The Financial (In)Stability Real Interest Rate, R**
We introduce the concept of financial stability real interest rate using a macroeconomic banking model with an occasionally binding financing constraint as in Gertler and Kiyotaki (2010). The financial stability interest rate, r**, is the threshold interest rate that triggers the constraint being binding. Increasing imbalances in the financial sector measured by an increase in leverage are accompanied by a lower threshold that could trigger financial instability events. We also construct a theoretical implied financial condition index and show how it is related to the gap between the natural and financial stability interest rates.
Date:
15 October 2024, 13:15 (Tuesday, 1st week, Michaelmas 2024)
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Seminar Room A or https://zoom.us/j/99960790792?pwd=eVFyRGRQc1RRS3l1U1U2UnlKTHBqUT09
Speaker:
Gianluca Benigno (University of Lausanne)
Organising department:
Department of Economics
Part of:
Macroeconomics Seminar
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Edward Clark
