Federico Diaz Kalan's Books

Effects of Monetary and Macroprudential Policies on Financial Conditions

Evidence from the United States

By: Ms.Aleksandra Zdzienicka,Ms.Sally Chen,Federico Diaz Kalan,Stefan Laseen,Katsiaryna Svirydzenka

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Effects of Monetary and Macroprudential Policies on Financial Conditions

Evidence from the United States

By: Ms.Aleksandra Zdzienicka,Ms.Sally Chen,Federico Diaz Kalan,Stefan Laseen,Katsiaryna Svirydzenka

The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically—especially compared to the effects of macroprudential policies— and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries—with the effects varying with country-specific characteristics—an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.

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International Monetary Fund

Published Date

ISBN 10

1513534998

ISBN 13

9781513534992

Thou Shalt Not Breach: The Impact on Sovereign Spreads of Noncomplying with the EU Fiscal Rules

By: Federico Diaz Kalan,Ms.Adina Popescu,Julien Reynaud

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Thou Shalt Not Breach: The Impact on Sovereign Spreads of Noncomplying with the EU Fiscal Rules

By: Federico Diaz Kalan,Ms.Adina Popescu,Julien Reynaud

There is evidence that fiscal rules, in particular well-designed rules, are associated with lower sovereign spreads. However, the impact of noncompliance with fiscal rules on spreads has not been examined in the literature. This paper estimates the effect of the Excessive Deficit Procedure (EDP) on sovereign spreads of European Union member states. Based on a sample including the 28 European Union countries over the period 1999 to 2016, sovereign spreads of countries placed under an EDP are found to be on average higher compared to countries that are not under an EDP. The interpretation of this result is not straight-forward as different channels may be at play, in particular those related with the credibility and the design of the EU fiscal framework. The specification accounts for typical macroeconomic, fiscal, and financial determinants of sovereign spreads, the System Generalized Method of Moments estimator is used to control for endogeneity, and results are robust to a range of checks on variables and estimators.

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