The Role of Central Banks in Financial Stability : How Has It Changed?.

By: Evanoff, Douglas DContributor(s): Holthausen, Cornelia | Kaufman, George G | Kremer, ManfredMaterial type: TextTextSeries: World Scientific Studies in International Economics SerPublisher: Singapore : World Scientific Publishing Co Pte Ltd, 2013Copyright date: ©2013Description: 1 online resource (462 pages)Content type: text Media type: computer Carrier type: online resourceISBN: 9789814449922Subject(s): Banks and banking, CentralGenre/Form: Electronic books.Additional physical formats: Print version:: The Role of Central Banks in Financial Stability : How Has It Changed?DDC classification: 332.042 LOC classification: HG1811.R65 2014ebOnline resources: Click to View
Contents:
Intro -- Contents -- Preface -- Acknowledgments -- I. Special Addresses -- The (Changing) Role of Central Banks in Financial Stability Policies Peter Praet -- The Role of Central Banks in Financial Stability: How Has It Changed? Willem H. Buiter -- 1. The Rediscovery of Financial Stability by the Central Banking Community of the Advanced Economies -- 2. Financial Stability: What is It? -- 3. Prevention -- 4. Regulate Risky Behavior, Not Institutions -- 5. Regulation and Resolution Need to be Global in Scope -- 6. Macroprudential Instruments -- 6.1 Leaning against the wind in asset markets and credit markets -- 7. The Fiscal Role of the Central Bank -- 7.1 A little seigniorage arithmetic -- 8. How Different is the Fiscal Role of the Central Bank in the U.S. from that in the Euro Area? -- 8.1 The ability and willingness to use the anticipated and unanticipated inflation taxes -- 8.2 Technical/economic obstacles to an inflationary solution of the U.S. and euro area sovereign debt problems: The seigniorage Laffer curve -- 9. Quasi-Fiscal Activities of the Central Bank -- 10. Instruments of the Modern Central Bank -- 11. The Institutional Division of Labor for Financial Stability: Who Does What? -- 12. Competence and Independence -- 13. Legitimacy, Accountability, Transparency -- 14. Conclusion -- References -- Pursuing Financial Stability at the Federal Reserve Janet L. Yellen -- 1. Overview of the Macroprudential Approach -- 2. Identifying and Addressing Structural Forms of Systemic Risk -- 3. Identifying and Addressing Cyclical Forms of Systemic Risk -- 4. Current Challenges -- 5. Conclusion -- II. The Role of Central Banks in Financial Stability: Historical Review and Critique -- Financial Stability: Lessons Learned from the Recent Crisis and Implications for the Federal Reserve Nellie Liang -- 1. Lessons Learned.
2. Implications for the Federal Reserve -- 3. Conclusion -- References -- Role of Central Banks in Financial Stability: Lessons from the Experience of the Bank of Japan Takeo Hoshi -- 1. Introduction -- 2. Financial Instability in the 1920s -- 3. Convoy System to Prevent Bank Failures -- 4. Bank of Japan After the New Bank of Japan Act of 1998 -- 5. Monetary Policy and Prudential Policy -- 6. Lessons from the Experiences of the Bank of Japan -- References -- Overcoming the Fear of Free Falling: Monetary Policy Graduation in Emerging Markets Carlos A. Vegh and Guillermo Vuletin -- 1. Introduction -- 2. Graduating Class -- 3. Graduation and "Fear of Free Falling" -- 4. Graduation and "Fear of Free Falling" - Regression Analysis -- 5. Conclusions -- References -- Appendix 1. Definition of Variables and Sources -- Gross Domestic Product -- GDP deflator -- Consumer price index -- Short-term interest rate -- Official exchange rate -- Institutional quality -- Appendix 2. Countries in the Sample -- Appendix 3. Data on Cyclicality of Monetary Policy, Fear of Free Falling, and Institutional Quality -- Can We Identify the Financial Cycle? Mathias Drehmann, Claudio Borio, and Kostas Tsatsaronis -- 1. Introduction -- 2. Data and Methodology -- 2.1 Frequency-based filter analysis -- 2.2 Turning-point analysis -- 3. Characterizing Cycles in Individual Series -- 3.1 Frequency-based filter analysis: Short-term and medium-term cycles -- 3.2 Turning-point analysis: Short-term and medium-term cycles -- 3.3 What happens around financial crises? -- 4. Toward a Measure of the Financial Cycle -- 4.1 Methodology for the combination of series -- 4.2 Selection of series -- 4.3 Results -- 5. Policy Context: Regime-Dependence and "Unfinished Recessions" -- 6. Conclusion -- References -- III. Central Banks and Asset Price Bubbles.
