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on Central Banking |
| By: | Roman Horváth (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic; Institute for East and Southeast European Studies, Regensburg, Germany); Júlia Jonášová (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic) |
| Abstract: | We examine whether central banks’ voting records help predict the future course of monetary policy in the Czech Republic, Hungary, Poland, Sweden and the United Kingdom, controlling for financial market expectations. Unlike previous research, first, we examine the period of the global financial crisis, characterized by a high level of uncertainty, and second, we examine the predictive power of voting records at longer time horizons, i.e., not only for the next monetary policy meeting. We find that voting records predict the policy rate set at the next meeting in all central banks that are recognized as independent. In some central banks, voting records are found—before, but not during, the financial crisis—to be informative about monetary policy even at more distant time horizons. |
| Keywords: | voting records, financial crisis, central bank, monetary policy |
| JEL: | D78 E52 E58 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2014_35&r=cba |
| By: | Paul Hubert (OFCE) |
| Abstract: | We aim at investigating how two different types of central bank communication affect the private inflation expectations formation process. The effects of ECB inflation projections and Governing Council members’ speeches on private inflation forecasts are identified through an Instrumental-Variables estimation using a Principal Component Analysis to generate valid instruments. We find that ECB projections have an effect on private current-year forecasts, while ECB speeches and the ECB rate impact next-year forecasts. When both communication types are interacted and go in the same direction, the inflation outlook signal tends to outweigh the policy path signal conveyed to private agents (and vice-versa). |
| Keywords: | European Central Bank; Monetary Policy; Central Bank Communication; ECB projections; Instrumental variables; Pincipal Component Analysis |
| JEL: | E52 E58 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/2t6uivimtr9438i2qqu6kgfded&r=cba |
| By: | Egor S. Malkov (National Research University Higher School of Economics) |
| Abstract: | As Akerlof and Shiller (2009) argue, corruption and bad faith played an important role in determining the severity of the recent recessions in the US. This paper studies the impact of robo-signing, which is a typical example of economic bad faith, on the economy and unconventional monetary policy during the last financial crisis. We modify the DSGE model by Gertler and Karadi (2011) by including the features of robo-signing. The paper concludes that banks’ bad faith magnifies the financial crisis through the transmission channel related to changes in the leverage of financial intermediaries and induces the central bank to conduct a more aggressive unconventional monetary policy. We suggest a theoretical framework for studying cases of economic bad faith during the last financial crisis, and provide a model that well fits the data. |
| Keywords: | robo-signing, unconventional monetary policy, bad faith, financial crisis. |
| JEL: | E44 E52 E58 G01 G21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:65/ec/2014&r=cba |
| By: | Schwarz, Claudia; Karakitsos, Polychronis; Merriman, Niall; Studener, Werner |
| Abstract: | This paper analyses how accounting frameworks can affect three important areas of responsibility of many central banks, namely monetary policy, financial stability and banking supervision. The identified effects of accounting rules and accounting information on the activities of a central bank are manifold. First, the effectiveness of monetary policy crucially hinges on the financial independence of a central bank, which can be evidenced, inter alia, by its financial strength. Using a new simulation of the financial results of the European Central Bank (ECB), this paper shows that the reported annual profit and financial buffers of a central bank can be significantly affected by accounting, profit distribution and loss coverage rules. Second, in respect of financial stability, the accounting frameworks applied by commercial banks can not only affect their behaviour, but also that of financial markets. Indeed, there is evidence that accounting frameworks amplified pro-cyclicality during the recent crisis, and thus posed risks to the stability of the financial system. This being so, the accounting frameworks of credit institutions have obvious implications for central banks’ analyses with regard to promoting financial stability. Finally, as regards banking supervision, regulatory reporting and key supervisory ratios are based on accounting data. Under the new regulatory framework for banks in the European Union (EU), bank supervisors are highly reliant on accounting data. This means that central banks, in their role as bank supervisors, need to understand the underlying accounting rules and should directly support the development and application of high-quality accounting frameworks. JEL Classification: E23, E25 |
