Emerging markets are concerned about sudden stops in international capital flows, which may lead to severe recessions associated with vicious spirals of currency depreciations and tightening borrowing constraints. A common prescription is to impose macroprudential policies, including prudential capital controls, to limit international borrowing especially in foreign currency. This paper analyzes the supportive role of macroprudential policies geared toward the domestic financial market, suggesting that emerging markets should resort to a wide mix of policies, even when the domestic financial market is frictionless. A simple formula provides further insights: domestic and international macroprudential policies are imperfect complements rather than substitutes, due to distinctive characteristics of foreign and domestic currency bonds. Furthermore, the relative importance of domestic macroprudential regulation increases in the return of domestic bonds.
{"title":"Macroprudential Policy Interlinkages","authors":"FRB of Kansas City Submitter, Johannes Matschke","doi":"10.2139/ssrn.3936903","DOIUrl":"https://doi.org/10.2139/ssrn.3936903","url":null,"abstract":"Emerging markets are concerned about sudden stops in international capital flows, which may lead to severe recessions associated with vicious spirals of currency depreciations and tightening borrowing constraints. A common prescription is to impose macroprudential policies, including prudential capital controls, to limit international borrowing especially in foreign currency. This paper analyzes the supportive role of macroprudential policies geared toward the domestic financial market, suggesting that emerging markets should resort to a wide mix of policies, even when the domestic financial market is frictionless. A simple formula provides further insights: domestic and international macroprudential policies are imperfect complements rather than substitutes, due to distinctive characteristics of foreign and domestic currency bonds. Furthermore, the relative importance of domestic macroprudential regulation increases in the return of domestic bonds.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"105 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114224213","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I investigate the role of household heterogeneity and redistribution in the transmission of foreign shocks to aggregate consumption for a small open economy. From theory, I identify key statistics that summarize systematic relationships between marginal propensity to consume (MPC) heterogeneity and shock exposure. Heterogeneous exposure across high-MPC and low-MPC households drives aggregate consumption responses through various redistribution channels. Using micro-data and a calibrated heterogeneous agent New Keynesian model, I gauge the importance of these channels. Most importantly, an unbalanced distribution of foreign-currency nominal wealth significantly amplifies the negative consumption impact of depreciation when more responsive agents are disproportionately less insured against wealth revaluation.
{"title":"Open Economy, Redistribution, and the Aggregate Impact of External Shocks","authors":"Hao Zhou","doi":"10.2139/ssrn.3902121","DOIUrl":"https://doi.org/10.2139/ssrn.3902121","url":null,"abstract":"I investigate the role of household heterogeneity and redistribution in the transmission of foreign shocks to aggregate consumption for a small open economy. From theory, I identify key statistics that summarize systematic relationships between marginal propensity to consume (MPC) heterogeneity and shock exposure. Heterogeneous exposure across high-MPC and low-MPC households drives aggregate consumption responses through various redistribution channels. Using micro-data and a calibrated heterogeneous agent New Keynesian model, I gauge the importance of these channels. Most importantly, an unbalanced distribution of foreign-currency nominal wealth significantly amplifies the negative consumption impact of depreciation when more responsive agents are disproportionately less insured against wealth revaluation.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"405-408 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132460435","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The main objective of the paper authorized by Bianca De Paoli under the title of “Monetary Policy and Welfare in Small Open Economy” is to scrutinize the optimal monetary policy in the context of a small open economy under monopolistic competition and nominal rigidities. By focusing on the research question of whether there is a role played by the central bank to stabilize international prices in open economies or it should solely aim to prevent fluctuations in domestic inflation and output, the author found out that utility-oriented loss function can be elaborated as a quadratic function of domestic inflation, output gap, and real exchange rate. In this brief article review, I analyzed the methodology, main deviations or modifications of the model, role of monetary policy, contributions of the study.
