Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

397     [ Page 15 of 34, No. 1 ]

Date

2013-07

Author

Ricardo Reis

Affiliation

National Bureau of Economic Research

Title

Central Bank Design

Summary /
Abstract

What set of institutions can support the activity of a central bank? Designing a central bank requires specifying its objective function, including the bank's mandate at different horizons and the choice of banker(s), specifying the resource constraint that limits the resources that the central bank generates, the assets it holds, or the payments on its liabilities, and finally specifying how the central bank will communicate with private agents to affect the way they respond to policy choices. This paper summarizes the relevant economic literature that bears on these choices, leading to twelve principles on central bank design.

Keywords

Central bank design

URL

http://www.nber.org/papers/w19187.pdf

Remarks

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.



Record ID

396     [ Page 15 of 34, No. 2 ]

Date

2013-08

Author

Li L. Ong and Ceyla Pazarbasioglu

Affiliation

Monetary and Capital Markets Department, IMF

Title

Credibility and Crisis Stress Testing

Summary /
Abstract

Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar exercises. In some of those cases, the design and implementation of certainelements of the framework have been criticized for their lack of credibility. This paper proposes a set of guidelines for constructing an effective crisis stress test. It combines financial markets impact studies of previous exercises with relevant case study information gleaned from those experiences to identify the key elements and to formulate their appropriate design. Pertinent concepts, issues and nuances particular to crisis stress testing are also discussed. The findings may be useful for country authorities seeking to include stress tests in their crisis management arsenal, as well as for the design of crisis programs.

Keywords

Asset quality review, crisis, disclosure, financial backstop, hurdle rates, liquidity risk, restructuring, solvency, transpar ency, CCAR, CEBS, EBA, PCAR, SCAP

URL

http://www.imf.org/external/pubs/ft/wp/2013/wp13178.pdf



Record ID

395     [ Page 15 of 34, No. 3 ]

Date

2013-08

Author

Li L. Ong, Phakawa Jeasakul and Sarah Kwoh

Affiliation

Monetary and Capital Markets Department, IMF

Title

HEAT! A Bank Health Assessment Tool

Summary /
Abstract

Developments during the global financial crisis have highlighted the importance of differentiating across financial systems and institutions. Assessments of financial stability have increasingly considered the characteristics of individual banks within a financial system, as well as those with significant international reach, to identify vulnerabilities and inform policy decisions. This paper proposes a simple measure of bank soundness, the Bank Health Index (BHI), to facilitate preliminary analyses of individual financial institutions relative to their peers. The evidence suggests that the BHI is useful for a first-pass identification of bank soundness conditions. Automated spreadsheet templates of the bank Health Assessment Tool (HEAT!) are provided for users with access to the BankScope, Bloomberg and/or SNL database(s).

Keywords

Asset quality, Bank Health Index, bank soundness, capital adequacy, earnings, HEAT!, heatm ap, leverage, liquidity.

URL

http://www.imf.org/external/pubs/ft/wp/2013/wp13177.pdf



Record ID

394     [ Page 15 of 34, No. 4 ]

Date

2013-07

Author

Tobias Hagen

Affiliation

Frankfurt University of Applied Sciences, Department of Business and Law, Nibelungenplatz 1, 60318 Frankfurt am Main, Germany

Title

The Impact of National Financial Regulation on Macroeconomic and Fiscal Performance after the 2007 Financial Shock – Econometric Analyses Based on Cross-Country Data

Summary /
Abstract

Using cross-country data, this paper estimates the impact of the 2007 financial shock on countries’ macroeconomic developments conditional on national financial regulations before the crisis. For this purpose, the “financial reform index” developed by Abiad et al. (A New Database of Financial Reforms, 2008a) is used. The econometric analyses indicate that countries with more deregulated financial markets experienced deeper recessions, stronger employment losses, and larger government budget deficits. Against the background of the ongoing global crisis and the results of other studies, the usefulness of liberalized financial markets for macroeconomic stability and economic development should be rigorously reconsidered.

