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| dc.title | Cyclically Adjusted Provisions and Financial Stability |
| dc.contributor.author | Agénor, Pierre-Richard |
| dc.contributor.author | Pereira da Silva, Luiz A. |
| dc.contributor.orgunit | Department of Research and Chief Economist |
| dc.date.available | 2016-05-11T00:00:00 |
| dc.date.issue | 2016-05-10T00:00:00 |
| dc.description.abstract | This paper studies the extent to which alternative loan loss provisioning regimes affect the procyclicality of the financial system and financial stability. It uses a DSGE model with financial frictions (namely, balance sheet and collateral effects, as well as economies of scope in banking) and a generic formulation of provisioning regimes. Numerical experiments with a parameterized version of the model show that cyclically adjusted (or, more commonly called, dynamic) provisioning can be highly effective in terms of mitigating procyclicality and financial instability, measured in terms of the volatility of the credit-output ratio and real house prices, in response to financial shocks. The optimal combination of simple cyclically adjusted provisioning and countercyclical reserve requirements rules is also studied. The simultaneous use of these instruments does not improve the ability of either one of them to mitigate financial instability, making them partial substitutes rather than complements. |
| dc.format.extent | 53 |
| dc.identifier.doi | http://dx.doi.org/10.18235/0011733 |
| dc.identifier.url | https://publications.iadb.org/publications/english/document/Cyclically-Adjusted-Provisions-and-Financial-Stability.pdf |
| dc.language.iso | en |
| dc.medium | Adobe PDF |
| dc.publisher | Inter-American Development Bank |
| dc.subject | Financial System |
| dc.subject | Financial Friction |
| dc.subject | Capital Goods |
| dc.subject | Housing Demand |
| dc.subject | Investment Loan |
| dc.subject | Loan Loss Reserve |
| dc.subject | Interest Rate |
| dc.subject | Housing Price |
| dc.subject | Commercial Bank |
| dc.subject.jelcode | E32 - Business Fluctuations • Cycles |
| dc.subject.jelcode | E44 - Financial Markets and the Macroeconomy |
| dc.subject.jelcode | E52 - Monetary Policy |
| dc.subject.keywords | Financial Frictions;Loan Loss Reserves;Financial Systems;Loan loss provisions;Financial Stability |
| dc.type | Working Papers |
| idb.identifier.pubnumber | Working Papers |
| idb.operation | RG-T2426 |