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Financial Markets and the Macroeconomy

Monetary Policy and Balance Sheets

Deniz Igan, Alain Kabundi, Francisco Nadal De Simone, Natalia Tamirisa
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...
Aug 2013
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The Equity Price Channel in a New-Keynesian DSGE Model with Financial Frictions and Banking

Hylton Hollander and Guangling Liu
This paper studies the role of the equity price channel in business cycle fluctuations, and highlights its systemic risk across all sectors of the economy. We develop a canonical New-Keynesian dynamic stochastic general equilibrium model with a tractable role for the equity market in banking,...
Jul 2013
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Interaction of Formal and Informal Financial Markets in Quasi-Emerging Market Economies

Harold P.E. Ngalawa and Nicola Viegi
The primary objective of this paper is to investigate the interaction of formal and informal financial markets and their impact on economic activity in quasi-emerging market economies. Using a four-sector dynamic stochastic general equilibrium model with asymmetric information in the formal...
Jan 2013
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Business Cycle and Bank Capital Regulation: Basel II Procyclicality

Guangling (Dave) Liu and Nkhahle E. Seeiso
This paper studies the impacts of bank capital regulation on business cycle fluctuations. To do so, we adopt the Bernanke et al. (1999) "financial accelerator" model (BGG), to which we augment a banking sector to study the procyclical nature of Basel II claimed in the literature. We first study the...
Jun 2011
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Three Cycles: Housing, Credit and Real Activity

Deniz Igan, Alain Kabundi, Francisco Nadal De Simone, Marcelo Pinheiro, and Natalia Tamirisa
We examine the characteristics and co movement of cycles in house prices, credit, real activity and interest rates in advanced economies during the past 25 years, using a dynamic generalized factor model. House price cycles generally lead credit and business cycles over the long term, while in the...
Jan 2010
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Isolating a Measure of Inflation Expectations for the South African Financial Market Using Forward Interest Rates

Monique Reid
The inflation expectations channel of the transmission mechanism has generally become recognised as crucial for the implementation of modern monetary policy. This paper briefly reviews the practices commonly employed for measuring inflation expectations in South Africa and others a market-based...
May 2009
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Exchange rate pass-through to import prices in South Africa: Is there asymmetry?

T D Karoro, M J Aziakpono & N Cattaneo
We examine the impact of financial development on earnings inequality in Brazil in the 1980s and first half of the 1990s. The evidence - based on panel time-series data and analysis - shows that financial development had a significant and robust effect in reducing inequality during the period. We...
Jul 2008
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