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Record ID
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197
[ Page 49 of 68, No. 1 ]
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Date
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2011-09 |
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Author
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Claudio Borio
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Affiliation
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Head, Research and Policy Analysis, BIS |
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Title
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Central banking post-crisis: What compass for uncharted waters? |
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Summary /
Abstract
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The global financial crisis has shaken the foundations of the deceptively comfortable pre-crisis central banking world. Central banks face a threefold challenge: economic, intellectual and institutional. This essay puts forward a compass to help central banks sail in the largely uncharted waters ahead. The compass is based on tighter integration of the monetary and financial stability functions, keener awareness of the global dimensions of those tasks, and stronger safeguards for an increasingly vulnerable central bank operational independence. |
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Keywords
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Central banking, monetary and financial stability, macroprudential, own-house-in-order doctrine, operational independence |
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URL
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http://www.bis.org/publ/work353.pdf
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Record ID
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196
[ Page 49 of 68, No. 2 ]
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Date
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2011-11 |
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Author
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Adam Gersl and Jakub Seidler
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Affiliation
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Czech National Bank |
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Title
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Credit Growth and Capital Buffers: Empirical Evidence from Central and Eastern European Countries |
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Summary /
Abstract
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Excessive credit growth is often considered to be an indicator of future problems in the financial sector. This paper examines the issue of how to determine whether the observed level of private sector credit is excessive in the context of the counter-cyclical capital buffer, a macroprudential tool proposed in the new regulatory framework of Basel III by the Basel Committee on Banking Supervision. An empirical analysis of selected Central and Eastern European countries, including the Czech Republic, provides alternative estimates of excessive private credit and shows that the HP filter calculation proposed by the Basel Committee is not necessarily a suitable indicator of excessive credit growth for converging countries. |
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Keywords
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Basel regulation, credit growth, financial crisis countercyclical buffer |
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URL
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http://www.cnb.cz/en/research/research_publications/irpn/download/rpn_2_2011.pdf
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Record ID
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195
[ Page 49 of 68, No. 3 ]
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Date
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2011-11 |
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Author
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Luis Ignacio Jácome, Tahsin Saadi Sedik, and Simon Townsend
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Affiliation
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Monetary and Capital Markets Department, IMF |
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Title
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Can Emerging Market Central Banks Bail Out Banks? A Cautionary Tale from Latin America |
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Summary /
Abstract
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This paper investigates whether developing and emerging market countries can implement monetary policies similar to those used by advanced countries during the recent global crisis - injecting significant amounts of money into the financial system without facing major short-run adverse macroeconomic repercussions. Using panel data techniques, the paper analyzes episodes of financial turmoil in 16 Latin American countries during 1995-2007. The results show that developing and emerging market countries should be cautious because injecting money on a large scale into the financial system may fuel further macroeconomic instability, increasing the chances of simultaneous currency crises. |
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Keywords
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Banking crises, central banks, currency crises, financial stability |
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URL
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http://www.imf.org/external/pubs/ft/wp/2011/wp11258.pdf
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Record ID
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194
[ Page 49 of 68, No. 4 ]
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Date
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2012-01 |
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Author
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Schaechter, Andrea; Alper, C. Emre; Arbatli, Elif; Caceres, Carlos; Callegari, Giovanni; Gerard, Marc ; Jonas, Jiri; Kinda, Tidiane; Shabunina, Anna; and Weber, Anke
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Affiliation
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Fiscal Affairs Department, IMF |
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Title
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A Toolkit to Assessing Fiscal Vulnerabilities and Risks in Advanced Economies |
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Summary /
Abstract
