سیستم های طبقه ای برای اجرای سیاست های پولی: برخی از حساب مالی نامطبوع
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|28113||2014||20 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Review of Economic Dynamics, Volume 17, Issue 3, July 2014, Pages 523–542
An increasing number of central banks implement monetary policy via a channel system or a floor system. We construct a general equilibrium model to study the properties of these systems. We find that a floor system is weakly optimal if and only if the target rate satisfies the Friedman rule. Unfortunately, the optimal floor system requires either transfers from the fiscal authority to the central bank or a reduction in seigniorage payments from the central bank to the government. This is the unpleasant fiscal arithmetic of a floor system. When the central bank faces financing constraints on its interest expense, we show that it is strictly optimal to operate a channel system.
Over the past years, a monetary policy framework known as a channel or corridor system has been implemented by several central banks and is being considered by other central banks.1 In this system, a central bank operates two facilities: a lending facility and a deposit facility. At the lending facility, the central bank stands ready to supply money overnight to financial intermediaries at a given borrowing rate, iℓiℓ, against collateral. At the deposit facility, intermediaries can make overnight deposits at the central bank to earn the interest rate id<iℓid<iℓ, where the spread is called the interest-rate corridor or channel . This simple framework immediately raises three questions. First, why provide these facilities? Second, why choose a positive corridor as opposed to a zero corridor? Third, what is the optimal value of idid? We construct a general equilibrium model of standing facilities to help answer these questions. Why do we consider a general equilibrium model? The typical answers to the questions above are based on partial equilibrium analysis, which we find incomplete. The usual answer to the first question is that the standing facility provides an outside option for intermediaries who, for whatever reason, were unable to execute desired trades in the money market. In this sense, the central bank is “completing” the money market by providing liquidity insurance to intermediaries. However, whenever insurance is provided, there may be incentive problems that lead to inefficient outcomes. Thus, is it optimal to provide this insurance? The answer to this question requires a general equilibrium model with a well-defined objective for the central bank. The typical answer to the second question is that a positive corridor gives intermediaries an incentive to trade amongst themselves rather than accessing the standing facilities. By exploiting gains from trade, intermediaries move the market rate, imim, inside the corridor; i.e., id<im<iℓid<im<iℓ. This allows the central bank to control the money market rate by either changing the width of the corridor or shifting it with the goal of keeping the money market interest rate close to its target.2 A floor system is a special case where id=imid=im, which can easily be achieved by setting id=im=iℓid=im=iℓ, i.e., by setting the channel width to zero. This would give the central bank perfect control of the money market rate. Thus, controlling the market rate cannot be the reason for a positive spread. So, is there another reason for doing so? Finally, in general but more importantly for a floor system, what determines the optimal value of idid? The typical answer is that idid is set at the “target” interest rate. But what determines that rate? Are there restrictions that affect the feasible set of target rates? Again, the answers to these questions require a general equilibrium model. We use a Lagos–Wright monetary model with financial intermediation to study the allocation of money/reserves. In this framework, we assume that some intermediaries are randomly excluded from trading in the money market (i.e., exogenous market segmentation). We then use our model to answer the three questions posed above. We show that by choosing id=im=iℓid=im=iℓ, i.e., with the use of a floor system, the central bank can effectively eliminate market segmentation and “complete” the money market. We find that this is the optimal policy if the central bank can implement the Friedman rule, which involves paying interest at the deposit facility that compensates for the time cost of holding reserves. If the Friedman rule cannot be implemented, then it is optimal to do two things. First, set the deposit rate as high as feasible (get as close to the Friedman rule as possible). Second, run a corridor system by setting id<iℓid<iℓ. By increasing the borrowing rate, the central bank “penalizes” intermediaries, who do not have sufficient reserves if they are excluded from the money market. As a result, intermediaries demand more reserves, which increases the real value of money/reserves and welfare. This is a pecuniary general equilibrium effect that is absent in partial equilibrium analysis. Why might it be infeasible for the central bank to implement the Friedman rule? Under this rule, banks are satiated with reserves and they do not need to borrow from each other or the central bank; yet, they will deposit excess reserves at the central bank to earn the deposit rate. How is this interest expense financed? The central bank can 1) print money, 2) use income from its asset holdings, or 3) receive transfers from the fiscal authority. Most of the existing analysis ignores