| Description |
1 online resource (37 pages) |
| Series |
IMF working paper ; no. WP/13/158 |
|
IMF working paper ; no. WP/13/158.
|
| Contents |
Cover; Abstract; Contents; I. Introduction; II. FAVAR Methodology and Balance Sheet Variables; III. Macroeconomic and Balance Sheet Data; IV. Transmission of A Monetary Shock through Sectoral Balance Sheets; V. Robustness Analysis; VI. Conclusion; Appendix; Appendix I. Data and Sources; Appendix II. Unit Root Tests and Analysis of Time Series' Degree of Integration; Appendix III. Investment, Consumption, and Trade-Based Channels; Table; Table 1. Determining the Number of Factors; Table 2. Importance of Variables in the Transmission of Monetary Policy: Factor Loadings and Variance Shares |
|
Table 3. Importance of Variables in the Transmission of Monetary Policy: Regression AnalysisFigure; Figure 1. Balance Sheet Variables, q1 1990 -- q2 2008; Figure 2. Interest Rate, Inflation, Unemployment, and GDP; Figure 3. Bank Lending Rates, External Finance Premium, Real Estate Loans, and Business Loans; Figure 4. Balance Sheets of Asset-Backed Securities Issuers, Money Market Funds, and Security Brokers & Dealers; Figure 5. Foreign Borrowing and Lending; Figure 6. Balance Sheets of Households; Figure 7. Balance Sheets of Nonfinancial Firms; Appendix Figure |
|
Appendix Figure 1. Interest Rates and Fixed Private InvestmentAppendix Figure 2. Stock Prices, House Prices, and Residential Investment; Appendix Figure 3. Real Effective Exchange Rate, Exports, and Imports; Appendix Figure 4. VIX, Capital Inflows, and Outflows |
| Summary |
This paper evaluates the strength of the balance sheet channel in the U.S. monetary policy transmission mechanism over the past three decades. Using a Factor-Augmented Vector Autoregression model on an expanded data set, including sectoral balance sheet variables, we show that the balance sheets of various economic agents act as important links in the monetary policy transmission mechanism. Balance sheets of financial intermediaries, such as commercial banks, asset-backed-security issuers and, to a lesser extent, security brokers and dealers, shrink in response to monetary tightening, while money market fund assets grow. The balance sheet effects are comparable in magnitude to the traditional interest rate channel. However, their economic significance in the run-up to the recent financial crisis was small. Large increases in interest rates would have been needed to avert a rapid rise of house prices and an unsustainable expansion of mortgage credit, suggesting an important role for macroprudential policies |
| Notes |
"July 2013." |
| Bibliography |
Includes bibliographical references |
| Subject |
Monetary policy.
|
|
Financial statements.
|
|
Financial statements
|
|
Monetary policy
|
| Form |
Electronic book
|
| Author |
Igan, Deniz, author.
|
|
International Monetary Fund, issuing body.
|
| ISBN |
9781484323977 |
|
1484323971 |
|
9781484343500 |
|
1484343506 |
|
