Optimal Monetary Policy in a Sudden Stop
|
|
- Lawrence O’Brien’
- 5 years ago
- Views:
Transcription
1 ... Optimal Monetary Policy in a Sudden Stop with Jorge Roldos (IMF) and Fabio Braggion (Northwestern, Tilburg) 1
2 Modeling Issues/Tools Small, Open Economy Model Interaction Between Asset Markets and Monetary Policy Limited Participation Model of Money. 2
3 Motivation Asian Financial Crisis: Sudden Stop Current Account Swings Negative to Positive by 15 Percentage Points of GDP Output Drops 12 Percent, Consumption a Little More, Employment a Little Less Asset Prices and Exchange Rates Drop by Over 4 Percent Controversy: How Should the Domestic Monetary Authority Respond? Two Responses: Krugman-Stiglitz: A Crisis is a Time When Economies are Slipping Into Recession. Medicine Appropriate for US: Interest Rate Cut. If It s Good Enough for the US, then It s Good Enough for Thailand. IMF: A Crisis is a Time When Foreign Investors are Rushing for the Exits. Need High Rates to Stop Them. 1
4 Motivation... What Did They Do? Both! 35 SHORT-TERM INTEREST RATES 1/ Thailand Korea M alaysia Philippines Jan-97 Jan-98 Jan-99 Jan- Was Policy Erratic, Responding to Different Advice at Different Times? Our Argument: this Policy May have been Roughly Optimal. 14
5 Motivation... Analysis: Compute Optimal Monetary Policy in a Variant on Model in Christiano, Gust, Roldos (JET, 24) Model Highlights Key Features of Crisis Economies: General Evidence From Surveys of Credit Crunch 17
6 Fig.9. Availability of Credit after the Crisis 5 more available same less available 3 domestic banks foreign banks other domestic financial institution local money lenders 1.92 family/friends suppliers partner firms bond market equity market
7 Motivation... Analysis: Compute Optimal Monetary Policy in a Variant on Model in Christiano, Gust, Roldos (JET, 24) Model Highlights Key Features of Crisis Economies: General Evidence From Surveys of Credit Crunch Collateral Constraints on Loans in Crisis Economies Tightened Syndicated Loans to Emerging Markets (in billions of U.S. dollars) Year Total Secured Secured as % of Total Thailand: banks loaned 7-8% of collateral pre-crisis, 5-6% after crisis (Edison, Luangaram and Miller (2)) 2
8 Motivation... Analysis: Compute Optimal Monetary Policy in a Variant on Model in Christiano, Gust, Roldos (JET, 24) Model Highlights Key Features of Crisis Economies: General Evidence From Surveys of Credit Crunch Collateral Constraints on Loans in Crisis Economies Tightened Intermediate Inputs are an Important Component of Imports Thailand Year Total Intermediate % of Total ,718 25,61 35% ,248 24,874 34% ,286 21,86 35% ,43 14,744 35% ,919 18,25 36% 2 62,181 23,663 38% 21 61,847 22,978 37% 22 64,317 24,461 38% Korea Total Intemediate % of Total 135,119 64,611 48% 15,339 68,556 46% 144,616 69,361 48% 93,282 45,593 49% 119,752 57,253 48% 16,481 78,975 49% 141,98 71,929 51% 152,126 73,891 49% 22
9 Motivation... Analysis: Compute Optimal Monetary Policy in a Variant on Model in Christiano, Gust, Roldos (JET, 24) Model Highlights Key Features of Crisis Economies: General Evidence From Surveys of Credit Crunch Collateral Constraints on Loans in Crisis Economies Tightened Intermediate Inputs are an Important Component of Imports Intermediate Inputs are Closely Correlated with Output During Crisis. 25
10 Intermediate Goods Import vs. GDP (Index 1995 = 1) 14 Indones ia Korea Intermediate GDP 6 4 GDP Malaysia Intermediate Philippines Intermediate GDP GDP Thailand Intermediate GDP Sources: CEIC; and WEO. Figure 2
11 Structure of Model Small, Open Economy with Traded and Nontraded Goods Imported Intermediate Inputs and Labor Must be Financed in Advance Trigger of Crisis: Collateral Shock. Sudden Tightening of Binding Collateral Constraints. We Do Not Explain Why this Shock Occurs We Only Hope to Explain the Consequences Labor Market Frictions Short Run: Labor Hard to Adjust in Tradable Sector Longer Run: Labor Everywhere Flexible 29
