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Banks, Sovereign Risk and Unconventional Monetary Policies

Stéphane Auray, Aurélien Eyquem and Xiaofei Ma
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Xiaofei Ma: CREST-ENSAI

No 2014-10, Working Papers from Center for Research in Economics and Statistics

Abstract: We develop a two-country model with an explicitly microfounded interbank market and sovereign default risk. Calibrated to the Euro Area, the model performs satisfactorily in matching key business cycle facts on real, financial and fiscal time series. We then use the model to assess the effects of a large crisis and quantify the potential effects of alternative unconventional policies on the dynamics of GDP, sovereign default risk and public indebtedness. We show that quantitative monetary easing is more efficient in stimulating GDP, while qualitative monetary easing relieves financial tensions and sovereign risk more efficiently. In terms of welfare, in the short run, unconventional monetary policies bring sizable welfare gains for households, while the long term effects are much smaller

Keywords: Recession; Interbank Market; Sovereign Default; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E44 F34 G15 (search for similar items in EconPapers)
Pages: 37
Date: 2014-03
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac and nep-mon
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http://crest.science/RePEc/wpstorage/2014-10.pdf Crest working paper version (application/pdf)

Related works:
Journal Article: Banks, sovereign risk and unconventional monetary policies (2018) Downloads
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2018) Downloads
Working Paper: Banks, sovereign risk and unconventional monetary policies (2018)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2018) Downloads
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2017) Downloads
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2016)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2016)
Working Paper: Banks, Sovereign Risk and Unconventional Monetary Policies (2015)
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