Private sector deleveraging in Europe

Cuerpo, Carlos; Drumond, Inês; Lendvai, Julia; Pontuch, Peter; Raciborski, Rafal

doi:10.1016/j.econmod.2014.07.034

Cited by 22 publications

(16 citation statements)

References 5 publications

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“…10 All types of …nancial intermediaries, markets, and infrastructures in the 28 EU countries may be systemically important to some degree and may be an object of analysis for the ESRB. 11 As stated in the Introduction, the ESRB recommends that EU Member States should designate a national macroprudential authority to be in charge of …nancial stability policies. 12 To date, 27 of the 28 EU members have already appointed macroprudential authorities.…”

Section: Macroprudential Policy In the Eumentioning

confidence: 99%

“…Welfare bene…ts are long term. 5 5 According to the DSGE model simulations presented by Cuerpo et al (2015), an adjustment in the housing sector of the Spanish economy could have a signi…cant negative impact on economic activity through a decrease in housing investment and consumption. active and the LTV ratio goes down, we see that credit does not increase as much as it does without the macroprudential rule.…”

Section: Impulse Responsesmentioning

confidence: 99%

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Coordinating macroprudential policies within the Euro area: The case of Spain

Rubio

Carrasco-Gallego²

2016

Economic Modelling

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In the aftermath of the global …nancial crisis, there is consensus on the need for macroprudential policies to promote …nancial stability. However, the optimal way to implement such policies in the Euro area is a question open to debate, given that countries have to coordinate. In this paper, we propose a two-country, two-sector monetary union dynamic stochastic general equilibrium model (DSGE) with housing to analyze the optimal implementation of macroprudential policies in the Euro area. Currently, Spain is the only country within the EU that has not established a macroprudential regulator. We use Spain as a natural experiment to study the e¤ects of a lack of coordination in the use of macroprudential policies in the European Monetary Union (EMU). We focus on a particular macroprudential policy, a rule regarding the loan-to-value ratio, which responds countercyclically to credit booms. We …nd that such a policy is welfare enhancing for the Euro area. Nevertheless, if one country does not implement the policy, but the rest of the EMU does, as in the current situation with Spain, this country still yields some bene…ts as a result of its partners'implementation of the policy because it gains from a more stable …nancial system without incurring any output costs. However, if all Euro countries actively implement the policy, the welfare gains for all of them are larger.

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Section: Macroprudential Policy In the Eumentioning

confidence: 99%

Section: Impulse Responsesmentioning

confidence: 99%

Coordinating macroprudential policies within the Euro area: The case of Spain

Rubio

Carrasco-Gallego²

2016

Economic Modelling

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“…As noted above, the calculation of sustainability gaps, following Cuerpo et al (2015), involves the construction of notional, or deflated assets. At the aggregate level, notional total assets are obtained as the sum of deflated financial and non-financial assets where:…”

Section: Assessing Debt Overhangmentioning

confidence: 99%

Excessive Private Sector Leverage and Its Drivers: Evidence from Advanced Economies

Jarmuzek

Rozenov

2017

IMF Working Papers

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Nonfinancial private sector debt increased significantly in advanced economies prior to the global financial crisis and, with a few exceptions, deleveraging has been limited. Furthermore, in some countries households and corporations have continued to accumulate debt. Drawing on the literature, the paper aims to provide a quantitative assessment of the gaps between actual and sustainable levels of debt and to identify the key factors that drive excessive borrowing. Results suggest that variables that are typically found important in studies focusing on borrowing decisions, are also relevant for explaining the debt sustainability gaps.

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“…An alternative to the threshold approach is the sustainability definition proposed by Arrow et al (2004), which, applied to indebtedness, can be interpreted as a requirement for the net worth of the entity of interest to be non-decreasing. Cuerpo et al (2015) and IMF (2016b) apply this sustainability framework to households and non-financial corporations. Wyplosz (2011) discusses it in relation to government debt, pointing out that the concept can be made operational by requiring the debt to GDP ratio to be stationary, and since stationarity is difficult to ascertain, the ratio should follow a declining trend, allowing only for temporary increases.…”

Section: Introductionmentioning

confidence: 99%

Public Debt Sustainability Under Uncertainty: An Invariant Set Approach

Rozenov

2017

IMF Working Papers

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The paper offers an approach to assessing the sustainability of public debt taking into account the effect of fiscal policy on output, as well as uncertainty in the model parameters and system dynamics. Uncertainty is specified in general terms, and the analysis is based on the notion of invariant sets. Examples are provided to illustrate how the method can be applied in practice.JEL Classification Numbers: C61, C63, D81, E62, H63 the participants in the IMF FAD Seminar for valuable comments and suggestions. All remaining errors are my own.

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Private sector deleveraging in Europe

Cited by 22 publications

References 5 publications

Coordinating macroprudential policies within the Euro area: The case of Spain

Coordinating macroprudential policies within the Euro area: The case of Spain

Excessive Private Sector Leverage and Its Drivers: Evidence from Advanced Economies

Public Debt Sustainability Under Uncertainty: An Invariant Set Approach

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