| Keywords: | accounting standards, banking supervision, central bank balance sheet, financial reporting, financial stability |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2014153&r=cba |
| By: | Truman, Edwin M. (Peterson Institute for International Economics) |
| Abstract: | This paper traces the evolution of the Federal Reserve and its engagement with the global economy over the last three decades of the 20th century: 1970 to 2000. The paper examines the Federal Reserve’s role in international economic and financial policy and analysis covering four areas: the emergence and taming of the great inflation, developments in US external accounts, foreign exchange analysis and activities, and external financial crises. It concludes that during this period the US central bank emerged to become the closest the world has to a global central bank. |
| Keywords: | Federal Reserve; Federal Open Market Committee; inflation; macroeconomic policies; monetary policy; external balance; exchange rates; exchange market intervention; financial crises; third world debt crises; Mexican crisis; Asian financial crises |
| JEL: | E4 E42 F3 F31 F32 F33 F34 F5 F52 F53 |
| Date: | 2014–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:210&r=cba |
| By: | Bordo, Michael D. (Rutgers University); Humpage, Owen F. (Federal Reserve Bank of Cleveland) |
| Abstract: | During the Bretton Woods era, balance-of-payments developments, gold losses, and exchange-rate concerns had little influence on Federal Reserve monetary policy, even after 1958 when such issues became critical. The Federal Reserve could largely disregard international considerations because the U.S. Treasury instituted a number of stopgap devices—the gold pool, the general agreement to borrow, capital restraints, sterilized foreign-exchange operations—to shore up the dollar and Bretton Woods. These, however, gave Federal Reserve policymakers the latitude to focus on the domestic objectives and shifted responsibility for international developments to the Treasury. Removing the pressure of international considerations from Federal Reserve policy decisions made it easier for the Federal Reserve to pursue the inflationary policies of the late 1960s and 1970s that ultimate destroyed Bretton Woods. In the end, the Treasury’s stopgap devices, which were intended to support Bretton Woods, contributed to its demise. |
| JEL: | F31 F33 N1 |
| Date: | 2014–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:206&r=cba |
| By: | Hamza Bennani; Matthias Neuenkirch |
| Abstract: | Speeches are an important vehicle for central bankers to convey individual views on the preferred policy stance. In this paper, we employ an automated text linguistic approach to create an indicator that measures the tone of the 1,618 speeches delivered by members of the Governing Council (GC) during the period 1999M1-2014M4. We then relate this variable to euro-area and national macroeconomic forecasts. Our key findings are as follows. First, inflation and growth expectations have a positive and significant impact on the hawkishness of a speech. Second, the voiced preferences of national central bankers largely coincide with the level of independence their banks had at the time of the Maastricht Treaty. Third, country-specific macroeconomic conditions matter for speeches delivered inside the central banker's home country but not for those made abroad. Fourth, differences in central banker preferences are the key source of variation in their speeches before the financial crisis, whereas divergent national economic conditions are the main factor in the second part of the sample. |
| Keywords: | Central Bank Communication, European Central Bank, Governing Council, Monetary Policy, National Interests, Speeches |
| JEL: | E52 E58 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:trr:wpaper:201416&r=cba |
| By: | BLINOV, Sergey |
| Abstract: | This paper investigates the possibility of conducting an unconventional monetary policy of Quantitative easing (QE) at high interest rates using the example and experience of Russia. The Central Bank of the Russian Federation has raised the key interest rate on six occasions during the 12 months of 2014 from 5.5% to 17%. The Central Bank has been coming in for criticism for such an increase. However, this criticism is unfair, as sometimes interest rate reduction or failure to raise interest rate result in adverse consequences. Luckily, interest rate is not the only and often far from being the most efficient tool of successful monetary policy. During the hardest phase of the most recent crisis, the central banks worldwide, for example, U.S. Federal Reserve System, resorted to another tool, i.e. Quantitative easing (QE), rather interest rates (which, by that time, had been virtually dropped down to zero). Some experts recognize those to be an important