Output Gap In Presence Of Financial Frictions And Monetary Policy Trade Offs
DOWNLOAD
Download Output Gap In Presence Of Financial Frictions And Monetary Policy Trade Offs PDF/ePub or read online books in Mobi eBooks. Click Download or Read Online button to get Output Gap In Presence Of Financial Frictions And Monetary Policy Trade Offs book now. This website allows unlimited access to, at the time of writing, more than 1.5 million titles, including hundreds of thousands of titles in various foreign languages. If the content not found or just blank you must refresh this page
Output Gap In Presence Of Financial Frictions And Monetary Policy Trade Offs
DOWNLOAD
Author : Francesco Furlanetto
language : en
Publisher: International Monetary Fund
Release Date : 2014-07-18
Output Gap In Presence Of Financial Frictions And Monetary Policy Trade Offs written by Francesco Furlanetto and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-07-18 with Business & Economics categories.
The recent global financial crisis illustrates that financial frictions are a significant source of volatility in the economy. This paper investigates monetary policy stabilization in an environment where financial frictions are a relevant source of macroeconomic fluctuation. We derive a measure of output gap that accounts for frictions in financial market. Furthermore we illustrate that, in the presence of financial frictions, a benevolent central bank faces a substantial trade-off between nominal and real stabilization; optimal monetary policy significantly reduces fluctuations in price and wage inflations but fails to alleviate the output gap volatility. This suggests a role for macroprudential policies.
Financial Factors
DOWNLOAD
Author : Mr.Pau Rabanal
language : en
Publisher: International Monetary Fund
Release Date : 2015-07-14
Financial Factors written by Mr.Pau Rabanal and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-07-14 with Business & Economics categories.
We suggest a new approach for analyzing the role of financial variables and shocks in computing the output gap. We estimate a two-region DSGE model for the euro area, with financial frictions at the household level, between 2000-2013. After joining the monetary union, a decline in some countries’ borrowing costs contributed to a credit, housing and real boom and bust cycle. We show that financial frictions amplified economic fluctuations and the measure of the output gap in those countries. On the contrary, in countries such as France and Germany, financial frictions played a minor role in output gap measures. We also present evidence of the trade-offs faced by the European Central Bank when trying to stabilize two regions in a currency union with unsynchronized economic cycles.
Beyond Divine Coincidence
DOWNLOAD
Author : Palek, Jakob
language : en
Publisher: kassel university press GmbH
Release Date : 2016-01-01
Beyond Divine Coincidence written by Palek, Jakob and has been published by kassel university press GmbH this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-01-01 with categories.
During the so-called Great Moderation the variability of output, employment and inflation declined substantially in most of the major economies. Because of this positive co-movement the ultimate objective of monetary policy was clear. By stabilizing inflation output will also stay at its potential and the central bank does not face any trade-off between its targets – a situation known as the divine coincidence. With the onset of the financial crisis 2007 these relationships changed. This book contributes to the research on the optimal macroeconomic policy design in the presence of financial frictions. These are incorporated via the cost channel approach into a two-country currency union model. Ultimately, a supply-side effect arises which lowers the efficiency of monetary policy - divine coincidence is not possible any more. Three questions are in the focus of interest of this analysis: What is the optimal monetary policy in the presence of country-specific financial frictions? What role can fiscal policy play? Is macroprudential policy able to improve welfare if the central bank targets a financial stability measure?
Systemic Risk
DOWNLOAD
Author : Stefan Laseen
language : en
Publisher: International Monetary Fund
Release Date : 2015-06-30
Systemic Risk written by Stefan Laseen and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-06-30 with Business & Economics categories.
We introduce time-varying systemic risk in an otherwise standard New-Keynesian model to study whether a simple leaning-against-the-wind policy can reduce systemic risk and improve welfare. We find that an unexpected increase in policy rates reduces output, inflation, and asset prices without fundamentally mitigating financial risks. We also find that while a systematic monetary policy reaction can improve welfare, it is too simplistic: (1) it is highly sensitive to parameters of the model and (2) is detrimental in the presence of falling asset prices. Macroprudential policy, similar to a countercyclical capital requirement, is more robust and leads to higher welfare gains.
Output Gap In Presence Of Financial Frictions And Monetary Policy Trade Offs
DOWNLOAD
Author : Francesco Furlanetto
language : en
Publisher: International Monetary Fund
Release Date : 2014-07-18
Output Gap In Presence Of Financial Frictions And Monetary Policy Trade Offs written by Francesco Furlanetto and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-07-18 with Business & Economics categories.
