Banks Endogenous Systemic Risk Taking. David Martinez-Miera Universidad Carlos III. Javier Suarez CEMFI
|
|
- Steven Caldwell
- 6 years ago
- Views:
Transcription
1 Banks Endogenous Systemic Risk Taking David Martinez-Miera Universidad Carlos III Javier Suarez CEMFI Banking and Regulation: The Next Frontier A RTF-CEPR-JFI Workshop, Basel, January
2 Introduction The recent crisis has evidenced the need to better understand banks contribution to systemic risk One of the dimensions of this multifaceted phenomenon is the exposure to common shocks In this paper, we analyze: The dynamic trade-offs behindbanks voluntary exposure to an infrequent & large common shock (attractive to them due to standard risk-shifting incentives) The extent to which capital requirements (CRs) contribute to reduce the resulting systemic risk & increase social welfare Issues such as the optimal level of CRs, their gradual introduction & cyclical adjustment 2
3 Simple dynamic equilibrium model in which bank capital dynamics is formalized like in other papers in recent literature (limited wealth of bankers who retain earnings and/or suffer losses from prior investments) But the role of bank capital is different Meh-Moran 10: Monitoring incentives alaholmström-tirole 97 Gertler-Kiyotaki 10: Preventing fund diversion alahart-moore 94 Here, it reduces systemic gambling incentives through two channels: Leverage reduction effect (standard) [Van den Heuvel 08 & many micro-banking models] Last bank standing effect (novel as for CRs) [akin to Perotti-Suarez 02] 3
4 Related literature Papers beyond those already mentioned: Ranciere-Tornell-Westermann 08: myopic firms adopt risky growth strategies due to lenders expectation of a systemic bailout when a crisis occurs Brunnermeier-Sannikov 14, He-Krishnamurthy 14: similar capital dynamics but no time-varying systemic risk-taking & no discussion on CRs Risk taking in banking: under deposit insurance: Kareken-Wallace 78 & many more effect of CRs: Hellmman-Murdock-Stiglitz 00, Repullo 04 equilibrium/dynamic considerations: Acharya-Yorulmazer 07-08, Farhi-Tirole 12 4
5 Our modeling of systemic risk taking 1. Firms production technology is subject to failure risk & can be managedintwomodes: non-systemic (x i =0): its failure is purely i.i.d. systemic (x i =1): if a rare shock occurs, all fail at once 2. Firms need bank loans to pay inputs in advance: l i =k i +wn i 3. Lending to systemic firms is socially inefficient, but... Highly levered banks may find it privately profitable Systemic lending is not ex-ante detectable Regulation sets a common capital requirement: e i γl i 4. Bankers competitively allocate their wealth e as capital across banks 5
6 Key variables Capital requirements are satisfied with inside equity Single state variable is bankers aggregate wealth e grows quickly if bank profits are high gets lost if invested systemically and shock realizes Two important endogenous variables v(e) :value of one unit of bankers wealth x(e) :fraction of bankers wealth invested in systemic banks [Banksspecializeassystemicornon-systemic] 6
7 Key insights 1. Systemic risk taking is maximal after several calm periods [bankers reaction to the lower shadow value of their wealth] 2. Higher capital requirements... reinforce the last bank standing effect make bank capital effectively scarcer at all times less credit lower economic activity [GOOD] [BAD] 3. The socially optimal capital requirements are quite high should be gradually introduced should not be lowered after a crisis 7
8 Key equations* Banks fix the terms of their supply of loans to firms taking bankers required value-weighted return as given Bankers allocate their wealth e t across banks taking the returns offered to them by banks as given v t = ψ +(1 ψ)β max{e t (v t+1 R 0t+1 ),E t (v t+1 R 1t+1 )} R jt+1 : gross return on equity under x i = j v t+1 : marginal value of bankers wealth at end of t Indifference requires E t (v t+1 R 0t+1 )=E t (v t+1 R 1t+1 ) (1) we look at a representative bank of each class Law of motion of total bank capital e t e t+1 = φ(1 + r)w t +(1 ψ)[(1 x t )R 0t+1 + x t R 1t+1 ]e t 8
9 Definition of equilibrium* Stationary law of motion for e t [e, e] Tuple (v(e),x(e); k(e),w(e), R 0 (e),r1 0 (e)) describing endogenous variables for each e [e, e] such that {e t } and {v t,x t ; k t,w t,r 0t+1,R 0 1t+1 } are compatible with: 1. Individual optimization 2. Market clearing Indifference condition for x t (0, 1): [(1 ε)v(e 0 t+1 )+εv(e1 t+1 )]R 0t+1 =(1 ε)v(e 0 t+1 )R0 1t+1 self-equilibrating mechanism for x t 9
