nep-cba New Economics Papers
on Central Banking
Issue of 2013‒12‒29
48 papers chosen by
Maria Semenova
Higher School of Economics

  1. Liquidity regulation and the implementation of monetary policy By Morten L. Bech; Todd Keister
  2. Interventions and inflation expectations in an inflation targeting economy By Pablo Pincheira
  3. Using Interest Rates as the Instrument of Monetary Policy: Beware Real effects, Positive Feedbacks, and Discontinuities By Mark Setterfield
  4. Is monetary policy overburdened? By Athanasios Orphanides
  5. Superstar Central Bankers By Matthias Neuenkirch; Peter Tillmann
  6. International monetary policy coordination: past, present and future By John B Taylor
  7. Indexed versus nominal government debt under inflation and price-level targeting By Michael, Hatcher
  8. How Optimal is US Monetary Policy? By Kirsanova, Tatiana; Leith, Campbell; Chen, Xiaoshan
  9. Imperfect Credibility and Robust Monetary Policy By Dennis, Richard
  10. Aggregate and welfare effects of long run inflation risk under inflation and price-level targeting By Michael, Hatcher
  11. “European Government Bond Markets and Monetary Policy Surprises: Returns, Volatility and Integration” By Pilar Abad; Helena Chuliá
  12. The Shadow Rate, Taylor Rules, and Monetary Policy Lift-off By Glenn Rudebusch; Michael Bauer
  13. Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area By Pau Rabanal; Dominic Quint
  14. Traditional and Matter-of-fact Financial Frictions in a DSGE Model for Brazil: the role of macroprudential instruments and monetary policy By Fabia A. de Carvalho; Marcos R. Castro; Silvio M. A. Costa
  15. Liquidity, moral hazard and bank crises By Chatterji, S.; Ghosal, S.
  16. Cyclical macroeconomic policy, financial regulation and economic growth By Philippe Aghion; Enisse Kharroubi
  17. Monetary Policy Effects on Long-term Rates and Stock Prices By Ranaldo, Angelo; Reynard, Samuel
  18. Can taxes tame the banks? Evidence from European bank levies By Michael P. Devereux; Niels Johannesen; John Vella
  19. Lessons from the Financial Crisis: Bank Performance and Regulatory Reform By Neville Arjani; Graydon Paulin
  20. Bank Deregulation, Competition and Economic Growth: The US Free Banking Experience By Philipp Ager; Fabrizio Spargoli
  21. Monetary policy shocks and macroeconomic variables: Evidence from fast growing emerging economies By Ivrendi, Mehmet; Yildirim, Zekeriya
  22. Capital Controls or Real Exchange Rate Policy? A Pecuniary Externality Perspective By Eric Young; Alessandro Rebucci; Christopher Otrok
  23. On central bank interventions in the Mexican peso/dollar foreign exchange market By Santiago García-Verdú; Miguel Zerecero
  24. Expectations and Fluctuations: The Role of Monetary Policy By Michael Rousakis
  25. The Cost of New Information – ECB Macro Announcement Impacts on Bid-Ask Spreads of European Blue Chips By Tobias R. Rühl; Michael Stein
  26. Working Paper 190 - Early Warning Systems and Systemic Banking Crises in Low Income Countries: A Multinomial Logit Approach By Giovanni Caggiano; Calice Pietro; Leone Leonida
  27. Nominal Stability and Financial Globalization By Devereux, Michael B; Senay, Ozge; Sutherland, Alan
  28. Monetary Policy Delegation and Equilibrium Coordination By Blake, Andrew P.; Kirsanova, Tatiana; Yates, Tony
  29. Macroeconomic Policy in New Zealand: From the Great Inflation to the Global Financial Crisis By Bruce White
  30. Monetary policy under the Labour government 1997- 2010: the first 13 years of the MPC By David, Cobham
  31. The comeback of inflation as an optimal public finance tool By Giovanni Di Bartolomeo; Patrizio Tirelli; Nicola Acocella
  32. Mortgages and Monetary Policy By Carlos Garriga; Finn E. Kydland; Roman Sustek
  33. Why Prudential Regulation Will Fail to Prevent Financial Crises. A Legal Approach By Marcelo Madureira Prates
  34. Macroprudential policies and the growth of bank credit By Paul H. Kupiec; Claire Rosenfeld; Yan Lee
  35. Monetary Policy and Exchange Rates: A Balanced Two-Country Cointegrated VAR Model Approach By Reinhold Heinlein; Hans-Martin Krolzig
  36. Capital Controls and Macroprudential Measures: What Are They Good For? By Kristin Forbes; Marcel Fratzscher; Roland Straub
  37. Regional Inflation and Financial Dollarization By Brown, M.; Haas, R. de; Sokolov, V.
  38. Co-movements in Real Effective Exchange Rates: Evidence from the Dynamic Hierarchical Factor Model By Nagayasu, Jun
  39. Market discipline and the Russian interbank market By Andrievskaya, Irina; Semenova , Maria
  40. The impact of pre-announced day-to-day interventions on the Colombian exchange rate By Juan José Echavarría; Luis Fernando Melo; Santiago Téllez; Mauricio Villamizar
  41. Determinants of Systemic Risk and Information Dissemination By Marcelo Bianconi; Xiaxin Hua; Chih Ming Tan
  42. Debt Dilution and Seniority in a Model of Defaultable Sovereign Debt By Satyajit Chatterjee; Burcu Eyigungor
  43. Global stochastic trends in growth, interest and inflation. Is the post-Bretton-Woods era driven by the Volcker disinflation? By Reinhold Heinlein; Hans-Martin Krolzig
  44. The Monetary Model of Exchange Rate in Nigeria: an Autoregressive Distributed Lag (ARDL) Approach By Evans, Olaniyi
  45. Currency Forecast Errors at Times of Low Interest Rates: Evidence from Survey Data on the Yen/Dollar Exchange Rate By MacDonald, Ronald; Nagayasu, Jun
  46. The Effect of Government Debt, External Debt and their Interaction on OECD Interest Rates By David Turner; Francesca Spinelli
  47. The State of the Banking Sector in Europe By Dirk Schoenmaker; Toon Peek
  48. Assessing competition in the banking industry: A multi-product approach By Barbosa, Klenio de Souza; Rocha, Bruno; Salazar, Fernando

  1. By: Morten L. Bech; Todd Keister
    Abstract: In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the liquidity coverage ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to survive a 30-day period of market stress. As monetary policy typically involves targeting the interest rate on loans of one of these assets — central bank reserves — it is important to understand how this regulation may impact the efficacy of central banks’ current operational frameworks. We introduce term funding and an LCR requirement into an otherwise standard model of monetary policy implementation. Our model shows that if banks face the possibility of an LCR shortfall, then the usual link between open market operations and the overnight interest rate changes and the short end of the yield curve becomes steeper. Our results suggest that central banks may want to adjust their operational frameworks as the new regulation is implemented.