Keywords

Financial crisis; financial regulation; Great Recession; robust regression; semiparametric regression

URL

http://dx.doi.org/10.5018/economics-ejournal.ja.2013-33



Record ID

393     [ Page 15 of 34, No. 5 ]

Date

2012-12

Author

Committee on Global Financial Stability Working Group

Affiliation

Bank for International Settlements

Title

Operationalising the selection and application of macroprudential instruments

Summary /
Abstract

This report - prepared by a Working Group chaired by José-Manuel González-Páramo, formerly European Central Bank - aims to help policymakers in operationalising macroprudential policies. Specifically, it draws out three high-level criteria that are key in determining the selection and application of macroprudential instruments: (1) the ability to determine the appropriate timing for the activation or deactivation of the instrument; (2) the effectiveness of the instrument in achieving the stated policy objective; and (3) the efficiency of the instrument in terms of a cost-benefit assessment. In trying to operationalise these criteria, this report proposes a number of practical tools. First, to help determine the appropriate timing for the activation and deactivation of instruments, it lays out stylised scenarios. Their identification is facilitated by two alternative approaches that seek to link systemic risk analysis and instrument selection. Second, to support the evaluation of the effectiveness and efficiency of macroprudential tools for a range of macroprudential instruments, the report proposes "transmission maps" - stylised presentations of how changes in individual instruments are expected to contribute to the objectives of macroprudential policy.

Keywords

Global financial stability, macroprudential instruments

URL

https://www.bis.org/publ/cgfs48.pdf



Record ID

392     [ Page 15 of 34, No. 6 ]

Date

2012-06

Author

Gianni De Nicolò, Giovanni Favara and Lev Ratnovski

Affiliation

Research Department, IMF

Title

EXTERNALITIES AND MACROPRUDENTIAL POLICY

Summary /
Abstract

The recent financial crisis has led to a reexamination of policies for macroeconomic and financial stability. Part of the current debate involves the adoption of a macroprudential approach to financial regulation, with an aim toward mitigating boom-bust patterns and systemic risks in financial markets. The fundamental rationale behind macroprudential policies, however, is not always clearly articulated. The contribution of this paper is to lay out the key sources of market failures that can justify macroprudential regulation. It explains how externalities associated with the activity of financial intermediaries can lead to systemic risk, and thus require specific policies to mitigate such risk. The paper classifies externalities that can lead to systemic risk as: (1) Externalities related to strategic complementarities , that arise from the strategic interaction of banks (and other financial institutions) and cause the build-up of vulnerabilities during the expansionary phase of a financial cycle; (2) Externalities related to fire sales, that arise from a generalized sell-off of financial assets causing a decline in a sset prices and a deterioration of the balance sheets of intermediaries, especially during the contractionary phase of a financial cycle; and (3) Externalities related to interconnectedness , caused by the propagation of shocks from systemic institutions or through financial networks. The correction of these externalities can be seen as intermediate targets for macroprudential policy, since policies that control externalities mitigate market failures that create systemic risk. This paper discusses how the main proposed macroprudential policy tools—capital requirements, liquidity requirements, restrictions on activities, and taxes—address the identified externalities. It is argued that each externality can be corrected by different tools that can complement each other. Capital surcharges, however, are likely to play an important role in the design of macroprudential regulation. This paper’s analysis of macroprudential policy complements the more traditional one that builds on the distinction between time-series and cross-sectional dimensions of systemic risk.

Keywords

Externalities, systemic risk, macroprudential policy

URL

http://www.imf.org/external/pubs/ft/sdn/2012/sdn1205.pdf



Record ID

391     [ Page 15 of 34, No. 7 ]

Date

2013-07

Author

Juan Carlos Hatchondo and Leonardo Martinez

Affiliation

IMF Institute for Capacity Development

Title

Sudden stops, time inconsistency, and the duration of sovereign debt

Summary /
Abstract

We study the sovereign debt duration chosen by the government in the context of a standard model of sovereign default. The government balances off increasing the duration of its debt to mitigate rollover risk and lowering duration to mitigate the debt dilution problem. We present two main results. First, when the government decides the debt duration on a sequential basis, sudden stop risk increases the average duration by 1 year. Second, we illustrate the time inconsistency problem in the choice of sovereign debt duration: governments would like to commit to a duration that is 1.7 years shorter than the one they choose when decisions are made sequentially.

Keywords

Sovereign debt, default, sudden stops, debt dilution, time inconsistency, debt maturity

URL

http://www.imf.org/external/pubs/ft/wp/2013/wp13174.pdf



Record ID

390     [ Page 15 of 34, No. 8 ]

Date

2011-04

Author

Jonathan D. Ostry, Atish R. Ghosh, Karl Habermeier, Luc Laeven, Marcos Chamon, Mahvash S. Qureshi, and Annamaria Kokenyne

Affiliation

Research Department, IMF

Title

Managing Capital Inflows: What Tools to Use?