innovation devised by Ben Bernanke, Head of the U.S. Fed during 2006 - 2014. The Central Bank of Russia now has an opportunity of employing a still more innovative policy, i.e. to have “quantitative easing” at high interest rates rather than at zero rates. The experience of the «Golden Decade» (the decade of robust economic growth in Russia between September 1998 and September 2008) proves the efficiency of such monetary policy. The criterion for «sufficiency» of quantitative easing must be the growth rate of the real money supply. In June 2014, the real money supply decreased. That has happened for the first time since December 2009. It shows that there is a need for urgent action on the part of the Central Bank. To bring about steady economic growth, it is required that such quantitative easing be put in place as would make real money supply grow at a pace no slower than the target growth rate for GDP. According to preliminary estimate, the volume of necessary easing would be in the range between RUR 0.6 and 1.9 trillion. Such a program may make itself felt as soon as 3-4 months after its launch. |
| Keywords: | Monetary Policy, Central Banking, Interest Rates, Quantitative Easing (QE), Economic Growth, Money Supply |
| JEL: | E31 E32 E40 E43 E50 E51 E52 E58 E65 G01 N10 O11 |
| Date: | 2014–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:60765&r=cba |
| By: | Anton Korinek; Damiano Sandri |
| Abstract: | We examine the effectiveness of capital controls versus macroprudential regulation in reducing financial fragility in a small open economy model in which there is excessive borrowing because of externalities associated with financial crises and contractionary exchange rate depreciations. We find that both types of instruments play distinct roles: macroprudential regulation reduces the indebtedness of leveraged borrowers whereas capital controls induce more precautionary behavior for the economy as a whole, including for savers. This reduces crisis risk by shoring up aggregate net worth and mitigating the transfer problem that occurs during crises. In advanced countries where the risk of large contractionary depreciations is more limited, the role for capital controls subsides. However, macroprudential regulation remains essential in our model to mitigate booms and busts in asset prices. |
| JEL: | E44 F34 F41 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20805&r=cba |
| By: | Carlson, Mark A. (Board of Governors of the Federal Reserve System); Wheelock, David C. (Federal Reserve Bank of St. Louis) |
| Abstract: | The 1950s are often cited as a decade in which the Federal Reserve operated a particularly successful monetary policy. The present paper examines the evolution of Federal Reserve monetary policy from the mid-1930s through the 1950s in an effort to understand better the apparent success of policy in the 1950s. Whereas others have debated whether the Fed had a sophisticated understanding of how to implement policy, our focus is on how the constraints on the Fed changed over time. Roosevelt Administration gold policies and New Deal legislation limited the Fed’s ability to conduct an independent monetary policy. The Fed was forced to cooperate with the Treasury in the 1930s, and fully ceded monetary policy to Treasury financing requirements during World War II. Nonetheless, the Fed retained a policy tool in the form of reserve requirements, and from the mid-1930s to 1951, changes in required reserve ratios were the primary means by which the Fed responded to expected inflation. The inability of the Fed to maintain a credible commitment to low interest rates in the face of increased government spending and rising inflation led to the Fed-Treasury Accord of March 1951. Following the Accord, the external pressures on the Fed diminished significantly, which enabled the Fed to focus primarily on macroeconomic objectives. We conclude that a successful outcome requires not only a good understanding of how to conduct policy, but also a conducive environment in which to operate. |
| JEL: | E52 E58 N12 |
| Date: | 2014–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:205&r=cba |
| By: | Stanislao Gualdi; Marco Tarzia; Francesco Zamponi; Jean-Philippe Bouchaud |
| Abstract: | We generalise the stylised macroeconomic Agent-Based model introduced in "Tipping Points in Macroeconomic Agent Based Models" [JEDC 50, 29-61 (2015)], with the aim of investigating the role and efficacy of monetary policy of a 'Central Bank', that sets the interest rate such as to steer the economy towards a prescribed inflation and unemployment level. Our major finding is that provided its policy is not too aggressive (in a sense detailed in the paper) the Central Bank is successful in achieving its goals. However, the existence of different equilibrium states of the economy, separated by phase boundaries (or "dark corners"), can cause the monetary policy itself to trigger instabilities and be counter-productive. In other words, the Central Bank must navigate in a narrow window: too little is not enough, too much leads to instabilities and wildly oscillating economies. This conclusion strongly contrasts with the prediction of DSGE models. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1501.00434&r=cba |