    Keywords: Basel III, Liquidity regulation, LCR, Reserves, Corridor system, Monetary policy
    Date: 2013–10
  2. By: Pablo Pincheira
    Abstract: In this paper we explore the role that exchange rate interventions may play in determining inflation expectations in Chile. To that end, we consider a set of nine deciles of inflation expectations coming from the survey of professional forecasters carried out by the Central Bank of Chile. We consider two episodes of preannounced central bank interventions during the sample period 2007-2012.
    Keywords: Exchange rates, inflation expectations, inflation targeting, interventions
    Date: 2013–09
  3. By: Mark Setterfield
    Abstract: This paper discusses central banks’ use of the interest rate as the instrument of monetary policy, in light of a reconsideration of macroeconomic theory induced by the financial crisis and Great Recession. Three main guiding principles for the future conduct of interest rate policy are identified: beware real effects; beware positive feedbacks; and beware discontinuities. The paper also reflects on the use of policy targets as a “quasi-instrument” of stabilization policy.
    Keywords: Interest rates, monetary policy, central banking, New Consensus, Post Keynesian Economics
    JEL: E12 E43 E52 E58
    Date: 2013–12
  4. By: Athanasios Orphanides
    Abstract: Following the experience of the global financial crisis, central banks have been asked to undertake unprecedented responsibilities. Governments and the public appear to have high expectations that monetary policy can provide solutions to problems that do not necessarily fit in the realm of traditional monetary policy. This paper examines three broad public policy goals that may overburden monetary policy: full employment, fiscal sustainability and financial stability. While central banks have a crucial position in public policy, the appropriate policy mix also involves other institutions, and overreliance on monetary policy to achieve these goals is bound to disappoint. Central bank policies that facilitate postponement of needed policy actions by governments may also have longer-term adverse consequences that could outweigh more immediate benefits. Overburdening monetary policy may eventually diminish and compromise the independence and credibility of the central bank, thereby reducing its effectiveness in maintaining price stability and contributing to crisis management.
    Keywords: Global financial crisis, monetary policy, real-time output gap, fiscal dominance, financial stability, central bank independence
    Date: 2013–12
  5. By: Matthias Neuenkirch (University of Trier); Peter Tillmann (University of Giessen)
    Abstract: The personalities of central bankers moved center stage during the recent financial crisis. Some central bankers even gained “superstar” status. In this paper, we evaluate the pivotal role of superstar central bankers by assessing the difference an outstanding governor makes to economic performance. We employ school grades given to central bankers by the financial press. A superstar central banker is one receiving the top grade. In a probit estimation we first relate the grades to measures of economic performance, institutional features, and personal characteristics. We then employ a nearest neighbor matching approach to identify the central bankers which are closest to those receiving the top grade and compare the economic performance across both groups. The results suggest that a superstar governor indeed matters: a topgraded central banker faces a significantly more favorable output-inflation trade-off than his peers.
    Keywords: Central banking, inflation expectations, monetary policy, nearest neighbor matching
    JEL: E52 E58
    Date: 2013
  6. By: John B Taylor
    Abstract: This paper examines two explanations for the recent spate of complaints about cross-border monetary policy spillovers and calls for international monetary policy coordination, a development that contrasts sharply with the monetary system in the 1980s, 1990s and until recently. The first explanation holds that deviations from rules-based policy at several central banks created incentives for other central banks to deviate from such policies. The second explanation either does not see deviations from rules or finds such deviations benign; it characterises recent unusual monetary policies as appropriate, explains the complaints as an adjustment to optimal policies, and downplays concerns about interest rate differentials and capital controls. Going forward, the goal for central banks should be an expanded rulesbased system similar to that of the 1980s and 1990s, which would operate near an international cooperative equilibrium. International monetary policy coordination – at least formal discussions of rules-based policies and the issues reviewed here – would help central banks get such equilibrium.
    Keywords: Monetary policy spillovers, unconventional monetary policy, international policy coordination
    Date: 2013–12
  7. By: Michael, Hatcher
    Abstract: This paper presents a DSGE model in which long run inflation risk matters for social welfare. Optimal indexation of long-term government debt is studied under two monetary policy regimes: inflation targeting (IT) and price-level targeting (PT). Under IT, full indexation is optimal because long run inflation risk is substantial due to base-level drift, making indexed bonds a much better store of value than nominal bonds. Under PT, where long run inflation risk is largely eliminated, optimal indexation is substantially lower because nominal bonds become a better store of value relative to indexed bonds. These results are robust to the PT target horizon, imperfect credibility of PT and model calibration, but the assumption that indexation is lagged is crucial. From a policy perspective, a key finding is that accounting for optimal indexation has important welfare implications for comparisons of IT and PT.
    Keywords: government debt, inflation risk, inflation targeting, price-level targeting,
    Date: 2013
  8. By: Kirsanova, Tatiana; Leith, Campbell; Chen, Xiaoshan
    Abstract: Most of the literature estimating DSGE models for monetary policy analysis assume that policy follows a simple rule. In this paper we allow policy to be described by various forms of optimal policy - commitment, discretion and quasi-commitment. We find that, even after allowing for Markov switching in shock variances, the inflation target and/or rule parameters, the data preferred description of policy is that the US Fed operates under discretion with a marked increase in conservatism after the 1970s. Parameter estimates are similar to those obtained under simple rules, except that the degree of habits is significantly lower and the prevalence of cost-push shocks greater. Moreover, we find that the greatest welfare gains from the ‘Great Moderation’ arose from the reduction in the variances in shocks hitting the economy, rather than increased inflation aversion. However, much of the high inflation of the 1970s could have been avoided had policy makers been able to commit, even without adopting stronger anti-inflation objectives. More recently the Fed appears to have temporarily relaxed policy following the 1987 stock market crash, and has lost, without regaining, its post-Volcker conservatism following the bursting of the dot-com bubble in 2000.
    Keywords: Bayesian Estimation, Interest Rate Rules, Optimal Monetary Policy, Great Moderation, Commitment, Discretion,
    Date: 2013
  9. By: Dennis, Richard
    Abstract: This paper studies the behavior of a central bank that seeks to conduct policy optimally while having imperfect credibility and harboring doubts about its model. Taking the Smets-Wouters model as the central bank.s approximating model, the paper's main findings are as follows. First, a central bank.s credibility can have large consequences for how policy responds to shocks. Second, central banks that have low credibility can bene.t from a desire for robustness because this desire motivates the central bank to follow through on policy announcements that would otherwise not be time-consistent. Third, even relatively small departures from perfect credibility can produce important declines in policy performance. Finally, as a technical contribution, the paper develops a numerical procedure to solve the decision-problem facing an imperfectly credible policymaker that seeks robustness.