Bianca De Paoli授权的论文“小型开放经济中的货币政策与福利”的主要目的是审视垄断竞争和名义刚性下的小型开放经济背景下的最优货币政策。通过关注开放经济体中央行是否起到稳定国际价格的作用，还是仅仅以防止国内通货膨胀和产出波动为目的的研究问题，笔者发现，效用导向的损失函数可以被阐述为国内通货膨胀、产出缺口和实际汇率的二次函数。在这篇简短的文章回顾中，我分析了模型的方法、主要偏差或修正、货币政策的作用、研究的贡献。
{"title":"Article Review of Monetary Policy and Welfare in a Small Open Economy","authors":"N. Mammadova","doi":"10.2139/ssrn.3907408","DOIUrl":"https://doi.org/10.2139/ssrn.3907408","url":null,"abstract":"The main objective of the paper authorized by Bianca De Paoli under the title of “Monetary Policy and Welfare in Small Open Economy” is to scrutinize the optimal monetary policy in the context of a small open economy under monopolistic competition and nominal rigidities. By focusing on the research question of whether there is a role played by the central bank to stabilize international prices in open economies or it should solely aim to prevent fluctuations in domestic inflation and output, the author found out that utility-oriented loss function can be elaborated as a quadratic function of domestic inflation, output gap, and real exchange rate. In this brief article review, I analyzed the methodology, main deviations or modifications of the model, role of monetary policy, contributions of the study.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122287871","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this study, the effects of financial shocks on macroeconomic variables and monetary policy in small open emerging market economies are analyzed both theoretically and empirically. Clarida et al. (1999) model was developed by adding financial stability as suggested by Tunay and Tunay (2019). Then, the macroeconomic effects of financial shocks and the reaction of the central bank to it were analyzed empirically. Using data set collected from Brazil, China, India, Russia, South Africa and Turkey, a structural panel VAR model was estimated. The findings show that the financial shock caused significant and permanent fluctuations in the output gap, inflation and interest rate. In addition, it has been observed that the inclusion of financial stability in the central bank's objective function causes asymmetric effects on the output gap and inflation, and deepens the bank's political trade-off.
本文从理论和实证两方面分析了金融冲击对小型开放新兴市场经济体宏观经济变量和货币政策的影响。Clarida et al.(1999)模型是根据Tunay和Tunay(2019)的建议，通过添加金融稳定性来开发的。然后，实证分析了金融冲击对宏观经济的影响以及央行的应对措施。利用巴西、中国、印度、俄罗斯、南非和土耳其的数据集，估计了一个结构面板VAR模型。研究结果表明，金融冲击导致产出缺口、通货膨胀和利率出现显著而持久的波动。此外，我们还观察到，将金融稳定纳入央行的目标函数会对产出缺口和通胀产生不对称效应，并加深银行的政治权衡。
{"title":"The Effects of Financial Shocks on Macroeconomic Variables and Monetary Policy in Emerging Market Economies","authors":"K. Tunay, Necla Tunay","doi":"10.2139/ssrn.3779162","DOIUrl":"https://doi.org/10.2139/ssrn.3779162","url":null,"abstract":"In this study, the effects of financial shocks on macroeconomic variables and monetary policy in small open emerging market economies are analyzed both theoretically and empirically. Clarida et al. (1999) model was developed by adding financial stability as suggested by Tunay and Tunay (2019). Then, the macroeconomic effects of financial shocks and the reaction of the central bank to it were analyzed empirically. Using data set collected from Brazil, China, India, Russia, South Africa and Turkey, a structural panel VAR model was estimated. The findings show that the financial shock caused significant and permanent fluctuations in the output gap, inflation and interest rate. In addition, it has been observed that the inclusion of financial stability in the central bank's objective function causes asymmetric effects on the output gap and inflation, and deepens the bank's political trade-off.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121717938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This document provides a fiscal-periscope analysis of Colombia, meaning a 360-view of the backward-looking obligations (clearing sectorial arrears), present obligations (debt burden), and forward-looking obligations (contingent and those resulting from covid-pandemic). We make a recollection of the fiscal rule performance (instituted in 2014), including the use of “escaping clauses”, and assess the medium term outlook. The conclusion is that Colombia needs urgently a new tax-reform aiming at increasing tax collection in no less than 2% of GPD. Under this scenario, the ratio Gross Debt of Central Government/GDP could be stabilized at 65%-70%, increasing the probability of Colombia maintaining her investment grade status. The bulk of the expected tax gains would come from extending the 19% VAT and reversing tax-brakes granted recently to firms. Some adjustments could also be done on households taxes of medium-high strata, although they were recently increased in a significant manner, including the wealth-tax. Under a more ambitions tax-raising scenario of up to 3.7% of GDP, Colombia could substitute firm’s non-wage costs, but this would entail a budgetary effort of 1.3% of GDP.The institutional settings of the fiscal rule and the medium-term projections ordered by laws have served well Colombia. However, we recommend to re-focus the fiscal rule to aim at not surpassing certain threshold of the central government gross debt/GDP ratio and instrumenting it through a primary surplus target. The strategy is to replicate at the fiscal level the successful “inflation-targeting” used by monetary authorities in Colombia.