| By: | Fabio Busetti (Banca d'Italia); Giuseppe Ferrero (Banca d'Italia); Andrea Gerali (Banca d'Italia); Alberto Locarno (Banca d'Italia) |
| Abstract: | A prolonged period of low inflation, particularly in a situation of monetary policy rates near the zero lower bound, can heighten the risk of inflation expectations de-anchoring from the central bank objective. The purpose of this paper is to assess the effects of a sequence of deflationary shocks, such as those that hit the euro area in 2013-14, on expected/realized inflation and output. To do so we consider a simple New Keynesian model where agents, rather than being endowed with rational expectations, have incomplete information about the working of the economy and form expectations through an adaptive learning process (in the sense that they behave like econometricians, using regressions to anticipate the future value of the variables of interest). The model is simulated with euro area data over the period 2014-16 under the assumption both of rational expectations and of learning. The main findings are the followings: (i) under learning, price dynamics in 2015-16 is on average 0.6 percentage points lower than in the case of fully rational agents, as inflation expectations are strongly affected by the repeated deflationary shocks; (ii) the learning process implies a (data-driven) de-anchoring of inflation expectations from the central bank target, which would be perceived by economic agents to fall to 0.8% at the end of 2016; (iii) output expectations would also be lower in the case of learning, resulting in a slower recovery of economic activity. |
| Keywords: | expected inflation, incomplete information, learning |
| JEL: | C51 E31 E52 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_252_14&r=cba |
| By: | Kerry B. Hudson; Joaquin L. Vespignani |
| Abstract: | This investigation aims to explain and quantify the deviations of the Taylor Rule. A novel three-step econometric procedure designed to reflect the data-rich environment in which central banks operate is proposed using information for 229 macroeconomic series. This procedure can be applied to data for any economy with inflation targeting monetary rule. Our application with Australian data shows that approximately 65% of Australia’s deviation from the Taylor Rule can be explained systematically, with international factors and a domestic factor accounting for 41.9% and 22.5% respectively of the total variation in deviation from the rule. Australian deviation from the Taylor Rule is also associated with the deviation of the US´s Taylor Rule, indicating that the Reserve Bank of Australia appears to be following an international monetary policy trend set forth by the world’s largest economy. |
| Keywords: | Taylor Rule, Monetary Policy, Small Open Economy |
| JEL: | E40 E52 E50 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2014-78&r=cba |
| By: | Marcin Kolasa (National Bank of Poland); Krzysztof Makarski (National Bank of Poland); Michał Brzoza-Brzezina (National Bank of Poland) |
| Abstract: | In a number of countries a substantial proportion of loans is denominated in foreign currency. In this paper we demonstrate how their presence affects the economy. To this end we construct a small open economy model with financial frictions where loans can be taken in domestic or foreign currency. The model is calibrated for Poland - a typical small open economy with a large share of foreign currency loans (FCL). We show that FCLs negatively affect the transmission of monetary policy but do not impact on the effectiveness of macroprudential policy. We also demonstrate that FCLs increase welfare when domestic interest rate shocks are strong and decrease it when risk premium (exchange rate) shocks dominate. Under a realistic calibration of the stochastic environment FCLs are welfare reducing. Finally, we show that regulatory policies that correct the share of FCLs may cause a cyclical slowdown. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:645&r=cba |
| By: | Michael D. Bordo; Owen F. Humpage; Anna J. Schwartz |
| Abstract: | In this paper, we describe the evolution of the Federal Reserve’s swap lines from their inception in 1962 as a mechanism to forestall claims on U.S gold reserves under Bretton Woods to a means of extending emergency dollar liquidity during the Great Recession. We describe a number of consequences associated with swap operations. We argue, for example, that swaps calm crisis situations by both supplementing foreign countries’ dollar reserves and by signaling central-bank cooperation. We show how swaps exposed the Federal Reserve to conditionality and raised fears that they bypassed the Congressional appropriations process. |
| JEL: | F3 N2 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20755&r=cba |
