Aggregate Bank Capital and Credit Dynamics
|
|
- Scott Boyd
- 6 years ago
- Views:
Transcription
1 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 the authors and do not necessarily represent those of the IMF. 1/34
2 MOTIVATION Financial regulators and central banks now control powerful macro-prudential tools for promoting systemic stability. Long-term impact on growth and financial stability? Standard DSGE models cannot really help: they were designed to reproduce short-term reactions of prices and output to monetary policy decisions. Monetary Policy and Macroprudential Policy have different objectives, different horizons and different instruments. To study the long-term impact of macro-prudential policies on output and financial stability, one needs a different type of model. We provide an example of such a model. 2/34
3 OUR CONTRIBUTION General equilibrium dynamic model with financial frictions, in the spirit of Brunnermeier-Sannikov (2014) and He-Krishnamurthy (2013). Banks are explicitly modeled. Bank capital serves as a loss-absorbing buffer and determines the volume of lending. Model allows the analysis of the long-run effects of minimum capital requirements on lending and systemic stability (ergodic distribution). Main implications are in line with empirical evidence. 3/34
4 RELATED LITERATURE 1. Macro-finance in continuous time Brunnermeier-Sannikov (2014, 2015), He-Krishnamurthy (2012, 2013), Di Tella (2015), Phelan (2015). 2. Welfare impact of capital requirements Van den Heuvel (2008) Martinez-Miera and Suarez (2014) DeNicolò-Gamba-Lucchetta (2014) Nguyen (2014) Begenau (2015) 4/34
5 ROADMAP 1. Model 2. Competitive equilibrium 3. Long run dynamics 4. Application to macro prudential policy analysis 5/34
6 MODEL General equilibrium model: real sector and banking sector. One physical good, can be consumed or invested. Households invest their savings in bank deposits and bank equity. Banks invest in (risky) loans to entrepreneurs and reserves (can be <0). Entrepreneurs have no capital and must borrow from banks, who monitor them: no direct finance. Central bank provides reserve and refinancing facilities to equilibrate the interbank lending market. 6/34
7 GLOBAL PICTURE Central bank Firms Loans Reserves Banks Liabilities (deposits, interbank loans, Interests on deposits Repayments Loans K t CB loans) Households Profits Equity E t Dividends Entrepreneurs Remark: equity acts as a buffer to guarantee safety of deposits (no deposit insurance) and interbank borrowings. 7/34
8 MODEL Households and entrepreneurs are risk neutral and discount future consumption at rate ρ. Interbank rate r is fixed and less than ρ. Households receive interest r D on deposits. At equilibrium r D = r. Households derive utility from holding riskless deposits (transactional demand for safe assets as in Stein (2012)). Supply of deposits is fixed and is a decreasing function of (ρ r). For simplicity, r 0 in this presentation. Easy to extend for r > 0. 8/34
9 MODEL: FIRMS Firms: can borrow 1 unit of productive capital from banks at time t, must repay 1 + R tdt at t + dt if borrow, produce xdt unit of good, where x is distributed over [0, R] with density f (x) borrow when x > R t; aggregate demand for loans is a decreasing function of loan rate R L(R) = R R f (x)dx productive capital is destroyed (default) with probability pdt + σ 0 dz t, where {Z t, t 0} is a standard Brownian motion (aggregate shocks) 9/34
10 MODEL: BANKS Aggregate shocks in the real sector translate into banks profits/losses Book equity of an individual bank evolves: de t = k t[(r t p)dt σ 0 dz t] }{{} return on a bank s loans dδ t }{{} dividends where k t is the volume of lending to firms at time t Aggregate bank equity evolves: de t = K t[(r t p)dt σ 0 dz t] }{{} return on total loans where K t is aggregate lending d t }{{} dividends + di }{{} t, recapitalizations + di }{{} t, recapitalizations Main friction: issuing new equity entails proportional cost γ 10/34