{"title":"A Fiscal-Periscope Analysis: The Case of Colombia","authors":"Sergio Clavijo","doi":"10.2139/ssrn.3689094","DOIUrl":"https://doi.org/10.2139/ssrn.3689094","url":null,"abstract":"This document provides a fiscal-periscope analysis of Colombia, meaning a 360-view of the backward-looking obligations (clearing sectorial arrears), present obligations (debt burden), and forward-looking obligations (contingent and those resulting from covid-pandemic). We make a recollection of the fiscal rule performance (instituted in 2014), including the use of “escaping clauses”, and assess the medium term outlook. The conclusion is that Colombia needs urgently a new tax-reform aiming at increasing tax collection in no less than 2% of GPD. Under this scenario, the ratio Gross Debt of Central Government/GDP could be stabilized at 65%-70%, increasing the probability of Colombia maintaining her investment grade status. The bulk of the expected tax gains would come from extending the 19% VAT and reversing tax-brakes granted recently to firms. Some adjustments could also be done on households taxes of medium-high strata, although they were recently increased in a significant manner, including the wealth-tax. Under a more ambitions tax-raising scenario of up to 3.7% of GDP, Colombia could substitute firm’s non-wage costs, but this would entail a budgetary effort of 1.3% of GDP.The institutional settings of the fiscal rule and the medium-term projections ordered by laws have served well Colombia. However, we recommend to re-focus the fiscal rule to aim at not surpassing certain threshold of the central government gross debt/GDP ratio and instrumenting it through a primary surplus target. The strategy is to replicate at the fiscal level the successful “inflation-targeting” used by monetary authorities in Colombia.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"64 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124057486","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
As interest rate-growth differentials (r-g) turned negative in many countries, governments consider pursuing fiscal expansion and the potential risks involved. Using a large sample of advanced and emerging economies, our analysis suggests that high public debts can lead to adverse future r-g dynamics. Specifically, countries with higher initial public debt experience (i) a shorter duration of negative r-g episodes and a higher probability of reversal, (ii) higher average r-g, and (iii) a more right-skewed r-g distribution, that implies higher down-side risks. Furthermore, high-debt countries experience larger increases in interest rates in response to (iv) an unexpected decline in domestic output and (v) an increase of global volatility. Results are stronger when public debts are denominated in foreign currencies.
{"title":"Public Debt and r - g at Risk","authors":"A. Presbitero, Ursula Wiriadinata","doi":"10.2139/ssrn.3710776","DOIUrl":"https://doi.org/10.2139/ssrn.3710776","url":null,"abstract":"As interest rate-growth differentials (r-g) turned negative in many countries, governments consider pursuing fiscal expansion and the potential risks involved. Using a large sample of advanced and emerging economies, our analysis suggests that high public debts can lead to adverse future r-g dynamics. Specifically, countries with higher initial public debt experience (i) a shorter duration of negative r-g episodes and a higher probability of reversal, (ii) higher average r-g, and (iii) a more right-skewed r-g distribution, that implies higher down-side risks. Furthermore, high-debt countries experience larger increases in interest rates in response to (iv) an unexpected decline in domestic output and (v) an increase of global volatility. Results are stronger when public debts are denominated in foreign currencies.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124761280","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Addressing the Seventh Asian Monetary Policy Forum, Chief Economist of the International Monetary Fund (IMF) Gita Gopinath stated that the world economic growth trajectory was on a shrinking trend. It will very likely be worse than what we had projected, she said. While most of the economies are focusing on re-opening, there have been reports regarding a possible second wave of the COVID-19 pandemic as well. The adverse impacts this can have on economic resilience does not require elaboration. The novel corona epidemic generated exceptional challenges which required exceptional solutions. Financial regulators have come up with very flexible macroprudential support to address acute market stress during the pandemic. In keeping with such international policy measures, the Central Bank of Sri Lanka (CBSL) also introduced extraordinary regulatory measures to provide relief to pandemic-affected individuals and businesses. Accordingly, Domestic Systemically Important Banks (D-SIBs) and non-D-SIBs were allowed to draw-down their Capital Conservation Buffers by 100 bps and 50 bps, respectively, to facilitate uninterrupted credit flows to the economy.The CBSL also withdrew the requirement to classify all credit facilities extended to a single borrower as non-performing when the aggregate amount of all outstanding non-performing loans granted to such borrower exceed 30% of total credit facilities.Sri Lanka’s business sector has been facing extreme challenges as the pre-Covid-19 economy