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Liquidity Trap And Excessive Leverage

Liquidity Trap and Excessive Leverage PDF
Author: Mr.Anton Korinek
Publisher: International Monetary Fund
ISBN: 1498370942
Size: 59.29 MB
Format: PDF, Docs
Category : Business & Economics
Languages : en
Pages : 49
View: 6239

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We investigate the role of macroprudential policies in mitigating liquidity traps driven by deleveraging, using a simple Keynesian model. When constrained agents engage in deleveraging, the interest rate needs to fall to induce unconstrained agents to pick up the decline in aggregate demand. However, if the fall in the interest rate is limited by the zero lower bound, aggregate demand is insufficient and the economy enters a liquidity trap. In such an environment, agents' exante leverage and insurance decisions are associated with aggregate demand externalities. The competitive equilibrium allocation is constrained inefficient. Welfare can be improved by ex-ante macroprudential policies such as debt limits and mandatory insurance requirements. The size of the required intervention depends on the differences in marginal propensity to consume between borrowers and lenders during the deleveraging episode. In our model, contractionary monetary policy is inferior to macroprudential policy in addressing excessive leverage, and it can even have the unintended consequence of increasing leverage.

Liquidity Trap And Excessive Leverage

Liquidity Trap and Excessive Leverage PDF
Author: Mr. Anton Korinek
Publisher: International Monetary Fund
ISBN: 1498356397
Size: 50.64 MB
Format: PDF, Kindle
Category : Business & Economics
Languages : en
Pages : 49
View: 4630

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We investigate the role of macroprudential policies in mitigating liquidity traps driven by deleveraging, using a simple Keynesian model. When constrained agents engage in deleveraging, the interest rate needs to fall to induce unconstrained agents to pick up the decline in aggregate demand. However, if the fall in the interest rate is limited by the zero lower bound, aggregate demand is insufficient and the economy enters a liquidity trap. In such an environment, agents' exante leverage and insurance decisions are associated with aggregate demand externalities. The competitive equilibrium allocation is constrained inefficient. Welfare can be improved by ex-ante macroprudential policies such as debt limits and mandatory insurance requirements. The size of the required intervention depends on the differences in marginal propensity to consume between borrowers and lenders during the deleveraging episode. In our model, contractionary monetary policy is inferior to macroprudential policy in addressing excessive leverage, and it can even have the unintended consequence of increasing leverage.

The Costs Of Macroprudential Deleveraging In A Liquidity Trap

The Costs of Macroprudential Deleveraging in a Liquidity Trap PDF
Author: Mr.Jiaqian Chen
Publisher: International Monetary Fund
ISBN: 1513546805
Size: 69.32 MB
Format: PDF, Docs
Category : Business & Economics
Languages : en
Pages : 66
View: 1186

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We examine the effects of various borrower-based macroprudential tools in a New Keynesian environment where both real and nominal interest rates are low. Our model features long-term debt, housing transaction costs and a zero-lower bound constraint on policy rates. We find that the long-term costs, in terms of forgone consumption, of all the macroprudential tools we consider are moderate. Even so, the short-term costs differ dramatically between alternative tools. Specifically, a loan-to-value tightening is more than twice as contractionary compared to loan-to-income tightening when debt is high and monetary policy cannot accommodate.

New Perspectives On Political Economy And Its History

New Perspectives on Political Economy and Its History PDF
Author: Maria Cristina Marcuzzo
Publisher: Springer Nature
ISBN: 3030429253
Size: 63.96 MB
Format: PDF, Docs
Category : Business & Economics
Languages : en
Pages : 406
View: 1614

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This Festschrift is published in honour of Annalisa Rosselli, a political economist and historian of economic thought, whose academic activity has promoted unconventional ways of thinking throughout her career. A renowned list of scholars articulate and respond to this vision through a series of essays, leading to an advocacy of pluralism and critical thinking in political economy. The book is split into five parts, opening with a section on new topics for the history of economic thought including new perspectives in gender studies and an illustration of the fecundity of the link with economic history. This is followed by sections that address relevant perspectives on the Classical approach to distribution and accumulation, Ricardo, interpretation of Sraffa and the legacy of Keynes. This book will appeal to students interested in reforming economics, as well as academics and economists interested in political economy and the history of economic thought.