11 ONE-PERIOD EXAMPLE 2 dates: t = 0 and t = 1, length of time period h = 1. Firms default probability: { p σ 0, with probability 1/2 (positive shock) p + σ 0, with probability 1/2 (negative shock) At t = 0 a typical bank starts with equity e, may distribute dividends δ 0 or issue new equity i 0, borrows d > 0 from depositors, lends k. Main friction: issuing new equity entails proportional cost γ. 11/34
12 AN INDIVIDUAL BANK S PROBLEM At t = 1 profits/losses are realized, bank equity becomes: e + (e δ + i) + k [ R (p σ 0 ) ] e (e δ + i) + k [ R (p + σ 0 ) ], Bank capital must be sufficiently high to cover the worst possible loss: Shareholders problem: v = max δ,i,k { δ (1 + γ)i + e 0 ( 1 2 ) e + + ( θ) e 1 + ρ θ denotes the Lagrange multiplier associated with constraint e 0. }, 12/34
13 AN INDIVIDUAL BANK S PROBLEM Shareholders problem is separable: v = eu + max δ 0 δ[ 1 u ] + max i 0 where is the Market-to-Book ratio. FOCs: i [ u (1 + γ) ] + max k 0 u 1 + θ 1 + ρ 1 u 0 (= if δ > 0) [ (R p)(1 + θ) θσ0 ] k, 1 + ρ u (1 + γ) 0 (= if i > 0) R p θ (= if k > 0) R (p + σ 0 ) 13/34
14 AN INDIVIDUAL BANK S PROBLEM u 1 θ > 0 non-default constraint binds on individual and aggregate level Dividends are distributed (δ > 0) when E E max, where u(e max) = 1 New equity is raised (i > 0) when E E min, where u(e min ) = 1 + γ 14/34
15 ONE-PERIOD EXAMPLE: COMPETITIVE EQUILIBRIUM a) The loan rate R R(E) is a decreasing function of aggregate capital and it is implicitly given by E + L(R(E)) [ R(E) (p + σ 0 ) ] = 0 b) All banks have the same market-to-book ratio of equity that belongs to [1, 1 + γ] and is a decreasing function of aggregate capital. ( ) ( ) 1 σ 0 u(e) = 1 + ρ R(E) (p + σ 0 ) c) Banks pay dividends when E E max u 1 (1) and recapitalize when E E min u 1 (1 + γ). 15/34
16 ONE-PERIOD EXAMPLE: TAKE AWAY 1. Only the level of aggregate bank capital E matters for banks policies 2. Banks recapitalization and dividend policies are of the "barrier type" and are driven by the market-to-book value 3. Loan rate is decreasing in aggregate bank capital E 16/34
17 AN INDIVIDUAL BANK S PROBLEM Markovian competitive equilibrium: R t = R(E t) and K(E t) = L(R(E t)) An individual bank chooses lending, dividend and recapitalization policies to maximize shareholder value: v(e t, E t) = max k s,dδ s,di s [ + E t ] e ρ(s t) (dδ s (1 + γ)di s) Shareholder value is linear in e: v(e, E) eu(e), where u(e) is the Market-to-Book ratio. Only aggregate capital E matters for banks policies. 17/34
18 DIVIDEND AND RECAPITALIZATION POLICIES Dividend/recapitalization policies of a barrier type: banks distribute dividends when E t = E max, such that u(e max) = 1 banks recapitalize when E t = E min = 0 Emax E t Dividends Emin=0 Recapitalizations Remark: E max and E min are determined by equilibrium forces on the market for bank equity. 18/34
19 EQUILIBRIUM LOAN RATE Positive loan spread, decreasing with E: [ R(E) p = σ0k(e) 2 u (E) ], u(e) }{{} where u (E) < 0 lending premium Source of lending premium: implied risk-aversion of bankers with respect to variations in aggregate capital 19/34
20 COMPETITIVE EQUILIBRIUM (CE) Aggregate bank capital evolves according to: ] de t = L(R(E t)) [(R(E t) p)dt σ 0 dz t, with reflection at E min = 0 (recapitalizations) and E max (dividends) The loan rate function R(E) : [0, E max] [p, R max] solves R 2ρσ0 2 + (R p) 2 (E) = σ0 2[L(R) (R p)l (R)], R(Emax) = p R max and E max increase with financing friction γ 20/34
21 TESTABLE PREDICTIONS R( E) Loan rate u( E) 1+ γ MTB ratio of bank equity R max p 1 E min = 0 E max E E min = 0 E max E Testable predictions: equilibrium loan rate and market-to-book ratio are decreasing functions of aggregate capital E = = Emax min E 0 21/34
