Book contents
- The Changing Fortunes of Central Banking
- The Changing Fortunes of Central Banking
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Acknowledgement
- 1 Introduction and Overview
- Part I Monetary Economics and Policy
- Part II Financial Stability and Regulatory Policy
- 8 The Macroprudential Toolkit
- 9 Three Cooks or Three Wise Men?
- 10 Liquidity, Default and the Interaction of Financial Stability and Monetary Policy
- 11 Systemic Risk Measurement and Quantification of Systemic Risk Amplification
- 12 What Binds? Interactions between Bank Capital and Liquidity Regulations
- 13 Is Burden Sharing Needed for International Financial Stability?
- Part III Foreign Exchanges and International Architecture
- Part IV The Millennium Challenges of Central Banks
- Index
- References
10 - Liquidity, Default and the Interaction of Financial Stability and Monetary Policy
from Part II - Financial Stability and Regulatory Policy
Published online by Cambridge University Press: 29 March 2018
Book contents
- The Changing Fortunes of Central Banking
- The Changing Fortunes of Central Banking
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Acknowledgement
- 1 Introduction and Overview
- Part I Monetary Economics and Policy
- Part II Financial Stability and Regulatory Policy
- 8 The Macroprudential Toolkit
- 9 Three Cooks or Three Wise Men?
- 10 Liquidity, Default and the Interaction of Financial Stability and Monetary Policy
- 11 Systemic Risk Measurement and Quantification of Systemic Risk Amplification
- 12 What Binds? Interactions between Bank Capital and Liquidity Regulations
- 13 Is Burden Sharing Needed for International Financial Stability?
- Part III Foreign Exchanges and International Architecture
- Part IV The Millennium Challenges of Central Banks
- Index
- References
Summary
“Default is to macro-economics what sin is to theology: regrettable but central and essential”. The contemporaneous assessment of both liquidity and default within a framework of missing financial markets, multiple currencies, heterogeneous economic actors (i.e., investors, firms and intermediaries) and multiple externalities is warranted for analysing the interplay of financial and price stability. Thus, the complementarity and substitutability of regulatory and monetary policies can be identified and dissected. The optimal policy mix may be subsequently determined given the objectives of the fiscal and monetary authorities.
- Type
- Chapter
- Information
- The Changing Fortunes of Central Banking , pp. 153 - 168Publisher: Cambridge University PressPrint publication year: 2018
References
Allen, F. and Gale, D. (1997), ‘Financial Markets, Intermediaries, and Intertemporal Smoothing’, Journal of Political Economy 105(3), pp. 523–46.Google Scholar
Benes, J., Kumhof, M. and Laxton, D. (2014), ‘Financial Crises in DSGE Models: A Prototype Model’, IMF Working Paper No. 14/57, International Monetary Fund.Google Scholar
Benston, G.J. and Smith, C. W. (1976), ‘A Transactions Cost Approach to the Theory of Financial Intermediation’, Journal of Finance 31(2), pp. 215–31.Google Scholar
Bhattacharya, S., Goodhart, C.A.E., Tsomocos, D. and Vardoulakis, A.P. (2015), ‘A Reconsideration of Minsky’s Financial Instability Hypothesis’, Journal of Money, Credit and Banking 47(5), pp. 931–73.Google Scholar
Borio, C. and Lowe, P. (2002), Asset Prices, Financial and Monetary Stability: Exploring the Nexus, Bank for International Settlements, Basel, Switzerland, BIS Working Paper No. 114.Google Scholar
Catarineu-Rabell, E., Jackson, P. and Tsomocos, D.P. (2005), ‘Procyclicality and the new Basel Accord: Banks’ Choice of Loan Rating System’, Economic Theory 26, pp. 537–57.CrossRefGoogle Scholar
