The Volatility Costs of Procyclical Lending Standards : : An Assessment Using a Dsge Model / / Silvia Sgherri, Bertrand Gruss

• Record Nr.: UNINA9910788347803321
• Autore: Sgherri Silvia
• Pubbl/distr/stampa: Washington, D.C. : , : International Monetary Fund, , 2009
• ISBN: 1-4623-4871-8; 1-4527-4099-2; 1-282-84257-9; 1-4518-7182-1; 9786612842573
• Descrizione fisica: 1 online resource (39 p.)
• Collana: IMF Working Papers
• Altri autori (Persone): GrussBertrand
• Disciplina: 338.9669
• Soggetti: Credit control - Mathematical models; Loans - Standards - Mathematical models; Investments: Stocks; Macroeconomics; Money and Monetary Policy; Industries: Financial Services; Business Fluctuations; Cycles; International Policy Coordination and Transmission; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors; Monetary Policy, Central Banking, and the Supply of Money and Credit: General; Macroeconomics: Consumption; Saving; Wealth; Banks; Depository Institutions; Micro Finance Institutions; Mortgages; Price Level; Inflation; Deflation; Investment & securities; Monetary economics; Finance; Stocks; Credit; Consumption; Collateral; Asset prices; Financial institutions; Money; National accounts; Prices; Economics; Loans; Estonia, Republic of
• Lingua di pubblicazione: Inglese
• Formato: Materiale a stampa
• Livello bibliografico: Monografia
• Note generali: Description based upon print version of record.
• Nota di bibliografia: Includes bibliographical references.
• Nota di contenuto: Contents; I. Introduction; II. Empirical Evidence; III. The Model; A. Home economy; B. Foreign economy; C. Shocks; D. Equilibrium and solution method; IV. Calibration; V. Policy experiment: altering the cyclical pattern of lending standards; A. Benchmark leverage level; B. Alternative leverage levels; VI. Sensitivity analysis; VII. Conclusions; Appendix; References; Tables; 1. Results from Estimating an AR(1) Processes to Demeaned LTVs; 2. Benchmark Calibration; Figures; 1. Time Variation in Loan-To-Value Ratios; 2. Share of Output Variation Explained by Credit and Asset Price Shocks; 3. Degree of Cyclicality in Credit Innovations 4. Procyclicality in Credit Innovations and Sensitivity of Credit to Asset Price Shocks; 5. Procyclicality in Credit Innovations and Macroeconomic Volatility; 6. Increasing Reliance of Emerging Europe on Foreign Funding; 7. Concentration of Emerging Europe Exposure to Western Europe; 3. Business Cycle Moments from Simulated Series under Benchmark Calibration; 4. Policy Exercise Results (Average LTV = 0.4); 5. Policy Exercise Results (Average LTV = 0.7); 8. IRFs to a Negative Productivity Shock under Alternative Leverage Levels; 9. IRFs to a Negative Shock to Lending Standards under Alternative Leverage Levels10. Sensitivity of Volatility to Different Degrees of Cyclicality in Lending Standards Under Alternative Leverage Levels; 6. Sensitivity Analysis
• Sommario/riassunto: The ongoing financial turmoil has triggered a lively debate on ways of containing systemic risk and lessening the likelihood of boom-and-bust episodes in credit markets. Particularly, it has been argued that banking regulation might attenuate procyclicality in lending standards by affecting the behavior of banks’ capital buffers. This paper uses a two-country DSGE model with financial frictions to illustrate how procyclicality in borrowing limits reinforces the “overreaction” of asset prices to shocks described by Aiyagari and Gertler (1999), and to quantify the stabilization gains from policies aimed at smoothing cyclical swings in credit conditions. Results suggest that, in financially ; constrained economies, the ensuing volatility reduction in equity prices, investment, and external imbalances would be sizable. In the presence of cross-border spillovers, gains would be even higher.