Remaking Retirement

Remaking Retirement PDF
Author: Olivia Mitchell
Publisher: Oxford University Press, USA
ISBN: 0198867522
Size: 57.49 MB
Format: PDF, Mobi
Category : Business & Economics
Languages : en
Pages : 304
View: 2102

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Around the world, people nearing and entering retirement are holding ever-greater levels of debt. This volume explores key aspects of the rise in debt across older cohorts, drills down into the types of debt and reasons for debt incurred, and reviews policies to remedy some of the financial problems facing older persons, in the US and elsewhere.

Currency Wars Or Efficient Spillovers A General Theory Of International Policy Cooperation

Currency Wars or Efficient Spillovers  A General Theory of International Policy Cooperation PDF
Author: Mr.Anton Korinek
Publisher: International Monetary Fund
ISBN: 1475579640
Size: 75.67 MB
Format: PDF, ePub
Category : Business & Economics
Languages : en
Pages : 66
View: 1843

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In an interconnected world, national economic policies regularly lead to large international spillover effects, which frequently trigger calls for international policy cooperation. However, the premise of successful cooperation is that there is a Pareto inefficiency, i.e. if there is scope to make some nations better off without hurting others. This paper presents a first welfare theorem for open economies that defines an efficient benchmark and spells out the conditions that need to be violated to generate inefficiency and scope for cooperation. These are: (i) policymakers act competitively in the international market, (ii) policymakers have sufficient external policy instruments and (iii) international markets are free of imperfections. Our theorem holds even if each economy suffers from a wide range of domestic market imperfections and targeting problems. We provide examples of current account intervention, monetary policy, fiscal policy, macroprudential policy/capital controls, and exchange rate management and show that the resulting spillovers are Pareto efficient, as long as the three conditions are satisfied. Furthermore, we develop general guidelines for how policy cooperation can improve welfare when the conditions are violated.

Fiscal Buffers Private Debt And Stagnation

Fiscal Buffers  Private Debt  and Stagnation PDF
Author: Nicoletta Batini
Publisher: International Monetary Fund
ISBN: 148436550X
Size: 15.70 MB
Format: PDF
Category : Business & Economics
Languages : en
Pages : 41
View: 2368

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We revisit the empirical relationship between private/public debt and output, and build a model that reproduces it. In the model, the government provides financial assistance to credit-constrained agents to mitigate deleveraging. As we observe in the data, surges in private debt are potentially more damaging for the economy than surges in public debt. The model suggests two policy implications. First, capping leverage leads to milder recessions, but also implies more muted expansions. Second, with fiscal buffers, financial assistance to credit-constrained agents helps avoid stagnation. The growth returns from intervention decline as the government approaches the fiscal limit.

Understanding The Macro Financial Effects Of Household Debt A Global Perspective

Understanding the Macro Financial Effects of Household Debt  A Global Perspective PDF
Author: Adrian Alter
Publisher: International Monetary Fund
ISBN: 1484349865
Size: 20.85 MB
Format: PDF, Kindle
Category : Business & Economics
Languages : en
Pages : 49
View: 4003

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We confirm the negative relationship between household debt and future GDP growth documented in Mian, Sufi, and Verner (2017) for a wider set of countries over the period 1950–2016. Three mutually reinforcing mechanisms help explain this relationship. First, debt overhang impairs household consumption when negative shocks hit. Second, increases in household debt heighten the probability of future banking crises, which significantly disrupts financial intermediation. Third, crash risk may be systematically neglected due to investors’ overoptimistic expectations associated with household debt booms. In addition, several institutional factors such as flexible exchange rates, higher financial development and inclusion are found to mitigate this impact. Finally, the tradeoff between financial inclusion and stability nuances downside risks to growth.

