Banks in The Global Integrated Monetary and Fiscal Model
IMF Working Papers, July 10, 2015
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- Banks in The Global Integrated Monetary and Fiscal Model
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Bibliographic details
- Authors: Michal Andrle, Michael Kumhof, Douglas Laxton, Dirk V Muir
- Published: July 10, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513532967.001
Overview and purpose
- Compares two versions of the Global Integrated Monetary and Fiscal model (GIMF), a multi-region DSGE model developed by the Economic Modeling Division of the IMF for policy and scenario analysis.
- Version 1: GIMF with a conventional financial accelerator, where bank balance sheets do not play a prominent role.
- Version 2: GIMF with both a financial accelerator and a fully specified banking sector that can make lending losses and that is regulated according to Basel-III.
- Illustrates comparative macroeconomic properties by presenting model responses to a wide range of fiscal, demand, supply, and financial shocks.
Model features and technical focus
- Multi-region DSGE framework used for policy and scenario analysis.
- Banking sector in the extended version: able to incur lending losses and subject to Basel-III regulation.
- Financial accelerator present in both versions, but the prominence of bank balance sheets differs across versions.
Key themes, subjects, and keywords
- Subjects highlighted: Bank credit, Banking, Capital adequacy requirements, Consumption, Financial institutions, Financial services, Income, Loans, Money, National accounts, Real interest rates.
- Keywords listed in the source: a lot of bank, bank, bank borrower, Bank credit, bank equity, borrower riskiness, Consumption, cost of capital, Financial Accelerator, Global, headline inflation, Income, loan loss, Loans, Macro-Financial Linkages, Macroprudential Policy, Multi-Region DSGE Models, Real interest rates, wholesale lending, WP.
Findings and comparative analysis (as presented)
- The paper demonstrates differences in macroeconomic responses across the two GIMF versions when subjected to:
- Fiscal shocks.
- Demand shocks.
- Supply shocks.
- Financial shocks.
- Emphasis on how inclusion of a fully specified banking sector (with lending losses and Basel-III regulation) alters model dynamics relative to a version where bank balance sheets are not prominent.
Policy and regulatory implications
- Incorporates Basel-III regulation in the banking-sector specification, enabling analysis of capital adequacy requirements and macroprudential policy interactions within a multi-region DSGE setting.
- Allows assessment of macro-financial linkages and the role of bank equity, borrower riskiness, loan loss dynamics, and wholesale lending in shaping macroeconomic outcomes.