Low Interest Rates and Housing Bubbles: Still No Smoking Gun Kenneth N. Kuttner -- 1. Introduction -- 2. Why Interest Rates Affect House Prices -- 2.1 The user cost framework -- 2.2 A dynamic user cost model -- 2.3 The credit channel -- 2.4 The risk-taking channel -- 3. Evidence on the Response of House Prices to Interest Rates -- 3.1 Existing literature -- 3.2 Results from an error-correction model -- 4. Interest Rates and the Property Price Boom of the mid-2000s -- 4.1 The U.S. experience -- 4.2 A cross-country exploration -- 5. Conclusions -- References -- Appendix -- Classic FIT and Lean FIT: Is Inflation-Targeting Guilty of Causing the Financial Instability of 2007-2009? Takatoshi Ito -- 1. Introduction -- 2. The Cause of the Global Financial Crisis -- 2.1 Causes1 -- 3. Flexible Inflation Targeting (FIT) and Bubble -- 4. Digression: The Japanese Bubble Experience -- 5. Middle Ground: Should the Central Bank Target Asset Prices? -- 6. Collecting and Calculating Housing Price Data -- 7. Legal Framework to Avoid Too-Big-to-Fail -- 8. Commitment to FIT with Financial Stability -- 9. Concluding Remarks -- References -- IV. Current, Past, and Potential Future Threats to Financial Stability -- Bank Capital Regulations: Learning the Right Lessons from the Crisis Asli Demirguc-Kunt -- 1. The Analysis and Results -- 2. Policy Implications -- References -- International Monetary Reform: Exchange Rates or Interest Rates? Ronald McKinnon -- 1. Introduction -- 2. Interest Differentials, Carry Trades, andWorldwide Inflation -- 3. Carry Trades and International Monetary Reform -- 4. A New International Monetary Agreement? -- 5. The Supply Constraint on Bank Credit -- 6. A Concluding Note on Stagflation in the United States -- References -- Threats to Financial Stability in Emerging Markets: The New and Very Active Role of Central Banks Liliana Rojas-Suarez.
1. Introduction -- 2. Capital Flow Volatility in the 2000s: The Dominance of Events in Advanced Economies -- 3. The Capital Inflow Problem: A Common Concern Under Different Growth Models -- 4. Central Bank Responses in Emerging Markets: Can There be Enough Instruments in Countries that Do Not Issue Hard Currency? -- 5. Concluding Remarks -- References -- V. The Social Productivity of the Financial Sector -- In Defense of Wall Street: The Social Productivity of the Financial System Ross Levine -- 1. Introduction -- 2. Finance and Growth, Inequality, and Poverty -- 2.1 Banks, growth, inequality, and the poor -- 2.1.1 Cross-country evidence -- 2.1.2 U.S. evidence on finance, growth, inequality, and the poor -- 2.2 Banks, markets, and growth -- 3. Financial Innovation and Growth -- 4. Conclusions -- References -- Output Growth Variability: The Role of Financial Markets Alexander Popov -- 1. Introduction -- 2. Finance, Output Growth, and Output Volatility -- 3. Finance, Output Growth, and Output Skewness -- 4. Conclusion -- References -- Occupying the Wrong Street? The Social Productivity of the Financial Sector: Some Comments Gerard Caprio, Jr. -- References -- VI. Open Issues in the Regulatory Debate: Failure Resolutions, Bailouts, Moral Hazard, and Market Discipline -- Bankers and Brokers First: Loose Ends in the Theory of Central Bank Policymaking Edward J. Kane -- 1. Misconceptions about Crises and Crisis Response -- 2. Central Bank and Government Rescue Programs -- 3. Rethinking Systemic Risk -- 4. Usefulness of Capital Requirements has been Oversold -- 5. Undone by the Regulatory Dialectic -- 6. Recommendations for Reform -- 7. Traditional Reporting and Incentive Frameworks are Inadequate -- References -- The Elusive Scale Economies of the Largest Banks and Their Implications for Global Competitiveness Joseph P. Hughes -- 1. Introduction.
