Market Power And Monetary Policy Transmission PDF Download
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Author | : Mr. Romain A Duval |
Publisher | : International Monetary Fund |
Total Pages | : 56 |
Release | : 2021-07-09 |
Genre | : Business & Economics |
ISBN | : 1513588001 |
Download Market Power and Monetary Policy Transmission Book in PDF, ePub and Kindle
We show that firms’ market power dampens the response of their output to monetary policy shocks, using firm-level data for the United States and a large cross-country firm-level dataset for 14 advanced economies. The estimated impact of a firm’s markup on its response to a monetary policy shock is large enough to materially affect monetary policy transmission. We also find some evidence that the role of markup in monetary policy transmission, while independent from other channels, is greater for firms whose characteristics — notably size and age — are likely to be associated with greater financial constraints. We rationalize these findings through a simple partial equilibrium model in which borrowing constraints amplify disproportionately low-markup firms’ responses to changes in interest rates.
Author | : Yifei Wang |
Publisher | : |
Total Pages | : |
Release | : 2020 |
Genre | : |
ISBN | : |
Download Bank Market Power and Monetary Policy Transmission Book in PDF, ePub and Kindle
We quantify the impact of bank market power on monetary policy transmission through banks to borrowers. We estimate a dynamic banking model in which monetary policy affects imperfectly competitive banks' funding costs. Banks optimize the pass-through of these costs to borrowers and depositors, while facing capital and reserve regulation. We find that bank market power explains much of the transmission of monetary policy to borrowers, with an effect comparable to that of bank capital regulation. When the federal funds rate falls below 0.9%, market power interacts with bank capital regulation to produce a reversal of the effect of monetary policy.
Author | : Sophocles N. Brissimis |
Publisher | : |
Total Pages | : 44 |
Release | : 2016 |
Genre | : |
ISBN | : |
Download Bank Market Power and Monetary Policy Transmission Book in PDF, ePub and Kindle
This paper examines empirically the role of bank market power as an internal factor influencing banks' reaction in terms of lending and risk taking to monetary policy impulses. The analysis is carried out for the U.S. and euro-area banking sectors over the period 1997-2010. Market power is estimated at the bank-year level, using a method that allows the efficient estimation of marginal cost of banks also at the bank-year level. The findings show that banks with even moderate levels of market power are able to buffer the negative impact of a monetary policy change on bank loans and credit risk. This effect is somewhat more pronounced in the euro area compared with the United States. However, following the sub-prime mortgage crisis of 2007, the level of market power needed to shield bank loans and credit risk from the impact of a change in monetary policy increased substantially. This is clear evidence that the financial crisis reinforced the mechanisms of the bank lending and the risk-taking channels.
Author | : Mr.Luis Brandao-Marques |
Publisher | : International Monetary Fund |
Total Pages | : 54 |
Release | : 2020-02-21 |
Genre | : Business & Economics |
ISBN | : 1513529730 |
Download Monetary Policy Transmission in Emerging Markets and Developing Economies Book in PDF, ePub and Kindle
Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.
Author | : Nuobu Renzhi |
Publisher | : |
Total Pages | : 0 |
Release | : 2023 |
Genre | : |
ISBN | : |
Download Corporate Market Power and Monetary Policy Transmission in Asia Book in PDF, ePub and Kindle
This paper empirically examines the effect of corporate market power on monetary policy transmission in Asia. Using panel local projections based on a firm-level dataset for 11 advanced and emerging Asian economies, we find that after a monetary policy tightening, the real sales of firms with low market power significantly decline, while real sales of firms with high market power respond little. Moreover, we find that the average responses of firms'real sales to monetary policy shocks are driven by firms with low markups. Our findings indicate that rising market power impairs the effective transmission of monetary policy. We discuss the implications in terms of balancing the need for industrial policies that promote innovation-led productivity against effective competition policy to compress heterogeneity in market power dynamics and enhance the monetary policy transmission mechanism.
