Resultados da Busca
Creator: Bianchi, Javier and Mondragon, Jorge Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 755 Abstract:
This paper shows that the inability to use monetary policy for macroeconomic stabilization leaves a government more vulnerable to a rollover crisis. We study a sovereign default model with self-fulfilling rollover crises, foreign currency debt, and nominal rigidities. When the government lacks monetary autonomy, lenders anticipate that the government will face a severe recession in the event of a liquidity crisis, and are therefore more prone to run on government bonds. By contrast, a government with monetary autonomy can stabilize the economy and can easily remain immune to a rollover crisis. In a quantitative application, we find that the lack of monetary autonomy played a central role in making the Eurozone vulnerable to a rollover crisis. A lender of last resort can help ease the costs from giving up monetary independence.
Palavra-chave: Sovereign debt crises, Rollover risk, and Monetary unions Sujeito: E50 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General, G15 - International Financial Markets, F34 - International Lending and Debt Problems, and E40 - Money and Interest Rates: General
Creator: Bengui, Julien and Bianchi, Javier Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 754 Abstract:
The outreach of macroprudential policies is likely limited in practice by imperfect regulation enforcement, whether due to shadow banking, regulatory arbitrage, or other regulation circumvention schemes. We study how such concerns affect the design of optimal regulatory policy in a workhorse model in which pecuniary externalities call for macroprudential taxes on debt, but with the addition of a novel constraint that financial regulators lack the ability to enforce taxes on a subset of agents. While regulated agents reduce risk taking in response to debt taxes, unregulated agents react to the safer environment by taking on more risk. These leakages undermine the effectiveness of macroprudential taxes but do not necessarily call for weaker interventions. A quantitative analysis of the model suggests that aggregate welfare gains and reductions in the severity and frequency of financial crises remain, on average, largely unaffected by even significant leakages.
Palavra-chave: Regulatory arbitrage, Macroprudential policy, Financial crises, and Limited regulation enforcement Sujeito: F32 - Current Account Adjustment; Short-term Capital Movements, E44 - Financial Markets and the Macroeconomy, E32 - Business Fluctuations; Cycles, F41 - Open Economy Macroeconomics, and D62 - Externalities
Creator: Bianchi, Javier, Hatchondo, Juan Carlos, and Martinez, Leonardo Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 735 Abstract:
We study the optimal accumulation of international reserves in a quantitative model of sovereign default with long-term debt and a risk-free asset. Keeping higher levels of reserves provides a hedge against rollover risk, but this is costly because using reserves to pay down debt allows the government to reduce sovereign spreads. Our model, parameterized to mimic salient features of a typical emerging economy, can account for a significant fraction of the holdings of international reserves, and the larger accumulation of both debt and reserves in periods of low spreads and high income. We also show that income windfalls, improved policy frameworks, larger contingent liabilities, and an increase in the importance of rollover risk imply increases in the optimal holdings of reserves that are consistent with the upward trend in reserves in emerging economies. It is essential for our results that debt maturity exceeds one period.
Palavra-chave: Safe assets, Rollover risk, Sovereign default, and International reserves Sujeito: F32 - Current Account Adjustment; Short-term Capital Movements, F41 - Open Economy Macroeconomics, and F34 - International Lending and Debt Problems
Creator: Bianchi, Javier Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 730 Abstract:
We develop a quantitative equilibrium model of financial crises to assess the interaction between ex-post interventions in credit markets and the buildup of risk ex ante. During a systemic crisis, bailouts relax balance sheet constraints and mitigate the severity of the recession. Ex ante, the anticipation of such bailouts leads to an increase in risk-taking, making the economy more vulnerable to a financial crisis. We find that moral hazard effects are limited if bailouts are systemic and broad-based. If bailouts are idiosyncratic and targeted, however, this makes the economy significantly more exposed to financial crises.
Palavra-chave: Credit crunch, Macroprudential policy, Moral hazard, and Financial shocks Sujeito: E44 - Financial Markets and the Macroeconomy, G18 - General Financial Markets: Government Policy and Regulation, E32 - Business Fluctuations; Cycles, and F40 - Macroeconomic Aspects of International Trade and Finance: General
Creator: Arce, Fernando, Bengui, Julien, and Bianchi, Javier Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 761 Abstract:
This paper proposes a theory of foreign reserves as macroprudential policy. We study an open economy model of financial crises, in which pecuniary externalities lead to over-borrowing, and show that by accumulating international reserves, the government can achieve the constrained-efficient allocation. The optimal reserve accumulation policy leans against the wind and significantly reduces the exposure to financial crises. The theory is consistent with the joint dynamics of private and official capital flows, both over time and in the cross section, and can quantitatively account for the recent upward trend in international reserves.