Handbook Of Macroeconomics

Handbook of Macroeconomics PDF
Author: John B. Taylor
Publisher: Elsevier
ISBN: 0444594884
Size: 59.46 MB
Format: PDF, ePub, Mobi
Category : Business & Economics
Languages : en
Pages : 2744
View: 5054

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Handbook of Macroeconomics Volumes 2A and 2B surveys major advances in macroeconomic scholarship since the publication of Volume 1 (1999), carefully distinguishing between empirical, theoretical, methodological, and policy issues, including fiscal, monetary, and regulatory policies to deal with crises, unemployment, and economic growth. As this volume shows, macroeconomics has undergone a profound change since the publication of the last volume, due in no small part to the questions thrust into the spotlight by the worldwide financial crisis of 2008. With contributions from the world’s leading macroeconomists, its reevaluation of macroeconomic scholarship and assessment of its future constitute an investment worth making. Serves a double role as a textbook for macroeconomics courses and as a gateway for students to the latest research Acts as a one-of-a-kind resource as no major collections of macroeconomic essays have been published in the last decade Builds upon Volume 1 by using its section headings to illustrate just how far macroeconomic thought has evolved

Advancing The Frontiers Of Monetary Policy

Advancing the Frontiers of Monetary Policy PDF
Author: Tobias Adrian
Publisher: International Monetary Fund
ISBN: 1484344480
Size: 80.23 MB
Format: PDF, Mobi
Category : Business & Economics
Languages : en
Pages : 296
View: 1942

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Inflation-forecast targeting is state of the art for monetary policy. This book explores first principles, including managing short-term policy trade-offs. The book also outlines efficient operational procedures and reviews the experiences of Canada, the Czech Republic, and India. The analysis highlights the need for assertive policies and maximum transparency.

Evidence And Innovation In Housing Law And Policy

Evidence and Innovation in Housing Law and Policy PDF
Author: Lee Anne Fennell
Publisher: Cambridge University Press
ISBN: 1107164923
Size: 64.92 MB
Format: PDF
Category : Law
Languages : en
Pages : 400
View: 713

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No area of law and policy is more central to our well-being than housing, yet research on the topic is too often produced in disciplinary or methodological silos that fail to connect to policy on the ground. This pathbreaking book, which features leading scholars from a range of academic fields, cuts across disciplines to forge new connections in the discourse. In accessible prose filled with cutting-edge ideas, these scholars address topics ranging from the recent financial crisis to discrimination and gentrification and show how housing law and policy impacts household wealth, financial markets, urban landscapes, and local communities. Together, they harness evidence and theory to capture the 'state of play' in housing, generating insights that will be relevant to academics and policymakers alike. This title is also available as Open Access.

Keep Reforming China S Strategic Economic Transformation

Keep Reforming  China   s Strategic Economic Transformation PDF
Author: Zhong Xu
Publisher: Springer Nature
ISBN: 9811580065
Size: 74.43 MB
Format: PDF, Mobi
Category : Business & Economics
Languages : en
Pages : 266
View: 5585

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This book is about China’s economy transformation. Currently, China’s macro-leverage ratio has been effectively controlled, the central market interest rate (one year fixed interest rate) has gone down, and liquidity is now relatively abundant. However, financial institutions are generally reluctant to lend, the local governments are unwilling to act, and the fact that liquidity released by the central bank cannot be effectively transmitted to the real economy is leading to a contraction of credit and higher financing costs for private enterprises. Meanwhile, the downturn in the internal economic cycle has been exacerbated by the external shocks caused by frictions in Sino-US trade, and this set of circumstances has contributed to the polarization of expectations regarding China's real economic prospects and policy trends, as seen, for example, in the questions and discussions about policy trends relevant to the private economy. Indeed, one might claim that the current confusion of expectations even exceeds that of 2008, when the international financial crisis breaks out. From a dialectical perspective, the more pessimistic expectation of economic trend, the easier it is to build consensus on reform, and the more remarkable actual effects of reform, which must be based on a comprehensive understanding of the phased characteristics of China’s economic development. In this book, based on the experience working in central bank of China, the author argues that China’s policy should focus on internal demand. In the coming period, China needs to persevere in the market orientation, step up reform and opening up, and create a favorable business environment. This book represents the following opinions: First, to reach a common understanding of the medium and high economic growth, and avoid the dream of high growth. Second, to stick to supply-side structural reform, accelerate economic transformation and structural adjustment, and further unleash the reform dividends and growth potential. The long-term and structural problems cannot be attributed to short-term and cyclical problems. Third, the challenges of external shocks could be also regarded as opportunities, which include but not limited to accelerate reform to improve property rights protection, state-owned capital management, corporate governance, income distribution, and social security. Fourth, whenever the trade friction happens, a multilateral framework is always helpful.