Author | : Ranasinghe Arachchige Anil Perera |
Publisher | : |
Total Pages | : 710 |
Release | : 2013 |
Genre | : |
ISBN | : |
Download Financial Sector Dynamics, Monetary Policy Transmission and Central Banking Book in PDF, ePub and Kindle
This thesis presents five empirical essays, all of which revolve around issues related to financial sector dynamics, interest rate pass-through, monetary policy transmission and central banking. The first research essay examines the dynamics and determinants of interest rate pass-through within the global context. This study first identifies long run interest rate pass-through in countries and then examines their changes over time. Thereafter, it explores various macroeconomic, financial/banking and institutional/governance determinants of interest rate pass-through. Findings suggest incomplete interest rate pass-through for the majority of countries while pointing to their changes over time. It also finds that amongst various determining factors of interest rate pass-through, financial market development, banking sector market power and central bank transparency remain the key determinants. The second research essay examines whether the dynamic economic and financial environment in an emerging market economy leads to changes in interest rate pass-through while reducing any asymmetries and heterogeneities. This study finds that economic and financial sector changes lead to substantial structural shifts in interest rate pass-through in emerging market economies. The results also suggest that despite there being structural changes, significant asymmetries and heterogeneities in interest rate pass-through exist due to prevailing high market power in the banking markets and also due to the impact of bank-specific characteristics.The third research essay examines issues related to the monetary transmission mechanism in an emerging market economy focusing on the effectiveness of monetary policy, the relative importance of different channels (interest rate, credit, exchange rate and asset prices), the sectoral effects of monetary policy across different financial institutions and the structural changes in the transmission process. The results suggest that market-based indirect instruments of monetary policy appear more effective in a liberalised financial environment, since price-based channels gain much importance. This study also supports the view that large financial institutions (generally banks) can withstand or delay the impact of monetary policy than small or financially vulnerable institutions pointing to substantial sectoral effects of monetary policy. The study also provides evidence on the changes in monetary transmission over time. The fourth research essay focuses on the impact of off-balance sheet banking on the bank lending channel of monetary transmission. This study finds that off-balance sheet banking reduces the effectiveness of the bank lending channel thus creating a buffering effect on monetary policy. It also finds that the buffering effects are substantial for small, highly-liquid and well-capitalised banks. The fifth research essay examines a recently recognised issue in central banking, i.e., central bank financial strength and its implications on inflation outcomes. Empirical estimates indicate that central bank financial strength is negatively associated with inflation suggesting that maintaining the health of the central bank balance sheet remains a vital pre-condition for desired policy outcomes of a central bank.The findings of this thesis provide important policy implications for economic policy makers, particularly for central banks while contributing to the existing academic literature.
Author | : Janice Eberly |
Publisher | : Brookings Institution Press |
Total Pages | : |
Release | : 2019-08-27 |
Genre | : Business & Economics |
ISBN | : 0815737106 |
Download Brookings Papers on Economic Activity: Fall 2018 Book in PDF, ePub and Kindle
Brookings Papers on Economic Activity (BPEA) provides academic and business economists, government officials, and members of the financial and business communities with timely research on current economic issues. Contents: The European Central Bank’s Monetary Policy during Its First 20 Years, Philipp Hartmann and Frank Smets Accounting for Macro-Finance Trends: Market Power, Intangibles, and Risk Premia, Emmanuel Farhi and François Gourio The Real Effects of Disrupted Credit: Evidence from the Global Financial Crisis, Ben S. Bernanke The Cyclical Sensitivity in Estimates of Potential Output, Olivier Coibion, Yuriy Gorodnichenko, and Mauricio Ulate Should the Federal Reserve Regularly Evaluate Its Monetary Policy Framework?, Jeff Fuhrer, Giovanni P. Olivei, Eric S. Rosengren, and Geoffrey M.B. Tootell Monetary Policy at the Effective Lower Bound: Less Potent? More International? More Sticky?, Kristin Forbes The Efficacy of Large-Scale Asset Purchases When the Short-Term Interest Rate Is at Its Effective Lower Bound, James D. Hamilton The Federal Reserve Is Not Very Constrained by the Lower Bound on Nominal Interest Rates, Eric T. Swanson Comments on Monetary Policy at the Effective Lower Bound, Janet Yellen
Author | : Ilya A. Strebulaev |
Publisher | : Now Pub |
Total Pages | : 174 |
Release | : 2012-10-02 |
Genre | : Business & Economics |
ISBN | : 9781601985804 |
Download Dynamic Models and Structural Estimation in Corporate Finance Book in PDF, ePub and Kindle
The goals of this monograph are to explain the models and techniques and make it more accessible, introduce the main strands of this literature, and explain how dynamic models can be taken to the data and estimated, providing a guide to 3 methodologies: generalized method of moments, simulated method of moments, and maximum simulated likelihood.
Author | : |
Publisher | : |
Total Pages | : 736 |
Release | : 1997 |
Genre | : Bank examination |
ISBN | : |
Download History of the Eighties--lessons for the Future Book in PDF, ePub and Kindle
Author | : Jens Eisenschmidt |
Publisher | : |
Total Pages | : 0 |
Release | : 2022 |
Genre | : |
ISBN | : 9789289952910 |
Download Monetary Policy Transmission in Segmented Markets Book in PDF, ePub and Kindle
We show that dealer market power impedes the pass-through of monetary policy in repo markets, which is an important first stage of monetary policy transmission. In the European repo market, most participants do not have access to trade on centralized exchanges. Rather, they rely on OTC intermediation by a small number of dealers that exhibit significant market power. As a result, the passthrough of the ECB's policy rate to the majority of non-dealer banks and non-banks is inefficient and unequal in repo markets. Our estimates imply that a secured funding facility like the Fed's RRP may alleviate dealer market power and improve the transmission efficiency of monetary policy to banks and non-bank financial institutions.