    Keywords: Imperfect Credibility, Robust Policymaking, Time-consistency,
    Date: 2013
  10. By: Michael, Hatcher
    Abstract: This paper presents a DSGE model in which long run inflation risk matters for social welfare. Aggregate and welfare effects of long run inflation risk are assessed under two monetary regimes: inflation targeting (IT) and price-level targeting (PT). These effects differ because IT implies base-level drift in the price level, while PT makes the price level stationary around a target price path. Under IT, the welfare cost of long run inflation risk is equal to 0.35 percent of aggregate consumption. Under PT, where long run inflation risk is largely eliminated, it is lowered to only 0.01 per cent. There are welfare gains from PT because it raises average consumption for the young and lowers consumption risk substantially for the old. These results are strongly robust to changes in the PT target horizon and fairly robust to imperfect credibility, fiscal policy, and model calibration. While the distributional effects of an unexpected transition to PT are sizeable, they are short-lived and not welfare-reducing.
    Keywords: inflation targeting, price-level targeting, inflation risk, monetary policy,
    Date: 2013
  11. By: Pilar Abad (University Rey Juan Carlos and University of Barcelona); Helena Chuliá (Faculty of Economics, University of Barcelona)
    Abstract: In this paper we investigate the response of bond markets to euro area and US monetary policy shocks. Specifically, we analyze the effect of unexpected changes in interest rates implemented by the European Central Bank (ECB) and the Federal Open Market Committee (FOMC) not only on the returns, but also on the volatility and the integration of European government bond markets. For all three characteristics our results show that the response to monetary policy surprises varies across groups of countries (EMU EU-15 central, EMU EU-15 peripheral, non-EMU EU-15 and non-EMU new EU). We also find that the effects of monetary policy announcements on the level of integration are more pronounced than those on returns and volatility. Finally, our results paint a complex picture of the effects of monetary policy news releases on the level of integration. The effect of ECB monetary policy surprises differs across old and new European Union members, while the effect of FOMC monetary policy surprises differs across EMU and non-EMU members.
    Keywords: Monetary policy announcements; Bond market integration; Interest rate surprises. JEL classification: E44; F36; G15.
    Date: 2013–12
  12. By: Glenn Rudebusch (Federal Reserve Bank of San Francisco); Michael Bauer (Federal Reserve Bank of San Francisco)
    Abstract: When the policy rate is constrained by the zero lower bound (ZLB), a new set of tools is needed to answer crucial questions about monetary policy, regarding the impact of the ZLB, expected lift-off, and the appropriateness of the policy stance. We document the shortcomings of affine dynamic term structure models (DTSMs) at the ZLB, and the benefits of shadow rate DTSMs. Using these we are able to appropriately answer the questions of interest: First, over recent years U.S. monetary policy has become increasingly constrained by the zero bound. Second, we estimate that in December 2012 the expected duration of the period of near-zero policy rates was 33 months, in line with survey-based and private-sector forecasts. Third, incorporating macroeconomic information in ZLB models is beneficial, improving inference about future policy, and allowing us to derive model-based Taylor rules and the resulting policy prescriptions. We find that in December 2012 the stance of monetary policy was in line with the desired stance based on simple policy rules.
    Date: 2013
  13. By: Pau Rabanal (IMF); Dominic Quint (Free University Berlin)
    Abstract: In this paper, we study the optimal mix of monetary and macroprudential policies in an estimated two-country model of the euro area. The model includes real, nominal and financial frictions, and hence both monetary and macroprudential policies can play a role. We find that the introduction of a macroprudential rule would help in reducing macroeconomic volatility, improve welfare, and partially substitute for the lack of national monetary policies. Macroprudential policies always increase the welfare of savers, but their effects on borrowers depend on the shock that hits the economy. In particular, macroprudential policies may entail welfare costs for borrowers under technology shocks, by increasing the countercyclical behavior of lending spreads.
    Date: 2013
  14. By: Fabia A. de Carvalho; Marcos R. Castro; Silvio M. A. Costa
    Abstract: This paper investigates the transmission channel of macroprudential instruments in a closed-economy DSGE model with a rich set of financial frictions. Banks' decisions on risky retail loan concessions are based on borrowers' capacity to settle their debt with labor income. We also introduce frictions in banks' optimal choices of balance sheet composition to better reproduce banks' strategic reactions to changes in funding costs, in risk perception and in the regulatory environment. The model is able to reproduce not only price effects from macroprudential policies, but also quantity effects. The model is estimated with Brazilian data using Bayesian techniques. Unanticipated changes in reserve requirements have important quantitative effects, especially on banks' optimal asset allocation and on the choice of funding. This result holds true even for required reserves deposited at the central bank that are remunerated at the base rate. Changes in required core capital substantially impact the real economy and banks' balance sheet. When there is a lag between announcements and actual implementation of increased capital requirement ratios, agents immediately engage in anticipatory behavior. Banks immediately start to retain dividends so as to smooth the impact of higher required capital on their assets, more particularly on loans. The impact on the real economy also shifts to nearer horizons. Announcements that allow the new regulation on required capital to be anticipated also improve banks' risk positions, since banks achieve higher capital adequacy ratios right after the announcement and throughout the impact period. The effects of regulatory changes to risk weights on bank assets are not constrained to impact the segment whose risk was reassessed. We compare the model responses with those generated by models with collateral constraints traditionally used in the literature. The choice of collateral constraint is found to have important implications for the transmission of shocks to the economy
    Date: 2013–11
  15. By: Chatterji, S.; Ghosal, S.
    Abstract: Bank crises, by interrupting liquidity provision, have been viewed as resulting in welfare losses. In a model of banking with moral hazard, we show that second best bank contracts that improve on autarky ex ante require costly crises to occur with positive probability at the interim stage. When bank payoffs are partially appropriable, either directly via imposition of fines or indirectly by the use of bank equity as a collateral, we argue that an appropriately designed ex-ante regime of policy intervention involving conditional monitoring can prevent bank crises.
