"Money, financial stability and efficiency". A summary of the article by Franklin Allen, Elena Carletti and Douglas Gale (2014) PDF Download
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Author: Christian Summerer Publisher: GRIN Verlag ISBN: 3668876231 Category : Business & Economics Languages : en Pages : 20
Book Description
Seminar paper from the year 2016 in the subject Economics - Macro-economics, general, grade: 2,0, University of Cologne, course: Seminar Macroeconomics, language: English, abstract: At least since the start of the last financial crisis in 2007, the analysis of financial stability is a broadly investigated field of research. Macroeconomic as well as microeconomic models try to evaluate the effects of distortions (liquidity shocks, substantial losses on equity good markets. . . ) on the financial markets to the stability of all or some areas of the economy. Macroeconomic models mainly evaluate the impacts of such disruptions to benchmarks like GDP, unemployment or international trade and give recommendations regarding how institutions (central banks, governments. . . ) should react. As Blaug indicates, classical, neoclassical and new-classical models can be distinguished in this context. In contrary, microeconomic models are trying to quantify the welfare effects of such events on the level of individual economic participants like households, firms or banks. Most of this literature measure such losses via real-term variables, for example real wages or real consumption. Within such models, this causes instability on the banking/financial sector due to crashes in equity or bank-runs. Just a small group of younger literature, such as Carletti et al. (2009) or Gersbach (2012), examines the question whether modeling nominal but non-contingent contracts instead of real ones improve financial stability in theory. Among this literature, the present article “Money, financial stability and efficiency”, written by Franklin et al. (2014), can be found. The authors consider a standard banking model with aggregate return risk, aggregate liquidity risk and idiosyncratic liquidity shocks. The aim of this term paper is to briefly describe relevant model specifications and main assumptions of the underlying model. Secondly, main findings and their implications regarding the proposed research question will be presented. Finally, this term paper will complete with some critical reflections about the applicability of the model in theoretic and empirical research.
Author: Christian Summerer Publisher: GRIN Verlag ISBN: 3668876231 Category : Business & Economics Languages : en Pages : 20
Book Description
Seminar paper from the year 2016 in the subject Economics - Macro-economics, general, grade: 2,0, University of Cologne, course: Seminar Macroeconomics, language: English, abstract: At least since the start of the last financial crisis in 2007, the analysis of financial stability is a broadly investigated field of research. Macroeconomic as well as microeconomic models try to evaluate the effects of distortions (liquidity shocks, substantial losses on equity good markets. . . ) on the financial markets to the stability of all or some areas of the economy. Macroeconomic models mainly evaluate the impacts of such disruptions to benchmarks like GDP, unemployment or international trade and give recommendations regarding how institutions (central banks, governments. . . ) should react. As Blaug indicates, classical, neoclassical and new-classical models can be distinguished in this context. In contrary, microeconomic models are trying to quantify the welfare effects of such events on the level of individual economic participants like households, firms or banks. Most of this literature measure such losses via real-term variables, for example real wages or real consumption. Within such models, this causes instability on the banking/financial sector due to crashes in equity or bank-runs. Just a small group of younger literature, such as Carletti et al. (2009) or Gersbach (2012), examines the question whether modeling nominal but non-contingent contracts instead of real ones improve financial stability in theory. Among this literature, the present article “Money, financial stability and efficiency”, written by Franklin et al. (2014), can be found. The authors consider a standard banking model with aggregate return risk, aggregate liquidity risk and idiosyncratic liquidity shocks. The aim of this term paper is to briefly describe relevant model specifications and main assumptions of the underlying model. Secondly, main findings and their implications regarding the proposed research question will be presented. Finally, this term paper will complete with some critical reflections about the applicability of the model in theoretic and empirical research.
Author: Mr.Itai Agur Publisher: International Monetary Fund ISBN: 1484382757 Category : Business & Economics Languages : en Pages : 33
Book Description
The notion of a tradeoff between output and financial stabilization is based on monetarymacroprudential models with unique equilibria. Using a game theory setup, this paper shows that multiple equilibria lead to qualitatively different results. Monetary and macroprudential authorities have tools that impose externalities on each other's objectives. One of the tools (macroprudential) is coarse, while the other (monetary policy) is unconstrained. We find that this asymmetry always leads to multiple equilibria, and show that under economically relevant conditions the authorities prefer different equilibria. Giving the unconstrained authority a weight on "helping" the constrained authority ("leaning against the wind") now has unexpected effects. The relation between this weight and the difficulty of coordinating is hump-shaped, and therefore a small degree of leaning worsens outcomes on both authorities' objectives.