12 Outline Dynamic Model Simulation of Optimal Policy Comparison with Korean Data Draw Attention to the Unusual Nature of the Monetary Transmission Mechanism Welfare and Output Increased in First Period with Increase in Domestic Interest Rate Carefully Go Through A Highly Simplified (Non-Monetary, Static) Version of the Model to Better Understand Monetary Transmission Mechanism. 3
13 Outline... Flow of Goods and Labor in the Model Household Final Consumption Good Traded Goods Nontraded Goods Foreign Sector Labor Market 31
14 Outline... Model Agents: Households, Final Good Firms, Intermediate Good Firms, Foreign Sector. Households max c t,l t X t= β t h i 1 σ c t ψ 1+ψ L1+ψ t 1 σ P t c t W t L t + M t D t = R t (D t + X t )+Pt T π t + W t L t + M t D t P t c t M t+1 money chosen by household R t gross domestic nominal rate X t money injection by central bank π t profits D t deposits of cash with intermediary. M t+1 32
15 Outline... 33
16 Outline... Final Good Firms ( Retailers ): c =min (1 γ) c T,γc Nª. c N c T non-traded intermediate input traded intermediate input 34
17 Outline... Domestic Intermediate Good Firms: Technology, traded goods: y T = nθ [µ 1 V ] ξ 1 ξ o +(1 θ)[µ 2 z] ξ 1 ξ ξ 1 ξ, V = A K T ν L T 1 ν, Short Run Friction: ξ elasticity of substitution between V and z z foreign intermediate good Traded Good Firm Decides L T At Start of Period Technology, non-traded goods: y N = K N α L N 1 α. 35
18 Outline... 36
19 Outline... Objective of Intermediate Good Firms: X max β t Λ t+1 π t, t= π t = p N t y N t + y T t w t R t L t R z t r B t +(B t+1 B t ) Collateral Constraint: τ QN t S t K N + τ QT t S t K T R z t +(1+r )B t q i t = VMP Ki,t + λ t τ i q i t + qi t+1 1+ρ t,q i t = Qi t S t,i= N,T. Resource Constraints: y N = c N y T = c T + R z + r B (B B) 37
20 Outline... Parameters Values of the Model β.943 γ.3 ψ 3. R 1.11 R 1.6 r.6 α.36 K N 1 ν.5 K T 5 µ 1 1 µ τ.8 θ.5 ψ.36 σ 2 A 1.5 ξ.1 ζ.6 Note : Here, β, R and R are expressed in annualized terms. 38
21 Outline... Timing Collateral Shock Monetary Action 1 2 t Traded Good Firm Decides Employment in Traded Sector Household Deposit Decision Production, Consumption Occur 39
22 Effects of Collateral Shock Economy in Steady State Until Period, Ignoring Collateral Constraint. Collateral Constraint Unexpectedly Imposed and Binding in Period Current Account Switches to Positive As Firms Pay Down Debt. Intertemporal Euler Equation of Firm 1=β Λ t+2 Λ t+1 (1 + r )(1 + λ t+1 ),t=, 1, 2,.... Λ t+1 multiplier on household budget constraint We Assume β(1 + r )=1, so Λ t+1 Λ t+2 =1+λ t+1,t=, 1, 2,... With λ t+1 >, Consumption Level Low, Growth High B t Falls Until λ t. 41
23 Effects of Collateral Shock... Response of Debt and Output to Collateral Shock In the Absence of Monetary Policy Response (Fixed Money Growth) B t Level of International Debt in Old Steady State High Shadow Value of Debt Induces Firms to Pay it D ow n Financial Crisis Level of Debt in New Steady State t Output Output During the Transition t 42
24 .4 current account Optimal and Constant Money Growth 5 real GDP Employment Consumption Imports -2 1 Asset Prices Nominal Interest Rate Nominal Exchange Rate (Price of Traded) Inflation Optimal Money Growth Constant Money Growth
25 .2 current account Optimal and Korea 5 real GDP Employment Consumption Imports -2 1 Asset Prices Nominal Interest Rate 1.6 Nominal Exchange Rate (Price of Traded) Inflation Simulation Actual Korean Data
26 Heart of Analysis Raising Interest Rate Leads to Higher Employment, Asset Prices and Welfare Puzzle: Interest Rate is Like Tax on Labor Why Does Raising Tax on Labor Lead to More Employment and Higher Welfare? Asset Values Correspond to Inputs that Complement Labor Why Does Raising Tax on Labor Raise Value of Complementary Inputs? Answer: Higher Wedge on Labor Permits Reduction in Another Wedge, Collateral Constraint Will Work Through a Simple Example, Where Analytic Result is Possible 47