22 EMPIRICAL EVIDENCE: DATA DESCRIPTION Panel of publicly traded banks in 43 advanced and emerging market economies ( ): U.S. banks (728 banks) Japan (128 banks) Banks in advanced economies (248 banks) Japanese banks; banks in advanced economies (excluding the U.S. and Japan); banks in emerging market economies. Table 1 summarizes the denitions of the variables considered. Banks in emerging market economies (183 banks) Table 1: Denition of variables Identier Variable Measurement ret bank gross return on assets total interest income/earning assets mtb market-to-book equity ratio market equity/book equity logta bank size Log(assets) loanasset % of loans to assets total loans/total assets bequity bank book equity bank book equity npl non-performing loans non-performing loans in % of total assets T BE total bank equity sum of bequity Note that bank gross return on assets include revenues accruing from investments other than loans; however, in the analysis below we will condition our estimates on asset composition using the % of loans to assets as a bank control. Furthermore, total bank equity is the sum of the equity 22/34
23 EMPIRICAL EVIDENCE: SAMPLE STATISTICS Table 2: Sample statistics and unconditional correlations 48 Panel A: Sample Statistics US Japan Advanced (ex. US and Japan) Emerging V ariable Obs. Mean Std.Dev. Obs. Mean Std.Dev. Obs. Mean Std.Dev. Obs. Mean Std.Dev. ret mtb logta loanasset bequity (US$ billion) npl TBE (US$ billion) Panel B: Correlations ret mtb logta ret mtb logta ret mtb logta ret mtb logta mtb logta TBE Notes: indicates signicance at 5% level. 23/34
24 EMPIRICAL MODEL Y t = α + βe t 1 + γx t 1 + ηdummy t + ɛ t Focus on coefficient β (must be negative) Dependent variables: Y = (ret, mtb) Bank specific effects: X = (bequity, logta, loanasset, npl) Time-varying country specific effects: Dummy 24/34
25 EMPIRICAL EVIDENCE: CONDITIONAL CORRELATIONS 25/34
26 LOAN RATE DYNAMICS Loan rate R t = R(E t) has explicit dynamics dr t = µ(r t)dt + σ(r t)dz t, p R t R max, with σ(r) = 2ρσ2 0 + (R p) 2 ( σ 0 where h(.) is explicit. 1 (R p) L (R) L(R) ) and µ(r) = σ(r)h(r), 26/34
27 LONG RUN BEHAVIOR OF THE ECONOMY Full description of the long run behavior of the economy: stochastic steady state It is characterized by the ergodic density function of R or E (shows how frequently each state is visited in the long run) We can numerically solve for the ergodic density function of R (no need for simulations): g (R) g(r) = 2µ(R) σ 2 (R) 2σ (R), on [p, Rmax] σ(r) 27/34
28 LONG RUN BEHAVIOR OF THE ECONOMY Particular specification: linear demand for loans ( R R ) L(R) = where R > p R p 0.12 σ(r) g(r) 80 γ small γ large Rmax Rmin = p Rmin = p Rmax R R Remark: the long run behavior of the economy is driven by the endogenous volatility. 28/34
29 APPLICATION: MINIMUM CAPITAL RATIO What happens if banks are subject to a minimal Capital Ratio (CR) Λ? e t Λk t Maximization problem of an individual bank: v Λ(e, E) = max k t e Λ,dδ t,di t [ + ] E e ρt (dδ t (1 + γ)di t) 0 Homogeneity property is preserved: v Λ(e, E) eu Λ(E) We find that CR constraint binds for low E and is slack for high E. u Λ(.) and equilibrium loan rate R Λ(.) have different expressions in constrained (E < E Λ c ) and unconstrained (E E Λ c ) regions. 29/34
30 CAPITAL RATIO AND BANK POLICIES E R Impact of capital regulation 0.05 on the maximum 0.2 E max r + p loan rate Λ * = 44% Λ,% Λ E min Λ E c Λ E max Banks increase their target level of capital (E Λ max > E max) and recapitalize earlier (E Λ min > 0). Small and moderate Λ: both the unconstrained and constrained regimes co-exist. Very high Λ: the unconstrained region disappears (no extra capital cushions). 30/34
31 CAPITAL RATIO AND LENDING K(E) 1.00 CE Λ = 3 % Λ = 10 % SB E Banks reduce lending not only in the constrained region, but also in the unconstrained one Lending exposure to aggregate shocks endogenous volatility 31/34
32 EXPECTED TIME TO RECAPITALIZATION Tγ(E) Λ= E - Emin Λ Λ>0 Stability measure: T γ(e) - the average time to recapitalization starting from the average level of aggregate capital E Λ endogenous volatility + expected banks profits stability 32/34
33 CONCLUSION Tractable dynamic macro model where aggregate bank capital drives credit volume. Asymptotic behavior described by the ergodic distribution. Model permits simple analysis of macro-prudential policy. Further investigations: market activities complementary to lending, endogenous risk-taking, banks defaults. 33/34
34 Thank you! 34/34