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This paper presents a range of tools and indicators for analyzing fiscal vulnerabilities and risks for advanced economies. The analysis covers key short-, medium- and long-term dimensions. Short-term pressures are captured by assessing (i) gross funding needs, (ii) market perceptions of default risk, and (iii) stress dependence among sovereigns. Medium- and long-term pressures are summarized by (iv) medium- and long-term budgetary adjustment needs, (v) susceptibility of debt projections to growth and interest rate shocks, and (vi) stochastic risks to medium-term debt dynamics. Aiming to cover a wide range of advanced economies and minimize data lags, has also influenced the selection of empirical methods. Due to these features, they can, for example, help inform the joint IMF-FSB Early Warning Exercise (EWE) on the fiscal dimensions of economic risks. |
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Keywords
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Fiscal vulnerabilities, fiscal risk, fiscal indicators, sustainability |
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URL
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http://www.imf.org/external/pubs/ft/wp/2012/wp1211.pdf
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Record ID
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193
[ Page 49 of 68, No. 5 ]
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Date
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2012-01 |
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Author
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Harun Alp, Selim Elekdag, and Subir Lall
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Affiliation
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Asia and Pacific Department, IMF |
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Title
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Did Korean Monetary Policy Help Soften the Impact of the Global Financial Crisis of 2008–09? |
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Summary /
Abstract
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Korea was one of the Asian economies hardest hit by the global financial crisis. Anticipating the downturn that would follow the episode of extreme financial stress, the Bank of Korea (BOK) let the exchange rate depreciate as capital flowed out, and preemptively cut the policy rate by 325 basis points. But did it work? This paper seeks a quantitative answer to the following question: Were it not for an inflation targeting framework underpinned by a flexible exchange rate regime, how much deeper would the recession have been? Taking the most intense year of the crisis as our baseline (2008:Q4–2009:Q3), counterfactual simulations indicate that rather the actual outcome of a –2.1 percent contraction, the outturn would have been –2.9 percent if the BOK had not implemented countercyclical and discretionary interest rate cuts. Furthermore, had a fixed exchange rate regime been in place, simulations indicate that output would have contracted by –7.5 percent over the same four-quarter period. In other words, exchange rate flexibility and the interest rate cuts implemented by the BOK helped substantially soften the impact of the global financial crisis on the Korean economy. These counterfactual experiments are based on an estimated structural model, which, along with standard nominal and real rigidities, includes a financial accelerator mechanism in an open economy framework. |
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Keywords
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Financial accelerator, Bayesian estimation, DSGE model, financial crises, sudden stops, monetary policy, Korea, emerging economies, emerging markets. |
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URL
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http://www.imf.org/external/pubs/ft/wp/2012/wp1205.pdf
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Record ID
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191
[ Page 49 of 68, No. 7 ]
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Date
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2011-12 |
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Author
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Daniel Sámano
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Affiliation
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Banco de Mexico |
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Title
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In the Quest of Macroprudential Policy Tools |
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Summary /
Abstract
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The global financial crisis of late 2008 could not have provided more convincing evidence that price stability is not a sufficient condition for financial stability. In order to attain both, central banks must develop macroprudential instruments in order to prevent the occurrence of systemic risk episodes. For this reason testing the effectiveness of different macroprudential tools and their interaction with monetary policy is crucial. In this paper we explore whether two policy instruments, namely, a capital adequacy ratio rule in combination with a Taylor rule may provide a better macroeconomic outcome than a Taylor rule alone. We conduct our analysis by appending a macroeconometric financial block to an otherwise standard semistructural small open economy neokeynesian model for policy analysis estimated for the Mexican economy. Our results show that with the inclusion of the second instrument, the central bank may obtain substantial gains. Specifically, the central authority can isolate financial shocks and dampen their effects over macroeconomic variables. |
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Keywords
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Macroprudential policy, monetary policy, capital requirements |
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URL
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http://d.repec.org/n?u=RePEc:bdm:wpaper:2011-17&r=mac
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Remarks
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In the above paper, Daniel Sámano of Banco de Mexico explores "whether two policy instruments, namely, a capital adequacy ratio (CAR) rule in combination with a Taylor rule may provide a better macroeconomic outcome than a Taylor rule alone," conducting his analysis by adding a financial block to a Neo-Keynesian, semistructural small open economy model estimated using Mexican data. With a CAR rule as second instrument, he concludes that Banco de Mexico can continue to implement small, measured increments in the policy rates, with lower variability in inflation and output outcomes. His model is estimable and potentially useful when adapted to the Philippine situation. |