    Keywords: bank runs, contagion, moral hazard, liquidity, random, contracts, monitoring,
    Date: 2013
  16. By: Philippe Aghion; Enisse Kharroubi
    Abstract: This paper investigates the effect of cyclical macroeconomic policy and financial sector characteristics on growth. Using cross-country, cross-industry OECD data, it yields two main findings. First, countercyclical fiscal and monetary policies foster growth disproportionately in more credit/liquidity-constrained industries. Second, while higher bank capital ratios may contribute to reducing the benefit of a countercyclical monetary policy, countercyclical credit enhances growth disproportionately in more credit/liquidity-constrained industries and this complements the growth effects of countercyclical monetary policy. Raising regulatory requirements for bank capital can therefore help achieve financial stability and preserve economic growth if complemented with more countercyclical macroeconomic and regulatory policy.
    Keywords: Growth, financial constraints, fiscal policy, monetary policy, financial regulation
    Date: 2013–12
  17. By: Ranaldo, Angelo; Reynard, Samuel
    Abstract: This paper explains the effects of monetary policy surprises on long-term interest rates and stock prices in terms of changes in expected inflation, real interest rate and dividend growth, and relates these effects to markets’ perceptions of economic shocks and Fed’s information set. We analyze stock and bond futures price co-movements and relate them to Treasury Inflation-Protected Securities (TIPS) data. The sign of long-term interest rate reactions is mostly driven by changes in expected inflation. The sign of stock price reactions is mostly driven by changes in expected dividend growth, but it is also sometimes determined by changes in expected real rates. The co-movements of long-term interest rates and stock prices are determined by the co-movements of expected inflation and dividend growth. The majority of Fed’s interest rate surprises are expected to be followed by negative co-movements between inflation and output. This can be due to relatively more frequent “inflation” or “supply” shocks together with Fed’s private information. Most Fed’s actions are perceived as reactions to economic shocks rather than true policy shocks.
    JEL: E52 E58 E43 E44
    Date: 2013–11
  18. By: Michael P. Devereux (Centre for Business Taxation, Oxford University); Niels Johannesen (Copenhagen University); John Vella (Centre for Business Taxation, Oxford University)
    Abstract: In the wake of the ?nancial crisis, a number of countries have introduced levies on bank borrowing with the aim of reducing risk in the ?nancial sector. This paper studies the behavioral responses to the bank levies and evaluates the policy. We ?nd that the levies induced banks to borrow less but also to hold more risky assets. The reduction in funding risk clearly dominates for banks with high capital ratios but is exactly o¤set by the increase in portfolio risk for banks with low capital ratios. This suggests that while the levies have reduced the total risk of relatively safe banks, they have done nothing to curb the risk of relatively risky banks, which presumably pose the greatest threat to ?nancial stability.
    Date: 2013–12–09
  19. By: Neville Arjani; Graydon Paulin
    Abstract: The financial systems of some countries fared materially better than others during the global financial crisis of 2007-09. The performance of the Canadian banking system during this period was relatively strong. Using a case study approach together with empirical analysis, we assess some of the factors that contributed to this favourable outcome with a view to drawing useful lessons for regulatory reform. We argue that an important contributor to positive bank performance was a solid approach to risk management on the part of the Canadian banking system, an approach that was actively fostered by the domestic authorities. Efforts to buttress risk management were favourably influenced by several stressful yet instructive episodes in Canadian financial history. The 2007-09 crisis experience suggests a need to make risk management a pervasive element of financial system culture and emphasizes the importance of robust liquidity management.
    Keywords: Financial institutions; Financial system regulation and policy
    JEL: G21 G28
    Date: 2013
  20. By: Philipp Ager (University of Southern Denmark); Fabrizio Spargoli (Erasmus University Rotterdam)
    Abstract: We exploit the introduction of free banking laws in US states during the 1837-1863 period to examine the impact of removing barriers to bank entry on bank competition and economic growth. As governments were not concerned about systemic stability in this period, we are able to isolate the effects of bank competition from those of state implicit guarantees. We find that the introduction of free banking laws stimulated the creation of new banks and led to more bank failures. Our empirical evidence indicates that states adopting free banking laws experienced an increase in output per capita compared to the states that retained state bank chartering policies. We argue that the fiercer bank competition following the introduction of free banking laws might have spurred economic growth by (1) increasing the money stock and the availability of credit; (2) leading to efficiency gains in the banking market. Our findings suggest that the more frequent bank failures occurring in a competitive banking market do not harm long-run economic growth in a system without public safety nets.
    Keywords: Bank Deregulation, Bank Competition, Economic Growth, Financial Development, Dynamic Efficiency, Free Banking
    JEL: G18 G21 G28 N21
    Date: 2013–12
  21. By: Ivrendi, Mehmet; Yildirim, Zekeriya
    Abstract: This paper investigates both the effects of domestic monetary policy and external shocks on fundamental macroeconomic variables in six fast growing emerging economies: Brazil, Russia, India, China, South Africa and Turkey - denoted hereafter as BRICS_T. The authors adopt a structural VAR model with a block exogeneity procedure to identify domestic monetary policy shocks and external shocks. Their research reveals that a contractionary monetary policy in most countries appreciates the domestic currency, increases interest rates, effectively controls inflation rates and reduces output. They do not find any evidence of the price, output, exchange rates and trade puzzles that are usually found in VAR studies. Their findings imply that the exchange rate is the main transmission mechanism in BRICS_T economies. The authors also find that that there are inverse J-curves in five of the six fast growing emerging economies and there are deviations from UIP (Uncovered Interest Parity) in response to a contractionary monetary policy in those countries. Moreover, world output shocks are not a dominant source of fluctuations in those economies. --
    Keywords: monetary policy,inflation,international trade,exchange rate,SVAR
    JEL: E52 E63 F14 F31 C51
    Date: 2013
  22. By: Eric Young (University of Virginia); Alessandro Rebucci (Inter-American Development Bank); Christopher Otrok (University of Missouri/St Louis Fed)
    Abstract: In the aftermath of the global financial crisis, a new policy paradigm has emerged in which old-fashioned policies such as capital controls and other government distortions have become part of the standard policy toolkit (the so-called macro-prudential policies). On the wave of this seemingly unanimous policy consensus, a new strand of theoretical literature contends that capital controls are welfare enhancing and can be justified rigorously because of second-best considerations. Within the same theoretical framework adopted in this fast-growing literature, we show that a credible commitment to support the exchange rate in crisis times always welfare-dominates prudential capital controls as it can achieve the unconstrained allocation.
    Date: 2013
  23. By: Santiago García-Verdú; Miguel Zerecero
    Abstract: In recent years the Bank of Mexico has made a series of rules-based interventions in the peso/dollar foreign exchange market. We assess the effectiveness of two specific interventions that occurred in periods of great stress for the Mexican economy. The aims of these two interventions were, respectively, to provide liquidity and to promote orderly conditions in the foreign exchange market. For our analysis, we follow the framework implemented by Dominguez (2003) and Dominguez (2006), an event-style microstructure approach. We use the bid-ask spreads as a measure of liquidity and of orderly conditions. In general, our results show no indication of an effect in the opposite direction from the one intended for the first intervention and are fairly conclusive regarding a significant reduction on the bid-ask spread for the second intervention.