2. Evidence of Scale Economies at the Largest Financial Institutions -- 3. How are Economies of Scale Typically Measured and Why Do They Elude Many Investigations? -- 4. How are Scale Economies Measured While Accounting for Endogenous Risk-Taking? -- 5. Do Too-Big-to-Fail Subsidies Account for the Estimated Scale Economies at the Largest Institutions? -- 6. What are the Implications of the Estimated Scale Economies at the Largest Institutions for Restricting Their Scale and for Their International Competitiveness? -- 7. Conclusions -- References -- The Ex Ante versus Ex Post Effect of Public Guarantees Evren Damar, Reint Gropp, and Adi Mordel -- 1. Introduction -- 2. The Event -- 3. Methodology -- 4. Guarantees and Risk-Taking -- 5. The Net Effect of Guarantees -The Role of Charter Values -- 6. Normal Times versus Crisis Times -- 7. Discussion and Conclusion -- References -- Appendix 1. Listed Banks Implicated by the DBRS Introduction of the SA Methodology on October 6, 2006 -- Appendix 2. Difference-in-Differences: Wholesale Funding Market Access -- Real and Imaginary Resolution Options for Large Financial Institutions David A. Skeel, Jr. -- 1. Introduction -- 2. Dodd-Frank's New Resolution Rules -- 2.1 Origin myths and their implications -- 2.2 Key problems with Dodd-Frank resolution -- 2.3 Potential benefits -- 3. The Bankruptcy Alternative -- 3.1 The bankruptcy process -- 3.2 Benefits of bankruptcy -- 3.3 The limitations of bankruptcy -- 3.4 The role and status of bankruptcy judges -- 4. Is Bail-in the Solution? -- 5. Implications and Potential Reforms -- 5.1 Next steps for Dodd-Frank and bankruptcy reform -- 5.2 A more ambitious program: Chapter 14 -- 6. Conclusion -- References -- VII. Policy Panel: Where to from Here? -- Is Our Economy's Financial Sector Worth What It Costs Us? Benjamin M. Friedman.
The Eurozone Crisis: Causes, Remedy, and Misperceptions Richard C. Koo.
Summary: The two most topical issues in current financial markets deal with the causes of the recent financial crisis and the means to prevent future crises. This book addresses the latter and stresses a major shift in most countries toward a better understanding of financial stability and how it can be achieved. In particular, the papers in this volume examine the recent change in emphasis at central banks with regard to financial stability. For example: What were the cross-country differences in emphasis on financial stability in the past" Did these differences appear to affect the extent of the adverse impact of the financial crisis on individual countries" What are perceived to be the major future threats to financial stability" These and related issues are discussed in the book by well-known experts in the field - some of the best minds in the world pursuing financial stability. Following the global financial crisis, significant reforms have been initiated in many countries to address financial stability more directly, frequently focusing on macroprudential policy frameworks in which central banks play a more active role.
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Intro -- Contents -- Preface -- Acknowledgments -- I. Special Addresses -- The (Changing) Role of Central Banks in Financial Stability Policies Peter Praet -- The Role of Central Banks in Financial Stability: How Has It Changed? Willem H. Buiter -- 1. The Rediscovery of Financial Stability by the Central Banking Community of the Advanced Economies -- 2. Financial Stability: What is It? -- 3. Prevention -- 4. Regulate Risky Behavior, Not Institutions -- 5. Regulation and Resolution Need to be Global in Scope -- 6. Macroprudential Instruments -- 6.1 Leaning against the wind in asset markets and credit markets -- 7. The Fiscal Role of the Central Bank -- 7.1 A little seigniorage arithmetic -- 8. How Different is the Fiscal Role of the Central Bank in the U.S. from that in the Euro Area? -- 8.1 The ability and willingness to use the anticipated and unanticipated inflation taxes -- 8.2 Technical/economic obstacles to an inflationary solution of the U.S. and euro area sovereign debt problems: The seigniorage Laffer curve -- 9. Quasi-Fiscal Activities of the Central Bank -- 10. Instruments of the Modern Central Bank -- 11. The Institutional Division of Labor for Financial Stability: Who Does What? -- 12. Competence and Independence -- 13. Legitimacy, Accountability, Transparency -- 14. Conclusion -- References -- Pursuing Financial Stability at the Federal Reserve Janet L. Yellen -- 1. Overview of the Macroprudential Approach -- 2. Identifying and Addressing Structural Forms of Systemic Risk -- 3. Identifying and Addressing Cyclical Forms of Systemic Risk -- 4. Current Challenges -- 5. Conclusion -- II. The Role of Central Banks in Financial Stability: Historical Review and Critique -- Financial Stability: Lessons Learned from the Recent Crisis and Implications for the Federal Reserve Nellie Liang -- 1. Lessons Learned.

