Monetary policy and macro-prudential regulation: the risk-sharing paradigm
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Date
2014
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Banco Central de Chile
Abstract
Description
Economic history is replete with episodes of financial crises creating havoc for the real economy. These episodes typically have three important ingredients. First there are large financial flows to finance a bubbling asset class such as sovereigns or housing with 'safe' debt. Second there is a sharp downward movement in the price of the asset that was being financed with debt. Third there is no apparent 'real shock' that one can point a figure at for the large drop in asset prices. In particular there is no major productionside disruption such as the failure of a technology political coup or breakout of large-scale disease. Yet the financial shocks translate into a deep and long economic recession. Why?
Keywords
POLĂTICA MONETARIA, CRISIS FINANCIERA