Download or read book Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area written by Mr.Dominic Quint and published by International Monetary Fund. This book was released on 2013-10-14 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 policy 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 policy would always increase the welfare of savers, but their effects on borrowers depend on the shock that hits the economy. In particular, macroprudential policy may entail welfare costs for borrowers under technology shocks, by increasing the countercyclical behavior of lending spreads.

Download or read book Exploring the Nexus Between Macro Prudential Policies and Monetary Policy Measures written by Giacomo Carboni and published by . This book was released on 2013 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial crisis highlighted the importance of systemic risks and of policies that can be employed to prevent and mitigate them. Several recent initiatives aim at establishing institutional frameworks for macro-prudential policy. As this process advances further, substantial uncertainties remain regarding the transmission channels of macro-prudential instruments as well as the interactions with other policy functions, and monetary policy in particular. This paper provides an overview and some illustrative model simulations using an estimated DSGE model for the euro area of the macroeconomic interdependence between macro-prudential instruments and monetary policy.

Download or read book Macroprudential and Monetary Policy Interactions in a DSGE Model for Sweden written by Mr.Jiaqian Chen and published by International Monetary Fund. This book was released on 2016-03-23 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyse the effects of macroprudential and monetary policies and their interactions using an estimated dynamic stochastic general equilibrium (DSGE) model tailored to Sweden. Households face a ceiling on their loan-to-value ratio and must amortize their mortgages. The government grants mortgage interest payment deductions. Lending rates are affected by mortgage risk weights. We find that demand-side macroprudential measures are more effective in curbing household debt ratios than monetary policy, and they are less costly in terms of foregone consumption. A tighter macroprudential stance is also found to be welfare improving, by promoting lower consumption volatility in response to shocks, especially when using a combination of macroprudential instruments.

Download or read book QUEST III written by Marco Ratto and published by . This book was released on 1981 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Effectiveness and Channels of Macroprudential Instruments written by Mr.Thierry Tressel and published by International Monetary Fund. This book was released on 2016-01-12 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The crisis has highlighted the importance of setting up macro-prudential oversight frameworks, having effective macro-prudential instruments in place to be called upon to mitigate growing financial imbalances as needed. We develop a new approach using the euro area Bank Lending Survey to assess the effectiveness of macro-prudential policies in containing credit growth and house price appreciation in mortgage markets. We find instruments targeting the cost of bank capital most effective in slowing down mortgage credit growth, and that the impact is transmitted mainly through price margins, the same banking channel as monetary policy. Limits on loan-to-value ratios are also effective, especially when monetary policy is excessively loose.

Download or read book QUEST III an Estimated DSGE Model of the Euro Area with Fiscal and Monetary Policy written by and published by . This book was released on 2008 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a DSGE model for an open economy and estimates it on euro area data using Bayesian estimation techniques. The model features nominal and real frictions, as well as financial frictions in the form of liquidity constrained households. The model incorporates active monetary and fiscal policy rules (for government consumption, investment, transfers and wage taxes) and can be used to analyse the effectiveness of stabilisation policies. To capture the unit root character of macroeconomic time-series we allow for stochastic trend in TFP, but instead of filtering data prior to estimation, we estimate the model in growth rates and stationary nominal ratios.

Download or read book Complementaries and Tensions Between Monetary and Macroprudential Policies in an Estimated DSGE Model written by Črt Lenarčič and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent financial crisis has shown that the prior belief that the active monetary policy in pursuing price stability may not be sufficient enough to maintain financial stability as well as macroeconomic stability in an economy.

Download or read book Optimal Monetary Policy in an Estimated DSGE Model of the Euro Area with Cross country Heterogeneity written by Eric Jondeau and published by . This book was released on 2006 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Macroprudential Policy and Imbalances in the Euro Area written by Michał Brzoza-Brzezina and published by . This book was released on 2013 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Monetary Policy in an Estimated DSGE for the Euro Area written by Stéphane Adjemian and published by . This book was released on 2007 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this paper is to examine the main features of optimal monetary policy within a micro-founded macroeconometric framework. First, using Bayesian techniques, we estimate a medium scale closed economy DSGE for the euro area. Then, we study the properties of the Ramsey allocation through impulse response, variance decomposition and counterfactual analysis. In particular, we show that, controlling for the zero lower boundconstraint, does not seem to limit the stabilization properties of optimal monetary policy. We also present simple monetary policy rules which can "aproximate" and implement the Ramsey allocation reasonably well. Such optimal simple operational rules seem to reactspecifically to nominal wage inflation. Overall, the Ramsey policy together with its simple rule approximations seem to deliver consistent policy messages and may constitute someuseful normative benchmarks within medium to large scale estimated DSGE framework. However, this normative analysis based on estimated models reinforces the need to improve the economic micro-foundation and the econometric identification of the structural disturbances.