    Keywords: foreign exchange rate, central bank interventions, microstructure
    Date: 2013–09
  24. By: Michael Rousakis (European University Institute)
    Abstract: This paper reconsiders the effects of expectations on economic fluctuations. It does so within a competitive monetary economy featuring producers and consumers with heterogeneous information about productivity. Agents' expectations are coordinated by a noisy public signal which generates non-fundamental, purely expectational shocks. Agents' expectations, however, have different implications for the economy. Hence, depending on how monetary policy is pursued, purely expectational shocks can behave like either demand shocks, as conventionally thought, or supply shocks - increasing output and employment yet lowering inflation. On the policy front, conventional policy recommendations are overturned: inflation stabilization is suboptimal, whereas output-gap stabilization is optimal.
    Date: 2013
  25. By: Tobias R. Rühl; Michael Stein
    Abstract: Bid-ask spreads using intraday data reveal significant sensitivity to European Central Bank (ECB) macro announcements. Effects are strongest for announcements that comprise unexpected information or a change in interest rates, and spreads rise sharply during the minutes surrounding interest rate or other important macroeconomic announcements by the ECB. Both Euro area stocks (of German DAX 30 and French CAC 40) and non-Euro stocks (of FTSE 100) have been used for comparative reasons. All results are robust to changes in specification and when being controlled for normal daytime-dependent frictions or other macroeconomic announcements.
    Keywords: Market microstructure; transaction costs; bid-ask spreads; ECB; announcement effects
    JEL: G14 G18 E52
    Date: 2013–11
  26. By: Giovanni Caggiano; Calice Pietro (African Development Bank); Leone Leonida
    Abstract: This paper estimates an early warning system for predicting systemic banking crises in a sample of low income countries in Sub-Saharan Africa. Since the average duration of crises in this sample of countries is longer than one year, the predictive performance of standard binomial logit models is likely to be hampered by the so-called crisis duration bias. The bias arises from the decision to either treat crisis years after the onset of a crisis as non-crisis years or remove them altogether from the model. To overcome this potential drawback, we propose a multinomial logit approach, which is shown to improve the predictive power compared to the binomial logit model. Our results suggest that crisis events in low income countries are associated with low economic growth, drying up of banking system liquidity and widening of foreign exchange net open positions. JEL Classification: C52, G21, G28, E58.
    Keywords: Banking crises, Systemic risk, Early warning systems, Low income countries, Sub-Saharan Africa, Logit estimation, Financial regulation.
    Date: 2013–12–19
  27. By: Devereux, Michael B; Senay, Ozge; Sutherland, Alan
    Abstract: Over the past four decades, advanced economies experienced a large growth in gross external portfolio positions. This phenomenon has been described as Financial Globalization. Over roughly the same time frame, most of these countries also saw a substantial fall in the level and variability of inflation. Many economists have conjectured that financial globalization contributed to the improved performance in the level and predictability of inflation. In this paper, we explore the causal link running in the opposite direction. We show that a monetary policy rule which reduces inflation variability leads to an increase in the size of gross external positions, both in equity and bond portfolios. This appears to be a robust prediction of open economy macro models with endogenous portfolio choice. It holds across different modeling specifications and parameterizations. We also present preliminary empirical evidence which shows a negative relationship between inflation volatility and the size of gross external positions.
    Keywords: Nominal stability, Financial Globalization, Country Portfolios,
    Date: 2013
  28. By: Blake, Andrew P.; Kirsanova, Tatiana; Yates, Tony
    Abstract: This paper revisits the argument that the stabilisation bias that arises under discretionary monetary policy can be reduced if policy is delegated to a policymaker with redesigned objectives. We study four delegation schemes: price level targeting, interest rate smoothing, speed limits and straight conservatism. These can all increase social welfare in models with a unique discretionary equilibrium. We investigate how these schemes perform in a model with capital accumulation where uniqueness does not necessarily apply. We discuss how multiplicity arises and demonstrate that no delegation scheme is able to eliminate all potential bad equilibria. Price level targeting has two interesting features. It can create a new equilibrium that is welfare dominated, but it can also alter equilibrium stability properties and make coordination on the best equilibrium more likely.
    Keywords: Time Consistency, Discretion, Multiple Equilibria, Policy Delegation,
    Date: 2013
  29. By: Bruce White (The Treasury)
    Abstract: This paper surveys the evolution of macroeconomic policy, in the New Zealand context, from the beginning of the end of the Great Inflation of the 1970s/1980s, through to the current recovery from the Great Recession brought on by the Global Financial Crisis. The 30 or so years since the late 1970s is divided into four periods: the run-up to the mid-1984 currency crisis; the period of reform from that point until the early 1990s; the subsequent extended period of non-inflationary growth in the 1990s and into the 2000s (punctuated by the Asian Financial Crisis in 1997/98); and the GFC and the years since. The paper reviews macroeconomic policy and developments across each of these periods in relation to fiscal policy, monetary policy, exchange rate policy and prudential supervision, all of which at various times have been used with macroeconomic objectives in mind. The paper concludes with some observations on where macro policy appears to be headed, suggesting that is towards achieving some re-integration of its individual components.
    Keywords: Macroeconomy; fiscal policy; monetary policy; exchange rate policy; macro-prudential policy; prudential supervision
    JEL: E52 E62 E63
    Date: 2013–12
  30. By: David, Cobham
    Abstract: This paper examines the performance of monetary policy under the new framework established in 1997 up to the end of the Labour government in May 2010. Performance was relatively good in the years before the crisis, but much weaker from 2008. The new framework largely neglected open economy issues, while the Treasury’s EMU assessment in 2003 can be interpreted in different ways. inflation targeting in the UK and elsewhere may have contributed in some way to the eruption and depth of the financial crisis from 2008, but UK monetary policy responded in a bold and innovative way. Overall, the design and operation of monetary policy were much better than in earlier periods, but there remains scope for significant further evolution.