Neoliberalism 2 0 Regulating And Financing Globalizing Markets

Neoliberalism 2 0  Regulating and Financing Globalizing Markets PDF
Author: L. Nijs
Publisher: Springer
ISBN: 1137535563
Size: 73.62 MB
Format: PDF, ePub, Docs
Category : Business & Economics
Languages : en
Pages : 513
View: 1883

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In today's increasingly globalized environment, many economic fundamentals need to be reconsidered in order to regain stability in the global marketplace. One such consideration is the failing dynamics of the international tax infrastructure. Neoliberalism 2.0 brings a 21st century assessment of the Pigovian taxes, considering a completely new calibration of the international tax systems, inspired by the historically developed Pigovian tax model. The book considers the impact neoliberalism had and will have on regulatory infrastructure, democracy in an era of globalization and reduced legitimation of the national state. The Pigovian model brings home the often forgotten relationship between taxation (as a part of the regulatory sphere), macro-economics, and the political-philosophical context in which law and economics emerge. The model also takes into account the phenomena of globalization and financialization and is tested using the financial sector as an example. This book addresses the many challenges a Pigovian shift would imply for the sovereign and its national economies. Neoliberalism 2.0 demonstrates the ability to design a paradigm-changing alternative to the current tax infrastructure, while taking into account a low economic growth environment of the future, the implications of globalization and the changing relationship between citizens and their state.

Capital Controls Or Macroprudential Regulation

Capital Controls or Macroprudential Regulation  PDF
Author: Mr.Anton Korinek
Publisher: International Monetary Fund
ISBN: 1513506463
Size: 18.52 MB
Format: PDF, Mobi
Category : Business & Economics
Languages : en
Pages : 35
View: 4672

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International capital flows can create significant financial instability in emerging economies because of pecuniary externalities associated with exchange rate movements. Does this make it optimal to impose capital controls or should policymakers rely on domestic macroprudential regulation? This paper presents a tractable model to show that it is desirable to employ both types of instruments: Macroprudential regulation reduces overborrowing, while capital controls increase the aggregate net worth of the economy as a whole by also stimulating savings. The two policy measures should be set higher the greater an economy's debt burden and the higher domestic inequality. In our baseline calibration based on the East Asian crisis countries, we find optimal capital controls and macroprudential regulation in the magnitude of 2 percent. In advanced countries where the risk of sharp exchange rate depreciations is more limited, the role for capital controls subsides. However, macroprudential regulation remains essential to mitigate booms and busts in asset prices.

Household Finance

Household Finance PDF
Author: Sumit Agarwal
Publisher: Springer Nature
ISBN: 9811555265
Size: 23.35 MB
Format: PDF, Mobi
Category : Business & Economics
Languages : en
Pages : 352
View: 6196

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Household finance studies is a relatively recent field, exploring a growing understanding of how households make financial decisions relating to the functions of consumption, payment, risk management, borrowing and investing; how institutions provide goods and services to satisfy these financial functions of households; and how interventions by firms, governments and other parties affect the provision of financial services. This timely book analyses existing findings about household behavior as well as findings related to policy interventions. With international case studies, this book reviews a topic of global importance and brings a crucial up-to-date survey of the field for researchers and postgraduate students.

Macroprudential Policy And Practice

Macroprudential Policy and Practice PDF
Author: Paul Mizen
Publisher: Cambridge University Press
ISBN: 1108419909
Size: 69.58 MB
Format: PDF, Docs
Category : Business & Economics
Languages : en
Pages : 330
View: 1495

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A guide to the latest theoretical developments in macroprudential policy, the newest tool in central banking policymaking circles.

