IMF高级宏观经济学研修班课程CT14.05 MMF - L01 Macro Stability and Macro Management(CShiells).pptx

1、L-1 Macroeconomic Stability, Macroeconomic Policies, and Macro-Prudential Policies,Presenter Clinton Shiells,Joint China-IMF Training Program Course on Macroeconomic Management and Financial Sector Issues CT 14.05,Outline,What is macroeconomic stability and why do we care? Policies for macroeconomic

2、 stability Fiscal policy Monetary policy Exchange rate policy The financial sector and macroeconomic stability Macro-prudential policies,2,This training material is the property of the International Monetary Fund (IMF) and is intended for use in IMF Institute courses. Any reuse requires the permissi

3、on of the IMF Institute.”,What is Macroeconomic Stability and Why Do We Care?,3,MMF,What do we mean by “macroeconomic stability”?,Macroeconomic stability exists when key economic relationships are in balance: Internal balance occurs when real output is at or close to its capacity level and the infla

4、tion rate is low and non-accelerating External balance occurs when the current account position can be sustained by capital flows on terms compatible with the growth prospects of the economy without resort to restrictions on trade and payments,4,MMF,Why do we care about macro stability?,“In practice

5、, the concept of a stable macroeconomic framework is used to mean a macroeconomic policy environment that is conducive to growth.” Fischer (1993) “Conceptually, macroeconomic instability refers to phenomena that decrease the predictability of the domestic macroeconomic environment, and it is of conc

6、ern because unpredictability hampers resource-allocation decisions, investment and growth.” Montiel and Servn (2005),5,MMF,Volatility and growth,Source: Ramey 1963 for Korea; 1979 for China; 1984 for India),14,MMF,Policies for Macroeconomic Stability,15,MMF,What causes macroeconomic instability?,Exo

7、genous shocks E.g., terms of trade shocks, natural disasters, financial contagion, etc. Inappropriate policies E.g., excessively loose fiscal policy,16,MMF,What should policymakers do?,Remove destabilizing policies that are themselves sources of shocks E.g., tighten excessively loose fiscal policy D

8、epends on the institutional setting Use policies as stabilizing instruments in response to exogenous shocks E.g., countercyclical fiscal policy Depends on how vulnerable the economy is to shocks,17,MMF,Policies for macroeconomic stability,Fiscal policy Monetary policy Exchange rate policy Financial

9、sector policies,18,MMF,Fiscal policy,If fiscal policy is the cause of macroeconomic instability, strengthening the fiscal balance will promote internal balance and external balance CAB = S I = (Sg Ig) + (Sp Ip) Key measures: Expenditure restraint, expenditure reallocation Revenue-raising initiatives

10、 (tax and non-tax) Fiscal reform must be permanent in order to be credible,19,MMF,Public sector solvency condition,The present value (PV) of primary surpluses (T-G) and seigniorage revenue (dM) should be at least as large as the governments outstanding stock of net debt (B): PV T-G + dM = B Stabilit

11、y requires that the authorities choose a monetary and fiscal policy stance that is consistent with maintaining public sector solvency at low levels of inflation, while leaving some scope for mitigating the impact of real and financial shocks on macroeconomic performance,20,MMF,Fiscal policy over the

12、 cycle,Old view: Limited role for fiscal policy relative to monetary policy Focus on debt sustainability and fiscal rules to achieve this New view: Countercyclical fiscal policy is an important tool Create more fiscal space in good times: lower target debt levels Design better automatic fiscal stabi

13、lizers: rules that allow some transfers or taxes to vary based on pre-specified triggers tied to the state of the economic cycle,21,MMF,Fiscal balances,Source: WEO (Ch. I, Oct. 2009),General government fiscal balances (Percent of GDP),22,MMF,Fiscal volatility,(Unweighted averages),4 Defined as the r