this question and assumes that all of these options are sufficient. We argue in this paper that this is not a trivial issue and clearly affects the choice of a floor or corridor system. Our results take into account the possibility that central banks may be unable, or are unwilling for political reasons, to incur the interest expense required by the optimal floor system. We argue that this possibility is relevant for the following reasons: (i) Using taxes to finance interest payments to banks may not be politically acceptable, since other areas of government spending may be affected. As Feinman (1993) documents, the Federal Reserve long requested the power to pay interest on reserves only to be denied this on budgetary grounds. To illustrate the political opposition, consider the following Congressional testimony by a U.S. Treasury official on the proposal to pay interest on reserves: “As a general matter we are sympathetic to many of the arguments put forth by the proponents, particularly with regards to monetary policy. At the same time, however, we are also mindful of the budgetary costs associated with this proposal which would be significant. The President's budget does not include the use of taxpayer resources for this purpose. At this time, then, the Administration is not prepared to endorse that proposal.”3 (ii) Interest payments on reserves are quantitatively important. The Federal Reserve's Large Scale Asset Purchases (LSAP) generated $1.5 trillion in reserves at the end of 2012, and they are projected to be over $2.5 trillion if the latest LSAP continue to 2014. Analysis of the Fed's balance sheet by Federal Reserve economists suggests that the interest expense for locking up reserves in the banking system could top $60 billion for a couple of years under a plausible scenario of rising interest rates.4 In this scenario, the analysis also shows that remittances to the Treasury would be zero for more than five years. To highlight the potential political backlash from such large payments, note that according to Federal Deposit Insurance Corporation (FDIC) data, the combined net income of the top 10 U.S. banks in 2010 was less than $55 billion. Furthermore, Federal Reserve H.8 data at the end of 2012 shows that nearly half of all reserves are held by foreign banks, which suggests a transfer of U.S. taxpayer resources to foreign banks in the neighborhood of $30 billion. In the current populist environment confronting U.S. politicians, it is not unreasonable to conjecture that Congress could respond to these large payments to domestic and foreign banks by suspending or eliminating the Fed's power to pay interest on reserves. This would complicate the Fed's strategy for shrinking its balance sheet while attempting to keep inflation under control. It is important not to confuse the (steady state) results of our model with current short-run policies. In response to the financial crisis, several central banks have moved from a corridor system toward a floor system, at least temporarily (see e.g., Bernhardsen and Kloster, 2010). Short-term interest rates are currently at a record low. With the deposit rate close to zero, the fiscal implications of paying interest on reserves are largely irrelevant. However, once the economy recovers and short-term interest rates rise, the fiscal implications of a floor system will become relevant again, particularly if central banks choose not to drain reserves prior to raising their policy rates. 1.1. Related literature Despite the growing use of channel and floor systems to implement monetary policy, only a few theoretical studies on their use exist. The earlier literature on channel systems or aspects of channel systems were conducted in partial equilibrium models.5 Except for some non-technical discussions (e.g., Goodfriend, 2002 and Keister et al., 2008, and Bernhardsen and Kloster, 2010), there are no papers that compare floor versus corridor systems in a general equilibrium model. General equilibrium analysis is important because partial equilibrium analysis can be misleading. For example Goodfriend (2002) argues that the central bank can pay interest on reserves and always make a profit. This occurs by exploiting an exogenously given, positively sloped yield curve – the central bank can issue short maturity reserves and buy long maturity assets. The difference in returns is profit for the central bank that gets returned to the Treasury. However, in general equilibrium, the yield curve is an endogenous object – one cannot simply assume it has a particular slope. Furthermore, Goodfriend's argument raises the following question: why not exploit this ad infinitum to maximize revenue for the Treasury? In short, the central bank should expand its balance sheet until the yield curve is flat. Even if the yield curve is flat, it is feasible for the central bank to print money, acquire interest-bearing assets and simply transfer the funds to financial intermediaries. This looks as if there are no fiscal implications from running a floor system. However this is not the case. First, the interest income is being transferred to financial intermediaries as opposed to the Treasury. This would then force the fiscal authority to generate revenues in some other manner most likely from distortionary taxation. Second, the initial assets that are purchased to earn income, are again, resources that could have been transferred to the Treasury as ordinary seigniorage. Finally, albeit less importantly, even with a cancellation of interest income with interest expense, the central bank would still