Presenter: Ricardo Reis Affiliation: London School of Economics and Political Science Paper: TBA. Date: January 11, 2022 Time: 13:00 GMT Abstract: The prices of inflation options hold the promise of giving the probability of inflation being either very high or very low at long horizons. To realize this promise requires making three adjustments to option … Read more
Presenter: Toni Whited Affiliation: University of Michigan, Ross School of Business. Paper: Bank Market Power and Monetary Policy Transmission: Evidence from a Structural Estimation (Journal of Finance, forthcoming). Date: January 4, 2022 Time: 13:00 GMT Abstract: We quantify the impact of bank market power on monetary policy transmission through banks to borrowers. We estimate a … Read more
Presenter: Cynthia Wu Affiliation: University of Notre Dame, Department of Economics Paper: Average Inflation Targeting: Time Inconsistency and Intentional Ambiguity Date: December 28, 2021. Time: 13:00 GMT We study the implications of the Fed’s new policy framework of average inflation targeting (AIT) and its ambiguous communication. The central bank has the incentive to deviate from … Read more
Presenter: Jean Tirole Affiliation: Toulouse School of Economics Paper: Industrial Monetary Policy (link available soon) Date: December 14, 2021 Time: 13:00 GMT Abstract: We consider “industrial monetary policies”: Liquidity support policies through which authorities shape the location and continuation of economic activity on their soil, with consequences for banks’ international specialization, place of incorporation, charter … Read more
Presenter: Nikolai Roussanov Affiliation: University of Pennsylvania, Wharton School Paper: Getting to the Core: Inflation Risks Within and Across Asset Classes (slides) Date: November 30, 2021 Time: 13:00 GMT Abstract: Decomposing inflation into core and non-core components (e.g., energy) sheds new light on the nature of inflation risk and risk premia. While stocks have insignificant … Read more
Presenter: Ricardo Reis Affiliation: London School of Economics and Political Science Paper: The Constraint on Public Debt when r < g but g < m. Date: November 16, 2021 Time: 13:00 GMT Abstract: With real interest rates below the growth rate of the economy, but the marginal product of capital above it, the public debt ... Read more
We study the monetary-fiscal mix in the European Monetary Union. The medium and long-run effects of conventional and unconventional monetary policy can be analysed by combining monetary policy shocks identified in a Structural VAR, and the general government budget constraint featuring a single central bank and multiple fiscal authorities. In response to a conventional easing of the policy rate, the real discount rate declines, absorbing the increase in deficit due to the fiscal policy leaning towards the easing. Conversely, in response to an unconventional easing of the long end of the yield curve, the discount rate declines strongly, while the primary fiscal surplus barely moves. The long-run effect of unconventional monetary easing on inflation is about half than that of conventional, a result which also explains the muted response of fiscal policy. Results do not point to large differences across countries.
Before the 2008 crisis, the cross-sectional skewness of banks’ leverage went up and macro risk concentrated in the balance sheets of large banks. Using a model of profit-maximizing banks with heterogeneous Value-at-Risk constraints, we extract the distribution of banks’ risk-taking parameters from balance sheet data. The time series of these estimates allow us to understand systemic risk and its concentration in the banking sector over time. Counterfactual exercises show that (1) monetary policymakers confront the trade-off between stimulating the economy and financial stability, and (2) macroprudential policies can be effective tools to increase financial stability.
Presenter: Saki Bigio Affiliation: University of California, Los Angeles, Department of Economics. Paper: A Model of Credit, Money, Interest, and Prices Date: October 05, 2021 Time: 15:00 IDT (GMT+3) Abstract: This paper integrates a realistic implementation of monetary policy through the banking system into an incomplete-market economy with wage rigidity. Monetary policy sets policy rates … Read more
We construct new measures of country risk and sentiment as perceived by global investors and executives using textual analysis of the quarterly earnings calls of publicly listed firms around the world. Our quarterly measures cover 45 countries from 2002-2020. We use our measures to provide a novel characterization of country risk and to provide a harmonized definition of crises. We demonstrate that elevated perceptions of a country’s riskiness are associated with significant falls in local asset prices and capital outflows, even after global financial conditions are controlled for. Increases in country risk are associated with reductions in firm-level investment and employment. We also show direct evidence of a novel type of contagion, where foreign risk is transmitted across borders through firm-level exposures. Exposed firms suffer falling market valuations and significantly retrench their hiring and investment in response to crises abroad. Finally, we provide direct evidence that heterogeneous currency loadings on global risk help explain the cross-country pattern of interest rates and currency risk premia.