The Global Financial Cycle and Macroeconomic Tail Risks
Author: Johannes Beutel
Publisher:
Published: 2022
Total Pages: 0
ISBN-13: 9783957299222
DOWNLOAD EBOOKRead and Download eBook Full
Author: Johannes Beutel
Publisher:
Published: 2022
Total Pages: 0
ISBN-13: 9783957299222
DOWNLOAD EBOOKAuthor: Daron Acemoglu
Publisher:
Published: 2014
Total Pages: 29
ISBN-13:
DOWNLOAD EBOOKWe document that even though the normal distribution is a good approximation to the nature of aggregate fluctuations, it severely under-predicts the frequency of large economic downturns. We then provide a model that can explain these facts simultaneously. Our model show that the propagation of microeconomic shocks through input-output linkages can fundamentally reshape the distribution of aggregate output, increasing the likelihood of large downturns (macroeconomic tail risks) from infinitesimal to substantial. For example, an economy subject to thin-tailed micro shocks but with "unbalanced" input-output linkages (where some sectors or firms play a much more important role than others as inputs suppliers to the rest of the economy) may exhibit deep recessions as frequently as economies that are subject to heavy-tailed shocks. This is despite the fact that a central limit theorem-type result would imply that aggregate output is normally distributed. We characterize what types of input-output linkages and distributions of microeconomic shocks lead to sizable macroeconomic tail risks, and also show how the same economic forces cause the output of many sectors to simultaneously fall by large amounts. Keywords: Business cycles, macroeconomic tail risks, input-output linkages. JEL Classification: C67, E32.
Author: Laurent Ferrara
Publisher: Springer
Published: 2018-06-13
Total Pages: 300
ISBN-13: 3319790757
DOWNLOAD EBOOKThis book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
Author: Mr.R. G Gelos
Publisher: International Monetary Fund
Published: 2019-12-20
Total Pages: 44
ISBN-13: 1513522906
DOWNLOAD EBOOKThe volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new framework to answer critical policy questions: What policies and policy frameworks are most effective in dampening sharp capital flow movements in response to global shocks? What are the near- versus medium-term trade-offs of different policies? We tackle these questions using a quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on current domestic structural characteristics, policies, and global financial conditions. This new approach allows policymakers to quantify capital flows risks and evaluate policy tools to mitigate them, thus building the foundation of a risk management framework for capital flows.
Author: Francesca Loria
Publisher:
Published: 2019
Total Pages:
ISBN-13:
DOWNLOAD EBOOKAuthor: David Schreindorfer
Publisher:
Published: 2019
Total Pages: 57
ISBN-13:
DOWNLOAD EBOOKI document that dividend growth and returns on the aggregate U.S. stock market are more correlated with consumption growth in bad economic times. In a consumption-based asset pricing model with a generalized disappointment averse investor and small, IID consumption shocks, this feature results in a realistic equity premium despite low risk aversion. The model is consistent with the main facts about stock market risk premia inferred from equity index options, remains tightly parameterized, and allows for analytical solutions for asset prices. An extension with non-IID dynamics accounts for excess volatility and return predictability while preserving the model's consistency with option moments.
Author: Christoph E. Boehm
Publisher:
Published: 2023
Total Pages: 0
ISBN-13:
DOWNLOAD EBOOKWe provide evidence for a causal link between the US economy and the global financial cycle. Using intraday data, we show that US macroeconomic news releases have large and significant effects on global risky asset prices. Stock price indexes of 27 countries, the VIX, and commodity prices all jump instantaneously upon news releases. The responses of stock indexes co-move across countries and are large--often comparable in size to the response of the S&P 500. Further, US macroeconomic news explains on average 23 percent of the quarterly variation in foreign stock markets. The joint behavior of stock prices, bond yields, and risk premia suggests that systematic US monetary policy reactions to news do not drive the estimated effects. Instead, the evidence points to a direct effect on investors' risk-taking capacity. Our findings show that a byproduct of the United States' central position in the global financial system is that news about its business cycle has large effects on global financial conditions.
Author: Roberto Marfè
Publisher:
Published: 2020
Total Pages:
ISBN-13:
DOWNLOAD EBOOKAuthor: Erlend Nier
Publisher: International Monetary Fund
Published: 2010-11-01
Total Pages: 64
ISBN-13: 1455210722
DOWNLOAD EBOOKThis paper investigates empirically the drivers of financial imbalances ahead of the global financial crisis. Three factors may have contributed to the build-up of financial imbalances: (i) rising global imbalances (capital flows), (ii) monetary policy that might have been too loose, (iii) inadequate supervision and regulation. Panel data regressions are performed for OECD countries from 1999 to 2007, so as to shed light on the relative importance of these factors, as well as the extent to which these factors might have interacted in fuelling the build-up. We find that the build-up of financial imbalances was driven by capital inflows and an associated compression of the spread between long and short rates. The effect of capital inflows on the build-up is amplified where the supervisory and regulatory environment was relatively weak. We find that, by contrast, differences in monetary policy cannot account for differences across countries in the build-up of financial imbalances ahead of the crisis.
Author: Òscar Jordà
Publisher:
Published: 2016
Total Pages: 55
ISBN-13:
DOWNLOAD EBOOKAbstract: In advanced economies, a century-long near-stable ratio of credit to GDP gave way to rapid financialization and surging leverage in the last forty years. This "financial hockey stick" coincides with shifts in foundational macroeconomic relationships beyond the widely-noted return of macroeconomic fragility and crisis risk. Leverage is correlated with central business cycle moments, which we can document thanks to a decade-long international and historical data collection effort. More financialized economies exhibit somewhat less real volatility, but also lower growth, more tail risk, as well as tighter real-real and real-financial correlations. International real and financial cycles also cohere more strongly. The new stylized facts that we discover should prove fertile ground for the development of a new generation of macroeconomic models with a prominent role for financial factors