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Europe > Ireland

You are looking at 1 - 10 of 40 items for :

  • Type: Journal Issue x
  • Financial Markets and the Macroeconomy x
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Cover IMF Working Papers
The Diagnostic Financial Accelerator
Lahcen Bounader
and
Selim A Elekdag
We develop a model with diagnostic expectations (DE) and a financial accelerator (FA) that generates mutually reinforcing shock amplification, especially in the case of demand shocks. However, supply shocks can be dampened via a debt deflation channel, which is strengthened amid DE. Importantly, the model results in a worsening of the inflation-output volatility trade-off confronting policymakers. In contrast to most of the literature—which argues against targeting the level of asset prices—our financial accelerator model with DE suggests that targeting house price growth may result in welfare gains.
Keywords:
Financial Accelerator; Diagnostic Expectations; Optimal monetary policy; Instrument rules; debt deflation channel; inflation-output volatility trade-off; house price growth; inflation trade-off; model dynamics; Inflation; Asset prices; Housing prices; Consumption; Business cycles; Global
Cover IMF Working Papers
Micro-Assessment of Macroprudential Borrower-Based Measures in Lithuania
Mantas Dirma
and
Jaunius Karmelavičius
Despite having introduced borrower-based measures (BBM), Lithuania's housing and mortgage markets were booming during the low-interest-rate period, casting doubt on the macroprudential toolkit's ability to contain excessive mortgage growth. This paper assesses the adequacy of BBMs’ parametrization in Lithuania. We do so by building a novel lifetime expected credit loss framework that is founded on actual loan-level default and household income data. We show that the BBM package effectively contains mortgage credit risk and that housing loans are more resilient to stress than in the preregulatory era. Our BBM limit calibration exercise reveals that (1) in the low-rate environment, income-based measures could have been tighter; and (2) borrowers taking out secondary mortgages rightly are and should be required to pledge a higher down payment.
Keywords:
macroprudential policy; borrower-based measures; LTV; mortgage credit risk; lifetime expected loss; probability of default.; calibration exercise; BBM package; modeling mortgage risk; Lithuania's housing market; Mortgages; Loans; Credit risk; Housing prices; Macroprudential policy instruments; Europe; Baltics; Global
Cover IMF Working Papers
Differential Effects of Macroprudential Policy
Nina Biljanovska
and
Sophia Chen
We explore the differential effects of lender-based macroprudential policies on new mortgage borrowing for households of different income using a comprehensive dataset that links macroprudential policy actions with household survey data for European Union countries. The main results suggest that higher-income households on average experience a larger reduction in mortgage loan size than lower-income households when regulation targeting total lenders’ assets tightens. In contrast, lower-income households on average experience a larger reduction in mortgage loan size than higher-income households when regulation targeting lenders’ capital requirements tightens. We also provide evidence of the different channels through which the differential effects operate.
Keywords:
Household borrowing; macroprudential policy; income distribution; differential effect; higher-income household; capital requirements; household income; capital requirement; Income; Mortgages; Loans; Macroprudential policy instruments; Global
Cover IMF Staff Country Reports
Ireland: Financial Sector Assessment Program-Technical Note on Macroprudential Policy Framework and Tools
International Monetary Fund. Monetary and Capital Markets Department
Ireland is a small open economy that is part of a monetary union and has a major financial system. Within the Euro Area (EA), Ireland comprises a relatively small proportion of aggregate GDP (3.4 percent), of which a significant portion is attributable to foreign-owned multinational enterprises (MNEs). Yet, the Irish financial system holds assets of EUR 7.9 trillion, over 18 times GDP. Since monetary policy is carried out by the European Central Bank (ECB) for the entire EA, macroprudential policy has the potential to play a critical stabilizing role for the Irish financial system.
Keywords:
bank funding; bank lending; CRE market vulnerability; lending to SME; bank sector; commercial real estate; Housing prices; Mortgages; Financial sector stability; Macroprudential policy instruments; Credit; Global
Cover IMF Working Papers
What Can We Learn from Financial Stability Reports?
Mr. Fabio Comelli
and
Ms. Sumiko Ogawa
This paper reviews the approaches to systemic risk analysis in 32 central bank financial stability reports (FSRs). We compare and contrast the systemic risk analysis in FSRs with the IMF Article IV staff reports, noting that Article IV staff reports and FSRs frequently pick up analytical content from each other. All reviewed FSRs include a systemic risk assessment, which has not always been the case in Article IV staff reports. Also, compared to Article IV staff reports, on average, FSRs tend to cover a wider range of financial risks and vulnerabilities and tend to have more extensive discussions of the policy mix to mitigate systemic risk. In these assessments, FSRs utilize sophisticated analytical tools, such as stress tests and growth-at-risk, more frequently than Article IV staff reports. We emphasize that a central bank FSR typically presents a rich resource that IMF country teams can leverage, as already done by some, in forming their independent view about systemic risk.