27 Simplified Model Economy Households Maximize subject to: u(c, L) =c ψ 1+ψ L1+ψ pc wl + π + T Firms: Final Good Technology: c =min (1 γ)c T,γc Nª. 48
28 Simplified Model Economy... Traded and Non-Traded Good Technology: Market Clearing y T = Az θ,y N = K α L 1 α. y T = c T + R z, y N = c N. Intermediate Good Firm Problem: maximize π = p N y N + y T q(k K ) w(1 + τ)l R z, s.t. τ N qk R z. 49
29 Simplified Model Economy... Timing 1. Labor Tax Rate, τ, Selected 2. Domestic Market in Physical Capital, with Price: 3. Production and Trade Occurs. q = αpn K α 1 L 1 α 1 λτ N. Labor Supply: ψ o L ψ = w p Labor Demand: p N (1 α) K α L α =(1+τ) w 5
30 Results Proposition: If there is a unique equilibrium in which the collateral constraint binds, then an increase in τ leads to an increase in Real Exchange Rate (p N ), Asset Values (q), Imports (z), Employment (L), Welfare. Rise in τ Increases Marginal Cost of Nontraded Goods Relative Price, p N, of Non-Traded Goods, Rises Value of Assets in Non-Traded Good Sector Increase. Relaxation of Collateral Constraint: Imports of Intermediate Good Expand Increased Production of Tradeable Good Inreased Demand (Leontieff Helps Here!) For Non-Tradable Good Supports Increased Employment in Non-Tradable Sector. 56
31 Results... Figure: Labor Market Equilibrium Labor supply w/p Labor Demand (p N,τ) + 57
32 Results... f(λ;τ) = τ N q(λ;τ)k - z(λ) λ(τ 2 ) λ(τ 1 ) 1/τ N λ τ 2 > τ 1 Figure 4: The Effect of An Increase in the Labor Tax Rate 58
33 Results... 6 Figure 5: Equilibrium Associated With Various Tax Rates p N q z τ τ τ L λ.67 utility τ.2.4 τ τ 59
34 Results... Conclusion Identified Factors That Make Raising the Interest Rate in Immediate Aftermath of Financial Crisis Optimal Simulated a Model With These Properties (Inflexible Factors of Production in Short Run) and Found that Actual Interest Rate Response May Have Been Roughly Optimal. Broader Implications of Analysis: Monetary Transmission Mechanism May Be Profoundly Different When Collateral Constraints are Binding. Perhaps Binding Collateral Constraints are Binding More Often in Developing Countries, Where Collateral May Be in Short Supply Connections to Related Literature: Non-Keynesian Effects of Fiscal Policy, Expansionary Fiscal Consolidations (Giavazzi-Jappelli-Pagano, Perotti) Results in Financial Frictions Literature that Raising Interest Rates May Be Good When Borrowing Constraints Bind (Kocherlakota (AER, 22).) 64
Optimal Monetary Policy in a Sudden Stop
Optimal Monetary Policy in a Sudden Stop Fabio Braggion Lawrence J. Christiano Jorge Roldos May 8, 26. Abstract During the Asian financial crises, interest rates were raised immediately, and then reduced
More informationNBER WORKING PAPER SERIES OPTIMAL MONETARY POLICY IN A 'SUDDEN STOP' Fabio Braggion Lawrence J. Christiano Jorge Roldos
NBER WORKING PAPER SERIES OPTIMAL MONETARY POLICY IN A 'SUDDEN STOP' Fabio Braggion Lawrence J. Christiano Jorge Roldos Working Paper 13254 http://www.nber.org/papers/w13254 NATIONAL BUREAU OF ECONOMIC
More informationMonetary Policy in a Financial Crisis
Monetary Policy in a Financial Crisis Lawrence J. Christiano Christopher Gust Jorge Roldos May, 22 (First Draft: November 2) Abstract What are the economic effects of an interest rate cut when an economy
More information2. Preceded (followed) by expansions (contractions) in domestic. 3. Capital, labor account for small fraction of output drop,
Mendoza (AER) Sudden Stop facts 1. Large, abrupt reversals in capital flows 2. Preceded (followed) by expansions (contractions) in domestic production, absorption, asset prices, credit & leverage 3. Capital,
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 informationHeterogeneous Firm, Financial Market Integration and International Risk Sharing
Heterogeneous Firm, Financial Market Integration and International Risk Sharing Ming-Jen Chang, Shikuan Chen and Yen-Chen Wu National DongHwa University Thursday 22 nd November 2018 Department of Economics,
