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on Financial Development and Growth |
| By: | Ambrogio Cesa-Bianchi (Bank of England; Centre for Macroeconomics (CFM)); Fernando Eguren Martin (Bank of England); Gregory Thwaites (Bank of England; Centre for Macroeconomics (CFM)) |
| Abstract: | This paper provides novel empirical evidence showing that foreign financial developments are a powerful predictor of domestic banking crises. Using a new data set for 38 advanced and emerging economies over 1970-2011, we show that credit growth in the rest of the world has a large positive effect on the probability of banking crises taking place at home, even when controlling for domestic credit growth. Our results suggest that this effect is larger for nancially open economies, and is consistent with transmission via cross-border capital ows and market sentiment. Direct contagion from foreign crises plays an important role, but does not account for the whole effect. |
| Keywords: | Financial Crises, Global Credit Cycle, Banking, Financial Stability, Sentiment |
| JEL: | E32 E44 E52 G01 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1708&r=fdg |
| By: | Cesa-Bianchi, Ambrogio (Bank of England); Eguren-Martin, Fernando (Bank of England); Thwaites, Gregory (Bank of England) |
| Abstract: | This paper provides novel empirical evidence showing that foreign financial developments are a powerful predictor of domestic banking crises. Using a new data set for 38 advanced and emerging economies over 1970–2011, we show that credit growth in the rest of the world has a large positive effect on the probability of banking crises taking place at home, even when controlling for domestic credit growth. Our results suggest that this effect is larger for financially open economies, and is consistent with transmission via cross-border capital flows and market sentiment. Direct contagion from foreign crises plays an important role, but does not account for the whole effect. |
| Keywords: | Financial crises; global credit cycle; banking; financial stability; sentiment |
| JEL: | E32 E44 E52 G01 |
| Date: | 2017–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0644&r=fdg |
| By: | Maxime MENUET; Alexandru MINEA; Patrick VILLIEU |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:leo:wpaper:2467&r=fdg |
| By: | Victor Echevarria Icaza (Universidad Complutense de Madrid Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa)); Simón Sosvilla-Rivero (Department of Quantitative Economics, Universidad Complutense de Madrid) |
| Abstract: | The divergence in sovereign yields has been presented as a reason for the lack of traction of monetary policy. We use a GVAR framework to assess the transmission of monetary policy in the period 2005-2016. We identify sovereign yield divergence as a key mechanism by which the leverage channel of monetary policy worked. Unconventional monetary policy was successful in mitigating this effect. When exploring the channels through which yields may affect the heterogeneous transmission of monetary policy, we find that the reaction of bank leverage depended substantially on where the sovereign yield originated, thus providing a mechanism that explains this heterogeneity. Second, large spillover effects meant that yield divergence decreased the traction of monetary policy even in anchor countries. Third, the heterogeneity in the transmission mechanism can be in part attributed to contagion from euro area wide sovereign stress. Fiscal credibility, therefore, may be an appropriate tool to enhance the output effect of monetary policy. Given the importance of spillovers, this credibility may be achieved by changes in the institutional make-up and policies in the euro area |
| Keywords: | monetary policy, spillovers, euro area crisis |
| JEL: | E52 E63 F45 H63 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:aee:wpaper:1701&r=fdg |
| By: | Vasilev, Aleksandar |
| Abstract: | notes on growth models with overlapping generations (OLG) structure |
| Keywords: | growth models,OLG |
| JEL: | A1 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esrepo:149874&r=fdg |
| By: | Cristiano Cantore (University of Surrey); Paul Levine (University of Surrey); Giovanni Melina (City Univeristy and IMF); Joseph Pearlman (City University) |
| Abstract: | The initial government debt-to-GDP ratio and the government’s commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. A faster pace is optimal when the economy starts from a high level of public debt implying high sovereign risk premia, unless these are suppressed via a bailout by official creditors. Under discretion, the cost of not being able to commit is reflected into a quick consolidation of government debt. Simple monetary-fiscal rules with passive fiscal policy, designed for an environment with “normal shocks”, perform reasonably well in mimicking the Ramsey-optimal response to one-off government debt shocks. When the government can issue also long-term bonds – under commitment – the optimal debt consolidation pace is slower than in the case of short-term bonds only, and entails an increase in the ratio between long and short-term bonds. |
| JEL: | E52 E62 H12 H63 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0217&r=fdg |