2. Implications for the Federal Reserve -- 3. Conclusion -- References -- Role of Central Banks in Financial Stability: Lessons from the Experience of the Bank of Japan Takeo Hoshi -- 1. Introduction -- 2. Financial Instability in the 1920s -- 3. Convoy System to Prevent Bank Failures -- 4. Bank of Japan After the New Bank of Japan Act of 1998 -- 5. Monetary Policy and Prudential Policy -- 6. Lessons from the Experiences of the Bank of Japan -- References -- Overcoming the Fear of Free Falling: Monetary Policy Graduation in Emerging Markets Carlos A. Vegh and Guillermo Vuletin -- 1. Introduction -- 2. Graduating Class -- 3. Graduation and "Fear of Free Falling" -- 4. Graduation and "Fear of Free Falling" - Regression Analysis -- 5. Conclusions -- References -- Appendix 1. Definition of Variables and Sources -- Gross Domestic Product -- GDP deflator -- Consumer price index -- Short-term interest rate -- Official exchange rate -- Institutional quality -- Appendix 2. Countries in the Sample -- Appendix 3. Data on Cyclicality of Monetary Policy, Fear of Free Falling, and Institutional Quality -- Can We Identify the Financial Cycle? Mathias Drehmann, Claudio Borio, and Kostas Tsatsaronis -- 1. Introduction -- 2. Data and Methodology -- 2.1 Frequency-based filter analysis -- 2.2 Turning-point analysis -- 3. Characterizing Cycles in Individual Series -- 3.1 Frequency-based filter analysis: Short-term and medium-term cycles -- 3.2 Turning-point analysis: Short-term and medium-term cycles -- 3.3 What happens around financial crises? -- 4. Toward a Measure of the Financial Cycle -- 4.1 Methodology for the combination of series -- 4.2 Selection of series -- 4.3 Results -- 5. Policy Context: Regime-Dependence and "Unfinished Recessions" -- 6. Conclusion -- References -- III. Central Banks and Asset Price Bubbles.

Low Interest Rates and Housing Bubbles: Still No Smoking Gun Kenneth N. Kuttner -- 1. Introduction -- 2. Why Interest Rates Affect House Prices -- 2.1 The user cost framework -- 2.2 A dynamic user cost model -- 2.3 The credit channel -- 2.4 The risk-taking channel -- 3. Evidence on the Response of House Prices to Interest Rates -- 3.1 Existing literature -- 3.2 Results from an error-correction model -- 4. Interest Rates and the Property Price Boom of the mid-2000s -- 4.1 The U.S. experience -- 4.2 A cross-country exploration -- 5. Conclusions -- References -- Appendix -- Classic FIT and Lean FIT: Is Inflation-Targeting Guilty of Causing the Financial Instability of 2007-2009? Takatoshi Ito -- 1. Introduction -- 2. The Cause of the Global Financial Crisis -- 2.1 Causes1 -- 3. Flexible Inflation Targeting (FIT) and Bubble -- 4. Digression: The Japanese Bubble Experience -- 5. Middle Ground: Should the Central Bank Target Asset Prices? -- 6. Collecting and Calculating Housing Price Data -- 7. Legal Framework to Avoid Too-Big-to-Fail -- 8. Commitment to FIT with Financial Stability -- 9. Concluding Remarks -- References -- IV. Current, Past, and Potential Future Threats to Financial Stability -- Bank Capital Regulations: Learning the Right Lessons from the Crisis Asli Demirguc-Kunt -- 1. The Analysis and Results -- 2. Policy Implications -- References -- International Monetary Reform: Exchange Rates or Interest Rates? Ronald McKinnon -- 1. Introduction -- 2. Interest Differentials, Carry Trades, andWorldwide Inflation -- 3. Carry Trades and International Monetary Reform -- 4. A New International Monetary Agreement? -- 5. The Supply Constraint on Bank Credit -- 6. A Concluding Note on Stagflation in the United States -- References -- Threats to Financial Stability in Emerging Markets: The New and Very Active Role of Central Banks Liliana Rojas-Suarez.

