UID:
edoccha_9958069387002883
Format:
1 online resource (59 p.)
ISBN:
1-4639-3436-X
,
1-4639-2648-0
,
1-283-55661-8
,
9786613869067
,
1-4639-5928-1
Series Statement:
IMF Working Papers
Content:
This paper builds a model of financial sector vulnerability and integrates it into a macroeconomic framework, typically used for monetary policy analysis. The main question to be answered with the integrated model is whether or not the central bank should include explicitly the financial stability indicator in its monetary policy (interest rate) reaction function. It is found in general, that including distance-to-default (dtd) of the banking system in the central bank reaction function reduces both inflation and output volatility. Moreover, the results are robust to different model calibrations: whenever exchange-rate pass-through is higher; financial vulnerability has a larger impact on the exchange rate, as well as on GDP (or the reverse, there is more effect of GDP on bank's equity - i.e., what we call endogeneity), it is more efficient to include dtd in the reaction function.
Note:
Description based upon print version of record.
,
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. Risk Measures from Contingent Claims Analysis; A. Background; 1. Distribution of Asset Value and Probability of Default; B. Calculating Risk Indicators for Individual Banks or Financial Institutions; 2. Calibrating Bank CCA Balance Sheets and Risk Indicators; 3. Distance-to-Default for the Banking System; III. Linking Macrofinance Indicators to A Simple Dynamic, Stochastic Macroeconomic Policy Model; 1. Parameters of the Macro Model; IV. Stochastic Simulations and Policy Analysis
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4. Responses to a Shock to Inflation (π) or Cost-Push Shock5. Efficiency Frontiers; 6. Efficiency Frontier and Endogeneity of Bank's Equity; 7. Efficiency Frontier and Interest Parity Condition; V. Conclusions; I. Extensions of the Merton Model; II. Regression Results of Output and Output Gap on Distance-to-Default of the; III. Extensions and Further Applications; References; Footnotes
,
English
Additional Edition:
ISBN 1-4639-2128-4
Language:
English
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