Download or read book Monetary Policy Strategies for the Euro Area written by and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study alternative monetary policy strategies in the presence of the lower bound on nominal interest rates and a low equilibrium real rate using an estimated DSGE model for the euro area. We demonstrate that simple feedback rules that implement inflation targeting result in a binding lower bound one-fourth of the time as well as inflation and output exhibiting large downward biases and heightened volatility. Rule-based asset purchases that are activated once the policy rate reaches the lower bound are not able to fully offset the destabilizing effects of the lower bound if we assume plausible limits on the size of purchases. Makeup strategies, especially average inflation targeting with a long averaging window, perform better than inflation targeting. However, differences in performance across strategies become small if the response coefficients of the feedback rules are optimized. In addition, we find that the benefits of makeup strategies tend to vanish if agents exhibit a degree of inattention to central bank policies as estimated in the data.

Download or read book Macroprudential Policy in a Monetary Union with Cross border Banking written by and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyse the interaction between monetary and macroprudential policies in the euro area by means of a two-country DSGE model with financial frictions and cross-border spillover effects. We calibrate the model for the four largest euro area countries (i.e. Germany, France, Italy, and Spain), with particular attention to the calibration of cross-country financial and trade linkages and country specific banking sector characteristics. We find that countercyclical macroprudential interventions are supportive of monetary policy conduct through the cycle. This complementarity is significantly reinforced when there are asymmetric financial cycles across the monetary union, which provides a case for targeted country-specific macroprudential policies to help alleviate the burden on monetary policy. At the same time, our findings point to the importance of taking into account cross-border spillover effects of macroprudential measures within the Monetary Union.

Download or read book Macroprudential Policy Instruments and Economic Imbalances in the Euro Area written by Michał Brzoza-Brzezina and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Crises in DSGE Models written by Mr.Jaromir Benes and published by International Monetary Fund. This book was released on 2014-04-04 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.

Download or read book An Overview of Macroprudential Policy Tools written by Mr.Stijn Claessens and published by International Monetary Fund. This book was released on 2014-12-11 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Macroprudential policies – caps on loan to value ratios, limits on credit growth and other balance sheets restrictions, (countercyclical) capital and reserve requirements and surcharges, and Pigouvian levies – have become part of the policy paradigm in emerging markets and advanced countries alike. But knowledge is still limited on these tools. Macroprudential policies ought to be motivated by market failures and externalities, but these can be hard to identify. They can also interact with various other policies, such as monetary and microprudential, raising coordination issues. Some countries, especially emerging markets, have used these tools and analyses suggest that some can reduce procyclicality and crisis risks. Yet, much remains to be studied, including tools’ costs ? by adversely affecting resource allocations; how to best adapt tools to country circumstances; and preferred institutional designs, including how to address political economy risks. As such, policy makers should move carefully in adopting tools.

Download or read book How Loose How Tight A Measure of Monetary and Fiscal Stance for the Euro Area written by Nicoletta Batini and published by International Monetary Fund. This book was released on 2020-06-05 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper builds a model-based dynamic monetary and fiscal conditions index (DMFCI) and uses it to examine the evolution of the joint stance of monetary and fiscal policies in the euro area (EA) and in its three largest member countries over the period 2007-2018. The index is based on the relative impacts of monetary and fiscal policy on demand using actual and simulated data from rich estimated models featuring also financial intermediaries and long-term government debt. The analysis highlights a short-lived fiscal expansion in the aftermath of the Global Financial Crisis, followed by a quick tightening, with monetary policy left to be the “only game in town” after 2013. Individual countries’ DMFCIs show that national policy stances did not always mirror the evolution of the aggregate stance at the EA level, due to heterogeneity in the fiscal stance.

Download or read book Key Aspects of Macroprudential Policy Background Paper written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2013-10-06 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: The countercyclical capital buffer (CCB) was proposed by the Basel committee to increase the resilience of the banking sector to negative shocks. The interactions between banking sector losses and the real economy highlight the importance of building a capital buffer in periods when systemic risks are rising. Basel III introduces a framework for a time-varying capital buffer on top of the minimum capital requirement and another time-invariant buffer (the conservation buffer). The CCB aims to make banks more resilient against imbalances in credit markets and thereby enhance medium-term prospects of the economy—in good times when system-wide risks are growing, the regulators could impose the CCB which would help the banks to withstand losses in bad times.