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Long Term Interest Rates Risk Premia And Unconventional Monetary Policy
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Book Synopsis Negative Interest Rate Policy (NIRP) by : Andreas Jobst
Download or read book Negative Interest Rate Policy (NIRP) written by Andreas Jobst and published by International Monetary Fund. This book was released on 2016-08-10 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.
Book Synopsis Introduction to Central Banking by : Ulrich Bindseil
Download or read book Introduction to Central Banking written by Ulrich Bindseil and published by Springer Nature. This book was released on 2021-05-18 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book gives a concise introduction to the practical implementation of monetary policy by modern central banks. It describes the conventional instruments used in advanced economies and the unconventional instruments that have been widely adopted since the financial crisis of 2007–2008. Illuminating the role of central banks in ensuring financial stability and as last resort lenders, it also offers an overview of the international monetary framework. A flow-of-funds framework is used throughout to capture this essential dimension in a consistent and unifying manner, providing a unique and accessible resource on central banking and monetary policy, and its integration with financial stability. Addressed to professionals as well as bachelors and masters students of economics, this book is suitable for a course on economic policy. Useful prerequisites include at least a general idea of the economic institutions of an economy, and knowledge of macroeconomics and monetary economics, but readers need not be familiar with any specific macroeconomic models.
Book Synopsis Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data by : Margherita Bottero
Download or read book Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data written by Margherita Bottero and published by International Monetary Fund. This book was released on 2019-02-28 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.
Book Synopsis Negative Interest Rates by : Luís Brandão Marques
Download or read book Negative Interest Rates written by Luís Brandão Marques and published by International Monetary Fund. This book was released on 2021-03-03 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on negative interest rate policies and covers a broad range of its effects, with a detailed discussion of findings in the academic literature and of broader country experiences.
Book Synopsis A Macroeconomic Approach to the Term Premium by : Emanuel Kopp
Download or read book A Macroeconomic Approach to the Term Premium written by Emanuel Kopp and published by International Monetary Fund. This book was released on 2018-06-15 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, term premia have been very low and sometimes even negative. Now, with the United States economy growing above potential, inflationary pressures are on the rise. Term premia are very sensitive to the expected future path of growth, inflation, and monetary policy, and an inflation surprise could require monetary policy to tighten faster than anticipated, inducing to a sudden decompression of term and other risk premia, thus tightening financial conditions. This paper proposes a semi-structural dynamic term structure model augmented with macroeconomic factors to include cyclical dynamics with a focus on medium- to long-run forecasts. Our results clearly show that a macroeconomic approach is warranted: While term premium estimates are in line with those from other studies, we provide (i) plausible, stable estimates of expected long-term interest rates and (ii) forecasts of short- and long-term interest rates as well as cyclical macroeconomic variables that are stunningly close to those generated from large-scale macroeconomic models.
Book Synopsis Bank Profitability and Risk-Taking by : Natalya Martynova
Download or read book Bank Profitability and Risk-Taking written by Natalya Martynova and published by International Monetary Fund. This book was released on 2015-11-25 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They take risk by levering up to engage in risky ‘side activities’(such as market-based investments) alongside the core business. A more profitable core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk of given size. Consequently, more profitable banks may have higher risk-taking incentives. The framework is consistent with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis.
Book Synopsis Bank Leverage and Monetary Policy's Risk-Taking Channel by : Mr.Giovanni Dell'Ariccia
Download or read book Bank Leverage and Monetary Policy's Risk-Taking Channel written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2013-06-06 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.
Book Synopsis Financial Stability Monitoring by : Tobias Adrian
Download or read book Financial Stability Monitoring written by Tobias Adrian and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a recently released New York Fed staff report, we present a forward-looking monitoring program to identify and track time-varying sources of systemic risk.
Book Synopsis The Yield Curve and Financial Risk Premia by : Felix Geiger
Download or read book The Yield Curve and Financial Risk Premia written by Felix Geiger and published by Springer Science & Business Media. This book was released on 2011-08-17 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: The determinants of yield curve dynamics have been thoroughly discussed in finance models. However, little can be said about the macroeconomic factors behind the movements of short- and long-term interest rates as well as the risk compensation demanded by financial investors. By taking on a macro-finance perspective, the book’s approach explicitly acknowledges the close feedback between monetary policy, the macroeconomy and financial conditions. Both theoretical and empirical models are applied in order to get a profound understanding of the interlinkages between economic activity, the conduct of monetary policy and the underlying macroeconomic factors of bond price movements. Moreover, the book identifies a broad risk-taking channel of monetary transmission which allows a reassessment of the role of financial constraints; it enables policy makers to develop new guidelines for monetary policy and for financial supervision of how to cope with evolving financial imbalances.