also carried dark spots which have now been compounded. The tourism and travel industries were severely affected by the Easter Sunday bombing which occurred, in April 2019, and all businesses, in general, were affected by the pre-election political uncertainty which emerged towards the latter part of 2019. The banking sector was required to assist such businesses by providing debt moratoria and other relief packages introduced by the authorities during 2019 and in the beginning of 2020. The COVID-19 pandemic added new challenges for the country’s business sectors which were already vulnerable. In response, new debt repayment deferral policies were introduced to alleviate cash flow pressures on businesses and households. All such persistent fragilities in the economy and uncertainty about an end date of the health crisis have put severe strains on the financial system. The CBSL, as the prime regulator of the financial system, has a crucial task to ensure banks keep credit flowing to the real economy while preserving the safety and soundness of individual institutions and the entire system. However, the regulator alone cannot prepare the financial system and the economy to withstand the unfolding of a crisis of unprecedented scale. The purpose of this article is to invite the attention of all the stakeholder authorities to focus on the need for policy measures to be formulated to strike a delicate balance between the positive countercyclical role of financial intermediation du
{"title":"Financial Regulator’s Dilemma Amidst Persistent Fragilities","authors":"Nishadi Thennakoon","doi":"10.2139/ssrn.3770424","DOIUrl":"https://doi.org/10.2139/ssrn.3770424","url":null,"abstract":"Addressing the Seventh Asian Monetary Policy Forum, Chief Economist of the International Monetary Fund (IMF) Gita Gopinath stated that the world economic growth trajectory was on a shrinking trend. It will very likely be worse than what we had projected, she said. While most of the economies are focusing on re-opening, there have been reports regarding a possible second wave of the COVID-19 pandemic as well. The adverse impacts this can have on economic resilience does not require elaboration. The novel corona epidemic generated exceptional challenges which required exceptional solutions. Financial regulators have come up with very flexible macroprudential support to address acute market stress during the pandemic. In keeping with such international policy measures, the Central Bank of Sri Lanka (CBSL) also introduced extraordinary regulatory measures to provide relief to pandemic-affected individuals and businesses. Accordingly, Domestic Systemically Important Banks (D-SIBs) and non-D-SIBs were allowed to draw-down their Capital Conservation Buffers by 100 bps and 50 bps, respectively, to facilitate uninterrupted credit flows to the economy.The CBSL also withdrew the requirement to classify all credit facilities extended to a single borrower as non-performing when the aggregate amount of all outstanding non-performing loans granted to such borrower exceed 30% of total credit facilities.Sri Lanka’s business sector has been facing extreme challenges as the pre-Covid-19 economy also carried dark spots which have now been compounded. The tourism and travel industries were severely affected by the Easter Sunday bombing which occurred, in April 2019, and all businesses, in general, were affected by the pre-election political uncertainty which emerged towards the latter part of 2019. The banking sector was required to assist such businesses by providing debt moratoria and other relief packages introduced by the authorities during 2019 and in the beginning of 2020. The COVID-19 pandemic added new challenges for the country’s business sectors which were already vulnerable. In response, new debt repayment deferral policies were introduced to alleviate cash flow pressures on businesses and households. All such persistent fragilities in the economy and uncertainty about an end date of the health crisis have put severe strains on the financial system. The CBSL, as the prime regulator of the financial system, has a crucial task to ensure banks keep credit flowing to the real economy while preserving the safety and soundness of individual institutions and the entire system. However, the regulator alone cannot prepare the financial system and the economy to withstand the unfolding of a crisis of unprecedented scale. The purpose of this article is to invite the attention of all the stakeholder authorities to focus on the need for policy measures to be formulated to strike a delicate balance between the positive countercyclical role of financial intermediation du","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133495530","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Spanish Abstract: El documento propone el New Deal Monetario Argentino 2020. Sus objetivos principales son: A- Introducir transitoriamente flujos monetarios para reactivar la economia en el corto plazo (forma V) en lugar de que se prolongue en el largo plazo (forma L). B- Fomentar inversiones hacia las Energias Renovables. English Abstract: The paper proposes the Argentine Monetary New Deal 2020. Its main objectives are: A- It temporarily introduces monetary flows to reactivate the economy in the short term term (V form) rather than prolonged in the long term (L form). B- It promotes investments towards the Renewable Energies.