Author: Mr.Itai Agur Publisher: International Monetary Fund ISBN: 1513545337 Category : Business & Economics Languages : en Pages : 23
Book Description
How does monetary policy impact upon macroprudential regulation? This paper models monetary policy's transmission to bank risk taking, and its interaction with a regulator's optimization problem. The regulator uses its macroprudential tool, a leverage ratio, to maintain financial stability, while taking account of the impact on credit provision. A change in the monetary policy rate tilts the regulator's entire trade-off. We show that the regulator allows interest rate changes to partly "pass through" to bank soundness by not neutralizing the risk-taking channel of monetary policy. Thus, monetary policy affects financial stability, even in the presence of macroprudential regulation.
Author: Augusto de la Torre Publisher: World Bank Publications ISBN: 0821376896 Category : Business & Economics Languages : en Pages : 484
Book Description
Interest in access to finance and awareness of its importance have increased significantly since the early 2000s. Growing evidence suggests that lack of access to credit prevents many households and firms from financing high-return investment projects, which has an adverse effect on growth and poverty alleviation. Despite the increasing awareness of the importance of access to finance among both researchers and policymakers, there are still some major gaps in our understanding of the main drivers of access, as well as about the impact of different policies in this area. This book aims to fill some of these gaps by discussing recent innovative experiences in broadening access to credit in Latin America. These experiences are consistent with an emerging new view that, while recognizing the central role of the public sector in improving the contractual and informational environment for financial markets, also contends that there might be room for well-designed, restricted interventions in collaboration with the private sector to foster the development of financial markets and broaden access to them. In particular, the book analyzes, among other things, some interesting experiences from Brazil, Chile, Colombia, and Mexico that use different instruments to broaden access to credit in a sustainable way, such as structured finance, factoring, credit guarantees, and correspondent banking. Most of these experiences have led to financial innovation by developing new financial products and coordinating different players in the financial and real sectors to overcome barriers to access to credit. The book provides a first systematic analysis of these innovative experiences, including an analytical framework to understand problems of access to finance and a discussion of the effects and optimal design of public interventions. Finally, the book discusses some open policy questions about the role of the private and public sectors (including state†?owned banks) in broadening access to finance in a sustainable and market-friendly manner.
Author: Mr.Gianni De Nicolo Publisher: International Monetary Fund ISBN: 1463927290 Category : Business & Economics Languages : en Pages : 39
Book Description
We study versions of a general equilibrium banking model with moral hazard under either constant or increasing returns to scale of the intermediation technology used by banks to screen and/or monitor borrowers. If the intermediation technology exhibits increasing returns to scale, or it is relatively efficient, then perfect competition is optimal and supports the lowest feasible level of bank risk. Conversely, if the intermediation technology exhibits constant returns to scale, or is relatively inefficient, then imperfect competition and intermediate levels of bank risks are optimal. These results are empirically relevant and carry significant implications for financial policy.
Author: Mr.Stijn Claessens Publisher: International Monetary Fund ISBN: 1498340938 Category : Business & Economics Languages : en Pages : 38
Book Description
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.
Author: World Bank Group Publisher: World Bank Publications ISBN: 0821399853 Category : Business & Economics Languages : en Pages : 226
Book Description
The second issue in a new series, Global Financial Development Report 2014 takes a step back and re-examines financial inclusion from the perspective of new global datasets and new evidence. It builds on a critical mass of new research and operational work produced by World Bank Group staff as well as outside researchers and contributors.
Author: Mr.Stijn Claessens Publisher: International Monetary Fund ISBN: 1484355261 Category : Business & Economics Languages : en Pages : 754
Book Description
The lingering effects of the economic crisis are still visible—this shows a clear need to improve our understanding of financial crises. This book surveys a wide range of crises, including banking, balance of payments, and sovereign debt crises. It begins with an overview of the various types of crises and introduces a comprehensive database of crises. Broad lessons on crisis prevention and management, as well as the short-term economic effects of crises, recessions, and recoveries, are discussed.
Author: Mr.Stijn Claessens Publisher: International Monetary Fund ISBN: 1475561008 Category : Business & Economics Languages : en Pages : 66
Book Description
This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.
Author: Christian Summerer
Author: Christian Summerer
Author: Mr.Itai Agur
Author: Mr.Itai Agur
Author: Kjell G. Nyborg
Author: Augusto de la Torre
Author: Mr.Gianni De Nicolo
Author: Mr.Stijn Claessens
Author: World Bank Group
Author: Mr.Stijn Claessens
Author: Mr.Stijn Claessens