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A Semi-Structural Model for Credit Cycle and Policy Analysis – An Application for Luxembourg

2024-07-09
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Release : 2024-07-09
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Book Synopsis A Semi-Structural Model for Credit Cycle and Policy Analysis – An Application for Luxembourg by : Carlos de Resende

Download or read book A Semi-Structural Model for Credit Cycle and Policy Analysis – An Application for Luxembourg written by Carlos de Resende. This book was released on 2024-07-09. Available in PDF, EPUB and Kindle. Book excerpt: The paper explores the nexus between the financial and business cycles in a semi-structural New Keynesian model with a financial accelerator, an active banking sector, and an endogenous macroprudential policy reaction function. We parametrize the model for Luxembourg through a mix of calibration and Bayesian estimation techniques. The model features dynamic properties that align with theoretical priors and empirical evidence and displays sensible data-matching and forecasting capabilities, especially for credit indicators. We find that the credit gap, which remained positive during COVID-19 amid continued favorable financial conditions and policy support, had been closing by mid-2022. Model-based forecasts using data up to 2022Q2 and conditional on the October 2022 WEO projections for the Euro area suggest that Luxembourg's business and credit cycles would deteriorate until late 2024. Based on these insights about the current and projected positions in the credit cycle, the model can guide policymakers on how to adjust the macroprudential policy stance. Policy simulations suggest that the weights given to measures of credit-to-GDP and asset price gaps in the macroprudential policy rule should be well-calibrated to avoid unwarranted volatility in the policy response.

A Simple Macrofiscal Model for Policy Analysis: An Application to Morocco

2021-07-16 Business & Economics
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Release : 2021-07-16
Genre : Business & Economics
Kind : eBook
Book Rating : 98X/5 ( reviews)

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Book Synopsis A Simple Macrofiscal Model for Policy Analysis: An Application to Morocco by : Daniel Baksa

Download or read book A Simple Macrofiscal Model for Policy Analysis: An Application to Morocco written by Daniel Baksa. This book was released on 2021-07-16. Available in PDF, EPUB and Kindle. Book excerpt: The paper describes a semistructural macrofiscal approach to simulating and forecasting macroeconomic policies. The model focuses on only a few variables that are consistent with the New Keynesian framework. Thanks to its simplicity, it facilitates an initial and intuitive understanding of monetary and fiscal policy transmission channels, and their main impact on economic activity. The model is adapted to Morocco and we demonstrate its application with an illustrative scenario of policy responses to a slower-than-expected recovery from the Covid-19 pandemic, under different monetary policy and exchange rate regimes.

The Morocco Policy Analysis Model: Theoretical Framework and Policy Scenarios

2021-04-30 Business & Economics
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Release : 2021-04-30
Genre : Business & Economics
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Book Rating : 322/5 ( reviews)

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Book Synopsis The Morocco Policy Analysis Model: Theoretical Framework and Policy Scenarios by : Aya Achour

Download or read book The Morocco Policy Analysis Model: Theoretical Framework and Policy Scenarios written by Aya Achour. This book was released on 2021-04-30. Available in PDF, EPUB and Kindle. Book excerpt: The Morocco Policy Analysis model (MOPAM) was created in the Bank Al-Maghrib to simulate the impact of external developments, domestic macroeconomic policies, and structural reforms on key macroeconomic aggregates. We describe its structure and demonstrate its operation on two medium-term scenarios: (1) fiscal consolidation to stabilize the debt-to-GDP ratio and (2) the effects of the COVID-19 shock, including the endogenous fiscal and monetary policy response.

Stress Testing at the IMF

2020-02-05 Business & Economics
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Release : 2020-02-05
Genre : Business & Economics
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Book Rating : 741/5 ( reviews)

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Book Synopsis Stress Testing at the IMF by : Mr.Tobias Adrian

Download or read book Stress Testing at the IMF written by Mr.Tobias Adrian. This book was released on 2020-02-05. Available in PDF, EPUB and Kindle. Book excerpt: This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.

Stress Testing and Calibration of Macroprudential Policy Tools

2020-08-14
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Release : 2020-08-14
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Book Rating : 471/5 ( reviews)

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Book Synopsis Stress Testing and Calibration of Macroprudential Policy Tools by : Lucyna Gornicka

Download or read book Stress Testing and Calibration of Macroprudential Policy Tools written by Lucyna Gornicka. This book was released on 2020-08-14. Available in PDF, EPUB and Kindle. Book excerpt: We present a semi-structural model of default risk, which is a function of loan and borrower characteristics, economic conditions, and the regulatory environment. We use this model to simulate bank credit losses for stress-testing purposes and to calibrate borrower-based macroprudential tools. The proposed approach is very flexible and is particularly useful when there is limited history of crisis episodes, when crises bring unanticipated shocks where past tail events offer little guidance and when structural shocks or changes in financial regulations have altered the loan default process. We apply the model to quantify mortgage lending risk in two distinct mortgage markets. For each application, we show a range of modeling adjustments that can be made to capture country-specific institutional features. The model uses bank portfolio data broken down by risk bucket and vintage, which enables us to take explicit account of the loan life cycle and to incorporate the housing and economic cycles. This feature facilitates a timely assessment of banks' loss-absorbing capacity and the buildup of systemic risk conditional on policy. It also enables counterfactual analysis and the evaluation of macroprudential policy interventions.

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