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Endogenous exchange-rate pass-through and self-validating exchange rate regimes
A long-standing question in open macroeconomics concerns the choice of currency denomination of nominal prices and contracts. A firm serving the export market may choose to set prices in its domestic currency in the currency of the market of destination or in a vehicle currency possibly indexing these ...
Too poor to grow
Development theorists have long been intrigued by a variety of mechanisms capable of generating vicious cycles of poverty and stagnation—broadly referred to as poverty traps. These mechanisms highlight different ways in which poverty may deter growth and become self-perpetuating. Such situation may ...
Corporate saving in global rebalancing
The increase in global imbalances in the last decade posed a theoretical challenge for international macroeconomics. Why did some less developed countries with a higher need for capital like China lend to richer countries? The inconsistency of standard dynamic open-economy models with actual global ...
Tales of two recessions in Chile: financial frictions in 1999 and 2009
During 2007-2009 the world underwent a deep economic crisis that has been termed the Great Recession where total output is estimated to have decreased 0.6%. This event has had two salient characteristics: it was a financial shock that originated in advanced economies and in the end most of the economies ...
Monetary policy at the zero lower bound: the Chilean experience
The global financial crisis that started in 2008 dramatically changed the analysis and implementation of monetary policy worldwide. Central banks were at the center of the stage during that time implementing both conventional and unconventional policies. Not only were monetary policy rates drastically ...
Credit stabilization through public banks: the case of Banco Estado
A novel element in the policy mix that responded to the 2008- 2009 financial crisis was the explicit role given to BancoEstado a publicly-owned commercial bank to alleviate the contraction in domestic credit provided by the banking sector. In order to aid its mission BancoEstado was capitalized by 500 ...
Fiscal deficits debt and monetary policy in a liquidity trap
The dramatic policy response to the 2008-09 global economic crisis from many countries has revived some old debates about the use of fiscal and monetary policy in fighting recessions. The central dilemma for policy-makers in Japan North America and Europe has been to try to counter a large recession ...
Funding liquidity risk in a quantitative model of systemic stability
The global financial crisis of 2007–09 has illustrated the importance of including funding liquidity feedbacks in any model of systemic risk. This paper illustrates how we have incorporated such channels into a risk assessment model for systemic institutions (RAMSI) and it outlines the Bank of England’s ...
Private information in the mortgage market: evidence and a theory of crises
The securitization boom in the United States mortgage market from 2000 to 2005 was enormous (figure 1). According to the Securities Industry and Financial Markets Association (SIFMA) new issuance of securities backed by mortgages that were not insured by the U.S. government rose by a factor of twelve ...
Monetary policy through asset markets: lessons from unconventional measures and implications for an integrated world
The global financial crisis of 2008 and its aftermath brought many new challenges for the world’s central banks. These new challenges have resulted, in turn, in bold experimentation—not just the vigorous application of traditional policy tools, but the use of new ones, or at least ones that were rarely ...