Summary /
Abstract

Emerging market economies are facing increasing challenges in managing the current wave of capital inflows. In an earlier note (Ostry et al., 2010), we laid out a set of circumstances under which capital controls could usefully form part of the policy response to inflow surges. For countries whose currencies were on the strong side, where reserves were adequate, where overheating concerns precluded easier monetary policy, and where the fiscal balance was consistent with macroeconomic and public debt considerations, capital controls were a useful part of the policy toolkit to address inflow surges. Beyond macroeconomic considerations, capital controls could also help to address financial-stability concerns when prudential tools were insufficient or could not be made effective in a timely manner. We also stressed that the use of capital controls needs to take account of multilateral considerations, as well as their costs and the mixed evidence on their effectiveness in restraining aggregate flows. This note elaborates on how the macro and financial-stability rationales for capital controls fit together; how prudential and capital control measures should be deployed against various risks that inflow surges may bring; and specifically, how capital controls should be designed to best meet the goals of efficiency and effectiveness. Four broad conclusions emerge. First, capital controls may be useful in addressing both macroeconomic and financial-stability concerns in the face of inflow surges , but before imposing capital controls, countries need first to exhaust their macroeconomic-cum-exchange-rate policy options. The macropolicy response needs to have primacy both because of its importance in helping to abate the inflow surge, and because it ensures that countries act in a multilaterally-consistent manner and do not impose controls merely to avoid necessary external and macro-policy adjustment. Second, while prudential regulations and capital controls can help reduce the buildup of vulnerabilities on domestic balance sheets, they both inevitably create distortions—reducing some “good” financial flows alongside “bad” on es—and may be circumvented. Thus, there is no unambiguous welfare ranking of policy instruments (though non-discriminatory prudential measures are always appropriate), and a pragmatic approach taking account of the economy’s most pertinent risks and distortions needs to be adopted. Third, measures need to be targeted to the risks at hand. When inflows are intermediated through the regulated financial system, prudential regulation will be the main instrument. When inflows bypass regulated markets and institutions, capital controls may be the best option if the perimeter of regulation cannot be widened sufficiently quick ly or effectively. Fourth, the design of capital controls needs to be tailored to country circumstances. Where inflows raise macro concerns, controls will need to be broad, usually price-based, and temporary (though institutional arrangements to implement controls could be maintained). To address financial-stability concerns, controls could be targeted on the riskiest flows, might include administrative measures, and could be used even against more persistent inflows.

Keywords

Capital inflows, capital controls, prudential tools

URL

http://www.imf.org/external/pubs/ft/sdn/2011/sdn1106.pdf



Record ID

389     [ Page 15 of 34, No. 9 ]

Date

2013-05

Author

James A. Clouse

Affiliation

Federal Reserve Board, Washington, D.C.

Title

Monetary policy and financial stability risks: an example

Summary /
Abstract

The financial crisis and its aftermath have raised numerous questions about the appropriate role of financial stability considerations in the conduct of monetary policy. This paper develops a simple example of the possible connections between financial stability and monetary policy. We find that even without an explicit financial stability goal for monetary policy, financial stability considerations arise naturally in the context of standard models of optimal monetary policy if the potential magnitude of financial stability shocks is affected by the stance of policy. In this case, similar to the classic analysis of Brainard (1967), policymakers may seek to reduce the variance of output by scaling back the level of policy accommodation provided today in response to an aggregate demand shock relative to the level that would otherwise be provided. However, the policy implications of this possible connection between monetary policy and financial stability are complex even in the simple example considered here. In particular, financial stability considerations may also increase the relative benefits of following a commitment policy relative to a discretionary strategy.

Keywords

Monetary policy

URL

http://www.federalreserve.gov/pubs/feds/2013/201341/201341pap.pdf



Record ID

388     [ Page 15 of 34, No. 10 ]

Date

2013-07

Author

Roberto Leon-Gonzalez and Thanabalasingam Vinayagathasan

Affiliation

National Graduate Institute for Policy Studies, Tokyo, Japan

Title

Robust Determinants of Growth in Asian Developing Economies: A Bayesian Panel Data Model Averaging Approach

Summary /
Abstract

This paper investigates the determinants of growth in the Asian developing economies. We use Bayesian model averaging (BMA) in the context of a dynamic panel data growth regression to overcome the uncertainty over the choice of control variables. In addition, we use a Bayesian algorithm to analyze a large number of competing models. Among the explanatory variables, we include a non-linear function of inflation that allows for threshold effects. We use an unbalanced panel data set of 27 Asian developing countries over the period 1980–2009. Our empirical evidence on the determinants of growth suggests that an economy’s investment ratio and trade openness are positively correlated to growth, whereas government consumption expenditure is negatively correlated. Further, our empirical results indicate a substantial probability that inflation impedes economic growth when it exceeds 5.43%. We also find no evidence of conditional convergence or divergence.