Aggregate 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 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 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 informationBanks Endogenous Systemic Risk Taking. David Martinez-Miera Universidad Carlos III. Javier Suarez CEMFI
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, 22-23 January 2015 1 Introduction
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 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 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 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 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 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 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 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 informationCapital Constraints, Lending over the Cycle and the Precautionary Motive: A Quantitative Exploration
Capital Constraints, Lending over the Cycle and the Precautionary Motive: A Quantitative Exploration Angus Armstrong and Monique Ebell National Institute of Economic and Social Research 1. Introduction
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 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 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 informationIntermediary Asset Pricing
Intermediary Asset Pricing Z. He and A. Krishnamurthy - AER (2012) Presented by Omar Rachedi 18 September 2013 Introduction Motivation How to account for risk premia? Standard models assume households
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 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 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 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 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 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 information1. Cash-in-Advance models a. Basic model under certainty b. Extended model in stochastic case. recommended)
Monetary Economics: Macro Aspects, 26/2 2013 Henrik Jensen Department of Economics University of Copenhagen 1. Cash-in-Advance models a. Basic model under certainty b. Extended model in stochastic case
More informationArbitrageurs, bubbles and credit conditions
Arbitrageurs, bubbles and credit conditions Julien Hugonnier (SFI @ EPFL) and Rodolfo Prieto (BU) 8th Cowles Conference on General Equilibrium and its Applications April 28, 212 Motivation Loewenstein
More informationQI SHANG: General Equilibrium Analysis of Portfolio Benchmarking
General Equilibrium Analysis of Portfolio Benchmarking QI SHANG 23/10/2008 Introduction The Model Equilibrium Discussion of Results Conclusion Introduction This paper studies the equilibrium effect of
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 informationBanks and Liquidity Crises in Emerging Market Economies
Banks and Liquidity Crises in Emerging Market Economies Tarishi Matsuoka Tokyo Metropolitan University May, 2015 Tarishi Matsuoka (TMU) Banking Crises in Emerging Market Economies May, 2015 1 / 47 Introduction
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 informationDynamic Bank Capital Regulation in Equilibrium
Dynamic Bank Capital Regulation in Equilibrium Douglas Gale Andrea Gamba Marcella Lucchetta February 11, 218 Abstract We study optimal bank regulation in an economy with aggregate uncertainty. Bank liabilities
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 informationGeneralized Multi-Factor Commodity Spot Price Modeling through Dynamic Cournot Resource Extraction Models
Generalized Multi-Factor Commodity Spot Price Modeling through Dynamic Cournot Resource Extraction Models Bilkan Erkmen (joint work with Michael Coulon) Workshop on Stochastic Games, Equilibrium, and Applications
More informationSovereign Default and the Choice of Maturity
Sovereign Default and the Choice of Maturity Juan M. Sanchez Horacio Sapriza Emircan Yurdagul FRB of St. Louis Federal Reserve Board Washington U. St. Louis February 4, 204 Abstract This paper studies
More informationLECTURE 12: FRICTIONAL FINANCE