摘要:阿根廷货币新政(El documentento proone El New Deal Argentino 2020)。6个目标原则:A-引入过渡性货币政策，促进经济增长，促进经济增长，促进经济增长(形式V)，促进经济增长，促进经济增长(形式L)。B-促进经济增长，促进能源再生。摘要:本文提出了阿根廷2020年货币新政。它的主要目标是:A-它暂时引入货币流动，以在短期内(V型)重新激活经济，而不是长期(L型)。它促进了对可再生能源的投资。
{"title":"New Deal Monetario Argentino 2020: Moneda Nacional Peso Argentino, Moneda Nacional Energía Argentina Y Monedas Provinciales (Argentine Monetary New Deal 2020: National Currency Peso Argentino, National Currency Energy Argentina and Provincial Currencies)","authors":"Federico José Camargo","doi":"10.2139/ssrn.3639565","DOIUrl":"https://doi.org/10.2139/ssrn.3639565","url":null,"abstract":"Spanish Abstract: El documento propone el New Deal Monetario Argentino 2020. Sus objetivos principales son: A- Introducir transitoriamente flujos monetarios para reactivar la economia en el corto plazo (forma V) en lugar de que se prolongue en el largo plazo (forma L). B- Fomentar inversiones hacia las Energias Renovables. \u0000 \u0000English Abstract: The paper proposes the Argentine Monetary New Deal 2020. Its main objectives are: A- It temporarily introduces monetary flows to reactivate the economy in the short term term (V form) rather than prolonged in the long term (L form). B- It promotes investments towards the Renewable Energies.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123867546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Nafisa Zabeen Ovi, S. Bose, A. Gunasekarage, Syed Shams
We examine the association of the business cycle and revenue diversification with the banks’ capital buffer and credit risk for a sample of banks from the Association of Southeast Asian Nations (ASEAN) region from 1998 to 2018, using 2847 banking firm–year observations. We find that ASEAN region banks react anticyclically in adjusting their capital buffer levels and credit risk. We find revenue diversification benefits and that banks, through revenue diversification, can reduce their credit risk while achieving capital savings when confronting economic downturns. Our results offer support for the Basel III accord. However, the relations revealed are somewhat moderated by the regulatory quality, competition, and phase of the business cycle encountered by ASEAN region banks.
{"title":"Do the Business Cycle and Revenue Diversification Matter for Banks’ Capital Buffer and Credit Risk: Evidence from ASEAN Banks","authors":"Nafisa Zabeen Ovi, S. Bose, A. Gunasekarage, Syed Shams","doi":"10.2139/ssrn.3544450","DOIUrl":"https://doi.org/10.2139/ssrn.3544450","url":null,"abstract":"We examine the association of the business cycle and revenue diversification with the banks’ capital buffer and credit risk for a sample of banks from the Association of Southeast Asian Nations (ASEAN) region from 1998 to 2018, using 2847 banking firm–year observations. We find that ASEAN region banks react anticyclically in adjusting their capital buffer levels and credit risk. We find revenue diversification benefits and that banks, through revenue diversification, can reduce their credit risk while achieving capital savings when confronting economic downturns. Our results offer support for the Basel III accord. However, the relations revealed are somewhat moderated by the regulatory quality, competition, and phase of the business cycle encountered by ASEAN region banks.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117205258","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Since the mid-1990s, Korea has been aging rapidly. At the same time, real interest rates have declined sharply. This paper studies whether population aging has contributed to the real interest rate decrease in Korea. We first present empirical evidence that increases in life expectancy and the old-age-dependency ratio, and a fall in population growth, i.e., the population aging, decrease real interest rates. Then we calibrate a life-cycle model to capture the features of the old-age-dependency ratio and population growth in Korea, and show that population aging accounts for about one third of the fall in real interest rates between 1995 and 2018. Furthermore, according to simulation results, increased life expectancy is more important than decreased population growth in affecting the real interest rate decrease during the period.
{"title":"인구 고령화가 실질 금리에 미치는 영향 (Impacts of Population Aging on Real Interest Rates)","authors":"Ohik Kwon, Myunghyun Kim","doi":"10.2139/ssrn.3518163","DOIUrl":"https://doi.org/10.2139/ssrn.3518163","url":null,"abstract":"Since the mid-1990s, Korea has been aging rapidly. At the same time, real interest rates have declined sharply. This paper studies whether population aging has contributed to the real interest rate decrease in Korea. We first present empirical evidence that increases in life expectancy and the old-age-dependency ratio, and a fall in population growth, i.e., the population aging, decrease real interest rates. Then we calibrate a life-cycle model to capture the features of the old-age-dependency ratio and population growth in Korea, and show that population aging accounts for about one third of the fall in real interest rates between 1995 and 2018. Furthermore, according to simulation results, increased life expectancy is more important than decreased population growth in affecting the real interest rate decrease during the period.","PeriodicalId":178626,"journal":{"name":"ERN: Monetary & Fiscal Policies in Emerging Markets (Topic)","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126172153","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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