07682oam 22015854 450 991081461600332120240402045409.01-4755-4251-81-4755-7072-4(CKB)2670000000278844(EBL)1606843(SSID)ssj0000942157(PQKBManifestationID)11565989(PQKBTitleCode)TC0000942157(PQKBWorkID)10964413(PQKB)10996332(Au-PeEL)EBL1606843(CaPaEBR)ebr10627065(OCoLC)801529075(IMF)WPIEE2012181(IMF)WPIEA2012181(MiAaPQ)EBC1606843(EXLCZ)99267000000027884420020129d2012 uf 0engur|n|---|||||txtccrMacro-prudential Policy in a Fisherian Model of Financial Innovation /Javier Bianchi, Emine Boz, Enrique Mendoza1st ed.Washington, D.C. :International Monetary Fund,2012.1 online resource (55 p.)IMF Working PapersDescription based upon print version of record.1-4755-7662-5 1-4755-0529-9 Includes bibliographical references.Cover; Contents; 1.Introduction; 2 A Fisherian Model of Financial Innovation; 2.1 Decentralized Competitive Equilibrium; 2.2 Learning Environment; 2.3 Learning, Debt and Price Dynamics after Financial Innovation; 2.4 Recursive Anticipated Utility Competitive Equilibrium; 2.5 Conditionally Efficient Planners' Problems; 2.6 Pecuniary Externality and Decentralization of Planners' Allocations; 3 Quantitative Analysis; 3.1 Baseline Calibration; Tables; Table 1: Baseline Parameter Values; 3.2 Baseline Results; 3.3 Welfare Analysis; Table 2: Welfare Gains; 3.4 Sensitivity AnalysisTable 3: Summary of Priors4 Conclusion; Appendixes; Appendix: Recursive Optimization Problems; References; References; Figures; Figure 1: Dynamics in the Baseline Calibration; Figure 2: Period 40 Bond Holdings and Asset Prices; Figure 3: Period 41 Bond Holdings and Asset Prices; Figure 4: Crisis Episode; Figure 5: Taxes on Debt and Land Dividends; Figure 6: Decomposition of Taxes on Debt; Figure 7: Priors; Figure 8: Dynamics in Gradual Optimism Calibration; Figure 9: Period 40 Bond Holdings and Prices: Gradual Optimism; Figure 10: Taxes on Debt and Land Dividends: Gradual OptimismFigure 11: Decomposition of Taxes on Debt: Gradual OptimismFigure 12: Dynamics in Asymmetric Priors Calibration; Figure 13: Taxes on Debt: Asymmetric PriorsThe interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification mechanism to study the effects of macro-prudential policy. Financial innovation enhances the ability of agents to collateralize assets into debt, but the riskiness of this new regime can only be learned over time. Beliefs about transition probabilities across states with high and low ability to borrow change as agents learn from observed realizations of financial conditions. At the same time, the collateral constraint introduces a pecuniary externality, because agents fail to internalize the effect of their borrowing decisions on asset prices. Quantitative analysis shows that the effectiveness of macro-prudential policy in this environment depends on the government's information set, the tightness of credit constraints and the pace at which optimism surges in the early stages of financial innovation. The policy is least effective when the government is as uninformed as private agents, credit constraints are tight, and optimism builds quickly.IMF Working Papers; Working Paper ;No. 2012/181Financial institutionsManagementEconometric modelsEquilibrium (Economics)Econometric modelsMacroeconomicsimfMoney and Monetary PolicyimfReal EstateimfTaxationimfIndustries: Financial ServicesimfExternalitiesimfAsymmetric and Private InformationimfBusiness FluctuationsimfCyclesimfFinancial Markets and the MacroeconomyimfCurrent Account AdjustmentimfShort-term Capital MovementsimfOpen Economy MacroeconomicsimfMonetary Policy, Central Banking, and the Supply of Money and Credit: GeneralimfBanksimfDepository InstitutionsimfMicro Finance InstitutionsimfMortgagesimfPrice LevelimfInflationimfDeflationimfNonagricultural and Nonresidential Real Estate MarketsimfTax Evasion and AvoidanceimfMonetary economicsimfFinanceimfProperty & real estateimfPublic finance & taxationimfCreditimfCollateralimfAsset pricesimfLand pricesimfTax arrears managementimfMoneyimfFinancial institutionsimfPricesimfRevenue administrationimfLoansimfHousingimfTax administration and procedureimfUnited StatesimfFinancial institutionsManagementEconometric models.Equilibrium (Economics)Econometric models.MacroeconomicsMoney and Monetary PolicyReal EstateTaxationIndustries: Financial ServicesExternalitiesAsymmetric and Private InformationBusiness FluctuationsCyclesFinancial Markets and the MacroeconomyCurrent Account AdjustmentShort-term Capital MovementsOpen Economy MacroeconomicsMonetary Policy, Central Banking, and the Supply of Money and Credit: GeneralBanksDepository InstitutionsMicro Finance InstitutionsMortgagesPrice LevelInflationDeflationNonagricultural and Nonresidential Real Estate MarketsTax Evasion and AvoidanceMonetary economicsFinanceProperty & real estatePublic finance & taxationCreditCollateralAsset pricesLand pricesTax arrears managementMoneyFinancial institutionsPricesRevenue administrationLoansHousingTax administration and procedure332.152Bianchi Javier1631767Boz Emine1631768Mendoza Enrique119545DcWaIMFBOOK9910814616003321Macro-prudential Policy in a Fisherian Model of Financial Innovation3970552UNINA