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Información del Evento
SEMINARIO IEEC: Making sense of the Frankenschok (regresar)
Fecha: viernes, mayo 11, 2018 (10:30 AM - 11:30 AM)
Lugar del Evento: Salón 25 G2
Categorías: Economía

Título: Making sense of the Frankenschok, how can financial constraints force a central bank to exit a currency peg?

Conferencista: Julien Pinter, Ph.D - Universite Paris 1 Pantheon-Sorbonne and University of Amsterdam.

Resumen: Negative equity or insolvency concerns can force a central bank to exit a temporary currency peg earlier than it would have done absent such concerns. We show under which conditions such a reasoning can apply for a traditional inflation-averse central bank. We then build an exchange rate market pressure model fitting with a peg reality to forecast both the central bank future bond holdings under a peg as well as its future losses. The model encompasses important and realistic features such as open-mouth effects under a peg and unconventional monetary policies effects. Applying our model to the Swiss Franc peg, we show that the fear of staying with a negative equity for a long period of time could have motivated the SNB early peg exit in 2015, thereby providing a potential explanation for the ”Frankenshock”. ECB QE policy appears as a potential key driver of this decision. The paper also adds to the literature on the limits of foreign exchange interventions for the particular case of central banks fighting appreciation pressures, a greatly under-researched area.

Dirigido a: Comunidad Uninorte
Costo de admisión: Gratis
Información de Contacto:
Instituto de Estudios Económicos del Caribe IEEC