INTERNALISASI SEKTOR PERBANKAN DALAM MODEL DSGE

We build DSGE model for small open economy with financial friction in the form of collateral constrain on banking sector, designed for Indonesian economy. The constructed model is capable to simulate the monetary policy (Bank Indonesia rate) and macroprudential policy (reserve requirement, capital adequacy ratio – CAR, and loan to value – LTV). By internalizing banking sector into the model, this model also enable us to simulate the impact of any shock originated from banking sector. Keywords: monetary policy, DSGE with banking sector, macroprudential policy JEL Classification: E32, E44, E52, E58

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PERANAN KEBIJAKAN MONETER DALAM MENJAGA STABILITAS PEREKONOMIAN INDONESIA SEBAGAI RESPON TERHADAP FLUKTUASI PEREKONOMIAN DUNIA

Buletin Ekonomi Moneter dan Perbankan ◽

10.21098/bemp.v9i2.203 ◽

2007 ◽

Vol 9 (2) ◽

pp. 145-177

Author(s):

M. Maulana Al Arif ◽

Achmad Tohari

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Interest Rate ◽

Open Economy ◽

Small Open Economy ◽

Monthly Data ◽

Vector Autoregressive ◽

The World ◽

The Exchange Rate ◽

The Impact

This paper analyzes the impact of the inflation and the world interest rate on the Indonesian economy and the effectiveness of the Indonesian central bank policy to adopt the domestic macroeconomic fluctuation.Assuming Indonesia as a small-open economy, the Stuctural Vector Autoregressive Model is utilized on the monthly data during the periode of 1999: 1 – 2004: 12 covering the main domestic macroeconomic indicator (output, price, money supply, interest rate and the exchange rate) and the world oil price and world interest rate as the disturbance source.The analysis provides 2 main results, first, the international variables do have impacts on the domestic variables fluctuation, implying the fragility of the domestic economy due to the external shock, second, the monetary policy is effective on supporting the economic growth and stabilizing the price level. However, the Bank Indonesia policy to stabilize the international shock via the exchange rate channel, contributes to a higher impact of the international shock on domestic interest rate.Keywords: monetary policy, business cycle, SVARJEL Classification: E52, E32, C32, F41

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Risky Mortgages and Macroprudential Policy: A Calibrated DSGE Model for Lithuania

Ekonomika ◽

10.15388/ekon.2021.100.2.1 ◽

2021 ◽

Vol 100 (2) ◽

pp. 6-39

Author(s):

Jaunius Karmelavičius

Keyword(s):

Credit Risk ◽

Open Economy ◽

Banking Sector ◽

Capital Requirements ◽

Mortgage Lending ◽

Slight Reduction ◽

Dsge Model ◽

Macroprudential Policy ◽

Credit Cycle ◽

The Impact

Following the financial crisis of 2009 there was an emergence of macroprudential policy tools, as well as a need to model the macroeconomy and the financial sector in a coherent framework. This paper develops and calibrates a small open economy DSGE model for Lithuania to shed some light on the interactions between the macroeconomy and the banking sector, regulated by macroprudential policy. The model features housing market, and endogenous credit risk a la de Walque et al. (2010), whereby the household can default on mortgage repayments, what leads to housing collateral seizure. Foreign-owned banks, that are subject to risk-sensitive macroprudential capital requirements, take into account not only the mortgage default rate but also the cap on loan to value (LTV) ratio when making lending decisions. Using this mechanism, we show that while a more stringent LTV constraint reduced credit demand, it can also lead to an expansion in credit supply via lower credit risk. Therefore, a tightening of LTV requirement should result in only a slight reduction in mortgage lending, coupled with lower interest rate margins. The article compares the impact of the tightening of three macroprudential tools, namely, bank capital requirements, mortgage risk weights and LTV limit. We find that broad-based capital requirements, such as the counter-cyclical capital buffer, are less efficient in leaning against the housing credit cycle, because of a relatively large cost incurred on the firm sector.