14、olling 10-year standard deviation of cyclically adjusted government consumption as a percent of GDP,Source: WEO (Ch. V, Oct. 2007),23,MMF,Fiscal volatility: East Asia,Source: Olaberria and Rigolini (PRWP 4989, 2009),East Asia displays a high correlation between the volatility of fiscal policy and ou

15、tput growth volatility (0.89),Volatility of government spending is measured as the weighted average standard deviation of detrended government consumption growth using a 10-year window. Output volatility is measured as the standard deviation of per capita GDP growth using a 10-year window.,24,MMF,Pr

16、ocyclical fiscal policy: Developing countries,Source: Ilzatzki and Vegh (NBER WP 14191, 2008),A 10% shock to GDP leads to an increase of around 3% in government consumption after 2 quarters.,27 developing countries, 1960-2006,Response of real government consumption to GDP shock,25,MMF,Public debt,So

17、urce: WEO (October 2013),26,MMF,Monetary policy,Fiscal dominance “The roots of inflation are ultimately fiscal.” Strengthening central bank independence may be important for credibility Rules versus discretion Effectiveness of monetary policy for macroeconomic stabilization depends on the exchange r

18、ate regime and the degree of international financial integration,27,MMF,Inflation,Source: WEO (October 2013),28,MMF,The Great Moderation,Source: Bean (2009),29,MMF,Monetary policy credibility,Source: WEO (Ch. III, Apr. 2006),Minimum = 0; Maximum = 1,30,MMF,Central bank autonomy,Source: WEO (Ch. III,

19、 Oct. 2008),This index captures the ability of a central bank to pursue independent monetary policy,31,MMF,Monetary policy index,(Unweighted averages),Source: WEO (Ch. V, Oct. 2007),This index measures the success of the monetary framework in maintaining low inflation,3/ Defined as exp 0.005 * (infl

20、ation 2%)2,32,MMF,Credit expansion,Financial liabilities of household and business (Percent of GDP),If monetary policy was so advanced in the advanced economies, why was there a credit boom in the run-up to the crisis?,Source: Bean (2009),33,MMF,Deviation of policy rates from Taylor rule,Source: Bea

21、n (2009),Was monetary policy too expansionary?,34,MMF,Monetary policy and housing booms,Source: WEO (Ch. III, Oct. 2009),Euro area economies are designated by blue squares. Other advanced economies are designated by red squares. Blue lines are fitted to a subsample of euro area economies. Black line

22、s are fitted to the whole sample of advanced economies.,Did expansionary monetary policy lead to asset price booms?,35,MMF,Exchange rate policy,Goals of exchange rate policy: Promote competitiveness and a sustainable current account position Serve as a credible nominal anchor (in the case of a peg)

23、What is the appropriate level of the real exchange rate? One that ensures a sustainable current account balance When is an exchange rate adjustment needed? Possible signals: Noticeable parallel market in foreign exchange Large and persistent current account deficits Large and sustained appreciation

24、in the real effective exchange rate,36,MMF,Currency crashes,Source: Reinhart and Rogoff (2009),37,MMF,Limitations of macroeconomic stabilization,Macroeconomic stabilization can achieve low inflation and external sustainability. . But stabilization alone is often not enough to achieve rapid growth an

25、d higher real incomes. Structural reform must usually accompany stabilization to achieve higher incomes. Structural reform may also be needed for the credibility of an adjustment program.,38,MMF,Examples of structural reforms,Financial sector policies Financial sector development and regulation Exte

26、rnal sector reforms Trade liberalization, capital account liberalization Price adjustment and liberalization Wage policy, administered prices, etc. Policies to promote competition Tax, expenditure, and budgetary reforms State enterprise reform, privatization, restructuring,39,MMF,The Financial Secto

27、r and Macroeconomic Stability,40,MMF,Financial sector policy,An efficient domestic financial system is important for growth A sound domestic financial system is important for macroeconomic stability A sound domestic financial system requires regulation and oversight Financial liberalization should b