10 Rest of the talk 1. Baseline parameterization 2. Graphical presentation of key results 3. Quantitative results 4. Applications 5. Conclusions 10
11 Baseline parameterization (1 period = 1 year) T1. Baseline parameter values Patient agents discount rate ρ 0.02 Impatient agents discount factor β 0.96 Total factor productivity A 2 Physical capital elasticity α 0.3 Depreciation rate in successful firms δ 0.05 Depreciation rate in failed firms λ 0.35 Idiosyncratic default rate of non-systemic firms π Idiosyncratic default rate of systemic firms π Probability of a systemic shock ε 0.03 Bankers exit rate ψ 0.20 Fraction of wage income earned by bankers φ 0.05 [Parsimonious model: 11 parameters only] 11
12 Why these values? Low real interest rates such as prior to the recent crisis A =2is inconsequential (levels in 0 to 100 range) α =0.30 produces labor share ' 70% δ and λ match K/Y ' 3-4 & LGD' 45% π 0,π 1, and ε sufficient room of risk shifting [expected default rates 3% 4.7%; systemic shocks every 33y] Bank capital dynamics (highly tentative): ψ: bankers expected active life = 5y φ: capital brought in by active bankers = 5% of agg. labor income 12
13 Social welfare W as a function of γ Social welfare % 8% 10% 12% 14% 16% 18% Capital requirement Figure 1: W (γ) [we compare γ =14% with γ=7%] 13
14 v(e) and x(e) under low and optimal γ Marginal value of bank capital (v) optimal capital requirement (14%) low capital requirement (7%) Systemic risk taking (x) optimal capital requirement (14%) low capital requirement (7%) Aggregate amount of bank capital (e) Figure 2a: v(e) Aggregate amount of bank capital (e) Figure 2b: x(e) 14
15 Equilibrium dynamics with low and optimal γ 3 Equilibrium dynamics (CR=7%) 3 Equilibrium dynamics (CR=14%) Aggregate bank capital at t Dynamics if no shock realizes Dynamics if shock realizes 45-degree line Aggregate bank capital at t Dynamics if no shock realizes Dynamics if shock realizes 45-degree line Aggregate bank capital at t Aggregate bank capital at t Figure 3a (γ =7%) Figure 3b (γ =14%) 15
16 Equilibrium dynamics with low and optimal γ Frequency Ergodic distribution (CR=7%) Aggregate bank capital Frequency Ergodic distribution (CR=14%) Aggregate bank capital Figure 3c (γ =7%) Figure 3d (γ =14%) 16
17 Quantitative results Optimal capital requirements: positive and large (14%) Comparison CR=7% CR=14% (unconditional means) Lower fraction of systemic loans: 71% 25% Higher loan rates: 4.1% 5.6% Lower macro aggregates: bank credit ( 21%), GDP ( 8.5%) Higher social welfare: ' +0.9% permanent consumption Variation in year-after-shock aggregates: CR=7%: loan rate (+11.8pp), bank credit (-66%), GDP (-34%) CR=14%: loan rate (+2.6pp), bank credit (-24%), GDP (-10%) 17
18 Quantitative results (details, 1/3) T2. Main unconditional means γ =7% γ =14% % Welfare (equivalent consumption flow) GDP Bank credit (l) Bank equity (e) Loan rate (r L ) (in %) pp Deposit insurance costs Value of one unit of bank capital (v) Fraction of equity in systemic banks (x)
19 Quantitative results (details, 2/3) T3. % Change in after-shock period (from PSS) γ=7% γ=14% Aggregate net consumption GDP Bank credit (l) Loan rate (r L ) 11.8pp 2.6pp Value of one unit of bank capital (v) Fraction of equity in systemic banks (x)
20 Quantitative results (details, 3/3) T4. Other macro & financial ratios γ =7% γ =14% Labor income/gdp Physical capital/gdp Bank credit/gdp* Deposit insurance costs/gdp (%) ROE at non-systemic banks (%) ROE at systemic banks if no shock realizes (%) [*: suggests exuberance due to lax regulation] 20
21 Applications Transitional dynamics from moving γ and impact on welfare: There is value (and limits to the value) of applying gradualism in rising γ [Best: moving from 7% to 13% in 9 years] Assessment of countercyclical capital requirements They have a bad effect on incentives Overall, there is no net gain from making them countercyclical But sticking to flat requirements may not be time-consistent 21
22 % 14% % 12% Social welfare % 9% 10% 8% Years of transition (T) 22
23 Conclusions Dynamic equilibrium model of banks endogenous systemic risktaking Allows us to assess the macroprudential role of capital requirements using an internally consistent welfare metrics: They reduce credit and output in calm times but also systemic risk taking interior socially optimal level The identified last bank standing effect implies that systemic risk taking increases as the economy expands... Yet, systemic risk taking increases if the CRs are cyclically adjusted 23