1. Introduction -- 2. Capital Flow Volatility in the 2000s: The Dominance of Events in Advanced Economies -- 3. The Capital Inflow Problem: A Common Concern Under Different Growth Models -- 4. Central Bank Responses in Emerging Markets: Can There be Enough Instruments in Countries that Do Not Issue Hard Currency? -- 5. Concluding Remarks -- References -- V. The Social Productivity of the Financial Sector -- In Defense of Wall Street: The Social Productivity of the Financial System Ross Levine -- 1. Introduction -- 2. Finance and Growth, Inequality, and Poverty -- 2.1 Banks, growth, inequality, and the poor -- 2.1.1 Cross-country evidence -- 2.1.2 U.S. evidence on finance, growth, inequality, and the poor -- 2.2 Banks, markets, and growth -- 3. Financial Innovation and Growth -- 4. Conclusions -- References -- Output Growth Variability: The Role of Financial Markets Alexander Popov -- 1. Introduction -- 2. Finance, Output Growth, and Output Volatility -- 3. Finance, Output Growth, and Output Skewness -- 4. Conclusion -- References -- Occupying the Wrong Street? The Social Productivity of the Financial Sector: Some Comments Gerard Caprio, Jr. -- References -- VI. Open Issues in the Regulatory Debate: Failure Resolutions, Bailouts, Moral Hazard, and Market Discipline -- Bankers and Brokers First: Loose Ends in the Theory of Central Bank Policymaking Edward J. Kane -- 1. Misconceptions about Crises and Crisis Response -- 2. Central Bank and Government Rescue Programs -- 3. Rethinking Systemic Risk -- 4. Usefulness of Capital Requirements has been Oversold -- 5. Undone by the Regulatory Dialectic -- 6. Recommendations for Reform -- 7. Traditional Reporting and Incentive Frameworks are Inadequate -- References -- The Elusive Scale Economies of the Largest Banks and Their Implications for Global Competitiveness Joseph P. Hughes -- 1. Introduction.

2. Evidence of Scale Economies at the Largest Financial Institutions -- 3. How are Economies of Scale Typically Measured and Why Do They Elude Many Investigations? -- 4. How are Scale Economies Measured While Accounting for Endogenous Risk-Taking? -- 5. Do Too-Big-to-Fail Subsidies Account for the Estimated Scale Economies at the Largest Institutions? -- 6. What are the Implications of the Estimated Scale Economies at the Largest Institutions for Restricting Their Scale and for Their International Competitiveness? -- 7. Conclusions -- References -- The Ex Ante versus Ex Post Effect of Public Guarantees Evren Damar, Reint Gropp, and Adi Mordel -- 1. Introduction -- 2. The Event -- 3. Methodology -- 4. Guarantees and Risk-Taking -- 5. The Net Effect of Guarantees -The Role of Charter Values -- 6. Normal Times versus Crisis Times -- 7. Discussion and Conclusion -- References -- Appendix 1. Listed Banks Implicated by the DBRS Introduction of the SA Methodology on October 6, 2006 -- Appendix 2. Difference-in-Differences: Wholesale Funding Market Access -- Real and Imaginary Resolution Options for Large Financial Institutions David A. Skeel, Jr. -- 1. Introduction -- 2. Dodd-Frank's New Resolution Rules -- 2.1 Origin myths and their implications -- 2.2 Key problems with Dodd-Frank resolution -- 2.3 Potential benefits -- 3. The Bankruptcy Alternative -- 3.1 The bankruptcy process -- 3.2 Benefits of bankruptcy -- 3.3 The limitations of bankruptcy -- 3.4 The role and status of bankruptcy judges -- 4. Is Bail-in the Solution? -- 5. Implications and Potential Reforms -- 5.1 Next steps for Dodd-Frank and bankruptcy reform -- 5.2 A more ambitious program: Chapter 14 -- 6. Conclusion -- References -- VII. Policy Panel: Where to from Here? -- Is Our Economy's Financial Sector Worth What It Costs Us? Benjamin M. Friedman.

The Eurozone Crisis: Causes, Remedy, and Misperceptions Richard C. Koo.

The two most topical issues in current financial markets deal with the causes of the recent financial crisis and the means to prevent future crises. This book addresses the latter and stresses a major shift in most countries toward a better understanding of financial stability and how it can be achieved. In particular, the papers in this volume examine the recent change in emphasis at central banks with regard to financial stability. For example: What were the cross-country differences in emphasis on financial stability in the past" Did these differences appear to affect the extent of the adverse impact of the financial crisis on individual countries" What are perceived to be the major future threats to financial stability" These and related issues are discussed in the book by well-known experts in the field - some of the best minds in the world pursuing financial stability. Following the global financial crisis, significant reforms have been initiated in many countries to address financial stability more directly, frequently focusing on macroprudential policy frameworks in which central banks play a more active role.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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