28、e a means to achieving an efficient financial system, not an end in itself,41,MMF,Financial system An efficient financial system allocates capital to the most productive uses and continually monitors the use of funds,Key services provided by the financial system,Lenders / Savers,Borrowers / Spenders

29、,Conveys information,Increases liquidity,Reduces risk,42,MMF,Financial development and growth,Financial development,Higher income per capita,Higher net worth lower monitoring costs, thicker securities markets More public goods that facilitate financial intermediation,Higher investment Higher product

30、ivity More incentive to save,43,MMF,Financial development and growth,Source: Levine (1997),44,MMF,Financial sector and macroeconomic stability,Banking crises and financial market crises can directly cause macroeconomic instability Financial market conditions can amplify real shocks and the business

31、cycle Financial accelerator Financial sector weakness can decrease the effectiveness of macro policy tools during a crisis Disrupt transmission links between monetary policy and operating targets Weaken supply response to exchange rate changes,45,MMF,Systemic banking crises and recessions,Source: Re

32、inhart and Rogoff (2008),Past Real Per Capita GDP Cycles and Banking Crises: Peak-to-trough,46,MMF,Credit crunches, asset price busts, and recessions,Recessions associated with credit crunches and asset price busts are longer and are associated with greater output losses than recessions without such

33、 financial stresses.,Source: Claessens, Kose, and Terrones (2008),47,MMF,Financial accelerator,The effects of a real shock on financial conditions can lead to persistent fluctuations in the economy. External finance (raising funds from lenders) is more expensive than internal finance (using internal

34、ly generated cash flows). The external finance premium that a borrower must pay depends inversely on the strength of the borrowers financial position (net worth). Positive shocks increase net worth, reduce the cost of credit, and induce more investment and consumption; negative shocks reduce net wor

35、th, increase the cost of credit, and induce less investment and consumption. Hence shocks are amplified and become more persistent.,48,MMF,Bank-lending channel,Shocks affecting the net worth and liquidity of banks, and thus their creditworthiness, in turn affect the external finance premium that ban

36、ks face and will be reflected in the cost and availability of funds to bank-dependent borrowers.,49,MMF,Financial regulation,Old view: Financial regulation is outside the macro policy framework; its objective is to keep individual institutions and markets behaving prudently. Micro-prudential regulat

37、ion New view: Financial regulation is not macroeconomically neutral; it can be used as a cyclical policy tool. Macro-prudential regulation Need for a policy approach that falls between macroeconomic management and traditional prudential regulation of financial institutions,50,MMF,Macro stability and

38、 risk perceptions,“A tendency of people to underestimate future risks during periods of good economic performance seems to be a recurring theme in the history of financial markets. “ (Bean, 2009),Implied volatilities from options (standardized to zero mean and unit variance),Chicago Board Options Ex

39、change Volatility Index (VIX) measures implied volatility of S&P 500 index options Merrill Lynch Option Volatility Estimate Index (MOVE) measures implied volatility on 1-month Treasury options,Source: Bean (2009),51,MMF,Feedback on the way up,In the up-phase of the economic cycle: Price-based measur

40、es of asset values rise, price-based measures of risk fall, and competition to grow bank profits increases. Market discipline encourages financial institutions to respond by increasing leverage (using short-term “wholesale” funding).,Increase balance sheet size,Stronger balance sheets,Increase lever

41、age,Asset price boom,52,MMF,Feedback on the way down,In the down-phase of the economic cycle: Probability of default on assets rises balance sheets weaken. Banks sell assets to satisfy liquidity runs by investors or to re-establish capital ratios (“fire sale”). Sale of assets by one institution decreases the value of all similar assets held by other institutions (mark-to-market valuation) downward price spiral.,Reduce balance sheet size,Weaker balance sheets,Decrease leverage,Asset price bust,53,MMF,Countercycli