Keywords

Determinants of Growth, Bayesian Model Averaging, Panel Data Model, Inflation Threshold

URL

http://r-center.grips.ac.jp/gallery/docs/13-12.pdf

Remarks

This empirical study finds that "the investment ratio of an economy is positively associated with its growth rate whereas government consumption expenditure is negatively correlated. Evidence also indicates that trade openness stimulates economic growth. Further, substantial evidence shows that inflation hurts economic growth when it is beyond the threshold value of 5.43% but does not have any significant effect on growth below that level." Thus, the BSP inflation target through 2016 seems appropriate, as far as the implications of this excellent empirical study are concerned.



Record ID

387     [ Page 15 of 34, No. 11 ]

Date

2013-06

Author

Prepared by a FAD team led by Michael Keen and Victoria Perry

Affiliation

Fiscal Affairs Department, IMF

Title

IMF Policy Paper: Issues in International Taxation and the Role of the IMF

Summary /
Abstract

In the discussion of the Board work program on June 3, 2013, it was urged that the Fund be more present in current discussions of international tax issues. This note reviews key issues and initiatives in this area, and sets out a work plan that is focused on the Fund‘s mandate and macroeconomic expertise and that complements the work of other institutions, notably the OECD.

Keywords

International Tax Issues

URL

http://www.imf.org/external/np/pp/eng/2013/062813.pdf



Record ID

386     [ Page 15 of 34, No. 12 ]

Date

2013-07

Author

John C. Williams

Affiliation

Federal Reserve Bank of San Francisco

Title

A defense of moderation in monetary policy

Summary /
Abstract

This paper examines the implications of uncertainty about the effects of monetary policy for optimal monetary policy with an application to the current situation. Using a stylized macroeconomic model, I derive optimal policies under uncertainty for both conventional and unconventional monetary policies. According to an estimated version of this model, the U.S. economy is currently suffering from a large and persistent adverse demand shock. Optimal monetary policy absent uncertainty would quickly restore real GDP close to its potential level and allow the inflation rate to rise temporarily above the longer-run target. By contrast, the optimal policy under uncertainty is more muted in its response. As a result, output and inflation return to target levels only gradually. This analysis highlights three important insights for monetary policy under uncertainty. First, even in the presence of considerable uncertainty about the effects of monetary policy, the optimal policy nevertheless responds strongly to shocks: uncertainty does not imply inaction. Second, one cannot simply look at point forecasts and judge whether policy is optimal. Indeed, once one recognizes uncertainty, some moderation in monetary policy may well be optimal. Third, in the context of multiple policy instruments, the optimal strategy is to rely on the instrument associated with the least uncertainty and use alternative, more uncertain instruments only when the least uncertain instrument is employed to its fullest extent possible.

Keywords

Monetary policy

URL

http://www.frbsf.org/economic-research/files/wp2013-15.pdf



Record ID

385     [ Page 15 of 34, No. 13 ]

Date

2013-06

Author

Laurence Ball, Davide Furceri, Daniel Leigh, and Prakash Loungani

Affiliation

Research Department, IMF

Title

The Distributional Effects of Fiscal Consolidation

Summary /
Abstract

This paper examines the distributional effects of fiscal consolidation. Using episodes of fiscal consolidation for a sample of 17 OECD countries over the period 1978–2009, we find that fiscal consolidation has typically had significant distributional effects by raising inequality, decreasing wage income shares and increasing long-term unemployment. The evidence also suggests that spending-based adjustments have had, on average, larger distributional effects than tax-based adjustments.