Lecture 12 Frictional Finance (1) Markus K. Brunnermeier LECTURE 12: FRICTIONAL FINANCE Lecture 12 Frictional Finance (2) Frictionless Finance Endowment Economy Households 1 Households 2 income will decline
More informationFor students electing Macro (8701/Prof. Roe) & Micro (8703/Prof. Glewwe) option
WRITTEN PRELIMINARY Ph.D EXAMINATION Department of Applied Economics Jan./Feb. - 2011 Trade, Development and Growth For students electing Macro (8701/Prof. Roe) & Micro (8703/Prof. Glewwe) option Instructions
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 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 informationSafe Assets. The I Theory of Money. with Valentin Haddad. - Money & Banking with Asset Pricing Tools - with Yuliy Sannikov. Princeton University
Safe ssets with Valentin Haddad The I Theory of Money - Money & Banking with sset Pricing Tools - with Yuliy Sannikov Princeton University World Finance Conference New York City, July 30 th, 2016 Definitions
More informationDiscussion of Chiu, Meh and Wright
Discussion of Chiu, Meh and Wright Nancy L. Stokey University of Chicago November 19, 2009 Macro Perspectives on Labor Markets Stokey - Discussion (University of Chicago) November 19, 2009 11/2009 1 /
More informationEndogenous risk in a DSGE model with capital-constrained financial intermediaries
Endogenous risk in a DSGE model with capital-constrained financial intermediaries Hans Dewachter (NBB-KUL) and Raf Wouters (NBB) NBB-Conference, Brussels, 11-12 October 2012 PP 1 motivation/objective introduce
More informationFinal Exam II ECON 4310, Fall 2014
Final Exam II ECON 4310, Fall 2014 1. Do not write with pencil, please use a ball-pen instead. 2. Please answer in English. Solutions without traceable outlines, as well as those with unreadable outlines
More informationA Macroeconomic Framework for Quantifying Systemic Risk
A Macroeconomic Framework for Quantifying Systemic Risk Zhiguo He Arvind Krishnamurthy First Draft: November 20, 2011 INCOMPLETE REFERENCES. REPORTED NUMBERS MAY CHANGE. Abstract Systemic risk arises when
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 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 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 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 informationFinal Exam II (Solutions) ECON 4310, Fall 2014
Final Exam II (Solutions) ECON 4310, Fall 2014 1. Do not write with pencil, please use a ball-pen instead. 2. Please answer in English. Solutions without traceable outlines, as well as those with unreadable
More informationThe Risky Steady State and the Interest Rate Lower Bound
The Risky Steady State and the Interest Rate Lower Bound Timothy Hills Taisuke Nakata Sebastian Schmidt New York University Federal Reserve Board European Central Bank 1 September 2016 1 The views expressed
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 informationGeneral Examination in Macroeconomic Theory. Fall 2010
HARVARD UNIVERSITY DEPARTMENT OF ECONOMICS General Examination in Macroeconomic Theory Fall 2010 ----------------------------------------------------------------------------------------------------------------
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 informationModels of Directed Search - Labor Market Dynamics, Optimal UI, and Student Credit
Models of Directed Search - Labor Market Dynamics, Optimal UI, and Student Credit Florian Hoffmann, UBC June 4-6, 2012 Markets Workshop, Chicago Fed Why Equilibrium Search Theory of Labor Market? Theory
More informationMacro, Money and Finance: A Continuous Time Approach
Macro, Money and Finance: A Continuous Time Approach Markus K. Brunnermeier & Yuliy Sannikov Princeton University International Credit Flows, Trinity of Stability Conference Princeton, Nov. 6 th, 2015
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 informationA Macroeconomic Framework for Quantifying Systemic Risk
A Macroeconomic Framework for Quantifying Systemic Risk Zhiguo He Arvind Krishnamurthy First Draft: November 20, 2011 This Draft: January 26, 2012 INCOMPLETE REFERENCES. REPORTED NUMBERS MAY CHANGE. Abstract
More informationWhat determines government spending multipliers?
