scholarly journals Stock-Flow Consistent Modeling of Default Events Sequence in a Closed Economy

2017 ◽  
pp. 55-65
Author(s):  
Ihor Voloshyn
Keyword(s):  
Numerical Simulation ◽  
Interest Rates ◽  
Recovery Rate ◽  
Balance Sheet ◽  
Probability Of Default ◽  
Closed Economy ◽  
Fire Sales ◽  
Consistent Model ◽  
Stock Flow ◽  
Financial Transactions

By sequentially examining the full chain of events starting from the default of firms through the fire-sale of goods towards the write-offs of bad loans, we develop a new matrix of financial transactions. This matrix is incorporated into the transactions-flows matrix of the closed economy consisting of households, firms, and banks. On the basis of the balance sheet and transactions-flows matrices, this study further constructs a stock-flow consistent model of the closed economy. We also provide the results of a numerical simulation and argue that our model allows studying how such key parameters as the probability of default, the rate of fire-sales (new injected parameter), the recovery rate, and interest rates on loans and deposits affect the performance of banks and firms, observing economic dynamics in time.

scholarly journals Money creation under full-reserve banking: a stock–flow consistent model

2018 ◽  
Vol 43 (5) ◽  
pp. 1219-1249 ◽  
Author(s):  
Patrizio Lainà
Keyword(s):  
Interest Rates ◽  
Government Spending ◽  
Banking System ◽  
Large Change ◽  
Real Economy ◽  
Consistent Model ◽  
Safety Margins ◽  
Money Creation ◽  
Reserve Banking ◽  
Stock Flow

Abstract This paper presents a stock–flow consistent model of full-reserve banking. The paper investigates money creation through government spending in a full-reserve banking system. The results are contrasted against the cases in which government spending is increased under full-reserve banking without money creation and under endogenous money, that is, the current monetary system. It is found that output, employment and inflation evolve almost identically. In contrast to other cases, money creation in a full-reserve banking system leads to a permanent reduction in consolidated government debt. Monetary policy transmits effectively as an increase in central bank reserves translates into an almost equal increase in demand deposits. Furthermore, an unusually large change in the money supply induces only smooth and relatively small changes in interest rates. In addition, the paper compares three additional ways to create money. Money creation through tax cuts or citizen’s dividend generates roughly the same results as creating money through government spending. In contrast, money creation through quantitative easing affects only monetary aggregates and interest rates but not the real economy. Although in every money creation experiment banks are able to fully satisfy the demand for loans, temporary credit crunches can occur under full-reserve banking. The occurrence of credit crunches depends on changes in private behaviour and economic policy as well as safety margins adopted by banks.

Abstract: Exchange Rate Risk, Foreign-Pay Bond Issues and the Financial Behavior of Canadian Corporations

1977 ◽  
Vol 12 (4) ◽  
pp. 633-633
Author(s):  
Karl A. Stroetmann
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Bond Market ◽  
Financial Behavior ◽  
Exchange Rate Risk ◽  
Closed Economy ◽  
Abstract Exchange ◽  
Bond Issues ◽  
Basic Ideas ◽  
Financial Transactions

Some basic ideas of a model of the international term structure of interest rates are outlined. Based on Roll's (1970) theory of equilibrium interest rates in an efficient bond market of a closed economy, we show that the term structure of interest rates in countries whose residents engage in international financial transactions is a function of domestic and foreign traders' expectations of future domestic and foreign spot interest rates, or their degree of risk aversion, and of differences in time preferences.

Workers' debt-financed consumption: a supermultiplier stock–flow consistent model

2020 ◽  
Vol 8 (3) ◽  
pp. 339-364
Author(s):  
Gabriel Vieira Mandarino ◽  
Claudio H, Dos Santos ◽  
Antonio Carlos Macedo e Silva
Keyword(s):  
Economic Growth ◽  
Computer Simulations ◽  
Banking Sector ◽  
Analytic Solution ◽  
Dynamic Properties ◽  
Growth Trajectories ◽  
Consistent Model ◽  
Stock Flow ◽  
Financial Transactions ◽  
Shed Light

This paper presents a supermultiplier stock–flow consistent model of economic growth led by debt-financed consumption of workers. In so doing it tries to shed light on the financial requirements of growth trajectories based on induced investment. The model explicitly derives the aggregate financial needs of both workers and firms and how these needs can be met by the banking sector – mapping out all the stock and flow implications of the assumed financial transactions for all sectors of the economy at hand. An analytic solution for the nature of the steady states of the model is then provided and its dynamic properties analysed by means of computer simulations.

scholarly journals Who Bears Interest Rate Risk?

2018 ◽  
Vol 32 (8) ◽  
pp. 2921-2954 ◽  
Author(s):  
Peter Hoffmann ◽  
Sam Langfield ◽  
Federico Pierobon ◽  
Guillaume Vuillemey
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Banking Sector ◽  
Balance Sheet ◽  
Interest Rate Risk ◽  
Cross Sectional ◽  
Net Worth ◽  
Loan Rate ◽  
Rate Risk ◽  
European Banking

Abstract We study the allocation of interest rate risk within the European banking sector using novel data. Banks’ exposure to interest rate risk is small on aggregate, but heterogeneous in the cross-section. Contrary to conventional wisdom, net worth is increasing in interest rates for approximately half of the institutions in our sample. Cross-sectional variation in banks’ exposures is driven by cross-country differences in loan-rate fixation conventions for mortgages. Banks use derivatives to partially hedge on-balance-sheet exposures. Residual exposures imply that changes in interest rates have redistributive effects within the banking sector. Received October 31, 2017; editorial decision August 30, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Essays on financial fragility, instability and the macroeconomy

