Policy Analysis
Assessing the Impact of Basel III: Evidence from Structural Macroeconomic Models
(with Bora Durdu, Olivier de Bandt, Hibiki Ichiue, Kalin Nikolov, Yasin Mimir, Jolan Mohimont, Sigrid Rohers, Jean-Guillaume Sahuc, Micheal Straughan)
This paper (i) reviews the different channels of transmission of prudential policy highlighted in the literature and (ii) provides a quantitative assessment of the impact of Basel III reforms using "off- the-shelf" DSGE models. It shows that the effects of regulation are positive on GDP whenever the costs and benefits of regulation are both introduced. However, this result may be associated with a temporary economic slowdown in the transition to Basel III, which can be accommodated by monetary policy. The assessment of liquidity requirements is still an area for research, as most models focus on costs, rather than on benefits, in particular in terms of lower contagion risk.
An analytical framework to calibrate macroprudential policy (with T. Bennani, C. Couaillier, A. Devulder, S. Gabrieli, J. Idier, P. Lopez, T. Piquard)
This project presents the analytical framework for macroprudential policy (AFMaP) developed at the Financial Stability Directorate of the Banque de France that could be used to calibrate macroprudential instruments and to provide analytical support to macroprudential policy decision making. In this paper, we present and compare several possible methodologies to calibrate macroprudential capital buffers that rely both on structural models and macroprudential stress-testing tools.
ALIENOR, a Macrofinancial Model for Macroprudential Policy (with C. Couaillier, T. Ferrière)
ALIENOR is an econometric model built to provide macroeconomic scenarios and conduct macroprudential analysis, in particular for larger stress-test exercises. In the model design, we pay particular attention to the link between financial variables and the real economy, to estimate the potential impact of the materialization of financial systemic risk, and to perform policy exercises. In addition, we quantify the impact of the macroeconomy on financial variables, with a focus on households’ credit, Non-Financial Corporates’ credit, and real estate prices, given the key role played by those variables during the crisis. Finally, we analyse the consequences on the economy of an exogenous increase in the long-term interest rates and a decrease in real estate prices.