Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

508     [ Page 19 of 68, No. 1 ]

Date

2014-05

Author

Marco Pagano

Affiliation

Centre for Studies in Economics and Finance, University of Naples

Title

Dealing with Financial Crises: How Much Help from Research

Summary /
Abstract

Has economic research been helpful in dealing with the financial crises of the early 2000s? On the whole, the answer is negative, although there are bright spots. Economists have largely failed to predict both crises, largely because most of them were not analytically equipped to understand them, in spite of their recurrence in the last 25 years. In the pre-crisis period, however, there have been important exceptions – theoretical and empirical strands of research that largely laid out the basis for our current thinking about financial crises. Since 2008, a flurry of new studies offered several different interpretations of the US crisis: to some extent, they point to potentially complementary factors, but disagree on their relative importance, and therefore on policy recommendations. Research on the euro debt crisis has so far been much more limited: even Europe-based researchers – including CEPR ones – have often directed their attention more to the US crisis than to that occurring on their doorstep. In terms of impact on policy and regulatory reform, the record is uneven. On the one hand, the swift and massive liquidity provision by central banks in the wake of both crises is, at least partly, to be credited to previous research on the role of central banks as lenders of last resort in crises and on the real effects of bank lending and monetary policy. On the other hand, economists have had limited impact on the reform of prudential and security market regulation. In part, this is due to their neglect of important regulatory choices, which policy-makers are therefore left to take without the guidance of academic research-based analysis.

Keywords

Financial crisis, risk taking, systemic risk, financial regulation, monetary policy, politics

URL

http://www.csef.it/WP/wp361.pdf



Record ID

507     [ Page 19 of 68, No. 2 ]

Date

2014-04

Author

Todd B. Walker, Alexander W. Richter, and Nathaniel A. Throckmorton

Affiliation

Auburn University and Indiana University

Title

Accuracy, Speed and Robustness of Policy Function Iteration

Summary /
Abstract

Policy function iteration methods for solving and analyzing dynamic stochastic general equilibrium models are powerful from a theoretical and computational perspective. Despite obvious theoretical appeal, significant startup costs and a reliance on grid-based methods have limited the use of policy function iteration as a solution algorithm. We reduce these costs by providing a user-friendly suite of MATLAB functions that introduce multi-core processing and Fortran via MATLAB's executable function. Within the class of policy function iteration methods, we advocate using time iteration with linear interpolation. We examine a canonical real business cycle model and a new Keynesian model that features regime switching in policy parameters, Epstein-Zin preferences, and monetary policy that occasionally hits the zero-lower bound on the nominal interest rate to highlight the attractiveness of our methodology. We compare our advocated approach to other familiar iteration and approximation methods, highlighting the tradeoffs between accuracy, speed and robustness.

Keywords

Policy function iteration; Zero lower bound; Epstein-Zin preferences; Markov switching; Chebyshev polynomials; Real business cycle model; New Keynesian model

URL

http://cla.auburn.edu/econwp/Archives/2014/2014-08.pdf



Record ID

506     [ Page 19 of 68, No. 3 ]

Date

2014-04

Author

Akio Hattori, Kentaro Kikuchi, Fuminori Niwa and Yoshihiko Uchida

Affiliation

All of Bank of Japan

Title

A Survey of Systemic Risk Measures: Methodology and Application to the Japanese Market

Summary /
Abstract

The recent financial crisis has prompted academia, country authorities, and international bodies to study quantitative tools to monitor the financial system, especially systemic risk measures. This paper aims to outline these measures and apply them to Japan's financial system. The paper demonstrates that they are effective tools for monitoring the robustness of financial system on a real-time basis, although there are some caveats.

Keywords

Systemic risk, Risk measure, Early warning indicators, Stress test, Scenario analysis, Macro-prudence, Financial crisis

URL

http://www.imes.boj.or.jp/research/papers/english/14-E-03.pdf



Record ID

505     [ Page 19 of 68, No. 4 ]

Date

2013-09

Author

Camilo González, Luisa F. Silva, Carmiña O. Vargas, and Andrés M. Velasco

Affiliation

Banco de la Republica Colombia

Title

An exploration on interbank markets and the operational framework of monetary policy in Colombia

Summary /
Abstract

We set up a dynamic stochastic model for the interbank daily market for funds in Colombia. The framework features exogenous reserve requirements and requirement period, competitive trading among heterogeneous commercial banks, daily open market operations held by the Central Bank (auctions and window facilities), and idiosyncratic demand shocks and uncertainty in the daily auction. The model highlights the institutional framework and the money supply mechanisms for the interbank market. We construct a data base for the Colombian case that incorporates the principal variables of the model and give us some insights about the behavior of them in a typical requirement period. We corroborate the Martingale hypothesis for the interbank interest rate.