A Macroeconomic Model of Endogenous Systemic Risk Taking. David Martinez-Miera Universidad Carlos III. Javier Suarez CEMFI
A Macroeconomic Model of Endogenous Systemic Risk Taking David Martinez-Miera Universidad Carlos III Javier Suarez CEMFI 2nd MaRs Conference, ECB, 30-31 October 2012 1 Introduction The recent crisis has
More informationThe Socially Optimal Level of Capital Requirements: AViewfromTwoPapers. Javier Suarez* CEMFI. Federal Reserve Bank of Chicago, November 2012
The Socially Optimal Level of Capital Requirements: AViewfromTwoPapers Javier Suarez* CEMFI Federal Reserve Bank of Chicago, 15 16 November 2012 *Based on joint work with David Martinez-Miera (Carlos III)
More informationBanks Endogenous Systemic Risk Taking
Banks Endogenous Systemic Risk Taking David Martinez-Miera Universidad Carlos III Javier Suarez CEMFI and CEPR September 2014 Abstract We develop a dynamic general equilibrium model that features endogenous
More informationBank Capital, Agency Costs, and Monetary Policy. Césaire Meh Kevin Moran Department of Monetary and Financial Analysis Bank of Canada
Bank Capital, Agency Costs, and Monetary Policy Césaire Meh Kevin Moran Department of Monetary and Financial Analysis Bank of Canada Motivation A large literature quantitatively studies the role of financial
More informationAMacroeconomicModelof Endogenous Systemic Risk Taking
AMacroeconomicModelof Endogenous Systemic Risk Taking David Martinez-Miera Universidad Carlos III Javier Suarez CEMFI and CEPR September 2012 Abstract We analyze banks systemic risk taking in a simple
More informationA Macroeconomic Framework for Quantifying Systemic Risk
A Macroeconomic Framework for Quantifying Systemic Risk Zhiguo He, University of Chicago and NBER Arvind Krishnamurthy, Northwestern University and NBER December 2013 He and Krishnamurthy (Chicago, Northwestern)
More informationA Macroeconomic Model with Financial Panics
A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 March 218 1 The views expressed in this paper are those of the authors
More informationMarkets, Banks and Shadow Banks
Markets, Banks and Shadow Banks David Martinez-Miera Rafael Repullo U. Carlos III, Madrid, Spain CEMFI, Madrid, Spain AEA Session Macroprudential Policy and Banking Panics Philadelphia, January 6, 2018
More informationCapital Requirements, Risk Choice, and Liquidity Provision in a Business Cycle Model
Capital Requirements, Risk Choice, and Liquidity Provision in a Business Cycle Model Juliane Begenau Harvard Business School July 11, 2015 1 Motivation How to regulate banks? Capital requirement: min equity/
More informationOverborrowing, Financial Crises and Macro-prudential Policy. Macro Financial Modelling Meeting, Chicago May 2-3, 2013
Overborrowing, Financial Crises and Macro-prudential Policy Javier Bianchi University of Wisconsin & NBER Enrique G. Mendoza Universtiy of Pennsylvania & NBER Macro Financial Modelling Meeting, Chicago
More informationA Macroeconomic Framework for Quantifying Systemic Risk
A Macroeconomic Framework for Quantifying Systemic Risk Zhiguo He, University of Chicago and NBER Arvind Krishnamurthy, Stanford University and NBER Bank of Canada, August 2017 He and Krishnamurthy (Chicago,
More informationA Macroeconomic Model with Financially Constrained Producers and Intermediaries
A Macroeconomic Model with Financially Constrained Producers and Intermediaries Authors: Vadim, Elenev Tim Landvoigt and Stijn Van Nieuwerburgh Discussion by: David Martinez-Miera ECB Research Workshop
More informationAMacroeconomicModelof Endogenous Systemic Risk Taking
AMacroeconomicModelof Endogenous Systemic Risk Taking David Martinez-Miera Universidad Carlos III Javier Suarez CEMFI and CEPR December 2013 Abstract We analyze banks systemic risk-taking decisions in
More informationReforms in a Debt Overhang
Structural Javier Andrés, Óscar Arce and Carlos Thomas 3 National Bank of Belgium, June 8 4 Universidad de Valencia, Banco de España Banco de España 3 Banco de España National Bank of Belgium, June 8 4
More informationFinancial Amplification, Regulation and Long-term Lending
Financial Amplification, Regulation and Long-term Lending Michael Reiter 1 Leopold Zessner 2 1 Instiute for Advances Studies, Vienna 2 Vienna Graduate School of Economics Barcelona GSE Summer Forum ADEMU,
