IMF高级宏观经济学研修班课程CT1405MMF-L01Macro

1、L-1 Macroeconomic Stability, Macroeconomic Policies, and Macro-Prudential PoliciesPresenterClinton ShiellsJoint China-IMF Training ProgramCourse on Macroeconomic Management and Financial Sector IssuesCT 14.051OutlineWhat is macroeconomic stability and why do we care?Policies for macroeconomic stabil

2、ityFiscal policyMonetary policyExchange rate policyThe financial sector and macroeconomic stabilityMacro-prudential policiesThis training material is the property of the International Monetary Fund (IMF) and is intended for use in IMF Institute courses. Any reuse requires the permission of the IMF I

3、nstitute.”2What is Macroeconomic Stability and Why Do We Care?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 inflation rate is low and non

4、-acceleratingExternal 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 paymentsWhy do we care about macro stability?“In practice, the concept of a stable macroec

5、onomic 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 concern because unpredictability hampe

6、rs resource-allocation decisions, investment and growth.” Montiel and Servn (2005)Volatility and growthSource: Ramey & Ramey (AER, 1995)92 countries, 1962-85Growth = 0.030 0.154 Vol (-2.3)R2 = 0.057There appears to be a negative relationship between the average and the standard deviation of per capi

7、ta GDP growth, both calculated over long periods.Volatility and growthSource: Hnatkovska and Loayza (2005)79 countries, 1960-2000“Normal” volatility vs. “crisis” volatility?Crisis volatilitySource: WEO (Ch. IV, Oct. 2009)(Log scale)Output costs of crisesLevel of outputLevel of outputSource: Cerra an

8、d Saxena (2008)Output costs of crisesSource: WEO (Ch. IV, Oct. 2009)On average, output falls steadily below its pre-crisis trend until the third year after the crisis and does not rebound thereafter.First year of crisis at t=0 Mean difference from year t=-11 The interquartile range indicates the mid

9、dle 50% of all crises88 banking crises from early 1970s to 2002222 currency crises from early 1970s to 2002Output evolution after banking crises(Percent of pre-crisis trend)Output evolution after currency crises(Percent of pre-crisis trend)YearYearGDP growthSource: WEO (October 2013)Output growth vo

10、latilitySource: WEO (Ch. V, Oct. 2007)Before the global financial crisis, output growth volatility had been steadily declining from its peak during the 1970s.Output growth volatilitySource: WEO (Ch. V, Oct. 2007)(Rolling 10-year standard deviations of detrended growth)Volatility patternsSource: WEO

11、(Ch. V, Oct. 2007)Growth takeoff begins in time t=0 on the x-axis. (1950 for Brazil, Japan, Mexico, W. Germany; 1963 for Korea; 1979 for China; 1984 for India) Policies for Macroeconomic StabilityWhat causes macroeconomic instability?Exogenous shocksE.g., terms of trade shocks, natural disasters, fi

12、nancial contagion, etc.Inappropriate policiesE.g., excessively loose fiscal policyWhat should policymakers do?Remove destabilizing policies that are themselves sources of shocksE.g., tighten excessively loose fiscal policyDepends on the institutional settingUse policies as stabilizing instruments in

13、 response to exogenous shocksE.g., countercyclical fiscal policyDepends on how vulnerable the economy is to shocksPolicies for macroeconomic stabilityFiscal policyMonetary policyExchange rate policyFinancial sector policiesFiscal policyIf fiscal policy is the cause of macroeconomic instability, stre

14、ngthening the fiscal balance will promote internal balance and external balanceCAB = S I = (Sg Ig) + (Sp Ip)Key measures:Expenditure restraint, expenditure reallocationRevenue-raising initiatives (tax and non-tax)Fiscal reform must be permanent in order to be crediblePublic sector solvency condition

15、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 = BStability requires that the authorities choose a monetary and fiscal policy stance that is consistent with maintaining public