2014 ◽  
Author(s):  
Μαρία Νικολαΐδη
Keyword(s):  
Financial Fragility ◽  
Consistent Model ◽  
Stock Flow

Ο στόχος της διατριβής αυτής είναι η διερεύνηση θεωρητικών και εμπειρικών θεμάτων που αφορούν τη χρηματοπιστωτική ευθραυστότητα και την αστάθεια των σύγχρονων μακροοικονομικών συστημάτων. Η διατριβή αποτελείται από τέσσερα ανεξάρτητα δοκίμια. Στο πρώτο δοκίμιο αναπτύσσεται ένα θεωρητικό δυναμικό μακροοικονομικό υπόδειγμα το οποίο επικεντρώνεται στους μηχανισμούς μέσω των οποίων τα επιθυμητά περιθώρια ασφάλειας των επιχειρήσεων και των τραπεζών δύνανται να επηρεάσουν τη μακροοικονομική επίδοση. Με τη χρήση τεχνικών δυναμικής μαθηματικής ανάλυσης καθώς και προσομοιώσεων αναδεικνύεται ότι η ενδογενής μεταβολή των επιθυμητών περιθωρίων ασφάλειας κατά τη διάρκεια του οικονομικού κύκλου συμβάλλει στη μακροοικονομική αστάθεια. Επιπλέον, επισημαίνεται ο ρόλος της δημοσιονομικής πολιτικής στη σταθεροποίηση του μακροοικονομικού συστήματος. Στο δεύτερο δοκίμιο αναλύονται με τη βοήθεια ενός μακροοικονομικού υποδείγματος αποθεμάτων-ροών (stock-flow consistent model) οι μηχανισμοί μέσω των οποίων η τιτλοποίηση (securitisation) στεγαστικών δανείων και η στασιμότητα των μισθών είναι πιθανόν να οδηγήσουν σε αύξηση της χρηματοπιστωτικής ευθραυστότητας. Τα αποτελέσματα των ασκήσεων προσομοίωσης φανερώνουν ότι η υψηλότερη ανισότητα σε συνδυασμό με την υιοθέτηση χρηματοπιστωτικών πρακτικών υψηλού ρίσκου μπορεί να έχει δυσμενείς επιδράσεις στο μακροοικονομικό σύστημα. Στο τρίτο δοκίμιο προτείνεται ένας νέος δείκτης για τη ρευστότητα του τραπεζικού συστήματος ο οποίος λαμβάνει υπόψη τη διαχρονικά μεταβαλλόμενη ρευστότητα των στοιχείων του ισολογισμού των τραπεζών. Ο συγκεκριμένος δείκτης υπολογίζεται για 12 χώρες της ΟΝΕ. Επιπλέον, στο εν λόγω δοκίμιο διερευνάται για τις χώρες της ΟΝΕ η σχέση ανάμεσα στη μακροοικονομική ευθραυστότητα και στη ρευστότητα του τραπεζικού συστήματος. Τα εμπειρικά ευρήματα δείχνουν ότι σε γενικές γραμμές τα τραπεζικά συστήματα των υπό εξέταση χωρών της ΟΝΕ δεν βελτιώνουν τη ρευστότητά τους όταν η μακροοικονομική ευθραυστότητα αυξάνεται. Στο τέταρτο δοκίμιο κατασκευάζεται ένας δείκτης ρευστότητας για το δημόσιο τομέα της οικονομίας ο οποίος βασίζεται στην ταξίνομηση της χρηματοπιστωτικής κατάστασης των οικονομικών μονάδων που έχει προταθεί από τον Minsky. Ο δείκτης υπολογίζεται για την Ελλάδα την περίοδο 2001-2009. Η ανάλυση των στοιχείων αναδεικνύει την αυξημένη χρηματοπιστωτική ευθραυστότητα του δημόσιου τομέα της Ελλάδας το εν λόγω διάστημα.

scholarly journals MONETARY DISCRETION BY FISCAL MEANS: THE CASE OF BULGARIA

2019 ◽  
Vol 7 ◽  
Author(s):  
Preslav Dimitrov ◽  
Ivan Todorov ◽  
Stoyan Tanchev ◽  
Petar Yurukov
Keyword(s):  
Interest Rates ◽  
Balance Sheet ◽  
Liquidity Effect ◽  
Currency Board ◽  
Automatic Adjustment ◽  
Adjustment Mechanism ◽  
Study Results ◽  
National Bank ◽  
The Impact ◽  
Reserve Ratio

The specific design of the Bulgarian currency board arrangement (CBA), which provides an opportunity for the Bulgarian government to conduct discretionary monetary policy by changes in the fiscal reserve, was analyzed. The impact of government deposit fluctuations on the dynamics of reserve money and interbank interest rates was investigated. The hypotheses of an automatic adjustment mechanism and a liquidity effect under the Bulgarian currency board arrangement were tested. The methodology employed was a vector autoregression, which included the following variables: MB – monetary base; BP – the balance of payments; GD – government deposit on the balance sheet of the Issue Department of the Bulgarian National Bank; MRR – minimum required reserve ratio of commercial banks. The target variable was MB. Monthly data for the period of January 1998 - December 2018 were used. The study results did not provide evidence of a statistically significant impact of changes in government deposit on reserve money and interbank interest rates. The hypotheses for the existence of an automatic adjustment mechanism and a liquidity effect did not find an empirical confirmation.

Sign in / Sign up

Export Citation Format

Share Document