Global Financial Stability Report October 2017

Global Financial Stability Report  October 2017 PDF
Author: International Monetary Fund. Monetary and Financial Systems Dept.
Publisher: International Monetary Fund
ISBN: 1484320565
Size: 38.62 MB
Format: PDF, Mobi
Category : Business & Economics
Languages : en
Pages : 136
View: 4868

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The October 2017 Global Financial Stability Report finds that the global financial system continues to strengthen in response to extraordinary policy support, regulatory enhancements, and the cyclical upturn in growth. It also includes a chapter that examines the short- and medium-term implications for economic growth and financial stability of the past decades’ rise in household debt. It documents large differences in household debt-to-GDP ratios across countries but a common increasing trajectory that was moderated but not reversed by the global financial crisis. Another chapter develops a new macroeconomic measure of financial stability by linking financial conditions to the probability distribution of future GDP growth and applies it to a set of 20 major advanced and emerging market economies. The chapter shows that changes in financial conditions shift the whole distribution of future GDP growth.

Optimal Macroprudential Policy And Asset Price Bubbles

Optimal Macroprudential Policy and Asset Price Bubbles PDF
Author: Nina Biljanovska
Publisher: International Monetary Fund
ISBN: 1513511076
Size: 31.66 MB
Format: PDF, ePub, Mobi
Category : Business & Economics
Languages : en
Pages : 44
View: 7705

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An asset bubble relaxes collateral constraints and increases borrowing by credit-constrained agents. At the same time, as the bubble deflates when constraints start binding, it amplifies downturns. We show analytically and quantitatively that the macroprudential policy should optimally respond to building asset price bubbles non-monotonically depending on the underlying level of indebtedness. If the level of debt is moderate, policy should accommodate the bubble to reduce the incidence of a binding collateral constraint. If debt is elevated, policy should lean against the bubble more aggressively to mitigate the pecuniary externalities from a deflating bubble when constraints bind.

Nber Macroeconomics Annual 2016

NBER Macroeconomics Annual 2016 PDF
Author: Martin Eichenbaum
Publisher: University of Chicago Press
ISBN: 022649036X
Size: 54.17 MB
Format: PDF, ePub, Mobi
Category : Business & Economics
Languages : en
Pages : 448
View: 1894

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The thirty-first edition of the NBER Macroeconomics Annual features theoretical and empirical research on central issues in contemporary macroeconomics. The first two papers are rigorous and data-driven analyses of the European financial crisis. The third paper introduces a new set of facts about economic growth and financial ratios as well as a new macrofinancial database for the study of historical financial booms and busts. The fourth paper studies the historical effects of Federal Reserve efforts to provide guidance about the future path of the funds rate. The fifth paper explores the distinctions between models of price setting and associated nominal frictions using data on price setting behavior. The sixth paper considers the possibility that the economy displays nonlinear dynamics that lead to cycles rather than long-term convergence to a steady state. The volume also includes a short paper on the decline in the rate of global economic growth.

Policy Conflicts And Inflation Targeting The Role Of Credit Markets

Policy Conflicts and Inflation Targeting  The Role of Credit Markets PDF
Author: Woon Gyu Choi
Publisher: International Monetary Fund
ISBN: 148435124X
Size: 61.44 MB
Format: PDF, ePub, Mobi
Category : Business & Economics
Languages : en
Pages : 36
View: 1417

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This paper shows that stabilizing volatility in credit growth often conflicts with price stability: unusual credit expansions often occur when inflation is low relative to goals, and credit slumps often appear when inflation is overshooting. We find that central banks with inflation targeting (IT) are responsive to credit conditions in both advanced economies and emerging-market economies (EMEs). However, EMEs are more sensitive to inflation conditions, responding to credit growth only when consistent with IT. Macroprudential measures are also deployed to address credit growth volatility when orthodox policy moves would be inconsistent with IT, complementing monetary policy.