Keywords

Interbank Market; Overnight Rates; Reserve Demand

URL

http://d.repec.org/n?u=RePEc:col:000094:010982&r=cba



Record ID

504     [ Page 19 of 68, No. 5 ]

Date

2014-04

Author

Dongho Song

Affiliation

University of Pennsylvania

Title

Bond Market Exposures to Macroeconomic and Monetary Policy Risks

Summary /
Abstract

I provide empirical evidence of changes in the U.S. Treasury yield curve and related macroeconomic factors, and investigate whether the changes are brought about by external shocks, monetary policy, or by both. To explore this, I characterize bond market exposures to macroeconomic and monetary policy risks, using an equilibrium term structure model with recursive preferences in which inflation dynamics are endogenously determined. In my model, the key risks that affect bond market prices are changes in the correlation between growth and inflation and changes in the conduct of monetary policy. Using a novel estimation technique, I find that the changes in monetary policy affect the volatility of yield spreads, while the changes in the correlation between growth and inflation affect both the level as well as the volatility of yield spreads. Consequently, the changes in the correlation structure are the main contributor to bond risk premia and to bond market volatility. The time variations within a regime and risks associated with moving across regimes lead to the failure of the Expectations Hypothesis and to the excess bond return predictability regression of Cochrane and Piazzesi (2005), as in the data.

Keywords

Monetary Policy Risks, Regime-Switching Macroeconomic Risks, Stochastic Volatility, Taylor-Rule, Term Structure

URL

http://d.repec.org/n?u=RePEc:pen:papers:14-017&r=cba



Record ID

503     [ Page 19 of 68, No. 6 ]

Date

2014-04

Author

Amstad, Marlene; Potter, Simon M.; and Rich, Robert W.

Affiliation

All of Federal Reserve Bank of New York

Title

The FRBNY staff underlying inflation gauge: UIG

Summary /
Abstract

Monetary policymakers and long-term investors would benefit greatly from a measure of underlying inflation that uses all relevant information, is available in real time, and forecasts inflation better than traditional underlying inflation measures such as core inflation measures. This paper presents the “FRBNY Staff Underlying Inflation Gauge (UIG)” for CPI and PCE. Using a dynamic factor model approach, the UIG is derived from a broad data set that extends beyond price series to include a wide range of nominal, real, and financial variables. It also considers the specific and time-varying persistence of individual sub-components of an inflation series. An attractive feature of the UIG is that it can be updated on a daily basis, which allows for a close monitoring of changes in underlying inflation. This capability can be very useful when large and sudden economic fluctuations occur, as at the end of 2008. In addition, the UIG displays greater forecast accuracy than traditional measures of core inflation.

Keywords

Expectations; survey forecasts; imperfect information; term structure of disagreement

URL

http://www.newyorkfed.org/research/staff_reports/sr672.pdf



Record ID

502     [ Page 19 of 68, No. 7 ]

Date

2014-04

Author

Thorsten Beck, Andrea Colciago, and Damjan Pfajfar

Affiliation

Cass Business School, City University London, and CEPR; De Nederlandsche Bank and University of Milano Bicocca; and EBC, CentER and Economics Department, Tilburg University

Title

The role of financial intermediaries in monetary policy transmission

Summary /
Abstract

The recent financial crisis has stimulated theoretical and empirical research on the propagation mechanisms underlying business cycles, in particular on the role of financial frictions. Many issues concerning the interactions between banking and monetary policy forced policy makers to redefine economic policies, and motivated macroeconomists to focus on the implications of financial intermediation constraints on asset price fluctuations, the behavior of non-financial firms, households, governments and in turn for real macroeconomic performance. This paper surveys research on the role of financial intermediaries and financial frictions in the transmission of monetary policy and discusses how to design both the new banking regulatory and supervisory structures and monetary policy in order to stabilize the economy. It also serves as an introduction to this special issue.