    Keywords: monetary policy, central bank independence, European Monetary Union, house prices, financial crisis,
    Date: 2013
  31. By: Giovanni Di Bartolomeo; Patrizio Tirelli; Nicola Acocella
    Abstract: We challenge the widely held belief that New-Keynesian models cannot predict optimal positive in�flation rates. In fact these are justi�fied by the Phelps argument that monetary fi�nancing can alleviate the burden of distortionary taxation. We obtain this result because, in contrast with previous contributions, our model accounts for public transfers as a component of fi�scal outlays. We also contradict the view that the Ramsey policy should minimize in�ation volatility and induce near-random walk dynamics of public debt in the long-run. In our model it should instead stabilize debt-to-GDP ratios in order to mitigate steady-state distortions. Our results thus provide theoretical support to policy-oriented analyses which call for a reversal of debt accumulated in the aftermath of the 2008 fi�nancial crisis.
    Keywords: Trend infl�ation, monetary and fi�scal policy, Ramsey plan
    JEL: E52 E58 J51 E24
    Date: 2013–12
  32. By: Carlos Garriga; Finn E. Kydland; Roman Sustek
    Abstract: Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. Observed debt levels and payment to income ratios suggest the role of such loans in monetary transmission may be important. A general equilibrium model is developed to address this question. The transmission is found to be stronger under adjustable- than fixed-rate contracts. The source of impulse also matters: persistent inflation shocks have larger effects than cyclical fluctuations in inflation and nominal interest rates
    JEL: E32 E52 G21 R21
    Date: 2013–12
  33. By: Marcelo Madureira Prates
    Abstract: In this paper, we suggest that the regulation of the financial system, especially if the aim is to prevent financial crises, should be focused on dealing with the consequences of the crises, not on trying to avoid their causes, although it may seem counterintuitive at first sight. Contrary to the majority of opinions in the field, we firmly believe that more important than organizing the best possible prudential regulation is having a solid and well-developed financial safety net. Building a strong safety net might not only boost confidence in the financial system and contribute to its stability, but also create the right incentives to avoid reckless risk-taking, mainly if there are rules establishing that other financial institutions, creditors and even executives could be held responsible for the trouble caused by any failed financial institution
    Date: 2013–11
  34. By: Paul H. Kupiec (American Enterprise Institute); Claire Rosenfeld; Yan Lee
    Abstract: New bank regulations include macroprudential policies to control bank loan growth. We find bank funding costs and supervisory monitoring intensity to be the most important determinants of loan growth followed by loan portfolio performance and bank profitability. Bank capital and liquidity ratios have limited impacts, suggesting that macroprudential regulations are unlikely to be effective.�
    Keywords: AEI Economic Policy Working Paper Series
    JEL: A G
    Date: 2013–12
  35. By: Reinhold Heinlein; Hans-Martin Krolzig
    Abstract: We study the exchange rate effects of monetary policy in a balanced macroeconometric two-country model for the US and UK. In contrast to the empirical literature on the 'delayed overshooting puzzle', which consistently treats the domestic and foreign countries unequally in themodelling process, we consider the full model feedback, allowing for a thorough analysis of the system dynamics. The consequential inevitable problem of model dimensionality is tackled in this paper by invoking the approach by Aoki (1981) commonly used in economic theory. Assuming country symmetry in the long-run allows to decouple the two-country macro dynamics of country averages and country differences such that the cointegration analysis can be applied to much smaller systems. Secondly the econometric modelling is general-to-specific, a graph-theoretic approach for the contemporaneous effects combined with an automatic general-to-specific model selection. The resulting parsimonious structural vector equilibrium correction model ensures highly significant impulse responses, revealing a delayed overshooting of the exchange rate in the case of a Bank of England monetary shock but suggests an instantaneous response to a Fed shock. Altogether the response is more pronounced in the former case.
    Keywords: Two-country model; Cointegration; Structural VAR; Gets Model Selection; Monetary Policy; Exchange Rates
    JEL: C22 C32 C50
    Date: 2013–12
  36. By: Kristin Forbes; Marcel Fratzscher; Roland Straub
    Abstract: Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding to changes in variables that the CFMs are intended to influence. This paper addresses these challenges by using a propensity-score matching methodology. We also create a new database with detailed information on weekly changes in controls on capital inflows, capital outflows, and macroprudential measures from 2009 to 2011 for 60 countries. Results show that macroprudential measures can significantly reduce some measures of financial fragility. Most CFMs do not significantly affect other key targets, however, such as exchange rates, capital flows, interest-rate differentials, inflation, equity indices, and different volatilities. One exception is that removing controls on capital outflows may reduce real exchange rate appreciation. Therefore, certain CFMs can be effective in accomplishing specific goals-but most popular measures are not "good for" accomplishing their stated aims.
    Keywords: capital controls, macroprudential measures, propensity-score matching, selection bias, capital flows, emerging markets
    JEL: F3 F4 F5 G0 G1
    Date: 2013
  37. By: Brown, M.; Haas, R. de; Sokolov, V. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: We exploit variation in consumer price inflation across 71 Russian regions to examine the relationship between the perceived stability of the local currency and financial dollarization. Our results show that regions with higher inflation experience an increase in the dollarization of household deposits and a decrease in the dollarization of (long-term) household credit. The negative impact of inflation on credit dollarization is weaker in regions with less-integrated banking markets, suggesting that the asset-liability management of banks constrains the currency-portfolio choices of households.
    Keywords: Financial dollarization;financial integration;regional inflation
    JEL: E31 E42 E44 F36 G21 P22 P24
    Date: 2013
  38. By: Nagayasu, Jun
    Abstract: We analyze and quantify co-movements in real effective exchange rates while considering the regional location of countries. More specifically, using the dynamic hierarchical factor model (Moench et al. (2011)), we decompose exchange rate movements into several latent components; worldwide and two regional factors as well as country-specific elements. Then, we provide evidence that the worldwide common factor is closely related to monetary policies in large advanced countries while regional common factors tend to be captured by those in the rest of the countries in a region. However, a substantial proportion of the variation in the real exchange rates is reported to be country-specific; even in Europe country-specific movements exceed worldwide and regional common factors.
    Keywords: Real e ffective exchange rates, dynamic hierarchical factor model, variance decomposition, Bayesian model averaging,
    Date: 2013
  39. By: Andrievskaya, Irina (BOFIT); Semenova , Maria (BOFIT)
    Abstract: The interbank market plays an important role in the overall function of the financial system. The efficiency of the interbank market, in turn, depends largely on its inherent disciplining mechanisms. This paper investigates the discipline mechanisms of Russia’s interbank market, testing the hypothesis that market discipline in Russia was strong enough to constrain excessive risk-taking by participating banks before, during, and after the 2008–2009 financial crisis. The existence of quantity-based market discipline is investigated using Heckman’s sample selection model and the efficiency of market discipline is studied with a panel data model. Our approach detects market discipline only during the financial crisis, not before or after. Even during the crisis, its efficiency in curbing bank risk-taking was rather low.