Palavra-chave: Macroprudential policy, Financial crises, and International reserves Sujeito: E00 - Macroeconomics and Monetary Economics: General, F00 - International Economics: General, and G00 - Financial Economics: General
Creator: Bianchi, Javier, Ottonello, Pablo, and Presno, Ignacio Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 762 Abstract:
The excess procyclicality of fiscal policy is commonly viewed as a central malaise in emerging economies. We document that procyclicality is more pervasive in countries with higher sovereign risk and provide a model of optimal fiscal policy with nominal rigidities and endogenous sovereign default that can account for this empirical pattern. Financing a fiscal stimulus is costly for risky countries and can render countercyclical policies undesirable, even in the presence of large Keynesian stabilization gains. We also show that imposing austerity can backfire by exacerbating the exposure to default, but a well-designed "fiscal forward guidance" can help reduce the excess procyclicality.
Palavra-chave: Procyclicality, Fiscal stabilization policy, and Sovereign default Sujeito: F44 - International Business Cycles, H50 - National Government Expenditures and Related Policies: General, E62 - Fiscal Policy, F41 - Open Economy Macroeconomics, and F34 - International Lending and Debt Problems
Creator: Bengui, Julien, Bianchi, Javier, and Coulibaly, Louphou Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 535 Abstract:
In this paper, we study the optimal design of financial safety nets under limited private credit. We ask when it is optimal to restrict ex ante the set of investors that can receive public liquidity support ex post. When the government can commit, the optimal safety net covers all investors. Introducing a wedge between identical investors is inefficient. Without commitment, an optimally designed financial safety net covers only a subset of investors. Compared to an economy where all investors are protected, this results in more liquid portfolios, better social insurance, and higher ex ante welfare. Our result can rationalize the prevalent limited coverage of safety nets, such as the lender of last resort facilities.
Palavra-chave: Safety nets, Public liquidity provision, Bailouts, and Time inconsistency Sujeito: G28 - Financial Institutions and Services: Government Policy and Regulation, E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination, and E58 - Central Banks and Their Policies
Creator: Bianchi, Javier and Bigio, Saki Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 503 Abstract:
We develop a new tractable model of banks' liquidity management and the credit channel of monetary policy. Banks finance loans by issuing demand deposits. Because loans are illiquid, deposit transfers across banks must be settled with reserves. Deposit withdrawals are random, and banks manage liquidity risk by holding a precautionary buffer of reserves. We show how different shocks affect the banking system by altering the trade-off between profiting from lending and incurring greater liquidity risk. Through various tools, monetary policy affects the real economy by altering that trade-off. In a quantitative application, we study the driving forces behind the decline in lending and liquidity hoarding by banks during the 2008 financial crisis. Our analysis underscores the importance of disruptions in interbank markets followed by a persistent decline in credit demand.
Palavra-chave: Liquidity, Monetary policy, Banks, and Capital requirements Sujeito: G10 - General Financial Markets: General (includes Measurement and Data), E52 - Monetary Policy, E51 - Money Supply; Credit; Money Multipliers, and E44 - Financial Markets and the Macroeconomy
Creator: Amador, Manuel, Bianchi, Javier, Bocola, Luigi, and Perri, Fabrizio Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 528 Abstract:
In January 2015, in the face of sustained capital inflows, the Swiss National Bank abandoned the floor for the Swiss Franc against the Euro, a decision which led to the appreciation of the Swiss Franc. The objective of this paper is to present a simple framework that helps to better understand the timing of this episode, which we label a “reverse speculative attack". We model a central bank which wishes to maintain a peg, and responds to increases in demand for domestic currency by expanding its balance sheet. In contrast to the classic speculative attacks, which are triggered by the depletion of foreign assets, reverse attacks are triggered by the concern of future balance sheet losses. Our key result is that the interaction between the desire to maintain the peg and the concern about future losses, can lead the central bank to first accumulate a large amount of reserves, and then to abandon the peg, just as we have observed in the Swiss case.
Palavra-chave: Fixed exchange rates, Balance sheet concerns, and Currency crises Sujeito: F31 - Foreign Exchange and F32 - Current Account Adjustment; Short-term Capital Movements
Creator: Amador, Manuel, Bianchi, Javier, Bocola, Luigi, and Perri, Fabrizio Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 740 Abstract:
Recently, several economies with interest rates close to zero have received large capital inflows while their central banks accumulated large foreign reserves. Concurrently, significant deviations from covered interest parity have appeared. We show that, with limited international arbitrage, a central bank's pursuit of an exchange rate policy at the ZLB can explain these facts. We provide a measure of the costs associated with this policy and show they can be sizable. Changes in external conditions that increase capital inflows are detrimental, even when they are beneficial away from the ZLB. Negative nominal rates and capital controls can reduce the costs.
Palavra-chave: Negative interest rates, Foreign exchange interventions, CIP deviations, Currency pegs, Capital flows, and International reserves Sujeito: F41 - Open Economy Macroeconomics, F31 - Foreign Exchange, and F32 - Current Account Adjustment; Short-term Capital Movements