Keywords

Financial Intermediation; DSGE models; Financial Frictions

URL

http://www.dnb.nl/en/binaries/Working%20Paper%20420_tcm47-306757.pdf



Record ID

501     [ Page 19 of 68, No. 8 ]

Date

2014-04

Author

Pejman Bahramian, Mehmet Balcilar, Rangan Gupta and Patrick T. Kanda

Affiliation

Eastern Mediterranean University, and University of Pretoria

Title

Forecasting South African Inflation Using Non-Linear Models: A Weighted Loss-Based Evaluation

Summary /
Abstract

The conduct of inflation targeting is heavily dependent on accurate inflation forecasts. Non-linear models have increasingly featured, along with linear counterparts, in the forecasting literature. In this study, we focus on forecasting South African infl ation by means of non-linear models and using a long historical dataset of seasonally-adjusted monthly inflation rates spanning from 1921:02 to 2013:01. For an emerging market economy such as South Africa, non-linearities can be a salient feature of such long data, hence the relevance of evaluating non-linear models' forecast performance. In the same vein, given the fact that 1969:10 marks the beginning of a protracted rising trend in South African inflation data, we estimate the models for an in-sample period of 1921:02-1966:09 and evaluate 24 step-ahead forecasts over an out-of-sample period of 1966:10-2013:01. In addition, using a weighted loss function specification, we evaluate the forecast performance of different non-linear models across various extreme economic environments and forecast horizons. In general, we find that no competing model consistently and significantly beats the LoLiMoT's performance in forecasting South African inflation.

Keywords

Inflation, forecasting, non-linear models, weighted loss function, South Africa

URL

http://web.up.ac.za/sitefiles/file/40/677/WP_2014_16.pdf



Record ID

500     [ Page 19 of 68, No. 9 ]

Date

2014-02

Author

Pablo Pincheira and Andrés Gatty

Affiliation

Banco Central de Chile

Title

Forecasting Chilean Inflation with International Factors

Summary /
Abstract

In this paper we build forecasts for Chilean year-on-year inflation using simple time-series models augmented with different measures of international inflation. Broadly speaking, we construct two families of international inflation factors. The first family is built using year-on-year inflation of 18 Latin American (LA) countries (excluding Chile). The second family is built using year-on-year inflation of 30 OECD countries (excluding Chile). We show sound in-sample and pseudo out-ofsample evidence indicating that these international factors do help forecast Chilean inflation at several horizons. Incorporating the international factors reduce the Root Mean Squared Prediction Error of pure univariate SARIMA models statistically speaking. We also show that the predictive pass-through from international to local inflation has increased in the recent years. As a final exercise we construct another international inflation factor as an average of the inflation of fifteen countries from which Chile gets a high percentage of its imports. With the aid of this factor the models outperform our univariate benchmarks but also underperform the results obtained with the broader factors built with LA or OECD countries, suggesting that imported inflation is not the only channel explaining our findings.

Keywords

Inflation forecasting for IT central banks, international inflation factors

URL

http://www.bcentral.cl/estudios/documentos-trabajo/pdf/dtbc723.pdf



Record ID

499     [ Page 19 of 68, No. 10 ]

Date

2014-01

Author

Keiichiro Kobayashi and Tomoyuki Nakajima

Affiliation

Keio University/The Canon Institute for Global Studies and Institute of Economic Research, Kyoto University/The Canon Institute for Global Studies

Title

A macroeconomic model of liquidity crises

Summary /
Abstract

We develop a simple macroeconomic model that captures key features of a liquidity crisis. During a crisis, the supply of short-term loans vanishes, the interest rate rises sharply, and the level of economic activity declines. A crisis may be caused either by self-fulfilling beliefs or by fundamental shocks. It occurs as a result of market failure due to debt overhang in short-term loans. The government's commitment to deposit guarantee reduces the likelihood of self-fulfilling crisis but increases that of fundamental crisis.

Keywords

Debt overhang, liquidity, systemic crisis

URL

http://www.canon-igs.org/en/column/140203_nakajima_02.pdf



Total records: 676 | Select no. of records per page: 10 | 20 | 30 | 50 | 100 | Show all | Search
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