Keywords

Fiscal consolidation, distributional effects, income inequality

URL

http://www.imf.org/external/pubs/ft/wp/2013/wp13151.pdf



Record ID

384     [ Page 15 of 34, No. 14 ]

Date

2013-03

Author

Leonardo Melosi

Affiliation

Federal Reserve Bank of Chicago

Title

Signaling Effects of Monetary Policy

Summary /
Abstract

We develop a DSGE model in which the policy rate signals to price setters the central bank’s view about macroeconomic developments. The model is estimated with likelihood methods on a U.S. data set that includes the Survey of Professional Forecasters as a measure of price setters’ inflation expectations. We find that the model fits the data better than a prototypical New Keynesian DSGE model because the signaling effects of monetary policy help the model account for the run-up in inflation expectations in the 1970s. The estimated model with signaling effects delivers large and persistent real effects of monetary disturbances even though the average duration of price contracts is fairly short. While the signaling effects do not substantially alter the transmission of technology shocks, they bring about deflationary pressures in the aftermath of positive demand shocks. The signaling effects of monetary policy have contributed (i ) to heightening inflation expectations in the 1970s, (ii ) to raising inflation and to exacerbating the recession during the first years of Volcker’s monetary tightening, and (iii ) to subduing inflation and to stimulating economic activity from 1991 through 2007.

Keywords

Bayesian econometrics; price puzzle; persistent real effects of nominal shocks; imperfect common knowledge; public signal; heterogeneous beliefs

URL

http://d.repec.org/n?u=RePEc:pen:papers:13-029&r=mon



Record ID

383     [ Page 15 of 34, No. 15 ]

Date

2013-05

Author

Dieter Gramlich, Mikhail V. Oet, and Stephen J. Ong

Affiliation

Federal Reserve Bank of Cleveland

Title

Policy in adaptive financial markets—the use of systemic risk early warning tools

Summary /
Abstract

How can a systemic risk early warning system (EWS) facilitate the financial stability work of policymakers? In the context of evolving financial market dynamics and limitations of microprudential policy, this study examines new directions for financial macroprudential policy. A flexible macroprudential approach is anchored in strategic capacities of systemic risk EWSs. Tactically, macroprudential applications are founded on information about the level, structure, and institutional drivers of systemic financial stress and aim to manage the financial system risk and imbalances in two dimensions: across time and institutions. Time-related EWS policy applications are analyzed in pursuit of prevention and mitigation. EWS applications across institutions are considered via common exposures and interconnectedness. Care must be taken in the calibration of macroprudential applications, given their reliance on quality of the underlying systemic risk-modeling framework.

Keywords

Business cycles, regulation, financial stability

URL

http://www.clevelandfed.org/research/workpaper/2013/wp1309.pdf



Record ID

382     [ Page 15 of 34, No. 16 ]

Date

2013-05

Author

Christiane Baumeister and Lutz Kilian

Affiliation

Bank of Canada and University of Michigan

Title

What Central Bankers Need to Know about Forecasting Oil Prices

Summary /
Abstract

Forecasts of the quarterly real price of oil are routinely used by international organizations and central banks worldwide in assessing the global and domestic economic outlook, yet little is known about how best to generate such forecasts. Our analysis breaks new ground in several dimensions. First, we address a number of econometric and data issues specific to real-time forecasts of quarterly oil prices. Second, we develop real-time forecasting models not only for U.S. benchmarks such as West Texas Intermediate crude oil, but we also develop forecasting models for the price of Brent crude oil, which has become increasingly accepted as the best measure of the global price of oil in recent years. Third, we design for the first time methods for forecasting the real price of oil in foreign consumption units rather than U.S. consumption units, taking the point of view of forecasters outside the United States. In addition, we investigate the costs and benefits of allowing for time variation in vector autoregressive (VAR) model parameters and of constructing forecast combinations. We conclude that quarterly forecasts of the real price of oil from suitably designed VAR models estimated on monthly data generate the most accurate forecasts among a wide range of methods including forecasts based on oil futures prices, no-change forecasts and forecasts based on regression models estimated on quarterly data.

