Zineddine Alla's Books

Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

By: Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto

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Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

By: Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto

We present a novel approach that incorporates individual entity stress testing and losses from systemic risk effects (SE losses) into macroprudential stress testing. SE losses are measured using a reduced-form model to value financial entity assets, conditional on macroeconomic stress and the distress of other entities in the system. This valuation is made possible by a multivariate density which characterizes the asset values of the financial entities making up the system. In this paper this density is estimated using CIMDO, a statistical approach, which infers densities that are consistent with entities’ probabilities of default, which in this case are estimated using market-based data. Hence, SE losses capture the effects of interconnectedness structures that are consistent with markets’ perceptions of risk. We then show how SE losses can be decomposed into the likelihood of distress and the magnitude of losses, thereby quantifying the contribution of specific entities to systemic contagion. To illustrate the approach, we quantify SE losses due to Lehman Brothers’ default.

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International Monetary Fund

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ISBN 10

1484346874

ISBN 13

9781484346877

FX Intervention in the New Keynesian Model

By: Zineddine Alla,Mr.Raphael A Espinoza,Mr.Atish R. Ghosh

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FX Intervention in the New Keynesian Model

By: Zineddine Alla,Mr.Raphael A Espinoza,Mr.Atish R. Ghosh

We develop an open economy New Keynesian Model with foreign exchange intervention in the presence of a financial accelerator mechanism. We obtain closed-form solutions for the optimal interest rate policy and FX intervention under discretionary policy, in the face of shocks to risk appetite in international capital markets. The solution shows that FX intervention can help reduce the volatility of the economy and mitigate the welfare losses associated with such shocks. We also show that, when the financial accelerator is strong, the risk of multiple equilibria (self-fulfilling currency and inflation movements) is high. We determine the conditions under which indeterminacy can occur and highlight how the use of FX intervention reinforces the central bank’s credibility and limits the risk of multiple equilibria.

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International Monetary Fund

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ISBN 10

1484323831

ISBN 13

9781484323830

Unconventional Policy Instruments in the New Keynesian Model

By: Zineddine Alla,Mr.Raphael A. Espinoza,Mr.Atish R. Ghosh

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Unconventional Policy Instruments in the New Keynesian Model

By: Zineddine Alla,Mr.Raphael A. Espinoza,Mr.Atish R. Ghosh

This paper analyzes the use of unconventional policy instruments in New Keynesian setups in which the ‘divine coincidence’ breaks down. The paper discusses the role of a second instrument and its coordination with conventional interest rate policy, and presents theoretical results on equilibrium determinacy, the inflation bias, the stabilization bias, and the optimal central banker’s preferences when both instruments are available. We show that the use of an unconventional instrument can help reduce the zone of equilibrium indeterminacy and the volatility of the economy. However, in some circumstances, committing not to use the second instrument may be welfare improving (a result akin to Rogoff (1985a) example of counterproductive coordination). We further show that the optimal central banker should be both aggressive against inflation, and interventionist in using the unconventional policy instrument. As long as price setting depends on expectations about the future, there are gains from establishing credibility by using any instrument that affects these expectations.

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International Monetary Fund

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ISBN 10

1513573071

ISBN 13

9781513573076

Unconventional Policy Instruments in the New Keynesian Model

By: Zineddine Alla,Mr.Raphael A. Espinoza,Mr.Atish R. Ghosh

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Unconventional Policy Instruments in the New Keynesian Model

By: Zineddine Alla,Mr.Raphael A. Espinoza,Mr.Atish R. Ghosh

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International Monetary Fund

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ISBN 10

1513573071

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9781513573076

Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

By: Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto

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Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

By: Zineddine Alla,Mr.Raphael A Espinoza,Qiaoluan H. Li,Miguel A. Segoviano Basurto

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International Monetary Fund

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ISBN 10

1484346874

ISBN 13

9781484346877

Unconventional Policy Instruments in the New Keynesian Model

By: Zineddine Alla,Raphael A. Espinoza

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Unconventional Policy Instruments in the New Keynesian Model

By: Zineddine Alla,Raphael A. Espinoza

This paper analyzes the use of unconventional policy instruments in New Keynesian setups in which the 'divine coincidence' breaks down. The paper discusses the role of a second instrument and its coordination with conventional interest rate policy, and presents theoretical results on equilibrium determinacy, the inflation bias, the stabilization bias, and the optimal central banker's preferences when both instruments are available. We show that the use of an unconventional instrument can help reduce the zone of equilibrium indeterminacy and the volatility of the economy. However, in some circumstances, committing not to use the second instrument may be welfare improving (a result akin to Rogoff (1985a) example of counterproductive coordination). We further show that the optimal central banker should be both aggressive against inflation, and interventionist in using the unconventional policy instrument. As long as price setting depends on expectations about the future, there are gains from establishing credibility by using any instrument that affects these expectations.--Abstract.

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1513573233

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9781513573236

Book's by Zineddine Alla

Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

FX Intervention in the New Keynesian Model

FX Intervention in the New Keynesian Model

Unconventional Policy Instruments in the New Keynesian Model

Unconventional Policy Instruments in the New Keynesian Model

Unconventional Policy Instruments in the New Keynesian Model

Unconventional Policy Instruments in the New Keynesian Model

Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

Macroprudential Stress Tests: A Reduced-Form Approach to Quantifying Systemic Risk Losses

Unconventional Policy Instruments in the New Keynesian Model

Unconventional Policy Instruments in the New Keynesian Model

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