Keywords:
IMF article IV staff report; IMF country team; central bank FSR; IMF article IV surveillance; IMF article IV consultation; Systemic risk; Financial sector stability; Macroprudential policy; Stress testing; Systemic risk assessment; Global; Caribbean
Cover IMF Working Papers
External Financing Risks: How Important is the Composition of the International Investment Position?
Mr. Luis M. Cubeddu
,
Mrs. Swarnali A Hannan
, and
Mr. Pau Rabanal
Building on the vast literature, this paper focuses on the role of the structure of the international investment position (IIP) in affecting countries’ external vulnerabilities. Using a sample of 73 advanced and emerging economies and new database on the IIP’s currency composition, we find that the size and structure of external liabilities and assets, especially with regards to currency denomination, matter in understanding balance-of-payments pressures. Specifically, and beyond the standard macroeconomic factors highlighted in other studies, higher levels of gross external debt increase the likelihood of an external crisis, while higher levels of foreign-currency-denominated external debt increase the likelihood of sudden stops. Foreign reserve assets play a mitigating role, although with diminishing returns, and the combination of flow and stock imbalances amplifies external risks, especially during periods of heightened global risk aversion. The results are especially strong for emerging economies, where the impact of flow and stock imbalances and foreign currency mismatches are larger and more robust across specifications.
Keywords:
international investment positions; current account; foreign reserves; sudden stops with large output loss; external crises.; WP; debt liability; foreign currency; debt liabilities increase; liability position; debt assets
Cover IMF Staff Country Reports
Norway: Financial Sector Assessment Program-Technical Note-Systemic Risk Oversight and Macroprudential Policy Framework
International Monetary Fund. Monetary and Capital Markets Department
While Norway’s institutional arrangement for macroprudential policy is uncommon, the authorities have shown strong willingness to act. The Ministry of Finance (MoF) is the sole macroprudential decision-maker in Norway, which is rare in international comparison. However, Norges Bank and the Finanstilsynet (FSA) play important advisory roles. In recent years, the authorities have taken substantive and wide-ranging macroprudential policy actions in response to growing systemic vulnerabilities—and these seem to have been effective in slowing down some of the riskier trends. The macroprudential policy toolkit is well stocked and actively used.
Keywords:
ISCR; CR; CRE sector; CRE market; CRE company; CRE risk; FSA survey; liquid asset; central bank; foreign currency; mortgage loan; financial system; Macroprudential policy; Financial stability assessment; Macroprudential policy instruments; Financial sector stability; Countercyclical capital buffers; Global; Mortgages
Cover IMF Research Perspectives
IMF Research Perspectives: Spring-Summer 2020
IMF Research Perspectives Spring-Summer 2020
Keywords:
IRB; worker; view IMF research; MARTINEZ PERIA interview
Cover IMF Working Papers
One Money, Many Markets: Monetary Transmission and Housing Financing in the Euro Area
Giancarlo Corsetti
,
Joao B. Duarte
, and
Samuel Mann
We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption, consumer prices, and variables related to local housing and labor markets. Building a small open economy model featuring a housing sector and calibrating it to Spain, we show that varying the share of adjustable-rate mortgages and loan-to-value ratios explains up to one-third of the cross-country heterogeneity in the responses of output and private consumption.
Keywords:
WP; coefficient of variation; nominal exchange rate
Cover IMF Working Papers
The Anatomy of the Transmission of Macroprudential Policies
Viral V. Acharya
,
Katharina Bergant
,
Matteo Crosignani
,
Tim Eisert
, and
Fergal McCann
We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—a?ect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Supervisory loan level data suggest that mortgage credit is reallocated from low-to high-income borrowers and from urban to rural counties. This reallocation weakens the feedback loop between credit and house prices and slows down house price growth in “hot” housing markets. Consistent with constrained lenders adjusting their portfolio choice, more-a?ected banks drive this reallocation and substitute their risk-taking into holdings of securities and corporate credit.
Keywords:
WP; lending limit; Macroprudential Regulation; Household Leverage; Residential Mortgage Credit; House Prices; credit reallocation; mortgage credit; mortgage issuance; house price growth; bank portfolio choice; Housing prices; Mortgages; Credit; Personal income; Residential mortgages; Loans