The gilded bubble buffer and optimal macroprudential policy

We provide a microfounded framework for the welfare analysis of macroprudential policy within a model of rational bubbles. For this we posit an overlapping generation model where productivity and credit supply are subject to random shocks. We find that when real interest rates are lower than the rat...

Descripción completa

Detalles Bibliográficos
Autores Principales: Freixas, Xavier, Pérez Reyna, David Alejandro
Formato: Desconocido (Unknown)
Lenguaje:Inglés (English)
Publicado: Universidad de los Andes, Facultad de Economía, CEDE 2018
Materias:
Acceso en línea:http://hdl.handle.net/1992/8851
id ir-1992-8851
recordtype dspace
spelling ir-1992-88512020-09-16T20:23:28Z The gilded bubble buffer and optimal macroprudential policy El amortiguador de las burbujas doradas y política macroprudencial óptima Freixas, Xavier Pérez Reyna, David Alejandro Bank Bubble Macroprudential regulation Burbujas (Economía) Precios Riesgo (Economía) Política económica Finanzas internacionales E44, E60, G18, G21, G28 We provide a microfounded framework for the welfare analysis of macroprudential policy within a model of rational bubbles. For this we posit an overlapping generation model where productivity and credit supply are subject to random shocks. We find that when real interest rates are lower than the rate of growth, credit financed bubbles may be welfare improving because of their role as a buffer in channeling excessive credit supply and inefficient investment at the firms' level, but its sudden price decrease may cause a systemic crisis. Therefore a well designed macroprudential policy plays a key role in improving efficiency while preserving financial stability. Our theoretical framework allows us to compare the efficiency of alternative macroprudential policies. Contrarily to conventional wisdom, we show that (i) macroprudential policy may be efficient even in the absence of systemic risk, (ii) it has to be contingent on productivity shocks and (iii) it must be contingent upon the level of real interest rates. En este artículo presentamos un marco teórico microfundamentado para un análisis de bienestar de políticas macroprudenciales en un modelo con burbujas racionales. Nuestro modelo es uno de generaciones traslapadas con choques aleatorios en la productividad y en la oferta de crédito. Encontramos que cuando la tasa de interés real es menor que la tasa de crecimiento de la economía, las burbujas financiadas con crédito pueden mejorar el bienestar debido a su rol como amortiguadoras en la canalización del exceso de crédito y de inversión ineficiente por parte de las empresas, pero una caída repentina en su precio puede causar una crisis sistémica. Por lo tanto una política macroprudencial bien diseñada juega un rol clave para mejorar la eficiencia y al mismo tiempo preservar la estabilidad financiera. Nuestro marco teórico permite comparar la eficiencia de políticas macroprudencial alternativas. Contrario a la sabiduría convencional, demostramos que (i) una política macroprudencial puede ser eficiente aún en ausencia de riesgo sistémico, (ii) debe ser contingente a choques de productividad y (iii) debe ser contingente al nivel de tasas de interés. 2018-09-27T16:58:06Z 2018-09-27T16:58:06Z 2017 document publishedVersion 1657-5334 http://hdl.handle.net/1992/8851 1657-7191 eng Documentos CEDE No. 58 Octubre de 2017 Al consultar y hacer uso de este recurso, está aceptando las condiciones de uso establecidas por los autores. openAccess Universidad de los Andes, Facultad de Economía, CEDE instname:Universidad de los Andes reponame:Repositorio Institucional Séneca
institution Universidad de los Andes
collection DSpace
language Inglés (English)
topic Bank
Bubble
Macroprudential regulation
Burbujas (Economía)
Precios
Riesgo (Economía)
Política económica
Finanzas internacionales
E44, E60, G18, G21, G28
spellingShingle Bank
Bubble
Macroprudential regulation
Burbujas (Economía)
Precios
Riesgo (Economía)
Política económica
Finanzas internacionales
E44, E60, G18, G21, G28
Freixas, Xavier
Pérez Reyna, David Alejandro
The gilded bubble buffer and optimal macroprudential policy
description We provide a microfounded framework for the welfare analysis of macroprudential policy within a model of rational bubbles. For this we posit an overlapping generation model where productivity and credit supply are subject to random shocks. We find that when real interest rates are lower than the rate of growth, credit financed bubbles may be welfare improving because of their role as a buffer in channeling excessive credit supply and inefficient investment at the firms' level, but its sudden price decrease may cause a systemic crisis. Therefore a well designed macroprudential policy plays a key role in improving efficiency while preserving financial stability. Our theoretical framework allows us to compare the efficiency of alternative macroprudential policies. Contrarily to conventional wisdom, we show that (i) macroprudential policy may be efficient even in the absence of systemic risk, (ii) it has to be contingent on productivity shocks and (iii) it must be contingent upon the level of real interest rates.
format Desconocido (Unknown)
author Freixas, Xavier
Pérez Reyna, David Alejandro
author_facet Freixas, Xavier
Pérez Reyna, David Alejandro
author_sort Freixas, Xavier
title The gilded bubble buffer and optimal macroprudential policy
title_short The gilded bubble buffer and optimal macroprudential policy
title_full The gilded bubble buffer and optimal macroprudential policy
title_fullStr The gilded bubble buffer and optimal macroprudential policy
title_full_unstemmed The gilded bubble buffer and optimal macroprudential policy
title_sort gilded bubble buffer and optimal macroprudential policy
publisher Universidad de los Andes, Facultad de Economía, CEDE
publishDate 2018
url http://hdl.handle.net/1992/8851
_version_ 1705932440533467136
score 11,828437