Liviu Voinea's Books

Defensive Expectations

Reinventing the Phillips Curve as a Policy Mix

By: Liviu Voinea

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Defensive Expectations

Reinventing the Phillips Curve as a Policy Mix

By: Liviu Voinea

This book explains why inflation remains subdued after recessions, based on three revolutionary concepts: defensive expectations, compensatory savings, and cumulative wage gap. When income falls, consumption falls, and savings rise, as people rebuild their past wealth. Households will not spend more until they fully recover what they lost. The revised Phillips Curve explains that current inflation depends on the cumulative difference between current income and past income. This new theory is tested and validated by data for US since 1960 to date and for 35 OECD countries from 1990 to date. A number of policy implications are derived from these results. The book calls for an optimal policy mix between monetary policy and fiscal policy; it also discusses the coronavirus crisis as an extreme case of defensive expectations.

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Page Count

216

Publisher

Springer Nature

Published Date

ISBN 10

3030550451

ISBN 13

9783030550455

Debt Service and Default: Calibrating Macroprudential Policy Using Micro Data

By: Erlend Nier,Radu Popa,Maral Shamloo,Liviu Voinea

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Debt Service and Default: Calibrating Macroprudential Policy Using Micro Data

By: Erlend Nier,Radu Popa,Maral Shamloo,Liviu Voinea

We provide empirical evidence to support the calibration of a limit on household indebtedness levels, in the form of a cap on the debt-service-to-income (DSTI) ratio, in order to reduce the probability of borrower defaults in Romania. The analysis establishes two findings that are new to the literature. First, we show that the relationship between DSTI and probability of default is non-linear, with probability of default responding to increases in DSTI only after a certain threshold. Second, we establish that consumer loan defaults occur at lower levels of DSTI compared to mortgages. Our results support the recent regulation adopted by the National Bank of Romania, limiting the household DSTI at origination to 40 percent for new mortgages and consumer loans. Our counterfactual analysis indicates that had the limit been in place for all the loans in our sample, the probability of default (PD) would have been lower by 23 percent.

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