This paper models monetary policy's transmission to bank risk taking, and its interaction with a regulator's optimization problem. The regulator uses its macroprudential tool, a leverage ratio, to maintain financial stability, while taking account of the impact on credit provision. A change in the monetary policy rate tilts the regulator's entire trade-off. We show that the regulator allows interest rate changes to partly "pass through" to bank soundness by not neutralizing the risk-taking channel of monetary policy. Thus, monetary policy affects financial stability, even in the presence of macroprudential regulation.
Author: Luca Amorello
Publisher: Springer
ISBN: 3319941569
Category : Business & Economics
Languages : en
Pages : 408
Get Book
Book Description
The European experience suggests that the efforts made to achieve an efficient trade-off between monetary policy and prudential supervision ultimately failed. The severity of the global crisis have pushed central banks to explore innovative tools—within or beyond their statutory constraints—capable of restoring the smooth functioning of the financial cycle, including setting macroprudential policy instruments in the regulatory toolkit. But macroprudential and monetary policies, by sharing multiple transmission channels, may interact—and conflict—with each other. Such conflicts may represent not only an economic challenge in the pursuit of price and financial stability, but also a legal uncertainty characterizing the regulatory developments of the EU macroprudential and monetary frameworks. In analyzing the “legal interaction” between the two frameworks in the EU, this book seeks to provide evidence of the inconsistencies associated with the structural separation of macroprudential and monetary frameworks, shedding light upon the legal instruments that could reconcile any potential policy inconsistency.