| By: | Pablo D'Erasmo (University of Maryland / FRB Philadelphi); Bora Durdu (Federal Reserve Board); Emine Boz (International Monetary Fund) |
| Abstract: | This paper explores the role of bank balance sheets, sovereign default risk, and capital adequacy requirements in amplifying aggregate fluctuations. The paper, first, proposes a unified model of defaultable sovereign debt and bank balance sheets to capture regularities on bank credit to firms, banks' holdings of sovereign bonds, and the behavior of sovereign debt and default. The model captures the procyclical bank credit and countercyclical bank holdings of sovereign bonds. Since the sovereign defaults indiscriminately, bank losses due to a default hampers its lending to firms, thereby, generating an endogenous cost of default. The paper then conducts counterfactual policy experiments in line with Basel III. Our preliminary findings suggest that the introduction of leverage ratios is superior to increasing the capital requirement on risk weighted assets where sovereign bonds are assigned a zero weight. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:641&r=cba |
| By: | Julio Escolano; Christina Kolerus; Constant Lonkeng Ngouana |
| Abstract: | This paper finds that tightening global financial conditions can worsen emerging economies’ public debt dynamics through an increasing interest rate-growth differential, particularly if coupled with high global risk aversion. Latin America and emerging Europe are the regions most likely to be adversely affected. In addition, historical evidence—analyzed by means of a Poisson count model—suggests that the frequency of sovereign debt crises increases in emerging economies at the early stage of U.S. monetary tightening cycles, at times in which the term spread also rises. The timing may be related to abrupt switches of expectations about the future course of policy in the early stages of tightening cycles. |
| Keywords: | Public debt;Emerging markets;Sovereign debt;United States;Monetary policy;Spillovers;Financial crises;Debt dynamics, emerging markets, sovereign debt crisis, unconventional monetary policy, U.S. economy |
| Date: | 2014–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:14/215&r=cba |
| By: | Daniel C. Hardy; Philipp Hochreiter |
| Abstract: | A mechanism is proposed that aims to reduce the risk of a banking sector liquidity crisis—which is a quintessentially systemic event and thus the object of macroprudential policy—and moderate the effects of a crisis should one occur. The instrument would give banks more incentive to build up buffers of systemically liquid assets as a proportion of their total liabilities, yet these buffers would be usable in times of stress. The modalities of the instrument are considered with a view to making it effective, efficient, and robust. |
| Keywords: | Banking sector;Liquidity;Bank financing;Systemic risk;Banking crisis;Macroprudential policies and financial stability;Crisis management; |
| Date: | 2014–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:14/235&r=cba |
| By: | Luis Eduardo Arango; Ximena Chavarro; Eliana González |
| Abstract: | A small open macroeconomic model, in which an optimal interest rate rule emerges to drive the inflation behavior, is used to model inflation within an inflation targeting framework. This set up is used to estimate the relationship between commodity prices shocks and the inflation process in a country that both export and import commodities. We found evidence of a positive, yet small, impact from food international price shocks to inflation. However, these effects are no longer observable once the sample is split in the periods before and after the boom. The lack of effect from oil and energy price shocks we obtain supports the recent findings in the literature of a substantial decrease in the pass-through from oil prices to headline inflation. Thus, our interpretation is that monetary authority has faced rightly the shocks to commodity prices. Inflation expectations are the main determinant of inflation during the inflation targeting regime. Commodity prices movements are to a great extent included in the information set to form expectations. |
| Keywords: | Commodity prices, inflation-targeting regime, optimal monetary policy, expectations. |
| JEL: | E43 E58 |
| Date: | 2014–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012380&r=cba |
| By: | L. Clerc; A. Derviz; C. Mendicino; S. Moyen; K. Nikolov; L. Stracca; J. Suarez; A. P. Vardoulakis |
| Abstract: | We develop a dynamic general equilibrium model for the positive and normative analysis of macroprudential policies. Optimizing financial intermediaries allocate their scarce net worth together with funds raised from saving households across two lending activities, mortgage and corporate lending. For all borrowers (households, firms, and banks) external financing takes the form of debt which is subject to default risk. This “3D model” shows the interplay between three interconnected net worth channels that cause financial amplification and the distortions due to deposit insurance. We apply it to the analysis of capital regulation. |
