Studies on the role of asset prices and credit in the design of monetary and regulatory policy [Elektronische Ressource] / vorgelegt von Florian Kajuth

Florian Kajuth

Informations

• Publié par: ludwig-maximilians-universitat_munchen
• Publié le: 01 janvier 2008
• Nombre de lectures: 14
• Langue: English

Extrait

Studies on the Role of Asset Prices and
Credit in the Design of Monetary and
Regulatory Policy
Inaugural-Dissertation
zur Erlangung des Grades
Doctor oeconomiae publicae (Dr. oec. publ.)
an der Ludwig-Maximilians-Universit?t M?nchen
2008
vorgelegt von
Florian Kajuth
Referent: Prof. Dr. Gerhard Illing
Korreferent: Prof. Dr. Jarko Fidrmuc
Promotionsabschlussberatung: 16. Juli 2008Acknowledgements
While writing this thesis I have received encouragement and support from a
number of people. First and foremost I would like to thank my supervisor Ger-
hard Illing, from whom I have learnt a lot. The conversations with him helped
my understanding of economic theory and practice very often much more than
lecturesortextbooks. Furthermore,Iappreciatehissupportandgenerousfund-
ingfornationalandinternationalconferencesandthesummerschoolinEltville.
Secondly, I would like to thank Jarko Fidrmuc, who kindly agreed to act as the
second examiner. Moreover, I am grateful to Sven Rady, whom I was happy
to win as my third examiner. In addition, ?nancial support from the Deutsche
Forschungsgemeinschaft through SFB/TR 15 is gratefully acknowledged.
During my time at the Seminar for Macroeconomics at the LMU in Munich
I was privileged to meet and become friends with many enjoyable and interest-
ing people. I would like to thank Desi Andreeva, Julia Bersch, Josef Forster,
Moritz Hahn, Frank Heinemann, Uli Kl?h, Katri Mikkonen, Stephan Sauer and
Sebastian Watzka for their help, encouragement and many stimulating discus-
sions over co⁄ee. Furthermore, I would like to thank AgnŁs Bierprigl for her
excellent support in all things related to administration, organisation and the
submission process. Special mention deserves Dirk R?sing for his reliable IT
support and advice. Moreover, I am grateful to Uwe B?wer, Marcus Drometer,
Hannah H?risch and Liudmyla Hvozdyk for their personal support and friend-
ship. Finally, I would like to thank my parents, my sister and Judith for their
patience, encouragementandfordistractingmefrommye⁄ortswiththisthesis,
which so often motivated me to carry on.Contents
List of Figures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
1 Introduction and summary 1
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2 The role of liquidity constraints in the response of monetary
policy to house prices 7
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Related literature . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 A life-cycle model of consumption . . . . . . . . . . . . . . . . . 14
2.3.1 Unconstrained consumers . . . . . . . . . . . . . . . . . 15
2.3.2 Who is constrained and why? . . . . . . . . . . . . . . . 16
2.3.3 Time-varying liquidity constraints . . . . . . . . . . . . . 17
2.3.4 Aggregation and equilibrium . . . . . . . . . . . . . . . . 18
2.4 Optimal monetary policy . . . . . . . . . . . . . . . . . . . . . . 20
2.5 The role of liquidity constraints . . . . . . . . . . . . . . . . . . 22
2.5.1 Constant liquidity constraints . . . . . . . . . . . . . . . 23
2.5.2 Time-varying liquidity constraints . . . . . . . . . . . . . 24
2.6 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.6.1 House prices are a⁄ected by the interest rate . . . . . . . 28
2.6.2 House prices follow an autoregressive process . . . . . . . 28
2.6.3 Discussion of some model assumptions . . . . . . . . . . 30
2.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Appendix 2.A Derivation of the optimal interest rate rule . . . . . . 35
3 U.S. stock prices and moral hazard: Did the Fed contribute to
the bubble in the late 1990s? 36
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.2 Empirical strategy . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.3 Related literature . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.4 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
iiiContents
3.5 The present value model and testable implications for bubbles . 44
3.6 Estimation of a state-space model . . . . . . . . . . . . . . . . . 48
3.6.1 The present value model in state-space representation . . 49
3.6.2 Empirical results . . . . . . . . . . . . . . . . . . . . . . 52
