On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies
The recent global financial crisis has put the spotlight on macro-prudential policies to protect firms and households from problems emanating from the financial sector. This paper proposes an analytical framework that combines exogenous and endogenous risks, the latter seen as stemming from frictions in financial markets. Arguing that endogenous risks may be systemic and costly, the paper employs a database of emerging market corporate bond spreads and finds evidence that endogenous risks are present and have amplified the effects of financial crises. Larger financial systems are found to exacerbate the impact of crises, and weaker financial systems are found to exacerbate particularly the impact of banking crises. The results suggest that policymakers should monitor time-varying systemic risks using both price and quantity signals and take actions in good times to mitigate potential amplifying effects at times of stress.
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Format: | Working Papers biblioteca |
Language: | English |
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Inter-American Development Bank
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Subjects: | Financial Risk, Financial Crisis and Structural Adjustement, Fiscal Policy, Monetary Policy, E32 - Business Fluctuations • Cycles, E44 - Financial Markets and the Macroeconomy, E58 - Central Banks and Their Policies, F30 - International Finance: General, G01 - Financial Crises, G30 - Corporate Finance and Governance: General, IDB-WP-276, Macro-prudential policies, Financial crises, Systemic risk, Financial Risk Management, economic policy, |
Online Access: | http://dx.doi.org/10.18235/0011345 https://publications.iadb.org/en/endogenous-risk-amplification-effects-financial-systems-and-macro-prudential-policies |
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dig-bid-node-109752024-05-30T20:30:06ZOn Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies 2011-11-01T00:00:00+0000 http://dx.doi.org/10.18235/0011345 https://publications.iadb.org/en/endogenous-risk-amplification-effects-financial-systems-and-macro-prudential-policies Inter-American Development Bank Financial Risk Financial Crisis and Structural Adjustement Fiscal Policy Monetary Policy E32 - Business Fluctuations • Cycles E44 - Financial Markets and the Macroeconomy E58 - Central Banks and Their Policies F30 - International Finance: General G01 - Financial Crises G30 - Corporate Finance and Governance: General IDB-WP-276, Macro-prudential policies, Financial crises, Systemic risk, Financial Risk Management, economic policy The recent global financial crisis has put the spotlight on macro-prudential policies to protect firms and households from problems emanating from the financial sector. This paper proposes an analytical framework that combines exogenous and endogenous risks, the latter seen as stemming from frictions in financial markets. Arguing that endogenous risks may be systemic and costly, the paper employs a database of emerging market corporate bond spreads and finds evidence that endogenous risks are present and have amplified the effects of financial crises. Larger financial systems are found to exacerbate the impact of crises, and weaker financial systems are found to exacerbate particularly the impact of banking crises. The results suggest that policymakers should monitor time-varying systemic risks using both price and quantity signals and take actions in good times to mitigate potential amplifying effects at times of stress. Inter-American Development Bank Giovanni Majnoni Andrew Powell Working Papers application/pdf IDB Publications en |
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Financial Risk Financial Crisis and Structural Adjustement Fiscal Policy Monetary Policy E32 - Business Fluctuations • Cycles E44 - Financial Markets and the Macroeconomy E58 - Central Banks and Their Policies F30 - International Finance: General G01 - Financial Crises G30 - Corporate Finance and Governance: General IDB-WP-276, Macro-prudential policies, Financial crises, Systemic risk, Financial Risk Management, economic policy Financial Risk Financial Crisis and Structural Adjustement Fiscal Policy Monetary Policy E32 - Business Fluctuations • Cycles E44 - Financial Markets and the Macroeconomy E58 - Central Banks and Their Policies F30 - International Finance: General G01 - Financial Crises G30 - Corporate Finance and Governance: General IDB-WP-276, Macro-prudential policies, Financial crises, Systemic risk, Financial Risk Management, economic policy |
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Financial Risk Financial Crisis and Structural Adjustement Fiscal Policy Monetary Policy E32 - Business Fluctuations • Cycles E44 - Financial Markets and the Macroeconomy E58 - Central Banks and Their Policies F30 - International Finance: General G01 - Financial Crises G30 - Corporate Finance and Governance: General IDB-WP-276, Macro-prudential policies, Financial crises, Systemic risk, Financial Risk Management, economic policy Financial Risk Financial Crisis and Structural Adjustement Fiscal Policy Monetary Policy E32 - Business Fluctuations • Cycles E44 - Financial Markets and the Macroeconomy E58 - Central Banks and Their Policies F30 - International Finance: General G01 - Financial Crises G30 - Corporate Finance and Governance: General IDB-WP-276, Macro-prudential policies, Financial crises, Systemic risk, Financial Risk Management, economic policy Inter-American Development Bank On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies |
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The recent global financial crisis has put the spotlight on macro-prudential policies to protect firms and households from problems emanating from the financial sector. This paper proposes an analytical framework that combines exogenous and endogenous risks, the latter seen as stemming from frictions in financial markets. Arguing that endogenous risks may be systemic and costly, the paper employs a database of emerging market corporate bond spreads and finds evidence that endogenous risks are present and have amplified the effects of financial crises. Larger financial systems are found to exacerbate the impact of crises, and weaker financial systems are found to exacerbate particularly the impact of banking crises. The results suggest that policymakers should monitor time-varying systemic risks using both price and quantity signals and take actions in good times to mitigate potential amplifying effects at times of stress. |
author2 |
Giovanni Majnoni |
author_facet |
Giovanni Majnoni Inter-American Development Bank |
format |
Working Papers |
topic_facet |
Financial Risk Financial Crisis and Structural Adjustement Fiscal Policy Monetary Policy E32 - Business Fluctuations • Cycles E44 - Financial Markets and the Macroeconomy E58 - Central Banks and Their Policies F30 - International Finance: General G01 - Financial Crises G30 - Corporate Finance and Governance: General IDB-WP-276, Macro-prudential policies, Financial crises, Systemic risk, Financial Risk Management, economic policy |
author |
Inter-American Development Bank |
author_sort |
Inter-American Development Bank |
title |
On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies |
title_short |
On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies |
title_full |
On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies |
title_fullStr |
On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies |
title_full_unstemmed |
On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies |
title_sort |
on endogenous risk, the amplification effects of financial systems and macro prudential policies |
publisher |
Inter-American Development Bank |
url |
http://dx.doi.org/10.18235/0011345 https://publications.iadb.org/en/endogenous-risk-amplification-effects-financial-systems-and-macro-prudential-policies |
work_keys_str_mv |
AT interamericandevelopmentbank onendogenousrisktheamplificationeffectsoffinancialsystemsandmacroprudentialpolicies |
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1809106913054425088 |