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Record ID
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190
[ Page 49 of 68, No. 8 ]
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Date
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2011-11 |
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Author
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Edward R. Gemayel, Sarwat Jahan, and Alexandra Peter
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Affiliation
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Strategy, Policy, and Review Department, IMF |
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Title
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What Can Low-Income Countries Expect from Adopting Inflation Targeting? |
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Summary /
Abstract
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Inflation targeting (IT) is a relatively new monetary policy framework for low-income countries (LICs). The limited number of LICs with an IT framework and the short time that has elapsed since the adoption of this framework explains why there are no previous empirical studies on the performance of IT in LICs. This paper has made a first attempt at filling this gap. It finds that inflation targeting appears to be associated with lower inflation and inflation volatility. At the same time, there is no robust evidence of an adverse impact on output. This may explain the appeal of IT for many LICs, where building credibility of monetary policy is difficult and minimizing output costs of reducing inflation is imperative for social and political reasons. |
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Keywords
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Albania , Armenia , Cross country analysis , Developed countries , Emerging markets , Ghana , Inflation targeting , Low-income developing countries , Monetary policy |
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URL
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http://www.imf.org/external/pubs/ft/wp/2011/wp11276.pdf
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Record ID
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189
[ Page 49 of 68, No. 9 ]
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Date
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2011-11 |
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Author
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Antonio, Paradiso; Kumar, Saten; and Rao, B Bhaskara
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Affiliation
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University of Rome La Sapienza, Auckland University of Technology, and University of Western Sydney |
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Title
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A New Keynesian IS Curve for Australia: Is it Forward Looking or Backward Looking? |
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Summary /
Abstract
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This paper estimates the forward looking, backward looking and an extended version of the New Keynesian IS curve for Australia. The validity of these models is investigated by imposing the constraint on real rate of interest and as well as when the constraint is relaxed. Two measures of output gap viz. GAP1 (constructed using the unobserved components approach) and GAP2 (constructed using a quadratic trend) are utilized. Our results suggest that the baseline backward looking and forward looking models are overwhelmingly rejected by the data. Evidence strongly supports for the extended backward looking model (with GAP2) being relevant for monetary policy analysis. |
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Keywords
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New Keynesian IS curve; Backward looking; Forward looking; Australia |
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URL
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http://mpra.ub.uni-muenchen.de/35296/1/MPRA_paper_35296.pdf
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Record ID
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188
[ Page 49 of 68, No. 10 ]
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Date
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2011-12 |
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Author
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Ian Christensen, Césaire Meh, and Kevin Moran
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Affiliation
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Bank of Canada and Département d’économique, Université Laval |
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Title
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Bank Leverage Regulation and Macroeconomic Dynamics |
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Summary /
Abstract
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This paper assesses the merits of countercyclical bank balance sheet regulation for the stabilization of financial and economic cycles and examines its interaction with monetary policy. The framework used is a dynamic stochastic general equilibrium model with banks and bank capital, in which bank capital solves an asymmetric information problem between banks and their creditors. In this economy, the lending decisions of individual banks affect the riskiness of the whole banking sector, though banks do not internalize this impact. Regulation, in the form of a constraint on bank leverage, can mitigate the impact of this externality by inducing banks to alter the intensity of their monitoring efforts. We find that countercyclical bank leverage regulation can have desirable stabilization properties, particularly when financial shocks are an important source of economic fluctuations. However, the appropriate contribution of countercyclical capital requirements to stabilization after a technology shock depends on the size of the externality and on the conduct of the monetary authority. |
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Keywords
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Moral hazard, bank capital, countercyclical capital requirements, leverage, monetary policy |
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URL
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http://www.cirpee.org/fileadmin/documents/Cahiers_2011/CIRPEE11-40.pdf
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