More informationCredit Booms, Financial Crises and Macroprudential Policy
Credit Booms, Financial Crises and Macroprudential Policy Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 March 219 1 The views expressed in this paper are those
More informationMacroprudential Bank Capital Regulation in a Competitive Financial System
Macroprudential Bank Capital Regulation in a Competitive Financial System Milton Harris, Christian Opp, Marcus Opp Chicago, UPenn, University of California Fall 2015 H 2 O (Chicago, UPenn, UC) Macroprudential
More informationThe Procyclical Effects of Basel II
9TH JACQUES POLAK ANNUAL RESEARCH CONFERENCE NOVEMBER 13-14, 2008 The Procyclical Effects of Basel II Rafael Repullo CEMFI and CEPR, Madrid, Spain and Javier Suarez CEMFI and CEPR, Madrid, Spain Presented
More informationA Macroeconomic Model with Financial Panics
A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 September 218 1 The views expressed in this paper are those of the
More informationThe Role of the Net Worth of Banks in the Propagation of Shocks
The Role of the Net Worth of Banks in the Propagation of Shocks Preliminary Césaire Meh Department of Monetary and Financial Analysis Bank of Canada Kevin Moran Université Laval The Role of the Net Worth
More informationA Policy Model for Analyzing Macroprudential and Monetary Policies
A Policy Model for Analyzing Macroprudential and Monetary Policies Sami Alpanda Gino Cateau Cesaire Meh Bank of Canada November 2013 Alpanda, Cateau, Meh (Bank of Canada) ()Macroprudential - Monetary Policy
More informationAggregate Bank Capital and Credit Dynamics
Aggregate Bank Capital and Credit Dynamics N. Klimenko S. Pfeil J.-C. Rochet G. De Nicolò (Zürich) (Bonn) (Zürich, SFI and TSE) (IMF and CESifo) March 2016 The views expressed in this paper are those of
More informationEstimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach
Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach Gianluca Benigno 1 Andrew Foerster 2 Christopher Otrok 3 Alessandro Rebucci 4 1 London School of Economics and
More informationBank Capital Buffers in a Dynamic Model 1
Bank Capital Buffers in a Dynamic Model 1 Jochen Mankart 1 Alex Michaelides 2 Spyros Pagratis 3 1 Deutsche Bundesbank 2 Imperial College London 3 Athens University of Economics and Business CRESSE 216,
More informationShadow Banking and Regulation: A Quantitative Assessment
Shadow Banking and Regulation: A Quantitative Assessment Césaire A. Meh Kevin Moran Bank of Canada Université Laval Journées du CIRPÉE 2013, Lac Beauport 26 septembre 2013 The views expressed are those
More informationEquity versus Bail-in Debt in Banking: An Agency Perspective. Javier Suarez (CEMFI) Workshop on Financial Stability CEMFI, Madrid, 13 May 2016
Equity versus Bail-in Debt in Banking: An Agency Perspective Caterina Mendicino (ECB) Kalin Nikolov (ECB) Javier Suarez (CEMFI) Workshop on Financial Stability CEMFI, Madrid, 13 May 2016 1 Introduction
More informationA Macroeconomic Framework for Quantifying Systemic Risk
A Macroeconomic Framework for Quantifying Systemic Risk Zhiguo He, University of Chicago and NBER Arvind Krishnamurthy, Northwestern University and NBER May 2013 He and Krishnamurthy (Chicago, Northwestern)
More informationTaxing Firms Facing Financial Frictions
Taxing Firms Facing Financial Frictions Daniel Wills 1 Gustavo Camilo 2 1 Universidad de los Andes 2 Cornerstone November 11, 2017 NTA 2017 Conference Corporate income is often taxed at different sources
More informationForeign Competition and Banking Industry Dynamics: An Application to Mexico
Foreign Competition and Banking Industry Dynamics: An Application to Mexico Dean Corbae Pablo D Erasmo 1 Univ. of Wisconsin FRB Philadelphia June 12, 2014 1 The views expressed here do not necessarily
More informationA Macroeconomic Framework for Quantifying Systemic Risk
A Macroeconomic Framework for Quantifying Systemic Risk Zhiguo He, University of Chicago and NBER Arvind Krishnamurthy, Stanford University and NBER March 215 He and Krishnamurthy (Chicago, Stanford) Systemic
More informationFinancial Intermediation and the Supply of Liquidity
Financial Intermediation and the Supply of Liquidity Jonathan Kreamer University of Maryland, College Park November 11, 2012 1 / 27 Question Growing recognition of the importance of the financial sector.
