We would like to cordially invite you to a research seminar by Eddie Gerba from the Financial Stability Department, Bank of Spain, and London School of Economics and Political Science.
Paper: "How effective are capital-based macroprudential measures in taming the macro-financial cycles? Evidence from structural models for Spain".
When: Friday, February 9, 2018, 12:00 - 13:30
Where: Institute of Economic Studies, FSV UK, Opletalova 26, Prague 1, room 206
Title of the paper: "How effective are capital-based macroprudential measures in taming the macro-financial cycles? Evidence from structural models for Spain"
Abstract: Analyses from a structural time-series model show that a 1p.p. increase in bank capital ratio reduces credit to firms by 1,1p.p., credit to households by 1p.p.,excess return of bank shares by 2p.p., and GDP by 0,35p.p.. During crises periods, such as the sovereign debt one, the macroeconomic impact was heavier. We also find that banks, while more prone to reduce firm lending in normal times, they tend to reduce both credit lines equally sharp during more turbulent periods. Taking into account these responses, we use a financial frictions DSGE model to find that an optimal CCyB rule is one that responds to credit to households and firms separately followed by one that, in addition, responds to house price growth. To conclude, our conditional projection exercises show that there are major economic benefits from holding higher ex-ante system-wide capital ratios and implement capital increases in a more gradual fashion. That allows policy-maker to align agents' expectations to policy objectives, and minimize costs created by policy surprises. Our findings empirically corroborate the results from DSGE models regarding optimal policy implementation.
Autor - Mgr. Eliška Šerhantová