and Vuletin Effects and role of macroprudential policy Evidence from reserve requirements based on a narrative approach Bent Vale Norges Bank 30 November 2012 ID: 797483
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Slide1
Comments to Federico, Vegh and Vuletin: ”Effects and role of macroprudential policy: Evidence from reserve requirements based on a narrative approach”
Bent Vale, Norges Bank30 November 2012
Views and conclusions are mine, and cannot be attributed to
Norges
Bank
Slide2Brief summary of paperMonetary policy (interest rate) versus Reserve requirement policy (RRP) in financially vulnerable economies. Show how and why just using interest
rate in a ”text book” fashion to stabilize output and inflation in these economies
can
be
difficult
.
Large
effects
of
interest
rate
on
capital
flows
or
exchange
rates. (”
fear
of
free
falling” or ”
fear
of
capital
inflows
”)
Slide3Brief summary of paperUse a panel of 4 financially vulnerable economies (Argentina, Brazil, Columbia and Uruguay) spanning 1992 to 2011 (quarterly)Find that
RRP is used instead of interest rate in order to stabilize
output.
Key to
this
finding
is
distinguishing
between
endogenous
and
exogenous
RRP
Slide4Brief summary of paperEndogenous RRP: changes in RR in response to deviations in GDP growth. Referred to as Macroprudential policy.Exogenous RRP: changes
in RRP for other purposes (financial liberalization, microprudential purposes,
liquidity
regulation
)
Distinction
is
done
empirically
using
narrative data (a la
Roemer
and
Roemer
).
Slide5CommentsContribution: Show empirically how RRP substitutes conventional monetary policy in financially vulnerable economies.
Slide6Critical comments: Main pointIs this paper about macroprudential policy?Macroprudential policy: policy aimed at banks to curb
build-up of systemic risks during booms or making banks robust enough to maintain
lending
in bad times.
The
endogenous
RRP
does
not do
that
, it
substitutes
for
conventional
monetary
policy to
stabilize
output.
Slide7Critical comments: Main pointMaybe instead some of the exogenous RRP changes could be considered macroprudential?
Focus on different target than GDP. Another
paper
.
Slide8Critical comments: Other pointsComparing effectiveness of monetary policy and ”exogenous” RRP on GDP. But monetary policy id endogenous
. Are you comparing ”apples to pears”?
Discrepancies
between
numbers
in
graphs
and
text
.
Definition
of
long
run?