More informationBank Regulation under Fire Sale Externalities
Bank Regulation under Fire Sale Externalities Gazi Ishak Kara 1 S. Mehmet Ozsoy 2 1 Office of Financial Stability Policy and Research, Federal Reserve Board 2 Ozyegin University May 17, 2016 Disclaimer:
More informationAggregate Bank Capital and Credit Dynamics
Aggregate Bank Capital and Credit Dynamics N. Klimenko S. Pfeil J.-C. Rochet G. De Nicolò (Zürich) (Bonn) (Zürich, SFI and TSE) (IMF and CESifo) MFM Winter 2016 Meeting The views expressed in this paper
More informationBank Capital Requirements: A Quantitative Analysis
Bank Capital Requirements: A Quantitative Analysis Thiên T. Nguyễn Introduction Motivation Motivation Key regulatory reform: Bank capital requirements 1 Introduction Motivation Motivation Key regulatory
More informationOptimal Credit Market Policy. CEF 2018, Milan
Optimal Credit Market Policy Matteo Iacoviello 1 Ricardo Nunes 2 Andrea Prestipino 1 1 Federal Reserve Board 2 University of Surrey CEF 218, Milan June 2, 218 Disclaimer: The views expressed are solely
More informationAchieving Actuarial Balance in Social Security: Measuring the Welfare Effects on Individuals
Achieving Actuarial Balance in Social Security: Measuring the Welfare Effects on Individuals Selahattin İmrohoroğlu 1 Shinichi Nishiyama 2 1 University of Southern California (selo@marshall.usc.edu) 2
More informationHousehold Debt, Financial Intermediation, and Monetary Policy
Household Debt, Financial Intermediation, and Monetary Policy Shutao Cao 1 Yahong Zhang 2 1 Bank of Canada 2 Western University October 21, 2014 Motivation The US experience suggests that the collapse
More informationCoordinating Monetary and Financial Regulatory Policies
Coordinating Monetary and Financial Regulatory Policies Alejandro Van der Ghote European Central Bank May 2018 The views expressed on this discussion are my own and do not necessarily re ect those of the
More informationOverborrowing, Financial Crises and Macro-prudential Policy
Overborrowing, Financial Crises and Macro-prudential Policy Javier Bianchi University of Wisconsin Enrique G. Mendoza University of Maryland & NBER The case for macro-prudential policies Credit booms are
More informationDiscussion by J.C.Rochet (SFI,UZH and TSE) Prepared for the Swissquote Conference 2012 on Liquidity and Systemic Risk
Discussion by J.C.Rochet (SFI,UZH and TSE) Prepared for the Swissquote Conference 2012 on Liquidity and Systemic Risk 1 Objectives of the paper Develop a theoretical model of bank lending that allows to
More informationBank Capital Buffers in a Dynamic Model 1
Bank Capital Buffers in a Dynamic Model 1 Jochen Mankart 1 Alex Michaelides 2 Spyros Pagratis 3 1 Deutsche Bundesbank 2 Imperial College London 3 Athens University of Economics and Business November 217
More informationWhat is Cyclical in Credit Cycles?
What is Cyclical in Credit Cycles? Rui Cui May 31, 2014 Introduction Credit cycles are growth cycles Cyclicality in the amount of new credit Explanations: collateral constraints, equity constraints, leverage
More informationInternational Banks and the Cross-Border Transmission of Business Cycles 1
International Banks and the Cross-Border Transmission of Business Cycles 1 Ricardo Correa Horacio Sapriza Andrei Zlate Federal Reserve Board Global Systemic Risk Conference November 17, 2011 1 These slides
More informationDiscussion of Procyclicality of Capital Requirements in a General Equilibrium Model of Liquidity Dependence
Discussion of Procyclicality of Capital Requirements in a General Equilibrium Model of Liquidity Dependence Javier Suarez CEMFI and CEPR 1. Introduction The paper that motivates this discussion belongs
More informationFinancial intermediaries in an estimated DSGE model for the UK
Financial intermediaries in an estimated DSGE model for the UK Stefania Villa a Jing Yang b a Birkbeck College b Bank of England Cambridge Conference - New Instruments of Monetary Policy: The Challenges
More informationStructural Reforms in a Debt Overhang
in a Debt Overhang Javier Andrés, Óscar Arce and Carlos Thomas 3 9/5/5 - Birkbeck Center for Applied Macroeconomics Universidad de Valencia, Banco de España Banco de España 3 Banco de España 9/5/5 - Birkbeck
More informationMacroprudential Policies in a Low Interest-Rate Environment
Macroprudential Policies in a Low Interest-Rate Environment Margarita Rubio 1 Fang Yao 2 1 University of Nottingham 2 Reserve Bank of New Zealand. The views expressed in this paper do not necessarily reflect
More informationConcerted Efforts? Monetary Policy and Macro-Prudential Tools
Concerted Efforts? Monetary Policy and Macro-Prudential Tools Andrea Ferrero Richard Harrison Benjamin Nelson University of Oxford Bank of England Rokos Capital 20 th Central Bank Macroeconomic Modeling
More informationRisky Mortgages in a DSGE Model