More informationSudden Stops and Output Drops
Federal Reserve Bank of Minneapolis Research Department Staff Report 353 January 2005 Sudden Stops and Output Drops V. V. Chari University of Minnesota and Federal Reserve Bank of Minneapolis Patrick J.
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 informationDeflation, Credit Collapse and Great Depressions. Enrique G. Mendoza
Deflation, Credit Collapse and Great Depressions Enrique G. Mendoza Main points In economies where agents are highly leveraged, deflation amplifies the real effects of credit crunches Credit frictions
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 informationLecture 4. Extensions to the Open Economy. and. Emerging Market Crises
Lecture 4 Extensions to the Open Economy and Emerging Market Crises Mark Gertler NYU June 2009 0 Objectives Develop micro-founded open-economy quantitative macro model with real/financial interactions
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 informationOptimal monetary policy when asset markets are incomplete
Optimal monetary policy when asset markets are incomplete R. Anton Braun Tomoyuki Nakajima 2 University of Tokyo, and CREI 2 Kyoto University, and RIETI December 9, 28 Outline Introduction 2 Model Individuals
More informationExternal Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory Ariel Zetlin-Jones and Ali Shourideh
External Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory Ariel Zetlin-Jones and Ali Shourideh Discussion by Gaston Navarro March 3, 2015 1 / 25 Motivation
More informationThe Costs of Losing Monetary Independence: The Case of Mexico
The Costs of Losing Monetary Independence: The Case of Mexico Thomas F. Cooley New York University Vincenzo Quadrini Duke University and CEPR May 2, 2000 Abstract This paper develops a two-country monetary
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 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 informationNot All Oil Price Shocks Are Alike: A Neoclassical Perspective
Not All Oil Price Shocks Are Alike: A Neoclassical Perspective Vipin Arora Pedro Gomis-Porqueras Junsang Lee U.S. EIA Deakin Univ. SKKU December 16, 2013 GRIPS Junsang Lee (SKKU) Oil Price Dynamics in
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 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 informationInternational Debt Deleveraging
International Debt Deleveraging Luca Fornaro London School of Economics ECB-Bank of Canada joint workshop on Exchange Rates Frankfurt, June 213 1 Motivating facts: Household debt/gdp Household debt/gdp
More informationSudden Stops and Output Drops
NEW PERSPECTIVES ON REPUTATION AND DEBT Sudden Stops and Output Drops By V. V. CHARI, PATRICK J. KEHOE, AND ELLEN R. MCGRATTAN* Discussants: Andrew Atkeson, University of California; Olivier Jeanne, International
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 informationTransactions and Money Demand Walsh Chapter 3
Transactions and Money Demand Walsh Chapter 3 1 Shopping time models 1.1 Assumptions Purchases require transactions services ψ = ψ (m, n s ) = c where ψ n s 0, ψ m 0, ψ n s n s 0, ψ mm 0 positive but diminishing
More informationBalance Sheet Recessions
Balance Sheet Recessions Zhen Huo and José-Víctor Ríos-Rull University of Minnesota Federal Reserve Bank of Minneapolis CAERP CEPR NBER Conference on Money Credit and Financial Frictions Huo & Ríos-Rull
More informationCollateralized capital and News-driven cycles
RIETI Discussion Paper Series 07-E-062 Collateralized capital and News-driven cycles KOBAYASHI Keiichiro RIETI NUTAHARA Kengo the University of Tokyo / JSPS The Research Institute of Economy, Trade and
More informationUnconventional Monetary Policy
Unconventional Monetary Policy Mark Gertler (based on joint work with Peter Karadi) NYU October 29 Old Macro Analyzes pre versus post 1984:Q4. 1 New Macro Analyzes pre versus post August 27 Post August
