Monetary policy and financial stability

We study optimal monetary policy under a constant policy rate mainly for simplicity. In our numerical simulations, optimal monetary policy calls for a departure from a Friedman rule.Esta tesis en PDF no tiene permisos por parte del autor para ser reproducida. Puedes venir a consultarla a la Biblioteca Di Tella pero recuerda que no podrás copiarla, ni grabarla en ningún dispositivo, ni enviarla, ni imprimirla. La consulta se hace solo bajo reserva escribiendo a [email protected] eres el autor de la tesis y quieres dar tu autorización para la reproducción, puedes ponerte en contacto con [email protected]

Coordinating monetary and financial regulatory policies

How to conduct macro-prudential regulation? How to coordinate monetary policy and macro-prudential policy? To address these questions, I develop a continuous-time New Keynesian economy in which a financial intermediary sector is subject to a leverage constraint. Coordination between monetary and macro-prudential policies helps to reduce the risk of entering into a financial crisis and speeds up exit from the crisis. The downside of coordination is variability in inflation and in the employment gap

Benefits of macro-prudential policy in low interest rate environments

I study macro-prudential policy intervention in economies with secularly low interest rates. Intervention boosts risk-free real interest rates unintentionally, simply as a by-product of containing systemic risk in financial markets. Thus, intervention also boosts the natural rate of return in particular (i.e., the equilibrium risk-free rate that is consistent with inflation on target and production at full capacity). These results point to a novel complementarity between financial stability and macroeconomic stabilization. Complementary is sufficiently strong to generate a divine coincidence if the natural rate is secularly low, but not too low

Essays on Monetary and Macro-prudential Policy

This dissertation comprises three essays that investigate the transmission mechanism of monetary policy and the interaction between monetary policy and macro-prudential policy. In Chapter 1, I examine the costs and benefits of coordinating monetary policy and macro-prudential policy. I obtain that the coordination between monetary and macro-prudential policies helps reducing the risk of entering into a financial crisis; helps also speeding up the exit from the crisis, if any; but implies further variability in inflation and in employment gap which is costly. In Chapter 2, I explore the interaction between monetary policy and macro-prudential policy in economies in which the natural rate of return occasionally attains negative values. In those economies, the zero-lower-bound (ZLB) constraint on the nominal interest rate occasionally prevents monetary policy from conducting its conventional task of replicating the natural rate of return with the nominal rate. I obtain that tighter macro-prudential policies, that restrict intermediary leverage more severely, mitigate the aggregate fluctuations resulting from frictions in financial markets; lift the natural rate of return; and whence facilitate the conventional task of monetary policy. In Chapter 3, I revisit the transmission mechanism of monetary policy in the context of a financially developed economy in which the provisions of settlement services and of financial intermediary services are highly interrelated. To this end, I develop a framework in which the joint provision of settlement and financial intermediary services creates a liquidity management problem at the intermediary level, and a corresponding demand for liquid assets. I analyze the real effects of unconventional monetary policies that target the width of the corridor between the discount window rate and interest rate on excess reserves. I obtain that the real effects of a narrower corridor in general depend on how liquid the financial intermediary system is

Financial cycles under diagnostic beliefs

Swift changes in investors' sentiment, such as the one triggered by COVID-19 global outbreak in March 2020, lead to financial tensions and asset price volatility. We study the interactions of behavioral and financial frictions in an environment with endoge- nous risk-taking and capital accumulation. Agents form diagnostic expectations about future stochastic outcomes: recent realizations of aggregate shocks are expected to persist. This behavioral friction gives rise to sentiment cycles with excessive invest- ment and occasional safety traps. The interactions with financial frictions lead to an endogenous amplification of financial instability. We discuss implications for policy interventions

Product quality, measured inflation and monetary policy

This paper proposes a tractable New Keynesian (NK) economy with endogenous adjustment in product quality that nests the canonical framework. Endogenous quality choice reduces the slope of the traditional NK Phillips curve and ampliffes the economy's response to productivity shocks. This leads to a less reactionary monetary policy where model misspeciffcation of imperfectly observable quality adjustments matters more for macroeconomic stabilization than the mismeasurement of those adjustments. With no misperception of product quality by the monetary authority, the principles for optimal monetary policy are, nonetheless, unchanged as the quality extensions to the canonical NK model preserve divine coincidence

On the interaction between monetary and macroprudential policies

The Global Financial Crisis fostered the design and adoption of macroprudential policies throughout the world. This raises important questions for monetary policy. What, if any, is the relationship between monetary and macroprudential policies? In particular, how does the effectiveness of macroprudential policies (or lack thereof) influence the conduct of monetary policy? This discussion paper builds on the insights of recent theoretical and empirical research to address these questions

Oligopolios mixtos: La firma pública como un instrumento para dificultar la colusión

Esta tesis solo está en formato papel por lo que se debe consultar en la propia Biblioteca Di Tella. La consulta se hace solo bajo reserva escribiendo a [email protected] tesis no tiene permisos por parte del autor para ser reproducida, por lo que no se puede fotocopiar, ni fotografiar ni reproducir con ningún medio. Si eres el autor de la tesis y quieres dar tu autorización para la reproducción, puedes ponerte en contacto con [email protected]

Sovereign Defaults and The Political Economy Of Market Reaccess

Following a sovereign default, governments are usually unable to borrow from international credit markets for some time. The period of "exclusion" has varied from more than twenty years following some default events to less than a year in others. Using a unique dataset on sovereign bond issuances and syndicated bank loans between 1980 and 2000, this paper studies empirically the determinants of the duration of exclusion following a sovereign default and presents a DSGE model of endogeneous sovereign borrowing that rationalizes our key empirical findings. In particular, we find that countries either reaccess the markets in the first years after a default or have to wait a much longer time to do it. We also find that political stability significantly increases the chances of reaccessing the market in any given period after the default. Our political economy model of market reaccess can match hese two features of the data.

Macroprudential policy measures: Macroeconomic impact and interaction with monetary policy

This paper examines the interactions of macroprudential and monetary policies. We find, using a range of macroeconomic models used at the European Central Bank, that in the long run, a 1% bank capital requirement increase has a small impact on GDP. In the short run, GDP declines by 0.15-0.35%. Under a stronger monetary policy reaction, the impact falls to 0.05-0.25%. The paper also examines how capital requirements and the conduct of macroprudential policy affect the monetary transmission mechanism. Higher bank leverage increases the economy's vulnerability to shocks but also monetary policy's ability to offset them. Macroprudential policy diminishes the frequency and severity of financial crises thus eliminating the need for extremely low interest rates. Counter-cyclical capital measures reduce the neutral real interest rate in normal times