have operating costs that need to be covered via fiscal transfers. The point of this discussion is to emphasize that general equilibrium models are more demanding in terms of what needs to be explained and what can be taken as given. General equilibrium models of channel systems are Berentsen and Monnet (2008), Cúrdia and Woodford (2011), Martin and Monnet (2011), and Chapman et al. (2011), where the latter two build on Berentsen and Monnet (2008). Our model also builds on Berentsen and Monnet (2008), who analyze the optimal interest-rate corridor in a channel system. In Berentsen and Monnet (2008), the central bank requires a real asset as a collateral at its borrowing facility. Due to its liquidity premium, the social return of the asset is lower than the private return to market participants. From a social point of view, this results in an over-accumulation of the asset if the central bank implements a zero interest-rate spread. It is, therefore, socially optimal to implement a strictly positive interest-rate spread to discourage the wasteful over-accumulation of collateral. In contrast, in our model the collateral is nominal government bonds, and there is no waste involved in producing nominal government bonds.6 Our result, therefore, that the constrained-efficient monetary policy involves a strictly positive interest-rate spread is due to a mechanism that is very different from the one proposed in Berentsen and Monnet (2008). Furthermore, several aspects of our environment, such as ex-post heterogeneity of money demand, differ substantially from Berentsen and Monnet (2008). Martin and Monnet (2011) compare the feasible allocations that one can obtain when a central bank implements monetary policy either with a channel system or via open market operations. The focus of our paper is the floor system and the fiscal implications of the optimal floor system. We also have a more complex structure of liquidity shocks, which allows us to study how policy affects the distribution of overnight liquidity in a general equilibrium model. In Chapman et al. (2011) the value of the collateral is uncertain. The focus in their paper is on the optimal haircut policy of a central bank. Cúrdia and Woodford (2011) study optimal policy in a New Keynesian framework with financial intermediation. They also find that the floor system is optimal, because it eliminates any inefficiencies associated with economizing reserves in the banking system. Unlike our paper, they do not study fiscal restrictions of paying interest on reserves. Furthermore, our paper differs from Cúrdia and Woodford along three additional dimensions. First, we do not have sticky prices. Second, we do not have inefficiencies in the financial intermediation process that give rise to a need for reserves. Our framework operates via a different mechanism – a combination of risk sharing, market segmentation and collateral requirements – none of which are present in Cúrdia and Woodford. Finally, we address the question of whether or not it is optimal for the central bank to run the standing facilities in a way that eliminates the effects of market segmentation. This is not an issue for them because they assume implementing the Friedman rule is fiscally feasible. The structure of our paper is as follows: Section 2 describes the environment. Section 3 characterizes optimal decisions by market participants. Section 4 studies symmetric stationary equilibria. Section 5 identifies the optimal policy and discusses its fiscal implications. Section 6 characterizes the second-best policy. Section 7 contains some extensions of our model, and Section 8 concludes. All proofs are in Appendix A.
نتیجه گیری انگلیسی
Despite the growing use of channel or floor systems to implement monetary policy, only a few theoretical studies exist. In particular, there are no formal studies that compare the two systems. This paper attempts to close this gap by constructing a general equilibrium model, where a central bank chooses to conduct monetary policy via either a floor system or a channel system. Unlike the existing literature, we explicitly take into account the financial implications of paying interest on deposits. The following results emerge from our analysis. First, the optimal framework is a floor system if and only if the target rate satisfies the Friedman rule. Second, implementing the optimal floor system is costly for the central bank. It requires that the central bank either has sufficient income to incur the interest expense or receives transfers from the fiscal authority. In either case, fewer resources are available to the government to finance its other priorities, which may lead to a political backlash and restrictions on the central bank's ability to pay interest on reserves. This is the unpleasant fiscal arithmetic of a floor system. Third, if the central bank is constrained by the fiscal authority regarding the size of its interest expense, a channel system is optimal. This last result does not mean that the central bank cannot implement a floor system, since it can always set the loan rate equal to the deposit rate, implying that the money market rate is equal to the deposit rate. Such a floor system, however, is suboptimal and the central bank can always do better by choosing a channel system instead. In a nutshell, our paper provides a rationale for operating a channel system as opposed to a floor system. Our explanation rests on the idea that central banks may be unable, or are unwilling for political reasons, to incur the interest expense required by the optimal floor system.