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 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 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 informationGovernment Policy Response to War-Expenditure Shocks
Government Policy Response to War-Expenditure Shocks Fernando M. Martin SFU August 12, 2011 Wartime policy in the U.S. Episodes of interest: Civil War World War I World War II Qualitative stylized facts:
More informationAsset purchase policy at the effective lower bound for interest rates
at the effective lower bound for interest rates Bank of England 12 March 2010 Plan Introduction The model The policy problem Results Summary & conclusions Plan Introduction Motivation Aims and scope The
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 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 informationGroupe de Travail: International Risk-Sharing and the Transmission of Productivity Shocks
Groupe de Travail: International Risk-Sharing and the Transmission of Productivity Shocks Giancarlo Corsetti Luca Dedola Sylvain Leduc CREST, May 2008 The International Consumption Correlations Puzzle
More informationOn the Merits of Conventional vs Unconventional Fiscal Policy
On the Merits of Conventional vs Unconventional Fiscal Policy Matthieu Lemoine and Jesper Lindé Banque de France and Sveriges Riksbank The views expressed in this paper do not necessarily reflect those
More informationState-Dependent Fiscal Multipliers: Calvo vs. Rotemberg *
State-Dependent Fiscal Multipliers: Calvo vs. Rotemberg * Eric Sims University of Notre Dame & NBER Jonathan Wolff Miami University May 31, 2017 Abstract This paper studies the properties of the fiscal
More information1. Borrowing Constraints on Firms The Financial Accelerator
Part 7 1. Borrowing Constraints on Firms The Financial Accelerator The model presented is a modifed version of Jermann-Quadrini (27). Earlier papers: Kiyotaki and Moore (1997), Bernanke, Gertler and Gilchrist
More information1 A tax on capital income in a neoclassical growth model
1 A tax on capital income in a neoclassical growth model We look at a standard neoclassical growth model. The representative consumer maximizes U = β t u(c t ) (1) t=0 where c t is consumption in period
More informationDiscussion: Liability Dollarization, Sudden Stops & Optimal Financial Policy by Enrique Mendoza and Eugenio Rojas
Discussion: Liability Dollarization, Sudden Stops & Optimal Financial Policy by Enrique Mendoza and Eugenio Rojas Cristina Arellano Federal Reserve Bank of Minneapolis and NBER IMF 18th Jacques Polak Annual
More informationThe Neoclassical Growth Model
The Neoclassical Growth Model 1 Setup Three goods: Final output Capital Labour One household, with preferences β t u (c t ) (Later we will introduce preferences with respect to labour/leisure) Endowment
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 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 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 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 informationSTATE UNIVERSITY OF NEW YORK AT ALBANY Department of Economics. Ph. D. Preliminary Examination: Macroeconomics Fall, 2009
STATE UNIVERSITY OF NEW YORK AT ALBANY Department of Economics Ph. D. Preliminary Examination: Macroeconomics Fall, 2009 Instructions: Read the questions carefully and make sure to show your work. You
More informationFiscal Multipliers in Recessions. M. Canzoneri, F. Collard, H. Dellas and B. Diba
1 / 52 Fiscal Multipliers in Recessions M. Canzoneri, F. Collard, H. Dellas and B. Diba 2 / 52 Policy Practice Motivation Standard policy practice: Fiscal expansions during recessions as a means of stimulating
More informationCredit Frictions and Optimal Monetary Policy. Vasco Curdia (FRB New York) Michael Woodford (Columbia University)
MACRO-LINKAGES, OIL PRICES AND DEFLATION WORKSHOP JANUARY 6 9, 2009 Credit Frictions and Optimal Monetary Policy Vasco Curdia (FRB New York) Michael Woodford (Columbia University) Credit Frictions and