    Keywords: market discipline; interbank market; risk-taking; banks; Russia
    JEL: G01 G21 P20
    Date: 2013–11–29
  40. By: Juan José Echavarría; Luis Fernando Melo; Santiago Téllez; Mauricio Villamizar
    Abstract: The adoption of a managed regime assumes that interventions are relatively successful. However, while some authors consider that foreign exchange interventions are not effective, arguing that domestic and foreign assets are close substitutes, others advocate their use and maintain that their effects can even last for months. There is also a lack of consensus on the related question of how to intervene. Are dirty interventions more powerful than pre-announced constant ones? This paper compares the effects of day-to-day interventions with discretionary interventions by combining a Tobit-GARCH reaction function with an asymmetric power PGARCH(1,1) impact function. Our results show that the impact of pre-announced and transparent US$ 20 million daily interventions, adopted by Colombia in 2008-2012, has been much larger than the impact of dirty interventions adopted in 2004-2007.We find that the impact of a change in daily interventions (from US$20 million to US$ 40 million) raises the exchange rate by approximately Col $2, implying that actual interventions of US$ 1000 million increase the exchange rate in one day by 5.50%. We also find a positive impact of capital controls.
    Keywords: Central bank intervention, reaction function, Tobit-GARCH, foreign exchange intervention mechanisms, capital controls, dirty interventions
    Date: 2013–09
  41. By: Marcelo Bianconi; Xiaxin Hua; Chih Ming Tan
    Abstract: We study the effects of two measures of information dissemination on the determination of systemic risk. One measure is print-media consumer sentiment based while the other is volatility based. We find evidence that while the volatility measure (VIX) of future expectations has a more significant direct impact upon systemic risk of financial firms under distress, a consumer sentiment measure based on print-media news does impact upon firm's financial stress via the externality of other firm's financial stress. This latter effect is robust even though the VIX and the consumer sentiment have dynamic feedback in the short one and two-day horizon in levels, and contemporaneously in volatility. In reference to the internet bubble of the 1990s, the consumer sentiment measure predicts larger systemic risk in the whole period of exuberance while the VIX predicts a sharp larger systemic risk in the height of the bubble. Our evidence suggests that print-media consumer sentiment might be dominated by the VIX when predicting systemic risk.
    Keywords: conditional value-at-risk, VIX, externality, consumer sentiment
    JEL: G00 G14
    Date: 2013
  42. By: Satyajit Chatterjee (Federal Reserve Bank of Philadelphia); Burcu Eyigungor (Phildalephia Federal Reserve Bank)
    Abstract: An important source of inefficiency in long-term debt contracts is the debt dilution problem, wherein a borrower ignores the adverse impact of new borrowing on the market value of outstanding debt and, therefore, borrows too much and defaults too frequently. A commonly proposed remedy to the debt dilution problem is seniority of debt, wherein creditors who lent first are given priority in any bankruptcy or restructuring proceedings. The goal of this paper is to incorporate seniority in a quantitatively realistic, infinite horizon model of sovereign debt and default and examine, both theoretically and quantitatively, the extent to which seniority can mitigate the debt dilution problem.
    Date: 2013
  43. By: Reinhold Heinlein; Hans-Martin Krolzig
    Abstract: This note aims to identify the stable long-run relationships as well as unstable driving forces of the world economy using an aggregated approach involving the four largest currency blocks. The small global macromodel encompasses aggregated quarterly US, UK, Japanese and Euro Area data for the post-Bretton-Woods era. Three stable long-run relationships are found: output growth, the global term spread and an inflation climate measure. The common stochastic trend of the global economy is found to be dominated by real short-term interest rate shocks, reflecting the strong increase of the global real rates during the Volcker disinflation period as a dominating event of the last 40 years of macro history.
    Keywords: Cointegration; Real interest rates; Volcker disinflation; Multi-country model; Divisia index
    JEL: C32 C50 C82
    Date: 2013–12
  44. By: Evans, Olaniyi
    Abstract: This study examines the monetary model of exchange rate in Nigeria, using an Autoregressive Distributed Lag (ARDL) approach over the period 1998Q1 to 2012Q2. The estimation results show that there is long run relationship among variables of the monetary model of exchange rate for Nigeria. That is, the estimated coefficients of the money supply, income and interest rate differentials support the monetary exchange rate model. As well, the stability test of CUSUM shows that there exists a significant and stable monetary model of exchange rate determination for Nigeria. Therefore, this study recommends that market participants in the foreign exchange market may monitor and forecast future exchange rate movements using the money supplies, incomes and interest rates variables.
    Keywords: monetary model, exchange rate, Autoregressive Distributed Lag, money supply, income and interest rate differentials
    JEL: E4 E43 E47 E52 G1
    Date: 2013–12
  45. By: MacDonald, Ronald; Nagayasu, Jun
    Abstract: Using survey expectations data and Markov-switching models, this paper evaluates the characteristics and evolution of investors' forecast errors about the yen/dollar exchange rate. Since our model is derived from the uncovered interest rate parity (UIRP) condition and our data cover a period of low interest rates, this study is also related to the forward premium puzzle and the currency carry trade strategy. We obtain the following results. First, with the same forecast horizon, exchange rate forecasts are homogeneous among different industry types, but within the same industry, exchange rate forecasts differ if the forecast time horizon is different. In particular, investors tend to undervalue the future exchange rate for long term forecast horizons; however, in the short run they tend to overvalue the future exchange rate. Second, while forecast errors are found to be partly driven by interest rate spreads, evidence against the UIRP is provided regardless of the forecasting time horizon; the forward premium puzzle becomes more significant in shorter term forecasting errors. Consistent with this finding, our coefficients on interest rate spreads provide indirect evidence of the yen carry trade over only a short term forecast horizon. Furthermore, the carry trade seems to be active when there is a clear indication that the interest rate will be low in the future.