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WHY JOIN A CURRENCY UNION? A NOTE ON THE IMPACT OF BELIEFS ON THE CHOICE OF MONETARY POLICY

Macroeconomic Dynamics ◽

10.1017/s1365100510000520 ◽

2011 ◽

Vol 16 (2) ◽

pp. 320-334 ◽

Cited By ~ 3

Author(s):

Federico Ravenna

Keyword(s):

Monetary Policy ◽

Open Economy ◽

Policy Maker ◽

Small Open Economy ◽

Optimal Choice ◽

New Keynesian ◽

Monetary Policies ◽

Keynesian Model ◽

The Impact ◽

Better Than

We argue that a fixed exchange rate can be an optimal choice even if a policy maker could commit to the first-best monetary policy whenever the private sector's beliefs reflect incomplete information about the policy maker's dependability. This model implies that joining a currency area may be optimal for its impact not on the behavior of the policy maker, but on the beliefs of the private sector. Monetary policies are evaluated using a new Keynesian model of a small open economy solved under imperfect policy credibility. We quantify the minimum distance between announced policy and the private sector's beliefs that is necessary for a peg to perform better than an independent monetary policy when the policy maker can commit to the first-best policy.

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The effect of the efficiency of monetary policy educational tools on the financial soundness of banks A pilot study in the Iraq Stock Exchange (2007-2017)

Academic Journal of Nawroz University ◽

10.25007/ajnu.v10n2a1002 ◽

2021 ◽

Vol 10 (2) ◽

pp. 54-75

Author(s):

Nasreen Mohamed AL-hakim ◽

Akram S. Yousif

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Commercial Banks ◽

Banking Sector ◽

Stock Exchange ◽

Capital Adequacy ◽

Policy Tools ◽

Integration Test ◽

Financial Soundness ◽

The Impact

The aim of the research is to identify the impact of the quantitative tools of monetary policy on the financial soundness of banks, and the research was based on a set of hypotheses, to determine the nature of the effect between independent and dependent variables, and for the purpose of testing research hypotheses, a number of financial ratios according to CAMEL indicators were used to analyze the historical data of banks, the research sample and the component From (7) banks for the period (2007-2017), the quantitative tools of monetary policy were used from the impact published in the Central Bank of Iraq, and a number of statistical methods were used, including time series testing, joint integration test and multiple regression test according to programs.EVIES10 has been reached through the research to a number of conclusions, the most important of which is that the CAMEL classification system is one of the effective supervisory methods for assessing the financial soundness of banks and determining the duration of the strength and durability of their financial positions and the extent of their ability to adapt to any variables related to their activities, as it ensures that the banks are moving in the direction. Correct or reverse, and the weakness of the monetary policy tools applied by the Central Bank of Iraq due to the limited Iraqi market for securities as it is still incomplete conditions as a secondary market that contributes to expanding the circulation of securities, which constitutes a burden on the use of quantitative tools of the Central Bank of Iraq, especially open market operations,As well as the weakness of the legal reserve ratio in the impact on the ability of commercial banks to grant credit, because commercial banks in Iraq enjoy high liquidity due to the high rate of inflation significantly. The research also presented a set of proposals, the most important of which is the activation of the monetary policy tools of the Central Bank of Iraq, which is currently being used to modernize, develop and increase the efficiency of the stock market in Iraq to keep pace with developments in global markets,nd developing the supervisory and supervisory role of the Central Bank of Iraq over Iraqi banks in terms of the extent of their commitment to regulations and laws and activating and activating the banking sector in a way that serves to build a banking infrastructure that keeps pace with the development of international banks. Delinquency and low capital adequacy ratio, thus hedging and beware of any problems that arise in the banking sector. Key words: monetary policy, quantitative tools of monetary policy, financial soundness, the CAMEL model, Iraq Stock Exchange Market.