What determines government spending multipliers? Paper by Giancarlo Corsetti, André Meier and Gernot J. Müller Presented by Michele Andreolli 12 May 2014 Outline Overview Empirical strategy Results Remarks
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 informationRegulation, Competition, and Stability in the Banking Industry
Regulation, Competition, and Stability in the Banking Industry Dean Corbae University of Wisconsin - Madison and NBER October 2017 How does policy affect competition and vice versa? Most macro (DSGE) models
More informationA Model with Costly-State Verification
A Model with Costly-State Verification Jesús Fernández-Villaverde University of Pennsylvania December 19, 2012 Jesús Fernández-Villaverde (PENN) Costly-State December 19, 2012 1 / 47 A Model with Costly-State
More informationProblem Set 3. Thomas Philippon. April 19, Human Wealth, Financial Wealth and Consumption
Problem Set 3 Thomas Philippon April 19, 2002 1 Human Wealth, Financial Wealth and Consumption The goal of the question is to derive the formulas on p13 of Topic 2. This is a partial equilibrium analysis
More informationChapter 9 Dynamic Models of Investment
George Alogoskoufis, Dynamic Macroeconomic Theory, 2015 Chapter 9 Dynamic Models of Investment In this chapter we present the main neoclassical model of investment, under convex adjustment costs. This
More informationIntermediary Leverage Cycles and Financial Stability Tobias Adrian and Nina Boyarchenko
Intermediary Leverage Cycles and Financial Stability 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
More informationInflation Dynamics During the Financial Crisis
Inflation Dynamics During the Financial Crisis S. Gilchrist 1 R. Schoenle 2 J. W. Sim 3 E. Zakrajšek 3 1 Boston University and NBER 2 Brandeis University 3 Federal Reserve Board Theory and Methods in Macroeconomics
More informationUnderstanding Predictability (JPE, 2004)
Understanding Predictability (JPE, 2004) Lior Menzly, Tano Santos, and Pietro Veronesi Presented by Peter Gross NYU October 19, 2009 Presented by Peter Gross (NYU) Understanding Predictability October
More informationA theory of nonperforming loans and debt restructuring
A theory of nonperforming loans and debt restructuring Keiichiro Kobayashi 1 Tomoyuki Nakajima 2 1 Keio University 2 University of Tokyo January 19, 2018 OAP-PRI Economics Workshop Series Bank, Corporate
More informationJean Charles Rochet (SFI and Zürich University) NIESR Financial Regulation Conference Bank of England, March 18 th 2016
Jean Charles Rochet (SFI and Zürich University) NIESR Financial Regulation Conference Bank of England, March 18 th 2016 1 Based on on-going research Aggregate Bank Capital and Credit Dynamics with Nataliya
More informationThe Labor Market Consequences of Adverse Financial Shocks
The Labor Market Consequences of Adverse Financial Shocks November 2012 Unemployment rate on the two sides of the Atlantic Credit to the private sector over GDP Credit to private sector as a percentage
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 informationSystemic Loops and Liquidity Regulation
Systemic Loops and Liquidity Regulation Ester Faia Inaki Aldasoro Goethe University Frankfurt and CEPR, Goethe University Frankfurt 26-27 April 2016, ECB-IMF reserach conference on Macro-prudential policy
More informationReserve Accumulation, Macroeconomic Stabilization and Sovereign Risk
Reserve Accumulation, Macroeconomic Stabilization and Sovereign Risk Javier Bianchi 1 César Sosa-Padilla 2 2018 SED Annual Meeting 1 Minneapolis Fed & NBER 2 University of Notre Dame Motivation EMEs with
More informationCapital Adequacy and Liquidity in Banking Dynamics
Capital Adequacy and Liquidity in Banking Dynamics Jin Cao Lorán Chollete October 9, 2014 Abstract We present a framework for modelling optimum capital adequacy in a dynamic banking context. We combine
More informationEconomics 826 International Finance. Final Exam: April 2007
Economics 826 International Finance Final Exam: April 2007 Answer 3 questions from Part A and 4 questions from Part B. Part A is worth 60%. Part B is worth 40%. You may write in english or french. You
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 informationConsumption and Portfolio Decisions When Expected Returns A
Consumption and Portfolio Decisions When Expected Returns Are Time Varying September 10, 2007 Introduction In the recent literature of empirical asset pricing there has been considerable evidence of time-varying
More informationInterest Rates, Market Power, and Financial Stability
Interest Rates, Market Power, and Financial Stability Rafael Repullo (joint work with David Martinez-Miera) Conference on Financial Stability Banco de Portugal, 17 October 2017 Introduction (i) Session
More informationSpillovers, Capital Flows and Prudential Regulation in Small Open Economies
Spillovers, Capital Flows and Prudential Regulation in Small Open Economies Paul Castillo, César Carrera, Marco Ortiz & Hugo Vega Presented by: Hugo Vega BIS CCA Research Network Conference Incorporating
More informationProfessor Dr. Holger Strulik Open Economy Macro 1 / 34
Professor Dr. Holger Strulik Open Economy Macro 1 / 34 13. Sovereign debt (public debt) governments borrow from international lenders or from supranational organizations (IMF, ESFS,...) problem of contract
More informationComprehensive Exam. August 19, 2013
Comprehensive Exam August 19, 2013 You have a total of 180 minutes to complete the exam. If a question seems ambiguous, state why, sharpen it up and answer the sharpened-up question. Good luck! 1 1 Menu
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 informationA dynamic model with nominal rigidities.