1 / 29 Risky Mortgages in a DSGE Model Chiara Forlati 1 Luisa Lambertini 1 1 École Polytechnique Fédérale de Lausanne CMSG November 6, 21 2 / 29 Motivation The global financial crisis started with an increase
More informationA Macroeconomic Framework for Quantifying Systemic Risk. June 2012
A Macroeconomic Framework for Quantifying Systemic Risk Zhiguo He Arvind Krishnamurthy University of Chicago & NBER Northwestern University & NBER June 212 Systemic Risk Systemic risk: risk (probability)
More informationExternal Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory. November 7, 2014
External Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory Ali Shourideh Wharton Ariel Zetlin-Jones CMU - Tepper November 7, 2014 Introduction Question: How
More informationInflation, Nominal Debt, Housing, and Welfare
Inflation, Nominal Debt, Housing, and Welfare Shutao Cao Bank of Canada Césaire A. Meh Bank of Canada José Víctor Ríos-Rull University of Minnesota and Federal Reserve Bank of Minneapolis Yaz Terajima
More informationMulti-Dimensional Monetary Policy
Multi-Dimensional Monetary Policy Michael Woodford Columbia University John Kuszczak Memorial Lecture Bank of Canada Annual Research Conference November 3, 2016 Michael Woodford (Columbia) Multi-Dimensional
More informationA Model of Financial Intermediation
A Model of Financial Intermediation Jesús Fernández-Villaverde University of Pennsylvania December 25, 2012 Jesús Fernández-Villaverde (PENN) A Model of Financial Intermediation December 25, 2012 1 / 43
More informationAsset Prices, Collateral and Unconventional Monetary Policy in a DSGE model
Asset Prices, Collateral and Unconventional Monetary Policy in a DSGE model Bundesbank and Goethe-University Frankfurt Department of Money and Macroeconomics January 24th, 212 Bank of England Motivation
More informationBooms and Banking Crises
Booms and Banking Crises F. Boissay, F. Collard and F. Smets Macro Financial Modeling Conference Boston, 12 October 2013 MFM October 2013 Conference 1 / Disclaimer The views expressed in this presentation
More informationEfficient Bailouts? Javier Bianchi. Wisconsin & NYU
Efficient Bailouts? Javier Bianchi Wisconsin & NYU Motivation Large interventions in credit markets during financial crises Fierce debate about desirability of bailouts Supporters: salvation from a deeper
More informationMoney and Capital in a persistent Liquidity Trap
Money and Capital in a persistent Liquidity Trap Philippe Bacchetta 12 Kenza Benhima 1 Yannick Kalantzis 3 1 University of Lausanne 2 CEPR 3 Banque de France Investment in the new monetary and financial
More informationThe I Theory of Money
The I Theory of Money Markus Brunnermeier and Yuliy Sannikov Presented by Felipe Bastos G Silva 09/12/2017 Overview Motivation: A theory of money needs a place for financial intermediaries (inside money
More informationKeynesian Views On The Fiscal Multiplier
Faculty of Social Sciences Jeppe Druedahl (Ph.d. Student) Department of Economics 16th of December 2013 Slide 1/29 Outline 1 2 3 4 5 16th of December 2013 Slide 2/29 The For Today 1 Some 2 A Benchmark
More informationQuantitative Significance of Collateral Constraints as an Amplification Mechanism
RIETI Discussion Paper Series 09-E-05 Quantitative Significance of Collateral Constraints as an Amplification Mechanism INABA Masaru The Canon Institute for Global Studies KOBAYASHI Keiichiro RIETI The
More informationMacroeconomics of Bank Capital and Liquidity Regulations
Macroeconomics of Bank Capital and Liquidity Regulations Authors: Frederic Boissay and Fabrice Collard Discussion by: David Martinez-Miera UC3M & CEPR Financial Stability Conference Martinez-Miera (UC3M
More informationEXAMINING MACROECONOMIC MODELS
1 / 24 EXAMINING MACROECONOMIC MODELS WITH FINANCE CONSTRAINTS THROUGH THE LENS OF ASSET PRICING Lars Peter Hansen Benheim Lectures, Princeton University EXAMINING MACROECONOMIC MODELS WITH FINANCING CONSTRAINTS
More informationPublic Investment, Debt, and Welfare: A Quantitative Analysis
Public Investment, Debt, and Welfare: A Quantitative Analysis Santanu Chatterjee University of Georgia Felix Rioja Georgia State University October 31, 2017 John Gibson Georgia State University Abstract
More informationMacroprudential Policies and the Lucas Critique 1
Macroprudential Policies and the Lucas Critique 1 Bálint Horváth 2 and Wolf Wagner 3 The experience of recent years has reinforced the view that the financial system tends to amplify shocks over the cycle,
More informationA Pigovian Approach to Liquidity Regulation
12TH JACQUES POLAK ANNUAL RESEARCH CONFERENCE NOVEMBER 10 11, 2011 A Pigovian Approach to Liquidity Regulation Enrico C. Perotti University of Amsterdam Javier Suarez CEMFI Presentation presented at the
More informationThe I Theory of Money