3.7 Indicators of moral hazard behaviour of investors . . . . . . . . 57
3.7.1 The probability of a stock market crash . . . . . . . . . . 57
3.7.2 A minimum level of dividends . . . . . . . . . . . . . . . 58
3.7.3 The degree of debt exposure . . . . . . . . . . . . . . . . 59
3.7.4 Empirical results . . . . . . . . . . . . . . . . . . . . . . 59
3.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Appendix 3.A Unit root and cointegration tests with a time-varying
interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Appendix 3.B Empirical results for the alternative dividend measure 67
Appendix 3.C Con?dence bands for the estimated state variable with
approximate estimation uncertainty . . . . . . . . . . . . . . . . 69
4 The cyclicality of aggregate bank lending under bank capital
regulation 72
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
4.2 Related literature . . . . . . . . . . . . . . . . . . . . . . . . . . 76
4.3 The model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
4.3.1 Loan demand . . . . . . . . . . . . . . . . . . . . . . . . 78
4.3.2 Optimal loan supply without regulation. . . . . . . . . . 79
4.3.3 Optimal loan supply under regulation . . . . . . . . . . . 84
4.4 Assessing procyclicality . . . . . . . . . . . . . . . . . . . . . . . 88
4.4.1 Fluctuations of aggregate lending without a capital con-
straint . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
4.4.2 Fluctuations of aggregate lending with a capital constraint 91
4.4.3 A measure of procyclicality . . . . . . . . . . . . . . . . 91
4.4.4 Constant risk-weights . . . . . . . . . . . . . . . . . . . . 92
4.4.5 Variable risk-weights . . . . . . . . . . . . . . . . . . . . 94
4.4.6 Can bank capital regulation reduce credit ?uctuations? . 94
4.5 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
4.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Appendix 4.A Derivation of ?rms?loan demand . . . . . . . . . . . . 100
Appendix 4.B Optimal loan supply without regulation . . . . . . . . 100
Appendix 4.C Optimal loan supply under regulation . . . . . . . . . 102
ivContents
Appendix 4.D The response of the equilibrium interbank rate to a
change in aggregate risk . . . . . . . . . . . . . . . . . . . . . . 104
Appendix 4.E The size of the marginal responses of lending to ?rms
with and without regulation . . . . . . . . . . . . . . . . . . . . 104
Appendix 4.F The role of the distribution function of bank capital . 105
vList of ?gures and tables
List of Figures
2.1 Housing equity withdrawal and real house prices in the U.S. . . 9
2.2 Housing equity withdrawal and real house prices in the U.K. . . 10
2.3 Distribution of liquid assets across U.S. homeowners . . . . . . . 11
2.4 Distribution of annual income across U.S. homeowners . . . . . 12
2.5 Distribution function of income going to the young agents . . . 17
3.1 Real S&P 500 and real S&P 500 dividend payments index . . . 36
3.2 Smoothedestimateofstatevariableinlevelswith95%-con?dence
bands, constant real interest rate . . . . . . . . . . . . . . . . . 53
3.3 Smoothedestimateofstatevariableinlevelswith95%-con?dence
bands, time-varying real interest rate . . . . . . . . . . . . . . . 56
4.1 Aggregate loan supply to ?rms across banks without a bank cap-
ital constraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
4.2 Aggregate loan supply to ?rms with a bank capital constraint . 88
4.3 Theoretical cumulative distribution function of bank capital . . 106
List of Tables
3.1 ADFunitrootandcointegrationtestsontherealstockpriceand
dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.2 Bhargava tests for stationarity on the real stock price, dividends
and cointegration residuals . . . . . . . . . . . . . . . . . . . . . 47
3.3 Bhargava tests for explosive roots on the real stock price, divi-
dends and cointegration residuals . . . . . . . . . . . . . . . . . 47
3.4 Estimation results of coe¢ cients in stock price and bubble equa-
tion, constant real interest rate . . . . . . . . . . . . . . . . . . 53
3.5 Signi?cant bubble episodes, constant real interest rate . . . . . . 54
3.6 Estimation results of coe¢ cients in stock price and bubble equa-
tion, time-varying real interest rate . . . . . . . . . . . . . . . . 55
3.7 Signi?cant bubble episodes, time-varying real interest rate . . . 55
3.8 Impact of moral hazard indicators on residuals from state equa-
tion in levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
3.9 Impactofmoralhazardindicators