A dynamic model with nominal rigidities. Olivier Blanchard May 2005 In topic 7, we introduced nominal rigidities in a simple static model. It is time to reintroduce dynamics. These notes reintroduce the
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 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 informationInt. Statistical Inst.: Proc. 58th World Statistical Congress, 2011, Dublin (Session CPS001) p approach
Int. Statistical Inst.: Proc. 58th World Statistical Congress, 2011, Dublin (Session CPS001) p.5901 What drives short rate dynamics? approach A functional gradient descent Audrino, Francesco University
More informationImperfect Information and Market Segmentation Walsh Chapter 5
Imperfect Information and Market Segmentation Walsh Chapter 5 1 Why Does Money Have Real Effects? Add market imperfections to eliminate short-run neutrality of money Imperfect information keeps price from
More informationWhat Can Rational Investors Do About Excessive Volatility and Sentiment Fluctuations?
What Can Rational Investors Do About Excessive Volatility and Sentiment Fluctuations? Bernard Dumas INSEAD, Wharton, CEPR, NBER Alexander Kurshev London Business School Raman Uppal London Business School,
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 informationFinancial Intermediary Capital
Financial Intermediary Capital Adriano A. Rampini Duke University S. Viswanathan Duke University Session on Asset prices and intermediary capital 5th Annual Paul Woolley Centre Conference, London School
More informationBanking Regulation in Theory and Practice (2)
Banking Regulation in Theory and Practice (2) Jin Cao (Norges Bank Research, Oslo & CESifo, Munich) November 13, 2017 Universitetet i Oslo Outline 1 Disclaimer (If they care about what I say,) the views
More informationUNIVERSITY OF OSLO DEPARTMENT OF ECONOMICS
UNIVERSITY OF OSLO DEPARTMENT OF ECONOMICS Postponed exam: ECON4310 Macroeconomic Theory Date of exam: Wednesday, January 11, 2017 Time for exam: 09:00 a.m. 12:00 noon The problem set covers 13 pages (incl.
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 informationWhy are Banks Exposed to Monetary Policy?
Why are Banks Exposed to Monetary Policy? Sebastian Di Tella and Pablo Kurlat Stanford University Bank of Portugal, June 2017 Banks are exposed to monetary policy shocks Assets Loans (long term) Liabilities
More informationCollateralized capital and news-driven cycles. Abstract
Collateralized capital and news-driven cycles Keiichiro Kobayashi Research Institute of Economy, Trade, and Industry Kengo Nutahara Graduate School of Economics, University of Tokyo, and the JSPS Research
More informationQuestion 1 Consider an economy populated by a continuum of measure one of consumers whose preferences are defined by the utility function:
Question 1 Consider an economy populated by a continuum of measure one of consumers whose preferences are defined by the utility function: β t log(c t ), where C t is consumption and the parameter β satisfies
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 informationGraduate Macro Theory II: The Basics of Financial Constraints
Graduate Macro Theory II: The Basics of Financial Constraints Eric Sims University of Notre Dame Spring Introduction The recent Great Recession has highlighted the potential importance of financial market
More informationDISCUSSION OF CAPITAL REQUIREMENTS, RISK CHOICE, AND LIQUIDITY PROVISION IN A BUSINESS CYCLE MODEL
DISCUSSION OF CAPITAL REQUIREMENTS, RISK CHOICE, AND LIQUIDITY PROVISION IN A BUSINESS CYCLE MODEL BY JULIANE BEGENAU Dmitriy Sergeyev Bocconi University and IGIER Structural Changes in the Banking 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 informationFor students electing Macro (8702/Prof. Smith) & Macro (8701/Prof. Roe) option
WRITTEN PRELIMINARY Ph.D EXAMINATION Department of Applied Economics June. - 2011 Trade, Development and Growth For students electing Macro (8702/Prof. Smith) & Macro (8701/Prof. Roe) option Instructions
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 informationGrowth Opportunities, Investment-Specific Technology Shocks and the Cross-Section of Stock Returns
Growth Opportunities, Investment-Specific Technology Shocks and the Cross-Section of Stock Returns Leonid Kogan 1 Dimitris Papanikolaou 2 1 MIT and NBER 2 Northwestern University Boston, June 5, 2009 Kogan,
More information