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The Impacts of Credit Standards on Aggregate Fluctuations in a Small Open Economy: The Role of Monetary Policy

Economies ◽

10.3390/economies9040203 ◽

2021 ◽

Vol 9 (4) ◽

pp. 203

Author(s):

Hai Le

Keyword(s):

Monetary Policy ◽

Open Economy ◽

Banking Sector ◽

Small Open Economy ◽

Output Volatility ◽

Aggregate Fluctuations ◽

Efficient Tool ◽

Macroeconomic Volatility ◽

Credit Standards

Empirical evidence demonstrates that credit standards, including lending margins and collateral requirements, move in a countercyclical direction. In this study, we construct a small open economy model with financial frictions to generate the countercyclical movement in credit standards. Our analysis demonstrates that countercyclical fluctuations in credit standards work as an amplifier of shocks to the economy. In particular, the existence of endogenous credit standards increases output volatility by 21%. We also suggest three alternative tools for policymakers to dampen the effects of endogenous credit standards on macroeconomic volatility. First, the introduction of credit growth to the monetary policy succeeds in counteracting the fluctuation of lending, and thus decreasing the additional volatility considerably. Second, the exchange rate augmented monetary policy, if well-constructed, is considered an efficient tool to eliminate most of the additional fluctuations caused by deep habits in the banking sector. Finally, the introduction of the foreign interest augmented policy also proves successful in dampening the effect of endogenous movements in lending standards.

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MONETARY POLICY AND ASSET PRICES IN A SMALL OPEN ECONOMY: A FACTOR-AUGMENTED VAR ANALYSIS FOR SINGAPORE

Annals of Financial Economics ◽

10.1142/s2010495209500043 ◽

2009 ◽

Vol 05 (01) ◽

pp. 0950004 ◽

Cited By ~ 3

Author(s):

HWEE KWAN CHOW ◽

KEEN MENG CHOY

Keyword(s):

Monetary Policy ◽

Open Economy ◽

Stock Prices ◽

Vector Autoregression ◽

Asset Price ◽

Small Open Economy ◽

Impulse Response Functions ◽

Economic Time Series ◽

Policy Shocks ◽

The Impact

The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy pre-emptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary policy response to asset price swings in the small open economy of Singapore. Empirical analysis of monetary policy based on standard vector autoregression (VAR) models, unfortunately, is often hindered by the use of sparse information sets. To better reflect the extensive information monitored by Singapore's central bank, including global economic indicators, we augment a monetary vector autoregression (VAR) model with common factors extracted from a large panel dataset spanning 122 economic time series and the period 1980q1–2008q2. The resulting FAVAR model is used to assess the impact of monetary policy shocks on residential property and stock prices. Impulse response functions and variance decompositions suggest that monetary policy can potentially be used to lean against asset price booms in Singapore.

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Fiscal Consolidation in an Open Economy

The American Economic Review ◽

10.1257/aer.102.3.186 ◽

2012 ◽

Vol 102 (3) ◽

pp. 186-191 ◽

Cited By ~ 33

Author(s):

Christopher J Erceg ◽

Jesper Lindé

Keyword(s):

Monetary Policy ◽

Lower Bound ◽

Open Economy ◽

Small Open Economy ◽

Currency Union ◽

New Keynesian ◽

Zero Lower Bound ◽

Fiscal Consolidation ◽

Monetary Regimes ◽

The Impact

his paper uses a New Keynesian DSGE model of a small open economy to compare how the effects of fiscal consolidation differ depending on whether monetary policy is constrained by currency union membership or by the zero lower bound on policy rates. We show that there are important differences in the impact of fiscal shocks across these monetary regimes that depend both on the duration of the zero lower bound and on features that determine the responsiveness of inflation.