16、 sector solvency at low levels of inflation, while leaving some scope for mitigating the impact of real and financial shocks on macroeconomic performanceFiscal policy over the cycleOld view: Limited role for fiscal policy relative to monetary policyFocus on debt sustainability and fiscal rules to ac

17、hieve thisNew view: Countercyclical fiscal policy is an important toolCreate more fiscal space in good times: lower target debt levelsDesign better automatic fiscal stabilizers: rules that allow some transfers or taxes to vary based on pre-specified triggers tied to the state of the economic cycleFi

18、scal balancesSource: WEO (Ch. I, Oct. 2009)General government fiscal balances(Percent of GDP)Fiscal volatility(Unweighted averages)4 Defined as the rolling 10-year standard deviation of cyclically adjusted government consumption as a percent of GDPSource: WEO (Ch. V, Oct. 2007)Fiscal volatility: Eas

19、t AsiaSource: Olaberria and Rigolini (PRWP 4989, 2009)East Asia displays a high correlation between the volatility of fiscal policy and output growth volatility (0.89)Volatility of government spending is measured as the weighted average standard deviation of detrended government consumption growth u

20、sing a 10-year window. Output volatility is measured as the standard deviation of per capita GDP growth using a 10-year window.Procyclical fiscal policy: Developing countriesSource: Ilzatzki and Vegh (NBER WP 14191, 2008)A 10% shock to GDP leads to an increase of around 3% in government consumption

21、after 2 quarters.27 developing countries, 1960-2006Response of real government consumption to GDP shockPublic debtSource: WEO (October 2013)Monetary policyFiscal dominance“The roots of inflation are ultimately fiscal.”Strengthening central bank independence may be important for credibilityRules vers

22、us discretionEffectiveness of monetary policy for macroeconomic stabilization depends on the exchange rate regime and the degree of international financial integrationInflationSource: WEO (October 2013)The Great ModerationSource: Bean (2009)Monetary policy credibilitySource: WEO (Ch. III, Apr. 2006)

23、Minimum = 0; Maximum = 1Central bank autonomySource: WEO (Ch. III, Oct. 2008)This index captures the ability of a central bank to pursue independent monetary policyMonetary policy index(Unweighted averages)Source: WEO (Ch. V, Oct. 2007)This index measures the success of the monetary framework in mai

24、ntaining low inflation3/ Defined as exp 0.005 * (inflation 2%)2Credit expansionFinancial 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)Deviation of policy

25、 rates from Taylor ruleSource: Bean (2009) Was monetary policy too expansionary?Monetary policy and housing boomsSource: 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 ar

26、ea economies. Black lines are fitted to the whole sample of advanced economies. Did expansionary monetary policy lead to asset price booms?Exchange rate policyGoals of exchange rate policy:Promote competitiveness and a sustainable current account positionServe as a credible nominal anchor (in the ca

27、se of a peg)What is the appropriate level of the real exchange rate?One that ensures a sustainable current account balanceWhen is an exchange rate adjustment needed?Possible signals:Noticeable parallel market in foreign exchangeLarge and persistent current account deficitsLarge and sustained appreci

28、ation in the real effective exchange rateCurrency crashesSource: Reinhart and Rogoff (2009)Share of countries with annual depreciation greater than 15%, 1800-2006Median Annual Depreciation, All countries, 5-year moving average, 1800-2006Limitations of macroeconomic stabilizationMacroeconomic stabili

29、zation can achieve low inflation and external sustainability. But stabilization alone is often not enough to achieve rapid growth and higher real incomes.Structural reform must usually accompany stabilization to achieve higher incomes.Structural reform may also be needed for the credibility of an ad

30、justment program.Examples of structural reformsFinancial sector policiesFinancial sector development and regulationExternal sector reformsTrade liberalization, capital account liberalization Price adjustment and liberalizationWage policy, administered prices, etc.Policies to promote competition Tax,

