TY  - BOOK
AU  - Bianchi,Javier
AU  - Boz,Emine
AU  - Mendoza,Enrique G.
ED  - International Monetary Fund.
TI  - Macro-prudential policy in a Fisherian model of financial innovation
T2  - IMF working paper
SN  - 1475576625
AV  - HG3881.5.I58 W67 No. 12/181eb
U1  - 332.152 23
PY  - 2012///
CY  - [Washington, D.C.]
PB  - International Monetary Fund
KW  - Financial institutions
KW  - Management
KW  - Econometric models
KW  - Equilibrium (Economics)
KW  - Financial crises
KW  - United States
KW  - Psychological aspects
KW  - BUSINESS & ECONOMICS / Finance
KW  - bisacsh
KW  - Electronic books
N1  - Title from PDF title page (IMF Web site, viewed Jul. 24, 2012); "Research Department; "July 2012."; Includes bibliographical references
N2  - The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification mechanism to study the effects of macro-prudential policy. Financial innovation enhances the ability of agents to collateralize assets into debt, but the riskiness of this new regime can only be learned over time. Beliefs about transition probabilities across states with high and low ability to borrow change as agents learn from observed realizations of financial conditions. At the same time, the collateral constraint introduces a pecuniary externality, because agents fail to internalize the effect of their borrowing decisions on asset prices. Quantitative analysis shows that the effectiveness of macro-prudential policy in this environment depends on the government's information set, the tightness of credit constraints and the pace at which optimism surges in the early stages of financial innovation. The policy is least effective when the government is as uninformed as private agents, credit constraints are tight, and optimism builds quickly
UR  - https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=568172
ER  -