"تمایلات در مقابل خستگی" و تنظیم وقت سیاست های پولی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|27902||2013||16 صفحه PDF||سفارش دهید||9262 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of International Money and Finance, Volume 35, June 2013, Pages 179–194
If monetary policy is to aim also at financial stability, how would it change? To analyze this question, this paper develops a general-form framework. Financial stability objectives are shown to make monetary policy more aggressive: in reaction to negative shocks, cuts are deeper but shorter-lived than otherwise. By keeping cuts brief, monetary policy tightens as soon as bank risk appetite heats up. Within this shorter time span, cuts must then be deeper than otherwise to also achieve standard objectives. Finally, we analyze how robust this result is to the presence of a bank regulatory tool, and provide a parameterized example.
Various authors have argued that central banks' prolonged accommodative policies spurred risk taking incentives among the financial intermediaries that were at the heart of the recent financial crisis.2 This had led to calls for a monetary policy that explicitly considers bank risk taking and financial stability,3 or as it is known in this literature, to “lean against the wind”. The main mechanisms through which the so-called risk taking channel of monetary policy is thought to work are: valuation effects, such as collateral which gains value from expansive policy, encouraging riskier profiles (Borio and Zhu, 2012); a search-for-yield that is driven by institutional factors leading some fund managers to seek higher risk to maintain yields after rates on safer assets decline (Rajan, 2006); and cheaper short-term debt, which raises levering incentives, and through interaction with banks' limited liability consequently also asset risk incentives (Agur and Demertzis, 2012; Dell'Ariccia et al., 2010). Empirically, Delis et al. (2011) use micro-level datasets from the US banking sector to examine the relationship between policy rates and risk taking. They find that low interest rates significantly strengthen banks' incentives to take on risky assets, and this is especially true for prolonged rate cuts. Maddaloni and Peydro (2011) use data from the Euro Area Bank Lending Survey to show that lower overnight rates soften lending standards. They also find evidence that keeping rates “low for too long” reduces credit standards even further. Similarly, Altunbas et al. (2010) find that keeping rates low for an extended period of time significantly raises banks' risk profiles. They obtain this result from a data set that includes quarterly balance sheet information on listed banks in the EU and the US.4 In this paper we give an analytical interpretation for the meaning of keeping rates “low for too long”, on the basis of the persistence of risk on banks' balance sheets, which relates to the long maturity of their assets. In a general form approach, in which we take the objectives of the monetary authority as given, we show that there are two main effects on optimal policy rates following a shock: the first is upon impact, and the second refers to the dynamic path of interest rates. Faced with a negative shock, the authority that “leans against the wind” would cut interest rates deeper upon impact, than absent of a financial objective. However, its dynamic response will be to return to the equilibrium level quicker. Intuitively, the monetary authority cuts extra deep at the bottom of the recession, when banks are in the process of building down risks. This extra depth of the cut is intended to compensate for its short duration. The reason the cut is short-lived is that as soon as the economy is past its lowest point, the monetary authority wants to raise back rates quickly in order to tame the banks' renewed appetite for risk. If this financial stability objective is indeed representative of a welfare gain, then by comparison to it, the interest rate path of a standard-objectives authority is “low for too long”. The result is summarized in Fig. 1, which represents the response of the monetary authority to a negative economic shock. The dotted line graphs the policy of an authority whose objectives include financial stability, while the solid line is that of an authority with standard objectives. While we derive our result in a general-form model, we also provide a parameterized example of the model to highlight its mechanisms (Appendix D).In an extension we show that a different interpretation can be given as well for the relationship between bank risk and the duration of a rate cut: since banks know that unwinding risk takes time, they only adjust their portfolio toward greater risk when they foresee that cuts last long. We investigate the robustness of our result to the presence of bank regulation, which is assigned to the same authority that also controls monetary policy. We show that in the presence of a perfect regulatory tool, perfect in the sense of being both capable of exactly targeting bank risk as well as of full dynamic adjustment, our monetary policy result vanishes. That is, the regulatory tool targets bank risk whereas the interest rate targets only standard objectives, regardless of the weight that the central bank places on financial stability. However, when the regulatory tool is imperfect in terms of precision and dynamic adjustability, as arguably the most common tools such as capital requirements indeed are, the difference between a “leaning against the wind” and standard objectives monetary policy in the sense that we have described re-emerges. The paper is organized as follows. Section 2 discusses related literature. Section 3 presents the basic model, and Section 4 derives the main result. Section 5 then extends to a regulatory tool. Additional extensions to bank optimization, generalized central bank objectives and a parameterized example can be found in the Appendix B, Appendix C and Appendix D. All proofs of the propositions in the text are presented in Appendix A.
نتیجه گیری انگلیسی
In this paper we examine how monetary policy would be altered if it were to account for financial imbalances. We allow for the economy to affect risk in a procyclical way, taking into account the persistent nature of long term loans on banks' balance sheets, and then examine how the interaction between bank risk taking and monetary policy would affect the path of interest rates. We find that, when faced with negative shocks, monetary authorities that have a financial stability objective are better off keeping rate cuts brief. But wishing to close the output gap as well then implies that the cut needs to be bigger than otherwise. The monetary authority essentially “frontloads” the cut to occur at the trough of a recession, when banks are building down risk, so that by the time banks want to start building up risk again, rates increase quickly. In an extension we show that there is also an other way to look at this, namely that when banks foresee a long period of low rates they are keener to pursue a risky strategy, than when cuts are brief. We acknowledge that while accounting for financial imbalances has a very clear implication for the path of interest rates, the definition and measurement of risk remains a considerable challenge in its implementation.