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March, 2013Prudential Capital Controls: The Impact of Di¤erent Collateral Constraint Assumptions (2013)
| Content Provider | CiteSeerX |
|---|---|
| Author | Takayuki Tsuruga, X. Mitsuru Katagiri, Y. Kato, Ryo Katagiri, Mitsuru Ryo Kato, Z. |
| Abstract | A fast-growing literature on small open economy models with pecuniary externalities has provided the theoretical grounds for the policy analysis of macro-prudential regulations and bailouts. Benigno, Chen, Otrok, Rebucci, and Young (2012a) recently showed that the macro-prudential regulations are desirable if the policy instrument is restricted to capital controls. Using the framework of Jeanne and Korinek (2010), we show that this result depends on the functional form of the collateral constraint which households are faced with. If households collateralize their assets that they purchase at the same time as their borrowing, capital controls in the form of bailout subsidy during crises can be optimal because they can achieve the …rst best allocation. If, on the other hand, the maximum borrowing is constrained by their assets that they have purchased before they borrow, a stronger case can be made for ex ante macroprudential regulations. |
| File Format | |
| Publisher Date | 2013-01-01 |
| Access Restriction | Open |
| Subject Keyword | Policy Instrument Small Open Economy Model Bailout Subsidy Fast-growing Literature Macro-prudential Regulation Di Erent Collateral Constraint Assumption Pecuniary Externality Capital Control Ex Ante Macroprudential Regulation Maximum Borrowing Theoretical Ground Policy Analysis Functional Form Collateral Constraint |
| Content Type | Text |
