Discussion of Global Banks and International Business Cycles by Enders, Kollman and Müller

Transcription

1 Discussion of Global Banks and Inernaional Business Cycles by Enders Kollman and Müller Sefano Neri (Banca d Ialia) Conference Advances in Inernaional Macroeconomics - Lessons from he Crisis European Commission July 2 The usual disclaimer applies

2 The quesion Under which circumsances counryspecific evens (increase in loan defauls) can rigger a sharp and highly synchronized inernaional downurn?

3 The answer When financial shocks are large alhough no necessarily synchronized and when i is cosly o adjus bank capial

4 The model Symmeric wo counry-one good RBC model (BKK ype) wih: - a global bank (varying capial is cosly) - a represenaive households - a represenaive enrepreneur

5 Commens. Correlaion among defaul raes and TFP shocks 2. Adjusmen coss for bank capial 3. Oher sources of synchronizaion in recen financial crisis 4. Oher commens

6 + = Chol Correlaion among defaul raes and TFP shocks

7 + = Chol Correlaion among defaul raes and TFP shocks

8 + = Chol Correlaion among defaul raes and TFP shocks

9 + = Chol Correlaion among defaul raes and TFP shocks

10 + = Chol Correlaion among defaul raes and TFP shocks

11 + = Chol How are IRFs and momens affeced by crosscorrelaions of innovaions? Is his srucure really needed? No clear how exercises are conduced. Needs be clarified in ex Correlaion among defaul raes and TFP shocks

12 Link beween coss relaed o bank capial and spreads Same idea in GNSS (2) Symmeric/asymmeric coss. How realisic is i? Adjusmen coss for bank capial ( ) [ ] W W D L D L mc R R = γ γφ Excess capial 2 = b b Kb b L K L K r R ν φ

13 8 6 Coss relaed o your bank's capial posiion Bank's margin on average loans

14 x -3 Oupu x -3 Consumpion x -3 Invesmen x -3 Toal loans. Deposis.5 Bank capial Capial/asses raio.2 Bank spread Policy rae linear 2nd order 3rd order

15 Oher sources of synchronizaion Oil and more generally commodiy prices may have played an imporan role in 28 recession

16 Dynamic forecass of GDP as of 27:Q3 wih and wihou knowledge of he ex-pos values of oil prices 27:Q4-28:Q4. From James D. Hamilon s esimony before he Join Economic Commiee of he Unied Saes Congress on May 2 29 Boh Hamilon and Kilian agree ha oil shocks have played an imporan role in he 28 recession Cumulaive effec of oil demand and supply shocks From Luz Kilian s commen on Causes and Consequences of he Oil Shock of 27-8 by James D. Hamilon

17 Dynamic forecass of GDP as of 27:Q3 wih and wihou knowledge of he ex-pos values of oil prices 27:Q4-28:Q4. From James D. Hamilon s esimony before he Join Economic Commiee of he Unied Saes Congress on May 2 29 Boh Hamilon and Kilian agree ha oil shocks have played an imporan role in he 28 recession Cumulaive effec of oil demand and supply shocks From Luz Kilian s commen on Causes and Consequences of he Oil Shock of 27-8 by James D. Hamilon

18 Oher sources of synchronizaion Oil and more generally commodiy prices may have played an imporan role in 28 recession Par of synchronizaion of downurn may be caused by oil shock In his sense posiive correlaion beween TFP innovaions capures he global dimension of 28 oil price shock

19 Oher commens Financial crisis sared in sub-prime segmen of residenial morgage marke 3.5 Business loans 3. Single family residenial morgages Hisorical averages..5. 2Q 2Q3 2Q 2Q3 22Q 22Q3 23Q 23Q3 24Q 24Q3 25Q 25Q3 26Q 26Q3 27Q 27Q3 28Q 28Q3 29Q 29Q3 2Q

20 Oher commens Financial crisis sared in sub-prime segmen of residenial morgage marke 3.5 Business loans 3. Single family residenial morgages Hisorical averages..5. 2Q 2Q3 2Q 2Q3 22Q 22Q3 23Q 23Q3 24Q 24Q3 25Q 25Q3 26Q 26Q3 27Q 27Q3 28Q 28Q3 29Q 29Q3 2Q

21 Oher commens (con d) Crucial role played by moneary policy boh wih convenional and unconvenional measures

22 Oher commens (con d) Righ o say ha model does no need collaeral consrains or heerogeneiy in discoun facors (as in Iacoviello 25 and 2) Bu i is crucial o assume ha deposis provide liquidiy services Oherwise model would no have a well-defined seady sae for loans and deposis

23 Oher commens (con d) Crucial assumpion is global dimension of bank: effecive loan raes are equalized across counries Size of adj. coss for bank capial is no crucial as long as i is no exacly zero in which case balance shee does no maer

24 To sum up Ineresing paper very simple model Too simple o capure complexiy of 28 financial crisis: Funding liquidiy and money markes ensions Is origins in housing markes Role of risk aking by financial insiuions poor risk managemen Loose moneary policy beween 23-25