31、 expenditure, and budgetary reformsState enterprise reform, privatization, restructuringThe Financial Sector and Macroeconomic StabilityFinancial sector policyAn efficient domestic financial system is important for growthA sound domestic financial system is important for macroeconomic stabilityA sou

32、nd domestic financial system requires regulation and oversightFinancial liberalization should be a means to achieving an efficient financial system, not an end in itselfFinancial systemAn efficient financial system allocates capital to the most productive uses and continually monitors the use of fun

33、ds Key services provided by the financial systemLenders / SaversBorrowers / SpendersConveys informationIncreases liquidityReduces riskFinancial development and growthFinancial developmentHigher income per capitaHigher net worth lower monitoring costs, thicker securities marketsMore public goods that

34、 facilitate financial intermediationHigher investmentHigher productivityMore incentive to saveFinancial development and growthDependent variableDEPTH (1960)R2Real per capita GDP growth, 1960-892.8*(0.001)0.61Real per capita capital growth, 1960-891.9*(0.001)0.63Productivity growth, 1960-892.2*(0.001

35、)0.58Source: Levine (1997)Financial sector and macroeconomic stabilityBanking crises and financial market crises can directly cause macroeconomic instabilityFinancial market conditions can amplify real shocks and the business cycleFinancial acceleratorFinancial sector weakness can decrease the effec

36、tiveness of macro policy tools during a crisisDisrupt transmission links between monetary policy and operating targetsWeaken supply response to exchange rate changesSystemic banking crises and recessions Source: Reinhart and Rogoff (2008)Spain, 1977Japan, 1992Norway, 1987Philippines, 1997Sweden, 199

37、1Hong Kong, 1997Colombia, 1998Korea, 1997Historical AverageMalaysia, 1997Finland, 1991Thailand, 1997Indonesia, 1997Argentina, 2001U.S., 19291.9 years-9.3 %Duration of downturn (in years)Percent decline in real GDPPast Real Per Capita GDP Cycles and Banking Crises: Peak-to-troughCredit crunches, asse

38、t price busts, and recessionsRecessions associated with credit crunches and asset price busts are longer and are associated with greater output losses than recessions without such financial stresses.Source: Claessens, Kose, and Terrones (2008)Financial accelerator The effects of a real shock on fina

39、ncial conditions can lead to persistent fluctuations in the economy. External finance (raising funds from lenders) is more expensive than internal finance (using internally generated cash flows).The external finance premium that a borrower must pay depends inversely on the strength of the borrowers

40、financial position (net worth).Positive shocks increase net worth, reduce the cost of credit, and induce more investment and consumption; negative shocks reduce net worth, increase the cost of credit, and induce less investment and consumption. Hence shocks are amplified and become more persistent.B

41、ank-lending channelShocks affecting the net worth and liquidity of banks, and thus their creditworthiness, in turn affect the external finance premium that banks face and will be reflected in the cost and availability of funds to bank-dependent borrowers. Financial regulationOld view: Financial regu

42、lation is outside the macro policy framework; its objective is to keep individual institutions and markets behaving prudently.Micro-prudential regulationNew view: Financial regulation is not macroeconomically neutral; it can be used as a cyclical policy tool.Macro-prudential regulationNeed for a pol

43、icy approach that falls between macroeconomic management and traditional prudential regulation of financial institutionsMacro stability and 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

44、financial markets. “ (Bean, 2009)Implied volatilities from options(standardized to zero mean and unit variance)Chicago Board Options Exchange Volatility Index (VIX) measures implied volatility of S&P 500 index options Merrill Lynch Option Volatility Estimate Index (MOVE) measures implied volatility

45、on 1-month Treasury optionsSource: Bean (2009)Feedback on the way upIn the up-phase of the economic cycle:Price-based measures 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 in

46、creasing leverage (using short-term “wholesale” funding).Increasebalance sheet sizeStrongerbalance sheetsIncrease leverageAsset price boomFeedback on the way downIn 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