The I Theory of Money Markus K. Brunnermeier & Yuliy Sannikov Princeton University CSEF-IGIER Symposium Capri, June 24 th, 2015 Motivation Framework to study monetary and financial stability Interaction
More informationConvergence of Life Expectancy and Living Standards in the World
Convergence of Life Expectancy and Living Standards in the World Kenichi Ueda* *The University of Tokyo PRI-ADBI Joint Workshop January 13, 2017 The views are those of the author and should not be attributed
More informationOptimal Time-Consistent Macroprudential Policy
Optimal Time-Consistent Macroprudential Policy Javier Bianchi Minneapolis Fed & NBER Enrique G. Mendoza Univ. of Pennsylvania, NBER & PIER Why study macroprudential policy? MPP has gained relevance as
More informationCapital Income Tax Reform and the Japanese Economy (Very Preliminary and Incomplete)
Capital Income Tax Reform and the Japanese Economy (Very Preliminary and Incomplete) Gary Hansen (UCLA), Selo İmrohoroğlu (USC), Nao Sudo (BoJ) December 22, 2015 Keio University December 22, 2015 Keio
More informationRisk-Adjusted Capital Allocation and Misallocation
Risk-Adjusted Capital Allocation and Misallocation Joel M. David Lukas Schmid David Zeke USC Duke & CEPR USC Summer 2018 1 / 18 Introduction In an ideal world, all capital should be deployed to its most
More informationThe lender of last resort: liquidity provision versus the possibility of bail-out
The lender of last resort: liquidity provision versus the possibility of bail-out Rob Nijskens Sylvester C.W. Eijffinger June 24, 2010 The lender of last resort: liquidity versus bail-out 1 /20 Motivation:
More informationThe Transmission of Monetary Policy through Redistributions and Durable Purchases
The Transmission of Monetary Policy through Redistributions and Durable Purchases Vincent Sterk and Silvana Tenreyro UCL, LSE September 2015 Sterk and Tenreyro (UCL, LSE) OMO September 2015 1 / 28 The
More informationHousehold income risk, nominal frictions, and incomplete markets 1
Household income risk, nominal frictions, and incomplete markets 1 2013 North American Summer Meeting Ralph Lütticke 13.06.2013 1 Joint-work with Christian Bayer, Lien Pham, and Volker Tjaden 1 / 30 Research
More informationLiquidity Regulation and Credit Booms: Theory and Evidence from China. JRCPPF Sixth Annual Conference February 16-17, 2017
Liquidity Regulation and Credit Booms: Theory and Evidence from China Kinda Hachem Chicago Booth and NBER Zheng Michael Song Chinese University of Hong Kong JRCPPF Sixth Annual Conference February 16-17,
More informationDebt Covenants and the Macroeconomy: The Interest Coverage Channel
Debt Covenants and the Macroeconomy: The Interest Coverage Channel Daniel L. Greenwald MIT Sloan EFA Lunch, April 19 Daniel L. Greenwald Debt Covenants and the Macroeconomy EFA Lunch, April 19 1 / 6 Introduction
More information. Social Security Actuarial Balance in General Equilibrium. S. İmrohoroğlu (USC) and S. Nishiyama (CBO)
....... Social Security Actuarial Balance in General Equilibrium S. İmrohoroğlu (USC) and S. Nishiyama (CBO) Rapid Aging and Chinese Pension Reform, June 3, 2014 SHUFE, Shanghai ..... The results in this
More informationDiscussion of: The Fiscal Multiplier
Discussion of: The Fiscal Multiplier Hagedorn M., I. Manovskii, K. Mitman Tommaso Monacelli - Università Bocconi, IGIER and CEPR CEPR-ECB, 13-14 December 2016. General questions 1. What are the aggregate
More informationOn the Design of an European Unemployment Insurance Mechanism
On the Design of an European Unemployment Insurance Mechanism Árpád Ábrahám João Brogueira de Sousa Ramon Marimon Lukas Mayr European University Institute and Barcelona GSE - UPF, CEPR & NBER ADEMU Galatina
More informationAtkeson, Chari and Kehoe (1999), Taxing Capital Income: A Bad Idea, QR Fed Mpls
Lucas (1990), Supply Side Economics: an Analytical Review, Oxford Economic Papers When I left graduate school, in 1963, I believed that the single most desirable change in the U.S. structure would be the
More informationGender Gaps and the Rise of the Service Economy
Gender Gaps and the Rise of the Service Economy L. Rachel Ngai & Barbara Petrongolo American Economic Journal: Macroeconomics 2017 Presented by Francisco Javier Rodríguez for the Macro Reading Group Universidad
More informationA Model with Costly Enforcement
A Model with Costly Enforcement Jesús Fernández-Villaverde University of Pennsylvania December 25, 2012 Jesús Fernández-Villaverde (PENN) Costly-Enforcement December 25, 2012 1 / 43 A Model with Costly
More informationLiquidity Policies and Systemic Risk Tobias Adrian and Nina Boyarchenko
Policies and Systemic Risk Tobias Adrian and Nina Boyarchenko The views presented here are the authors and are not representative of the views of the Federal Reserve Bank of New York or of the Federal
More informationBusiness Cycles and Household Formation: The Micro versus the Macro Labor Elasticity