Clerc, L., Derviz, A., Mendicino, C. et al. (2015), ‘Capital Regulation in a Macroeconomic Model with Three Layers of Default’, International Journal of Central Banking 11(3), pp. 9–63.Google Scholar
Cochrane, J.H. (2014), ‘Towards a Run-Free Financial System’, in Baily, M. and Taylor, J. (eds), Across the Divide: New Perspectives on the Financial Crisis, Stanford, CA: Hoover Institution Press, pp. 197–250.Google Scholar
Diamond, D.W. (1984), ‘Financial Intermediation and Delegated Monitoring’, Review of Economic Studies 51, pp. 393–414.Google Scholar
Diamond, D.W. and Dybvig, P.H. (1983), ‘Bank Runs, Deposit Insurance and Liquidity’, Journal of Political Economy 91(3), pp. 401–19.Google Scholar
Goodhart, C.A.E. (2008), ‘The Boundary Problem in Financial Regulation’, National Institute Economic Review 206, pp. 48–55.Google Scholar
Goodhart, C.A.E., Kashyap, A.K., Tsomocos, D.P. and Vardoulakis, A.P. (2012), ‘Financial Regulation in General Equilibrium’, NBER Working Paper No. 17909.Google Scholar
Goodhart, C.A.E., Kashyap, A.K., Tsomocos, D.P. and Vardoulakis, A.P. (2013), ‘An Integrated Framework for Multiple Financial Regulations’, International Journal of Central Banking 9(1), pp. 109–43.Google Scholar
Goodhart, C.A.E., Peiris, M.U., Tsomocos, D.P. and Vardoulakis, A.P. (2010), ‘On Dividend Restrictions and the Collapse of the Interbank Market’, Annals of Finance 6(4), pp. 455–73.Google Scholar
Goodhart, C.A.E., Peiris, M.U. and Tsomocos, D.P. (2013), ‘Global Capital Imbalances and Taxing Capital Flows’, International Journal of Central Banking 9(2), pp. 13–45.Google Scholar
Goodhart, C.A.E., Peiris, M.U. and Tsomocos, D.P. (2016), ‘Monetary Policy vs Debt Renegotiation: A Counterfactual Analysis on Greece’, Working Paper.Google Scholar
Goodhart, C.A.E., Sunirand, P. and Tsomocos, D.P. (2004), ‘A Model to Analyse Financial Fragility: Applications’, Journal of Financial Stability 27(1), pp. 1–35.Google Scholar
Goodhart, C.A.E., Sunirand, P. and Tsomocos, D.P. (2006), ‘A Model to Analyse Financial Fragility’, Economic Theory 27, pp. 107–42.Google Scholar
Goodhart, C.A.E., Tsomocos, D.P. and Vardoulakis, A.P. (2010), ‘Modelling a Housing and Mortgage Crisis’, in Alfaro, Rodrigo A. (ed), Financial Stability, Monetary Policy and Central Banking. Series in on Central Banking, Analysis and Economic Policies. Santiago: Central Bank of Chile.Google Scholar
Kashyap, A.K., Tsomocos, D.P. and Vardoulakis, A.P. (2014a), ‘Principles for Macroprudential Regulation’, Banque de France Financial Stability Review 18, pp. 173–82.Google Scholar
Kashyap, A.K., Tsomocos, D.P. and Vardoulakis, A.P. (2014b), ‘How Does Macroprudential Regulation Change Bank Credit Supply?’, NBER Working Paper No. 20165.Google Scholar
Kiyotaki, N. and Moore, J. (2002), ‘Evil is the Root of All Money’, American Economic Review 92(2), pp. 62–6.Google Scholar
Lin, L., Tsomocos, D.P. and Vardoulakis, A.P. (2015), ‘Debt Deflation Effects of Monetary Policy’, Journal of Financial Stability 21, pp. 81–94.CrossRefGoogle Scholar
Martinez, S.J.-F. and Tsomocos, D.P. (2016), ‘Liquidity and Default in an Exchange Economy’, Journal of Financial Stability, forthcoming.Google Scholar
Peiris, M.U. and Tsomocos, D.P. (2015), ‘International Monetary Equilibrium with Default’, Journal of Mathematical Economics 56, pp. 47–57.Google Scholar
Peiris, M.U. and Vardoulakis, A.P. (2013), ‘Savings and Default’, Economic Theory 54(1), pp. 153–80.Google Scholar
Peiris, M.U. and Vardoulakis, A.P. (2015), ‘Collateral and the Efficiency of Monetary Policy’, Economic Theory 59(3), pp. 579–603.Google Scholar
Shubik, M. (1999), The Theory of Money and Financial Institutions, Cambridge, MA: M.I.T. Press.Google Scholar
Tsomocos, D.P. (2003), ‘Equilibrium Analysis, Banking, and Financial Instability’, Journal of Mathematical Economics 39(5–6), pp. 619–55.CrossRefGoogle Scholar
- 1
- Cited by