    Keywords: Currency forecast errors, uncovered interest parity, forward premium puzzle, carry trade, Markov-switching modelate,
    Date: 2013
  46. By: David Turner; Francesca Spinelli
    Abstract: In the wake of the financial crisis there has been renewed focus on the importance of a country’s net external debt position in determining domestic interest rates and, relatedly, its vulnerability to a crisis. This paper extends the panel estimation of OECD countries described in Turner and Spinelli (2012) to investigate the effect of external debt and its interaction with government debt on the interest-rate-growth differential. The inclusion of net external debt is found to be significant in both economic and statistical terms, and of particular importance for euro area countries in the post-crisis period. The results imply that the interest-rate effect of marginal increases in external debt or government debt is non-linear and dependent on the initial levels of debt, with the interest rate effect rising sharply in the post-crisis period for euro area countries which have a combination of both high external debt and high government debt. The policy implications for those countries under financial market pressure, especially within the euro area, are that reducing external deficits and debt are at least as important as reducing government deficits and debt. In any case, the effect of higher net external debt on interest rates provides a feedback effect which may prevent countries running sustained large current account imbalances over a long period. However, evidence of an asymmetry in the effect (between the effect of net external debt and net external assets) suggests that the pressure for adjustment will apply more strongly to deficit countries. It also implies that increased polarisation of external debt positions will raise the overall level of global interest rates. L'effet de la dette publique, de la dette extérieure et de leur interaction sur les taux d'intérêt dans la zone OCDE À la suite de la crise financière, il y a eu un nouvel intérêt porté à l’importance de la position nette extérieure d’un pays dans la détermination des taux d’intérêt domestique, et par conséquent, sa vulnérabilité à une crise. Ce papier étend l’estimation de panel des pays de l’OCDE décrit dans Turner et Spinelli (2012) afin d’étudier l’effet de la dette extérieure et de son interaction avec la dette publique sur l’écart entre le taux d’intérêt et le taux de croissance. La prise en compte de la position nette extérieure apparait significative à la fois en termes économiques et statistiques, et notamment pour les pays de la zone euro dans la période postérieure à la crise. Les résultats soulignent que l’effet de la dette extérieure ou publique sur le taux d’intérêt est non linéaire et dépend des niveaux initiaux de dette ; en particulier l’effet sur le taux d’intérêt augmente beaucoup après la crise pour les pays de la zone euro du fait de la présence simultanée d’une dette extérieure et publique élevée. La conséquence en terme de politique économique pour ces pays sous pression des marchés financiers, spécialement dans la zone euro, est que la réduction des déficits et dettes extérieurs est au moins aussi importante que la réduction des déficits et dettes publics. Dans tous les cas, l’effet d’une dette extérieure nette élevée sur les taux d’intérêt se conjugue à un effet rétroactif qui peut empêcher un pays d’avoir des déséquilibres récurrents de balance courante sur une longue période. Cependant, l’existence d’une asymétrie de l’effet (entre l’effet d’une dette ou d’un surplus extérieur) suggère que la pression à l’ajustement va s’exercer plus fortement sur des pays avec des déficits. Cela implique également que la polarisation accrue sur les positions nettes extérieures va augmenter le niveau global des taux d’intérêt.
    Keywords: fiscal sustainability, government debt, external debt, interest rates, interest-rate-growth differential, écarts de taux d’intérêt, dette extérieure, taux d’intérêt, viabilité budgétaire
    JEL: E43 E62 H63 H68
    Date: 2013–12–11
  47. By: Dirk Schoenmaker; Toon Peek
    Abstract: This paper reviews the state of the banking sector in Europe. At the aggregate level, the empirical data suggest that the Baltics, Cyprus, Greece and Ireland, in particular, are hit by a strong decline in lending in the wake of the financial crisis. This deleveraging is mainly caused by a reduction in cross-border supply of credit. We also examine the capital position of the European banking system, using November 2013 stock market data. In the basic scenario to restore capital to a market based leverage ratio of 3%, EUR 84 billion of extra capital would be needed for the largest 60 banks. At the bank level, the top tertile of well-capitalised banks (with a market based leverage ratio well above 4%) continues lending. By contrast, the 2nd tertile of medium-capitalised banks (between 3 and 4%) and the 3rd tertile of weakly capitalised banks (well below 3%) show a strong decline in lending. Moreover, the market-to-book ratio is below one for these banks. The market thus gives a lower value to these banks. Our findings provide prima facie evidence of a credit crunch in Europe. Another fallout of the financial crisis is an increase, though very modest, of concentration in banking in the distressed countries (Greece, Ireland, Portugal, Spain and Italy). The enhancement of financial stability through (forced) M&As seems to come at the expense of reduced competition. L'état du secteur bancaire en Europe Ce document examine l'état du secteur bancaire en Europe. Au niveau agrégé, les données empiriques suggèrent que les pays baltes, Chypre, la Grèce et l'Irlande, en particulier, sont touchés par une forte diminution du crédit à la suite de la crise financière. Ce désendettement est principalement dû à une réduction de l'offre transfrontalière de crédit. Nous examinons également la capitalisation du système bancaire européen, en utilisant les données boursières de novembre 2013. Dans le scénario de base qui consiste à restaurer à 3 % le ratio de levier fondé sur la capitalisation boursière, 84 milliards d’euros de capitaux supplémentaires seraient nécessaires pour les 60 plus grandes banques. Au niveau des banques, le tiers supérieur des banques les mieux capitalisées (avec un ratio de levier fondé sur la capitalisation boursière bien au-dessus de 4 %) continue de prêter. En revanche, le deuxième tiers de banques de capitalisation intermédiaire (entre 3 et 4 %) et le troisième tiers des banques faiblement capitalisées (bien en-dessous de 3 %) montrent une forte diminution des prêts. En outre, le ratio entre valeur de marché et valeur comptable est inférieur à un pour ces banques. Le marché donne ainsi à ces banques une valeur inférieure. Nos résultats fournissent la preuve prima facie d'une chute du crédit en Europe. Une autre retombée de la crise financière est une augmentation, bien que très modeste, de la concentration du secteur bancaire dans les pays en difficulté (Espagne, Grèce, Irlande, Italie et Portugal). Le renforcement de la stabilité financière à travers des fusions et acquisitions (forcées) semble se faire au détriment de la concurrence.
    Keywords: capital, credit supply, banks, geographical segmentation, deleveraging, cross-border banking, activité bancaire transfrontalière, segmentation géographique, banques, capital, offre de crédit, désendettement
    JEL: D40 F36 G21 G28
    Date: 2013–12–13
  48. By: Barbosa, Klenio de Souza; Rocha, Bruno; Salazar, Fernando
    Abstract: This paper investigates the competitive aspects of multi-product banking operations.Extending Panzar and Rosse (1987)’s model to the case of a multi-product bankingfirm, we show that the higher the economies of scope in multi-product banking are,the lower Panzar-Rosse’s measure of competition in the banking sector is. To test thisempirical implication and determine the impact of multi-production/conglomeration onmarket power, we use a new dataset on Brazilian banking conglomerates. Consistentwith our theoretical prediction, we find that banks offering classic banking products (i.e.,loans and credit cards) and other banking products (i.e., brokerage services, insuranceand capitalization bonds) have substantially higher market power than banks that offeronly classic products. These results suggest a positive bias in the traditional estimatesof competition in which multi-output actions are not considered.
    Date: 2013–12–06

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