Book Synopsis Macroeconomic Shocks and Unconventional Monetary Policy by : Naoyuki Yoshino
Download or read book Macroeconomic Shocks and Unconventional Monetary Policy written by Naoyuki Yoshino and published by Oxford University Press. This book was released on 2019-06-27 with total page 361 pages. Available in PDF, EPUB and Kindle. Book excerpt: Barely two decades after the Asian financial crisis Asia was suddenly confronted with multiple challenges originating outside the region: the 2008 global financial crisis, the European debt crisis, and finally developed economies' implementation of unconventional monetary policies. The implementation of quantitative easing, ultra-low interest rate policies, and negative interest rate policies by a number of large central banks has given rise to concerns over financial stability and international capital flows. Macroeconomic Shocks and Unconventional Monetary Policy: Impacts on Emerging Markets explains how shocks stemming from the global financial crisis have affected macroeconomic and financial stability in emerging Asia. Macroeconomic Shocks and Unconventional Monetary Policy: Impacts on Emerging Markets brings together the most up-to-date knowledge impacts of recent macroeconomic shocks on Asia's real economy; the spillover effects of macroeconomic shocks on financial markets and flows in Asia; and key challenges for monetary, exchange rate, trade and macro prudential policies of developing Asian economies. It is authored by experts in the field of international macroeconomics from leading academic institutions, central banks, and international organizations including the International Monetary Fund, the Bank for International Settlement, and the Asian Development Bank Institute.
Book Synopsis The Effects of Unconventional Monetary Policies on Bank Soundness by : Frederic Lambert
Download or read book The Effects of Unconventional Monetary Policies on Bank Soundness written by Frederic Lambert and published by International Monetary Fund. This book was released on 2014-08-13 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Unconventional monetary policy is often assumed to benefit banks. However, we find little supporting evidence. Rather, we find some evidence for heightened medium-term risks. First, in an event study using a novel instrument for monetary policy surprises, we do not detect clear effects of monetary easing on bank stock valuation but find a deterioration of medium-term bank credit risk in the United States, the euro area, and the United Kingdom. Second, in panel regressions using U.S. banks’ balance sheet information, we show that bank profitability and risk taking are ambiguously affected, while balance sheet repair is delayed.
Book Synopsis Financial Crisis, US Unconventional Monetary Policy and International Spillovers by : Qianying Chen
Download or read book Financial Crisis, US Unconventional Monetary Policy and International Spillovers written by Qianying Chen and published by International Monetary Fund. This book was released on 2015-04-29 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of the US quantitative easing (QE) on both the emerging and advanced economies, estimating a global vector error-correction model (GVECM) and conducting counterfactual analyses. We focus on the effects of reductions in the US term and corporate spreads. First, US QE measures reducing the US corporate spread appear to be more important than lowering the US term spread. Second, US QE measures might have prevented episodes of prolonged recession and deflation in the advanced economies. Third, the estimated effects on the emerging economies have been diverse but often larger than those recorded in the US and other advanced economies. The heterogeneous effects from US QE measures indicate unevenly distributed benefits and costs.
Book Synopsis Large-Scale Asset Purchases by the Federal Reserve by : Joseph Gagnon
Download or read book Large-Scale Asset Purchases by the Federal Reserve written by Joseph Gagnon and published by DIANE Publishing. This book was released on 2010-05 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since Dec. 2008, the Fed. Reserve¿s traditional policy instrument, the target federal funds rate, has been near zero. In order to further ease the stance of monetary policy as the economic outlook deteriorated, the Fed. Reserve purchased substantial quantities of assets with medium and long maturities. This paper explains how these purchases were implemented and discusses how they can affect the economy. The purchases led to meaningful and long-lasting reductions in longer-term interest rates (IR) on a range of securities, incl. securities that were not included in the purchase programs. These reductions in IR primarily reflect lower risk premiums, including term premiums, rather than lower expectations of future short-term IR. Tables.
