Macrofinancial Modeling At Central Banks: Recent Developments and Future Directions
IMF Working Papers, January 1, 2012
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- Macrofinancial Modeling At Central Banks: Recent Developments and Future Directions
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Bibliographic details
- Authors: Jan Vlcek, Scott Roger
- Published: January 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463931834.001
Summary
- Surveys dynamic stochastic general equilibrium models with financial frictions in use by central banks.
- Discusses priorities for future development of such models for the purpose of monetary and financial stability analysis.
- Highlights the need to develop macrofinancial models which allow analysis of the macroeconomic effects of macroprudential policy tools and to evaluate elements of the Basel III reforms as a priority.
- Reviews the main approaches to introducing financial frictions into general equilibrium models.
Key findings and emphasis
- Central banks employ DSGE models with financial frictions to link macroeconomic dynamics and financial sector behavior.
- There is a priority need to:
- Develop models that permit analysis of macroprudential policy tools.
- Evaluate elements of the Basel III reforms within macrofinancial frameworks.
- The paper reviews multiple approaches to incorporating financial frictions into general equilibrium models, noting their relevance for monetary and financial stability analysis.
Major themes covered
- Banking and the banking sector: roles of banks, bank capital channel, lending bank behavior, and representative bank constructs.
- Financial frictions and transmission mechanisms: modeling how frictions affect macroeconomic outcomes and monetary policy transmission.
- Interbank markets and market linkages: treatment of interbank markets within macrofinancial DSGE frameworks.
- Forecasting and econometric analysis: implications for DSGE forecasting and macroeconomic modeling used by central banks.
- Financial sector policy and analysis: application to financial stability assessment and policy evaluation.
Policy recommendations and priorities
- Prioritize development of macrofinancial models that:
- Allow analysis of macroprudential policy tools.
- Enable evaluation of elements of the Basel III reforms.
- Use reviewed modeling approaches to improve monetary and financial stability analysis at central banks.
Metadata and classification (as stated in source)
- Subject: Banking, Dynamic stochastic general equilibrium models, Econometric analysis, Economic forecasting, Economic theory, Financial frictions, Financial markets, Financial sector policy and analysis, Financial stability assessment, Interbank markets
- Keywords: bank, bank capital channel, banking sector, capital, central bank, DSGE forecasting, Dynamic stochastic general equilibrium models, financial frictions, Financial stability assessment, interbank market, Interbank markets, lending bank, macroeconomic modeling, Monetary policy analysis, representative bank, transmission mechanism, WP
- Pages: 39
- Volume: 2012
- DOI: https://doi.org/10.5089/9781463931834.001
- Issue: 021
- Series: Working Paper No. 2012/021
- Stock No: WPIEA2012021
- ISBN: 9781463931834
- ISSN: 1018-5941
IMF Working Paper — Jan Vlcek and Scott Roger, January 1, 2012