quantfinanceclub.com

(Fuente: Under Which Conditions Will Fed Money Printing Create High Inflation? Deutsche Bank, March 2012)

QE 1 vs. 2 vs. 3… A Framework for Analyzing Large Scale Asset Purchases as a Monetary Policy Tool*

Abstract

We introduce large scale asset purchases (LSAPs) as a monetary policy tool within a macroeconomic model. We allow for purchases of both long term government bonds and securities with some private risks. We argue that LSAPs should be thought of as central bank intermediation that a?ect the economy to the extent there exist limits to arbitrage in private intermediation. We then build a model with limits to arbitrage in banking that vary countercyclically and where the frictions are greater for private securities than for government bonds. We use the framework to study the impact of LSAPs that have the broad features of the di?erent QE programs the Fed pursued over the course of the crisis. We ?nd: (i) LSAPs work in the model in a way mostly consistent with the evidence; (ii) purchases of securities with some private risk have stronger e?ects than purchases of government bonds; (iii) the e?ects of the LSAPs depend heavily on whether the zero lower bound is binding.

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A Proposal for the Resolution of Systemically Important Assets and  Liabilities: The Case of the Repo Market

Abstract

One of the several regulatory failures behind the ongoing  global  financial crisis that started in 2007 has been the regulatory focus on individual, rather than systemic, risk of financial institutions. Whether the recently proposed financial sector reforms can address the systemic risk associated with such systemically important markets as the sale and repurchase agreement (“repo”) market or such systemically important sectors of small institutions as the money market mutual funds remains debatable. Focusing on systemically important assets and liabilities  (SIALs)  rather than individual financial institutions, we propose a set of  resolution mechanisms which is not only capable of addressing the issues of  inducing market discipline and mitigating moral hazard, but also capable of addressing the systemic risk associated with the SIALs. Furthermore, because of our focus on SIALs, our proposed resolution mechanisms would be easier to implement at the global level compared to mechanisms that operate at the level of individual institutional forms. We, then, outline how our approach can be specialized to the repo market and propose a repo resolution authority for reforming this market.

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Replumbing Our Financial System: Uneven Progress

Abstract

The financial crisis of 2007-2009 has spurred significant ongoing changes in the “pipes and valves” through which cash and risk flow through the center of our financial system. These include adjustments to the forms of lender-of-last-resort financing from the central bank and changes the infrastructure for the wholesale overnight financing of major dealer banks. Significant changes in the regulation of money market funds are under consideration. The Dodd-Frank Act mandates the central clearing of standardized over-the-counter derivatives, although a pending exemption of foreign-exchange derivatives remains to be decided. The vulnerability of major dealers to runs by prime brokerage clients is also an issue to be addressed. I focus on U.S. financial plumbing and on areas where financial stability remains a concern.

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Monetary Aggregates and the Central Bank’s Financial Stability Mandate

Abstract

Money is the balance sheet counterpart to bank lending. As such, highly procyclical components of money re?ect incremental bank lending that may reverse abruptly as ?nancial conditions deteriorate. Components of monetary aggregates that correspond to cross-border banking sector ?ows depend sensitively on both domestic and global ?nancial factors and display a procyclical pattern that may be utilized in constructing a set of indicators of the vulnerability of the ?nancial system to crises. We illustrate our arguments by drawing on the experience of Korea and by presenting an empirical analysis of cross-border banking ?ows into “demand pull” and “supply push” components.

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An Integrated Framework for Multiple Financial Regulations*

Abstract

In this companion paper to Goodhart, Kashyap, Tsomocos and Vardoulakis (2012), we explore the interactions of various types of financial regulation.  We find that regulations that control fire sale risk are critical for delivering financial stability and improving the welfare of savers and borrowers.  We describe the combinations of capital regulations, margin requirements, liquidity regulation and dynamic provisioning that are most effective in this respect.  A policy featuring margin requirements together with counter-cyclical capital requirements delivers equal or better outcomes for the economy than does an unregulated financial system. But it is easy to produce combinations of regulation that look sensible but when combined have adverse effects on the economy.

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(Fuente: All eyes on LTRO II, Global Rates and FX Weekly, Bank of America Merrill Lynch, 23 February 2012)

(Fuente: Greek rescue wobbles, Central bank outlook, Standard Chartered Research, 17 February 2012)

Qué GROSSO es GROSS!!!!………………….. Finalmente, después de tanto tiempo escuchando historietas recicladas, tuve la chance de leer una historia fundamental que me dejó pensando….

(Fuente: FED, via Alea)