Book Synopsis Unconventional Monetary Policy and Financial Stability by : Alexis Stenfors
Download or read book Unconventional Monetary Policy and Financial Stability written by Alexis Stenfors and published by Routledge. This book was released on 2020-07-15 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the financial crisis of 2008-09, central bankers around the world have been forced to abandon conventional monetary policy tools in favour of unconventional policies such as quantitative easing, forward guidance, lowering the interest rate paid on bank reserves into negative territory, and pushing up prices of government bonds. Having faced a crisis in its banking sector nearly a decade earlier, Japan was a pioneer in the use of many of these tools. Unconventional Monetary Policy and Financial Stability critically assesses the measures used by Japan and examines what they have meant for the theory and practice of economic policy. The book shows how in practice unconventional monetary policy has worked through its impact on the financial markets. The text aims to generate an understanding of why such measures were introduced and how the Japanese system has subsequently changed regarding aspects such as governance and corporate balance sheets. It provides a comprehensive study of developments in Japanese money markets with the intent to understand the impact of policy on the debt structures that appear to have caused Japan’s deflation. The topics covered range from central bank communication and policymaking to international financial markets and bank balance sheets. This text is of great interest to students and scholars of banking, international finance, financial markets, political economy, and the Japanese economy.
Book Synopsis Exiting unconventional monetary policy by : Korbinian Stinglhamer
Download or read book Exiting unconventional monetary policy written by Korbinian Stinglhamer and published by GRIN Verlag. This book was released on 2017-10-11 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2016 in the subject Economics - Finance, grade: 1,0, University of Wisconsin-Madison (Economics), course: The Financial System, language: English, abstract: The paper analyzes the unconventional monetary policies that were implemented by the Federal Reserve Bank, the Bank of England, the European Central Bank, and the Bank of Japan during their post-crisis transitions. Next, potential challenges involved in the exit will be analyzed. During the financial crisis many central banks in the world implemented “unconventional monetary policy” measures, such as balance-sheet policies, forward guidance, and negative interest rates. Once the financial system stabilizes, the difficult process of returning back to conventional monetary policy begins. For this reason, this paper analyzes the unconventional monetary policies during post-crisis transitions and potential challenges involved in the exit. The analysis suggests that a transition from unconventional monetary policies should be accomplished smoothly, without exceeding inflation, harming economic recovery, or destabilizing financial markets. Furthermore, the analysis suggests to make use of forward guidance in order to prepare the market for the exit and to increase its potential speed. However, the optimal exiting policy depends largely on present and future economic conditions of the respective currency region. In order to analyze these conditions and determine the ideal exiting strategy for each central bank, further investigations need to be done.
Book Synopsis Unconventional Monetary Policy and Long-Term Interest Rates by : Mr.Tao Wu
Download or read book Unconventional Monetary Policy and Long-Term Interest Rates written by Mr.Tao Wu and published by International Monetary Fund. This book was released on 2014-10-22 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the transmission mechanism through which unconventional monetary policy affects long-term interest rates. I construct a real-time measure summarizing market projections of the magnitude and duration of the Federal Reserve's Large Scale Asset Purchases (LSAP) program, and analyze the determination of term premiums and expectations of future short-term interest rates in a sample spanning more than two decades. Empirical findings suggest that the LSAP has effectively lowered the long-term Treasury bond yields, through both "signaling" and "portfolio balance" channels. On the other hand, the Fed's "forward guidance" also leads to gradual extension of market projections for the duration of the LSAP program, thereby enhancing the LSAP's effect to keep term premiums low. Estimation results also reveal a diminished effectiveness of the LSAP during QE III. Finally, model simulations underscore the importance of policy transparency in minimizing unnecessary market turbulence and ensuring a timely and smooth exit of the unconventional monetary policy stimulus.
Book Synopsis Advanced Introduction to Central Banks and Monetary Policy by : de Haan, Jakob
Download or read book Advanced Introduction to Central Banks and Monetary Policy written by de Haan, Jakob and published by Edward Elgar Publishing. This book was released on 2022-08-12 with total page 125 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by two expert economists, this comprehensive Advanced Introduction provides a thorough and up-to-date analysis of central banks and monetary policy, analysing the ways in which views about monetary policy have developed and changed.
