Three Essays on Monetary Policy, Macro-prudential Policy, and Uncertainty Shocks

Three Essays on Monetary Policy, Macro-prudential Policy, and Uncertainty Shocks PDF Author: 王柏元
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Three Essays on Monetary Policy, Macro-prudential Policy, and Uncertainty Shocks

Three Essays on Monetary Policy, Macro-prudential Policy, and Uncertainty Shocks PDF Author: 王柏元
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Three Essays in Monetary and Macroprudential Policies

Three Essays in Monetary and Macroprudential Policies PDF Author: Benedikt Mario Kolb
Publisher:
ISBN:
Category : Global Financial Crisis, 2008-2009
Languages : en
Pages : 191

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This thesis focuses on recent monetary and macroprudential policies addressing the Financial Crisis. Chapter 1 stresses the role of central-bank communication. In particular, shocks derived from movements in federal funds futures prices during monetary policy announcement days have become popular for analysing U.S. monetary policy. While the literature often considers only surprise changes in the policy rate ("action shocks"), we distinguish between action and "communication shocks" (surprise announcements about future rates), using a novel decomposition of futures price movements. Our results indicate that communication shocks are the main driver of U.S. monetary policy shocks and that they explain a substantial share of variation in production. Chapter 2 turns to a macroprudential topic: How will a tightening in aggregate bank capital requirements affect the real economy? In this paper, we investigate this using a narrative index of regulatory US bank capital requirement changes for the period 1980M1 to 2016M8. Our results robustly suggest that a tightening in capital requirements leads to a temporary drop in lending and economic activity. The aggregate capital ratio and the level of bank capital increase permanently. Our results suggest that permanently higher capital requirements have no lasting negative effect on the real economy. Finally, Chapter 3 looks at asset purchases by the ECB. Their declared goal is to revive inflation, but purchases of which asset will be best suited for this? I address this question in a DSGE model with a role for three different asset classes: Government bonds, securitised financial assets and corporate sector bonds, which affect the economy via different channels. I investigate the impact of asset purchases in an environment of low inflation and a policy rate at the zero lower bound. Purchases of government bonds appear most effective in countering disinflationary episodes, while those of securitised assets have less impact.

Uncertainty Shocks and the Monetary-macroprudential Policy Mix

Uncertainty Shocks and the Monetary-macroprudential Policy Mix PDF Author: Valeriu Nalban
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Three Essays on Monetary Policy and Macroeconomics Stability

Three Essays on Monetary Policy and Macroeconomics Stability PDF Author: Shadi Nezar El Ramli
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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The three chapters of the thesis are centered around monetary policy and macroeconomic stability. In the first chapter, a DSGE model is simulated and estimated to evaluate the macroeconomic effect of credit-demand shocks versus credit- supply shocks. The model features two financial shocks originating on the credit-demand side and one shock originating on the credit-supply side. Model simulations show that credit-demand shocks could generate significant macroeconomic fluctuations, up to three times the impact of credit-supply shocks. Bayesian estimation of the parameters of the shocks and variance decomposition show that credit-demand shocks caused 17\% of the fluctuation in output. The second paper investigates the role of monetary policy in the rise of household debt in the periods leading to the Great Recession. A Factor-Augmented Vector Autoregression (FAVAR) model is estimated in multiple periods. Tests of stability of the estimated coefficients suggest the existence of a structural break, which is interpreted as a change in the transmission mechanism in periods of low versus high household debt. Monetary policy shocks during both periods are identified by Cholesky decomposition. The paper shows that during the period of higher household debt, the volatility of monetary policy shocks was lower and the impulse responses of output and household debt to monetary policy shocks were stronger. Estimates of monetary policy reaction functions in the two periods suggest the stronger response of output and household debt in the second period might have been due to a combination of a stronger transmission mechanism and a weaker monetary policy reaction. The final chapter of the thesis investigates whether monetary policy surprises affect home equity excess returns, and whether the effect transmits through expected future interest rates, expected future dividends, or expected future excess returns. Home equity excess returns are decomposed into three components using a forecasting VAR model. The three decomposed components are then used to estimate a VAR model where monetary policy shocks are identified by Cholesky decomposition. Analysis of the generated impulse responses shows that, unlike its effect on stock equity returns, the effect of monetary policy surprises on home returns transmits through interest rate and future dividends channels more than through the risk premium channel.