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Analysis of monetary regulation of the investment sphere in the Republic of Belarus

SHS Web of Conferences ◽

10.1051/shsconf/202110709001 ◽

2021 ◽

Vol 107 ◽

pp. 09001

Author(s):

Marina Zelenkevich ◽

Natallia Bandarenka

Keyword(s):

Economic Growth ◽

Monetary Policy ◽

Open Economy ◽

Financial Stability ◽

Developing Economies ◽

Small Open Economy ◽

Price Stability ◽

Practical Implementation ◽

The Republic ◽

The Impact

The purpose of the article is to substantiate the possibility and necessity of the central bank’s monetary policy to stimulate investment and economic growth for developing economies on the example of the investment sphere and monetary policy in Belarus. It was determined that the impact of monetary regulation on investment and economic growth is achieved in the course of the central bank’s activities to maintain indicators of price and financial stability which reflect favourable conditions for investment. Price stability is achieved through the implementation of various central bank strategies such as targeting the exchange rate, money supply and inflation. These strategies are defined as the objectives of monetary policy. The article discusses the advantages of monetary regulation in comparison with fiscal regulation, and also contains an analysis of its practical implementation in the Republic of Belarus in the period 2000–2019. As a result of the study the economic and financial results of the strategies applied at different stages were determined, their consequences for the economy were substantiated, and the strategies that best affect the financial and economic indicators in the country were identified. For countries with a small open economy which includes Belarus maintaining price and financial stability is complemented by a set of measures to reduce the devaluation expectations of market entities and create a favorable foreign economic environment.

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The limits to robust monetary policy in a small open economy with learning agents

10.36095/banxico/di.2020.12 ◽

2020 ◽

Author(s):

Marine Charlotte André ◽

Meixing Dai

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Open Economy ◽

Adaptive Learning ◽

High Speed ◽

Rational Expectations ◽

Small Open Economy ◽

Learning Gain ◽

Trade Offs ◽

The Impact

We study the impact of adaptive learning for the design of a robust monetary policy using a small open-economy New Keynesian model. We find that slightly departing from rational expectations substantially changes the way the central bank deals with model misspecification. Learning induces an intertemporal trade-off for the central bank, i.e., stabilizing inflation (output gap) today or stabilizing it tomorrow. The central bank should optimally anchoring private agents expectations in the short term in exchange of easier future intratemporal trade-offs. Compared to the rational expectations equilibrium, the possibility to conduct robust monetary policy is limited in a small open economy under learning for any exchange rate pass-through level and any degree of trade openness. The misspecification that can be introduced into all equations of the model is lower in a small open economy, and approaches zero at high speed as the learning gain rises.

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Does Exchange Rate Impact Commodity Prices: Evidence From a Small Open Economy

10.21203/rs.3.rs-215311/v1 ◽

2021 ◽

Author(s):

Kore Marc Antoine Guei ◽

IREEN CHOGA

Keyword(s):

Exchange Rate ◽

Open Economy ◽

Small Open Economy ◽

Commodity Prices ◽

Jel Classification ◽

Terms Of Trade ◽

Vector Autoregressive ◽

Threshold Autoregressive ◽

Svar Model ◽

The Impact

Abstract The paper assesses the dynamics of exchange rate and the terms of trade on industrial commodity prices. We investigate the linear and asymmetric effects of exchange rate on commodity prices using an error correction model (ECM) and a threshold autoregressive (TAR) model that allows to estimate the dynamics of different regimes. Further we employ a structural vector autoregressive (SVAR) model to examine the impact of an external shock on the terms of trade using quarterly data over the period 1992q1 to 2019q4.The results suggest that an exchange rate above or equal 4.6 has a positive and significant impact on commodity prices. Specifically, if real exchange rate is above the threshold 4.6, the price of gold, copper, and nickel increases by 0.9 %, 1.1%, and 2.7%, respectively. We also find that a 1% increase in real interest rate is associated with a 0.003% fall in the terms of trade. JEL classification: E31, E43, F3

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