| Keywords: | Macroprudential policy; Financial frictions; Default risk. |
| JEL: | E3 E44 G01 G21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:533&r=cba |
| By: | Jan Kregel |
| Abstract: | The Fed's zero interest policy rate (ZIRP) and quantitative easing (QE) policies failed to restore growth to the US economy as expected (i.e., increased investment spending a la John Maynard Keynes or from an expanded money supply a la Ben Bernanke / Milton Friedman). Senior Scholar Jan Kregel analyzes some of the arguments as to why these policies failed to deliver economic recovery. He notes a common misunderstanding of Keynes's liquidity preference theory in the debate, whereby it is incorrectly linked to the recent implementation of ZIRP. Kregel also argues that Keynes's would have implemented QE policies quite differently, by setting the bid and ask rate and letting the market determine the volume of transactions. This policy note both clarifies Keynes's theoretical insights regarding unconventional monetary policies and provides a substantive analysis of some of the reasons why central bank policies have failed to achieve their stated goals. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levypn:14-5&r=cba |
| By: | Aledjandro Lopez Mejia; Suliman Aljabrin; Rachid Awad; Mohamed Norat; Inwon Song |
| Abstract: | This paper aims at developing a better understanding of Islamic banking (IB) and providing policy recommendations to enhance the supervision of Islamic banks (IBs). It points out and discusses similarities and differences of IBs with conventional banks (CBs) and reviews whether the IBs are more stable than CBs. Given the risks faced by IBs, the paper concludes that they need a legal, corporate and regulatory framework as much as CB does. The paper also argues that it is important to ensure operational independence of the supervisory agency, which has to be supported by adequate resources, a sound legal framework, a well designed governance structure, and robust accountability practices. |
| Keywords: | Islamic banking supervision;Commercial banks;Bank regulations;Credit risk;Comparative advantage;Islamic banks, conventional banks, regulatory framework, banking supervision |
| Date: | 2014–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:14/219&r=cba |
| By: | Inwon Song; Carel Oosthuizen |
| Abstract: | The growing presence of Islamic banking needs to be accompanied by the development of effective regulation and supervision. This paper examines the results of the survey conducted by the International Monetary Fund to document international experiences and country practices related to legal and prudential frameworks governing Islamic banking activities. Although a number of countries have made considerable progress in creating legal, regulatory, and supervisory frameworks that accommodate Islamic banking, there are substantial differences. This paper also identifies a number of challenges faced by regulatory and supervisory agencies regarding Islamic banking. |
| Keywords: | Islamic banking;Commercial banks;Islamic banking supervision;Bank regulations;Bank deposits;Risk management;Transparency;Banking supervision, Islamic banks, regulatory framework |
| Date: | 2014–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:14/220&r=cba |
| By: | Homburg, Stefan |
| Abstract: | Monetary policy is superneutral in an overlapping generations model. Previous authors have argued that superneutrality does not hold in such a setting. However, the standard results rely on the counter-factual premise of helicopter money and are overturned if money creation through open market operations is taken into account. |
| Keywords: | Superneutrality, open market operations, seigniorage, monetary policy, overlapping generations |
| JEL: | E24 E43 E52 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-541&r=cba |
| By: | Sergio R. Stancato de Souza |
| Abstract: | This paper simulates the effects of credit risk, changes in capital requirements and price shocks on the Brazilian banking system. We perform the analysis within the context of a model that integrates data on bilateral exposures in the interbank market with information about the liquidity profile of each financial institution. Asset prices in the model are determined endogenously as a function of the total volume of fire sales, thus creating the possibility that marking to market may trigger new rounds of fire sales and downward asset price spirals. The simulation results show that the Brazilian banking system is robust, as relatively large increases in the delinquency rate lead to only modest losses in the system. We also compute the contribution of each financial institution to systemic losses under severe shocks and find that contributions from medium-sized banks can be significant. However, if shocks become more severe, only large banks will contribute significantly to systemic losses |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:375&r=cba |