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 informationMacroeconomics 2. Lecture 6 - New Keynesian Business Cycles March. Sciences Po
Macroeconomics 2 Lecture 6 - New Keynesian Business Cycles 2. Zsófia L. Bárány Sciences Po 2014 March Main idea: introduce nominal rigidities Why? in classical monetary models the price level ensures money
More informationECON 815. A Basic New Keynesian Model II
ECON 815 A Basic New Keynesian Model II Winter 2015 Queen s University ECON 815 1 Unemployment vs. Inflation 12 10 Unemployment 8 6 4 2 0 1 1.5 2 2.5 3 3.5 4 4.5 5 Core Inflation 14 12 10 Unemployment
More informationExchange Rate Adjustment in Financial Crises
Exchange Rate Adjustment in Financial Crises Michael B. Devereux 1 Changhua Yu 2 1 University of British Columbia 2 Peking University Swiss National Bank June 2016 Motivation: Two-fold Crises in Emerging
More informationOptimal Taxation Policy in the Presence of Comprehensive Reference Externalities. Constantin Gurdgiev
Optimal Taxation Policy in the Presence of Comprehensive Reference Externalities. Constantin Gurdgiev Department of Economics, Trinity College, Dublin Policy Institute, Trinity College, Dublin Open Republic
More informationProblem set Fall 2012.
Problem set 1. 14.461 Fall 2012. Ivan Werning September 13, 2012 References: 1. Ljungqvist L., and Thomas J. Sargent (2000), Recursive Macroeconomic Theory, sections 17.2 for Problem 1,2. 2. Werning Ivan
More informationMacro II. John Hassler. Spring John Hassler () New Keynesian Model:1 04/17 1 / 10
Macro II John Hassler Spring 27 John Hassler () New Keynesian Model: 4/7 / New Keynesian Model The RBC model worked (perhaps surprisingly) well. But there are problems in generating enough variation in
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 informationCredit Frictions and Optimal Monetary Policy
Credit Frictions and Optimal Monetary Policy Vasco Cúrdia FRB New York Michael Woodford Columbia University Conference on Monetary Policy and Financial Frictions Cúrdia and Woodford () Credit Frictions
More informationLinear Capital Taxation and Tax Smoothing
Florian Scheuer 5/1/2014 Linear Capital Taxation and Tax Smoothing 1 Finite Horizon 1.1 Setup 2 periods t = 0, 1 preferences U i c 0, c 1, l 0 sequential budget constraints in t = 0, 1 c i 0 + pbi 1 +
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 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 informationGernot Müller (University of Bonn, CEPR, and Ifo)
Exchange rate regimes and fiscal multipliers Benjamin Born (Ifo Institute) Falko Jüßen (TU Dortmund and IZA) Gernot Müller (University of Bonn, CEPR, and Ifo) Fiscal Policy in the Aftermath of the Financial
More informationAsset-price driven business cycle and monetary policy
Asset-price driven business cycle and monetary policy Vincenzo Quadrini University of Southern California, CEPR and NBER June 11, 2007 VERY PRELIMINARY Abstract This paper studies the stabilization role
More informationUncertainty Shocks In A Model Of Effective Demand
Uncertainty Shocks In A Model Of Effective Demand Susanto Basu Boston College NBER Brent Bundick Boston College Preliminary Can Higher Uncertainty Reduce Overall Economic Activity? Many think it is an
More informationUninsured Unemployment Risk and Optimal Monetary Policy
Uninsured Unemployment Risk and Optimal Monetary Policy Edouard Challe CREST & Ecole Polytechnique ASSA 2018 Strong precautionary motive Low consumption Bad aggregate shock High unemployment Low output
More informationFinancial Crises, Dollarization and Lending of Last Resort in Open Economies
Financial Crises, Dollarization and Lending of Last Resort in Open Economies Luigi Bocola Stanford, Minneapolis Fed, and NBER Guido Lorenzoni Northwestern and NBER Restud Tour Reunion Conference May 2018
More informationINTERNATIONAL MONETARY ECONOMICS NOTE 8b