Keywords

Econometric and statistical methods; International topics

URL

http://www.bankofcanada.ca/wp-content/uploads/2013/05/wp2013-15.pdf



Record ID

381     [ Page 15 of 34, No. 17 ]

Date

2013-06

Author

Paolo Manasse, Roberto Savona and Marika Vezzoli

Affiliation

University of Bologna and IGIER, Bocconi University, and University of Brescia

Title

Rules of Thumb for Banking Crises in Emerging Markets

Summary /
Abstract

This paper employs a recent statistical algorithm (CRAGGING) in order to build an early warning model for banking crises in emerging markets. We perturb our data set many times and create “artificial” samples from which we estimated our model, so that, by construction, it is flexible enough to be applied to new data for out-of-sample prediction. We find that, out of a large number (540) of candidate explanatory variables, from macroeconomic to balance sheet indicators of the countries’ financial sector, we can accurately predict banking crises by just a handful of variables. Using data over the period from 1980 to 2010, the model identifies two basic types of banking crises in emerging markets: a “Latin American type”, resulting from the combination of a (past) credit boom, a flight from domestic assets, and high levels of interest rates on deposits; and an “Asian type”, which is characterized by an investment boom financed by banks’ foreign debt. We compare our model to other models obtained using more traditional techniques, a Stepwise Logit, a Classification Tree, and an “Average” model, and we find that our model strongly dominates the others in terms of out-of-sample predictive power.

Keywords

Banking Crises, Early Warnings, Regression and Classification Trees, Stepwise Logit

URL

ftp://ftp.igier.unibocconi.it/wp/2013/481.pdf



Record ID

380     [ Page 15 of 34, No. 18 ]

Date

2013-06

Author

Bob Hills and Glenn Hoggarth

Affiliation

International Finance Division, Bank of England

Title

Cross-border bank credit and global financial stability

Summary /
Abstract

This article looks in detail at one aspect of global liquidity: cross-border credit provided by banks. Cross-border banking can potentially have considerable benefits, especially by diversifying the available sources of lending and borrowing, and by increasing banking competition. But such flows can also amplify risks in times of stress. As this article sets out, cross-border bank lending contributed to the build-up in vulnerabilities before the recent crisis, and exacerbated the bust once the crisis hit. The article then considers possible policy responses, arguing in particular that policymakers need to ensure that they can properly monitor these flows, from the point of view of recipient countries and the global system as a whole.

Keywords

Cross-border banking, global financial stability

URL

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2013/qb130204.pdf?goback=.gde_2942155_member_251289549



Record ID

379     [ Page 15 of 34, No. 19 ]

Date

2012-12

Author

Daniel Gros and Thorsten Beck

Affiliation

Centre for European Policy Studies and the European Banking Center, Tilburg University

Title

Monetary Policy and Banking Supervision: Coordination Instead of Separation

Summary /
Abstract

Following the June 2012 European Council's decision to place the ‘Single Supervisory Mechanism’ (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be ‘Chinese walls’ between the supervisory and monetary policy arms of the ECB. The current legislative proposal, in fact, is explicit on this account. On the contrary, however, this paper finds that there is no need to impose a strict separation between these two functions. The authors argue, in fact, that a strict separation of supervision and monetary policy is not even desirable during a financial crisis when the systemic stability of the financial system represents the biggest threat to a monetary policy that aims at price stability. In their view, the key problem hampering the ECB today is that it lacks detailed information on the state of health of the banking system, which is often highly confidential. Chinese walls would not solve this problem. Moreover, in light of the fact that the new, proposed Supervisory Board will be composed to a large extent of representatives of the same institutions that also dominate the Governing Council, the paper finds that it does not make sense to have Chinese walls between two boards with largely overlapping memberships. In addition, it recommends that some members of the Supervisory Boards should be “independents” in order to reduce the tendency of supervisors to unduly delay the recognition of losses.

Keywords

Monetary Policy, Banking Supervision, Coordination

URL

http://d.repec.org/n?u=RePEc:eps:cepswp:7528&r=mon



Record ID

378     [ Page 15 of 34, No. 20 ]

Date

2012-05

Author

Armand Fouejieu Azangue

Affiliation

LEO - Laboratoire d'économie d'Orleans - Université d'Orléans

Title

Coping with the Recent Financial Crisis, did Inflation Targeting Make Any Difference?

Summary /
Abstract

The 2008/2009 financial crisis hit the real economy, generating one of the greatest global economic shocks. The aim of this study is to investigate whether inflation targeting has made a difference during this crisis. We first present some arguments suggesting that inflation targeters can be expected to do better when facing a global shock. Applying difference in difference in the spirit of Ball and Sheridan (2005), we assess the difference between targeters and non-targeters and find that there is no significant difference concerning inflation rate and GDP growth. However, the rise in interest rates and inflation volatility during the crisis have been significantly less pronounced for targeters.

Keywords

Inflation targeting, financial crisis, macroeconomic performances

URL

http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00826277&r=mon



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