CHAFIK, Omar (2018): Financial cycle and conduct of monetary policy: The amplifier/divider theory.
This is the latest version of this item.
Preview |
PDF
MPRA_paper_89155.pdf Download (838kB) | Preview |
Abstract
The financial cycle can play a decisive role in the transmission of monetary policy decisions. The impact of these decisions is amplified when the financial cycle is positive, and it is compressed when this cycle is negative. Considering this amplifier/divider mechanism in a semi-structural NKM, estimated for the US economy using Bayesian techniques, confirms this conclusion and improves the decision of raising or lowering the interest rate. The information on the financial cycle also allows a better identification of the inflationary and disinflationary pressures due to the impact of this cycle on the balance between supply and demand of the economy through its action on financing conditions.
Item Type: | MPRA Paper |
---|---|
Original Title: | Financial cycle and conduct of monetary policy: The amplifier/divider theory |
Language: | English |
Keywords: | Financial cycle, monetary policy, New Keynesian Model, output gap, Bayesian estimation. |
Subjects: | C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit |
Item ID: | 89155 |
Depositing User: | Mr Omar CHAFIK |
Date Deposited: | 25 Sep 2018 09:30 |
Last Modified: | 27 Sep 2019 14:44 |
References: | Aikman, D., Haldane, A. G., & Nelson, B. D. (2015). Curbing the credit cycle. The Economic Journal, 125(585), 1072-1109. Beneš, J., Clinton, K., García-Saltos, R., Johnson, M., Laxton, D., Manchev, P. B., & Matheson, T. (2010). Estimating potential output with a multivariate filter (No. 10/285). International Monetary Fund. Berg, A., Karam, P. D., & Laxton, D. (2006). A practical model-based approach to monetary policy analysis-overview (No. 06/81). International Monetary Fund. Bernanke, B. S. (1983). Non-monetary effects of the financial crisis in the propagation of the Great Depression. Bernanke, B. S., & Gertler, M. (1995). Inside the black box: the credit channel of monetary policy transmission. Journal of Economic perspectives, 9(4), 27-48. Bernanke, B. S., Gertler, M., & Gilchrist, S. (1999). The financial accelerator in a quantitative business cycle framework. Handbook of macroeconomics, 1, 1341-1393. Bernanke, B., & Gertler, M. (1989). The Corporate Bond Credit Spread Puzzle. Borio, C. (2014). The financial cycle and macroeconomics: What have we learnt?. Journal of Banking & Finance, 45, 182-198. Borio, C. E., & Lowe, P. W. (2002). Asset prices, financial and monetary stability: exploring the nexus. Borio, C., Furfine, C., & Lowe, P. (2001). Procyclicality of the financial system and financial stability: issues and policy options. BIS papers, 1 (March), 1-57. BRI (2016). Annual Report, No. 86. Basel, Switzerland: Bank for International Settlements. Claessens, S., Kose, M. A., & Terrones, M. E. (2011, May). Financial cycles: what? how? when?. In International Seminar on Macroeconomics (Vol. 7, No. 1, pp. 303-344). Chicago, IL: University of Chicago Press. Dieppe, A., Georgiadis, G., Ricci, M., Van Robays, I., & Van Roye, B. (2017). ECB-Global: Introducing the ECB's global macroeconomic model for spillover analysis (No. 2045). ECB. Duprey, T., Klaus, B., & Peltonen, T. (2017). Dating systemic financial stress episodes in the EU countries. Journal of Financial Stability, 32, 30-56. Fisher, I. (1933). The debt-deflation theory of great depressions. Econometrica: Journal of the Econometric Society, 337-357. Hollo, D., Kremer, M., & Lo Duca, M. (2012). CISS-a composite indicator of systemic stress in the financial system. Illing, M., & Liu, Y. (2006). Measuring financial stress in a developed country: An application to Canada. Journal of Financial Stability, 2(3), 243-265. Islami, M., & Kurz‐Kim, J. R. (2014). A single composite financial stress indicator and its real impact in the euro area. International Journal of Finance & Economics, 19(3), 204-211. Kiyotaki, N., & Moore, J. (1997). Credit cycles. Journal of political economy, 105(2), 211-248. Kiyotaki, N., & Moore, J. (1997). Credit chains. mimeo. Lall, M. S., Cardarelli, M. R., & Elekdag, S. (2009). Financial stress, downturns, and recoveries (No. 9-100). International Monetary Fund. Ljung, L. (1999). System Identification: Theory for the User, ser. Information and System Sciences. Prentice Hall. Mishkin, F. S. (1978). The household balance sheet and the Great Depression. The Journal of Economic History, 38(4), 918-937. Osorio, M. C., Unsal, D. F., & Pongsaparn, M. R. (2011). A quantitative assessment of financial conditions in Asia (No. 11-170). International Monetary Fund. Reinhart, C. M., & Rogoff, K. S. (2009). The aftermath of financial crises. American Economic Review, 99(2), 466-72. Reinhart, C. M., & Rogoff, K. S. (2009). This time is different: Eight centuries of financial folly. Princeton university press. Taylor, J. B. (1993, December). Discretion versus policy rules in practice. In Carnegie-Rochester conference series on public policy (Vol. 39, pp. 195-214). North-Holland. Woodford, M. (2003), Interest and Prices: Foundations of a Theory of Monetary Policy. Princeton. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/89155 |
Available Versions of this Item
-
Financial cycle and conduct of monetary policy: theory and empirical evidence. (deposited 15 Sep 2018 07:39)
- Financial cycle and conduct of monetary policy: The amplifier/divider theory. (deposited 25 Sep 2018 09:30) [Currently Displayed]