316-632 INTERNATIONAL MONETARY ECONOMICS NOTE 8b Chris Edmond hcpedmond@unimelb.edu.aui Feldstein-Horioka In a closed economy, savings equals investment so in data the correlation between them would be
More informationDebt Constraints and the Labor Wedge
Debt Constraints and the Labor Wedge By Patrick Kehoe, Virgiliu Midrigan, and Elena Pastorino This paper is motivated by the strong correlation between changes in household debt and employment across regions
More informationPrecautionary Demand for Foreign Assets in Sudden Stop Economies: An Assessment of the New Mercantilism
Precautionary Demand for Foreign Assets in Sudden Stop Economies: An Assessment of the New Mercantilism Ceyhun Bora Durdu Enrique G. Mendoza Marco E. Terrones Board of Governors of the University of Maryland
More informationFiscal Multipliers and Financial Crises
Fiscal Multipliers and Financial Crises Miguel Faria-e-Castro New York University June 20, 2017 1 st Research Conference of the CEPR Network on Macroeconomic Modelling and Model Comparison 0 / 12 Fiscal
More informationFiscal Devaluations. Emmanuel Farhi Gita Gopinath Oleg Itskhoki Harvard Harvard Princeton. Cambridge University April / 23
Fiscal Devaluations Emmanuel Farhi Gita Gopinath Oleg Itskhoki Harvard Harvard Princeton Cambridge University April 2013 1 / 23 Motivation Currency devaluation: response to loss of competitiveness New
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 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 informationThe Real Business Cycle Model
The Real Business Cycle Model Economics 3307 - Intermediate Macroeconomics Aaron Hedlund Baylor University Fall 2013 Econ 3307 (Baylor University) The Real Business Cycle Model Fall 2013 1 / 23 Business
More informationFiscal Consolidations in Currency Unions: Spending Cuts Vs. Tax Hikes
Fiscal Consolidations in Currency Unions: Spending Cuts Vs. Tax Hikes Christopher J. Erceg and Jesper Lindé Federal Reserve Board June, 2011 Erceg and Lindé (Federal Reserve Board) Fiscal Consolidations
More informationState-Dependent Pricing and the Paradox of Flexibility
State-Dependent Pricing and the Paradox of Flexibility Luca Dedola and Anton Nakov ECB and CEPR May 24 Dedola and Nakov (ECB and CEPR) SDP and the Paradox of Flexibility 5/4 / 28 Policy rates in major
More informationFabrizio Perri Università Bocconi, Minneapolis Fed, IGIER, CEPR and NBER October 2012
Comment on: Structural and Cyclical Forces in the Labor Market During the Great Recession: Cross-Country Evidence by Luca Sala, Ulf Söderström and Antonella Trigari Fabrizio Perri Università Bocconi, Minneapolis
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 informationCAPITAL FLOWS AND FINANCIAL FRAGILITY IN EMERGING ASIAN ECONOMIES: A DSGE APPROACH α. Nur M. Adhi Purwanto
CAPITAL FLOWS AND FINANCIAL FRAGILITY IN EMERGING ASIAN ECONOMIES: A DSGE APPROACH α Nur M. Adhi Purwanto Abstract The objective of this paper is to study the interaction of monetary, macroprudential and
More informationRamsey s Growth Model (Solution Ex. 2.1 (f) and (g))
Problem Set 2: Ramsey s Growth Model (Solution Ex. 2.1 (f) and (g)) Exercise 2.1: An infinite horizon problem with perfect foresight In this exercise we will study at a discrete-time version of Ramsey
More informationFiscal Consolidation in a Currency Union: Spending Cuts Vs. Tax Hikes
Fiscal Consolidation in a Currency Union: Spending Cuts Vs. Tax Hikes Christopher J. Erceg and Jesper Lindé Federal Reserve Board October, 2012 Erceg and Lindé (Federal Reserve Board) Fiscal Consolidations
More informationProbably Too Little, Certainly Too Late. An Assessment of the Juncker Investment Plan
Probably Too Little, Certainly Too Late. An Assessment of the Juncker Investment Plan Mathilde Le Moigne 1 Francesco Saraceno 2,3 Sébastien Villemot 2 1 École Normale Supérieure 2 OFCE Sciences Po 3 LUISS-SEP
More information1 Fiscal stimulus (Certification exam, 2009) Question (a) Question (b)... 6