Macroprudential Policy - An Organizing Framework - Background Paper

Macroprudential Policy - An Organizing Framework - Background Paper PDF Author: International Monetary Fund. Monetary and Capital Markets Department
Publisher: International Monetary Fund
ISBN: 1498339174
Category : Business & Economics
Languages : en
Pages : 33

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Book Description
MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.

Three Essays on Global Transmission of US Monetary Policy Uncertainty

Three Essays on Global Transmission of US Monetary Policy Uncertainty PDF Author: Birendra Budha
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
investigate the global spillover effects of US monetary policy uncertainty in these three essays. In the first chapter, I focus on the impact of uncertainty on the macroeconomic activity of other advanced and emerging economies. I find that an increase in US monetary policy uncertainty reduces output, investment, consumption, exports, and imports in these economies. Such adverse effects are larger in relatively open than closed economies in trade and capital flows. Central banks around the world respond to heightened uncertainty by cutting policy rates, which is further validated by the evidence from central bank minutes. In the second chapter, I examine asset price spillovers from US monetary policy uncertainty to global asset prices. An increase in US monetary policy uncertainty raises sovereign yields and depreciates exchange rates in advanced and emerging economies. A higher level of uncertainty weakens the global transmission of US monetary policy to asset prices. Spillovers from uncertainty to asset prices are larger for the countries with high trade integration, but such effects on sovereign yields are larger only in advanced economies with higher financial integration and the exchange rate peg than the flexible regime. The third chapter investigates how uncertainty about US monetary policy affects cross-border bank flows. I find that an increase in US monetary policy uncertainty reduces cross-border bank lending. In response to higher uncertainty, banks reallocate their portfolio from foreign to domestic borrowers. Such cross-border effects are found to be higher in countries with low capital controls.

The Federal Reserve System Purposes and Functions

The Federal Reserve System Purposes and Functions PDF Author: Board of Governors of the Federal Reserve System
Publisher:
ISBN: 9780894991967
Category : Banks and Banking
Languages : en
Pages : 0

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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.

The Chicago Plan Revisited

The Chicago Plan Revisited PDF Author: Mr.Jaromir Benes
Publisher: International Monetary Fund
ISBN: 1475505523
Category : Business & Economics
Languages : en
Pages : 71

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Book Description
At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.

Macroprudential and Microprudential Policies

Macroprudential and Microprudential Policies PDF Author: Jacek Osinski
Publisher: International Monetary Fund
ISBN: 1484369998
Category : Business & Economics
Languages : en
Pages : 28

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Book Description
Effective arrangements for micro and macroprudential policies to further overall financial stability are strongly desirable for all countries, emerging or advanced. Both policies complement each other, but there can also be potential areas of overlap and conflict, which can complicate this cooperation. Organizing their very close interactions can help contain these potential tensions. This note clarifies the essential features of macroprudential and microprudential policies and their interactions, and delineates their borderline. It proposes mechanisms for aligning both policies in the pursuit of financial stability by identifying those elements that are desirable for effective cooperation between them. The note provides general guidance. Actual arrangements will need take into account country-specific circumstances, reflecting the fact that that there is no “one size fits all.”

Financial Crises Explanations, Types, and Implications

Financial Crises Explanations, Types, and Implications PDF Author: Mr.Stijn Claessens
Publisher: International Monetary Fund
ISBN: 1475561008
Category : Business & Economics
Languages : en
Pages : 66

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Book Description
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.