DSGE

publication

Is Basel III counter-cyclical: The case of South Africa?

Guangling Liu and Thabang Molise

This paper develops a dynamic general equilibrium model with banking and a macro-prudential authority, and studies the extent to which the Basel III bank capital regulation promotes financial and macroeconomic stability in the context of South African economy. The decomposition analysis of the...

Aug 2018

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publication

A New Keynesian DSGE model for Low Income Economies with Foreign Exchange Constraints

Bertha C. Bangara

The existing literature is clear that low income economies tend to suffer from foreign exchange shortages exacerbated by their exports. Most importantly, the concentration of their exports renders these countries susceptible to international price fluctuations. This frequently affects the level of...

Sep 2019

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publication

The effectiveness of counter-cyclical loan-to-value regulations: generic versus sector-specific rules

Guangling Liu and Thabang Molise

This paper considers the implications of the counter-cyclical loan-to-value (CcLTV) regulation in a setting where different types of borrowers from distinct sectors of the credit market co-exist. To identify the optimal policy design, we consider two macro-prudential policy regimes, nanely generic...

Aug 2019

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publication

Fiscal Policy and Adjustment in a Foreign Exchange Constrained Economy: Evidence from Malawi

Bertha C. Bangara and Amos C. Peters

Most of the recent literature analysing the adjustments of macroeconomic variables to fiscal policy shocks rely on the inclusion of non-Ricardian households to generate a positive response of consumption to an increase in government spending. This paper examines the dynamic effects of government...

Apr 2019

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publication

Macroprudential policy and foreign interest rate shocks: A comparison of different instruments and regulatory regimes

Chris Garbers and Guangling Liu

This paper presents a generic small open economy real business cycle model with banking and foreign borrowing. We incorporate capital requirements, reserve requirements, and loan-to-value (LTV) regulation into this framework, and subject the model to a positive foreign interest rate shock that...

Oct 2017

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publication

Flow specific capital controls for emerging markets

Chris Garbers and Guangling Liu

This paper investigates the impact of capital controls on business cycle fluctuations and welfare. To perform this analysis, we deploy an asymmetric two country model that is subject to negative foreign interest rate shocks. The results show that both an inflow and outflow capital control are able...

Oct 2017

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publication

Welfare analysis of bank capital requirements with endogenous default

Fernando Garcia-Barragan and Guangling Liu

This paper presents a tractable framework with endogenous default and evaluates the welfare implication of bank capital requirements. We analyze the response of social welfare to a negative technology shock under different capital requirement regimes with and without default. We show that including...

Jun 2017

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publication

Capital controls and foreign currency denomination

Fernando Garcia-Barragan and Guangling Liu

This paper studies the effectiveness of capital controls with foreign currency denomina tion and its welfare implications. To do this, we develop a general equilibrium model with fi nancial frictions and banking, in which assets and liabilities are denominated in both domestic and foreign...

Feb 2017

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publication

Credit market heterogeneity, balance sheet (in) dependence, financial shocks

Chris Garbers and Guangling Liu

This paper presents a real business cycle model with financial frictions and two credit markets to investigate the qualitative and quantitative relevance of credit market heterogeneity. To address this line of inquiry we contrast the transmission of financial shocks in an economy where loans are...

Sep 2016

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publication

Monetary policy and commodity terms of trade shocks in emerging market economies

Seedwell Hove, Albert Touna Mama and Fulbert Tchana Tchana

Commodity terms of trade shocks have continued to drive macroeconomic uctuations in most emerging market economies. The volatility and persistence of these shocks have posed great challenges for monetary policy. This study employs a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model...

Aug 2012

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