Business Cycles and Household Formation: The Micro versus the Macro Labor Elasticity Greg Kaplan José-Víctor Ríos-Rull University of Pennsylvania University of Minnesota, Mpls Fed, and CAERP EFACR Consumption
More informationMonetary policy and the asset risk-taking channel
Monetary policy and the asset risk-taking channel Angela Abbate 1 Dominik Thaler 2 1 Deutsche Bundesbank and European University Institute 2 European University Institute Trinity Workshop, 7 November 215
More informationA Macroeconomic Framework for Quantifying Systemic Risk
A Macroeconomic Framework for Quantifying Systemic Risk Zhiguo He, University of Chicago and NBER Arvind Krishnamurthy, Northwestern University and NBER November 2012 He and Krishnamurthy (Chicago, Northwestern)
More informationLiquidity Regulation and Unintended Financial Transformation in China
Liquidity Regulation and Unintended Financial Transformation in China Kinda Cheryl Hachem Zheng (Michael) Song Chicago Booth Chinese University of Hong Kong First Research Workshop on China s Economy April
More informationBank Runs, Prudential Tools and Social Welfare in a Global Game General Equilibrium Model
Bank Runs, Prudential Tools and Social Welfare in a Global Game General Equilibrium Model Daisuke Ikeda Bank of England 10 April 2018 Financial crises: predictability, causes and consequences The views
More informationOptimal Monetary Policy Rules and House Prices: The Role of Financial Frictions
Optimal Monetary Policy Rules and House Prices: The Role of Financial Frictions A. Notarpietro S. Siviero Banca d Italia 1 Housing, Stability and the Macroeconomy: International Perspectives Dallas Fed
More informationUncertainty, Liquidity and Financial Cycles
Uncertainty, Liquidity and Financial Cycles Ge Zhou Zhejiang University Jan 2019, ASSA Ge Zhou (Zhejiang University) Uncertainty, Liquidity and Financial Cycles Jan 2019 1 / 26 2500.00 Recession SP 500
More informationAsset Pricing with Endogenously Uninsurable Tail Risks. University of Minnesota
Asset Pricing with Endogenously Uninsurable Tail Risks Hengjie Ai Anmol Bhandari University of Minnesota asset pricing with uninsurable idiosyncratic risks Challenges for asset pricing models generate
More informationSudden stops, time inconsistency, and the duration of sovereign debt
WP/13/174 Sudden stops, time inconsistency, and the duration of sovereign debt Juan Carlos Hatchondo and Leonardo Martinez 2013 International Monetary Fund WP/13/ IMF Working Paper IMF Institute for Capacity
More informationDebt Overhang, Rollover Risk, and Investment in Europe
Debt Overhang, Rollover Risk, and Investment in Europe Ṣebnem Kalemli-Özcan, University of Maryland, CEPR and NBER Luc Laeven, ECB and CEPR David Moreno, University of Maryland September 2015, EC Post
More informationCapital Flows, Financial Intermediation and Macroprudential Policies
Capital Flows, Financial Intermediation and Macroprudential Policies Matteo F. Ghilardi International Monetary Fund 14 th November 2014 14 th November Capital Flows, 2014 Financial 1 / 24 Inte Introduction
More information1 Dynamic programming
1 Dynamic programming A country has just discovered a natural resource which yields an income per period R measured in terms of traded goods. The cost of exploitation is negligible. The government wants
More informationThe Eurozone Debt Crisis: A New-Keynesian DSGE model with default risk
The Eurozone Debt Crisis: A New-Keynesian DSGE model with default risk Daniel Cohen 1,2 Mathilde Viennot 1 Sébastien Villemot 3 1 Paris School of Economics 2 CEPR 3 OFCE Sciences Po PANORisk workshop 7
More informationRetirement in the Shadow (Banking)
Retirement in the Shadow (Banking) Guillermo Ordoñez 1 Facundo Piguillem 2 1 University of Pennsylvania 2 EIEF October 6, 2015 1/37 Motivation Since 1980 the US has experienced fundamental changes: Large
More informationDynamic Bank Capital Regulation in Equilibrium
Dynamic Bank Capital Regulation in Equilibrium Douglas Gale Andrea Gamba Marcella Lucchetta October 1, 2017 Abstract We study optimal bank regulation in an economy with aggregate uncertainty. Bank liabilities
More informationMisallocation and the Distribution of Global Volatility: Online Appendix on Alternative Microfoundations
Misallocation and the Distribution of Global Volatility: Online Appendix on Alternative Microfoundations Maya Eden World Bank August 17, 2016 This online appendix discusses alternative microfoundations
More informationLecture Notes. Petrosky-Nadeau, Zhang, and Kuehn (2015, Endogenous Disasters) Lu Zhang 1. BUSFIN 8210 The Ohio State University
Lecture Notes Petrosky-Nadeau, Zhang, and Kuehn (2015, Endogenous Disasters) Lu Zhang 1 1 The Ohio State University BUSFIN 8210 The Ohio State University Insight The textbook Diamond-Mortensen-Pissarides
More information