The recent global financial crisis illustrates that financial frictions are a significant source of volatility in the economy. This paper investigates monetary policy stabilization in an environment where financial frictions are a relevant source of macroeconomic fluctuation. We derive a measure of output gap that accounts for frictions in financial market. Furthermore we illustrate that, in the presence of financial frictions, a benevolent central bank faces a substantial trade-off between nominal and real stabilization; optimal monetary policy significantly reduces fluctuations in price and wage inflations but fails to alleviate the output gap volatility. This suggests a role for macroprudential policies.
Designing A Simple Loss Function For Central Banks
DOWNLOAD
Author : Davide Debortoli
language : en
Publisher: International Monetary Fund
Release Date : 2017-07-21
Designing A Simple Loss Function For Central Banks written by Davide Debortoli and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-07-21 with Business & Economics categories.
Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.
Monetary Policy Strategy
DOWNLOAD
Author : Frederic S. Mishkin
language : en
Publisher: MIT Press
Release Date : 2009-08-21
Monetary Policy Strategy written by Frederic S. Mishkin and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-08-21 with Business & Economics categories.
A leading academic authority and policymaker discusses monetary policy strategy from the perspectives of both scholar and practitioner, offering theory, econometric evidence, and extensive case studies. This book by a leading authority on monetary policy offers a unique view of the subject from the perspectives of both scholar and practitioner. Frederic Mishkin is not only an academic expert in the field but also a high-level policymaker. He is especially well positioned to discuss the changes in the conduct of monetary policy in recent years, in particular the turn to inflation targeting. Monetary Policy Strategy describes his work over the last ten years, offering published papers, new introductory material, and a summing up, “Everything You Wanted to Know about Monetary Policy Strategy, But Were Afraid to Ask,” which reflects on what we have learned about monetary policy over the last thirty years. Mishkin blends theory, econometric evidence, and extensive case studies of monetary policy in advanced and emerging market and transition economies. Throughout, his focus is on these key areas: the importance of price stability and a nominal anchor; fiscal and financial preconditions for achieving price stability; central bank independence as an additional precondition; central bank accountability; the rationale for inflation targeting; the optimal inflation target; central bank transparency and communication; and the role of asset prices in monetary policy.
Monetary And Macroprudential Policy With Endogenous Risk
DOWNLOAD
Author : Tobias Adrian
language : en
Publisher:
Release Date : 2020
Monetary And Macroprudential Policy With Endogenous Risk written by Tobias Adrian and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with Financial risk management categories.
We extend the New Keynesian (NK) model to include endogenous risk. Lower interest rates not only shift consumption intertemporally but also conditional output risk via the impact on risk-taking, giving rise to a vulnerability channel of monetary policy. The model fits the conditional output gap distribution and can account for medium-term increases in downside risks when financial conditions are loose. The policy prescriptions are very different from those in the standard NK model: monetary policy that focuses purely on inflation and output-gap stabilization can lead to instability. Macroprudential measures can mitigate the intertemporal risk-return tradeoff created by the vulnerability channel.
Steady As She Goes Estimating Potential Output During Financial Booms And Busts
DOWNLOAD
Author : Mr.Helge Berger
language : en
Publisher: International Monetary Fund
Release Date : 2015-11-09
Steady As She Goes Estimating Potential Output During Financial Booms And Busts written by Mr.Helge Berger and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-11-09 with Business & Economics categories.
Potential output—in the sense of the GDP level or path an economy can sustain over the medium term—is a crucial benchmark for policymakers. However, it is difficult to estimate when financial “booms and busts” are driving the real economy. This paper uses a simple multivariate filtering approach to illustrate the role financial variables play in driving potential or sustainable output. The results suggest that it moves more steadily during financial “boom and bust” periods than implied by conventional HP filter estimates, which tend to more closely follow actual GDP. A two-region, multisector New Keynesian DSGE model with financial frictions sheds light on the economic forces that could be behind the results obtained from the filter. This has important implications for policymakers.
Hysteresis And Business Cycles
DOWNLOAD
Author : Ms.Valerie Cerra
language : en
Publisher: International Monetary Fund
Release Date : 2020-05-29
Hysteresis And Business Cycles written by Ms.Valerie Cerra and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-05-29 with Business & Economics categories.
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.