Contents 1 Fiscal stimulus (Certification exam, 2009) 2 1.1 Question (a).................................................... 2 1.2 Question (b).................................................... 6 2 Countercyclical
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 informationManaging Capital Flows in the Presence of External Risks
Managing Capital Flows in the Presence of External Risks Ricardo Reyes-Heroles Federal Reserve Board Gabriel Tenorio The Boston Consulting Group IEA World Congress 2017 Mexico City, Mexico June 20, 2017
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 informationState Dependency of Monetary Policy: The Refinancing Channel
State Dependency of Monetary Policy: The Refinancing Channel Martin Eichenbaum, Sergio Rebelo, and Arlene Wong May 2018 Motivation In the US, bulk of household borrowing is in fixed rate mortgages with
More informationFinancial Autarky and International Business Cycles (JME 2002)
Financial Autarky and International Business Cycles (JME 2002) Jonathan Heathcote and Fabrizio Perri 9/9/2014 Sargent Reading Group Joseba Martinez Jonathan Heathcote and Fabrizio Perri Financial Autarky
More informationA MODEL OF SECULAR STAGNATION
A MODEL OF SECULAR STAGNATION Gauti B. Eggertsson and Neil R. Mehrotra Brown University BIS Research Meetings March 11, 2015 1 / 38 SECULAR STAGNATION HYPOTHESIS I wonder if a set of older ideas... under
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, externalities, and non-optimality of the Friedman rule
Credit, externalities, and non-optimality of the Friedman rule Keiichiro Kobayashi Research Institute for Economy, Trade and Industry and The Canon Institute for Global Studies Masaru Inaba The Canon Institute
More informationEconomics 502. Nominal Rigidities. Geoffrey Dunbar. UBC, Fall November 22, 2012
Economics 502 Nominal Rigidities Geoffrey Dunbar UBC, Fall 2012 November 22, 2012 Geoffrey Dunbar (UBC, Fall 2012) Economics 502 November 22, 2012 1 / 68 Money Our models thusfar have been real models.
More informationThe Role of Firm-Level Productivity Growth for the Optimal Rate of Inflation
The Role of Firm-Level Productivity Growth for the Optimal Rate of Inflation Henning Weber Kiel Institute for the World Economy Seminar at the Economic Institute of the National Bank of Poland November
More informationThe Macroeconomics of Universal Health Insurance Vouchers
The Macroeconomics of Universal Health Insurance Vouchers Juergen Jung Towson University Chung Tran University of New South Wales Jul-Aug 2009 Jung and Tran (TU and UNSW) Health Vouchers 2009 1 / 29 Dysfunctional
More informationEnrique Martínez-García. University of Texas at Austin and Federal Reserve Bank of Dallas
Discussion: International Recessions, by Fabrizio Perri (University of Minnesota and FRB of Minneapolis) and Vincenzo Quadrini (University of Southern California) Enrique Martínez-García University of
More informationMaturity, Indebtedness and Default Risk 1
Maturity, Indebtedness and Default Risk 1 Satyajit Chatterjee Burcu Eyigungor Federal Reserve Bank of Philadelphia February 15, 2008 1 Corresponding Author: Satyajit Chatterjee, Research Dept., 10 Independence
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 informationMonetary Economics Final Exam
316-466 Monetary Economics Final Exam 1. Flexible-price monetary economics (90 marks). Consider a stochastic flexibleprice money in the utility function model. Time is discrete and denoted t =0, 1,...
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 informationThe Basic New Keynesian Model
Jordi Gali Monetary Policy, inflation, and the business cycle Lian Allub 15/12/2009 In The Classical Monetary economy we have perfect competition and fully flexible prices in all markets. Here there is
More informationProduct Cycles and Prices: Search Foundation
Product Cycles and Prices: Search Foundation Mei Dong 1 Yuki Teranishi 2 1 University of Melbourne 2 Keio University and CAMA, ANU April 2018 1 / 59 In this paper, we Show a fact for product cycles and
More information