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Begin New Search Topic Government Political Geography Europe Content Type Working Paper Publishing Institution Board of Governors of the Federal Reserve System

1. Is The Corporate Loan Market Globally Integrated? A Pricing Puzzle

Author:
Mark Carey and Gregory P. Nini
Publication Date:
08-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We offer evidence that interest rate spreads on syndicated loans to corporate borrowers are economically significantly smaller in Europe than in the U.S., other things equal. Differences in borrower, loan and lender characteristics associated with equilibrium mechanisms suggested in the literature do not appear to explain the phenomenon. Borrowers overwhelmingly issue in their natural home market, and bank portfolios display significant home “bias.” This may explain why pricing discrepancies are not competed away, but the fundamental causes of the discrepancies remain a puzzle. Thus, important determinants of loan origination market outcomes remain to be identified, home “bias” appears to be material for pricing, and corporate financing costs differ in Europe and the U.S.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States and Europe

2. Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment

Author:
Tamim Bayoumi, Douglas Laxton, and Paolo Pesenti
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Using a general-equilibrium simulation model featuring nominal rigidities and monopolistic competition in product and labor markets, this paper estimates the macroeconomic benefits and international spillovers of an increase in competition. After calibrating the model to the euro area vs. the rest of the industrial world, the paper draws three conclusions. First, greater competition produces large effects on macroeconomic performance, as measured by standard indicators. In particular, we show that differences in competition can account for over half of the current gap in GDP per capita between the euro area and the US. Second, it may improve macroeconomic management by increasing the responsiveness of wages and prices to market conditions. Third, greater competition can generate positive spillovers to the rest of the world through its impact on the terms of trade.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
Europe

3. The Optimal Degree of Discretion in Monetary Policy

Author:
Susan Athey, Andrew Atkeson, and Patrick J. Kehoe
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
How much discretion should the monetary authority have in setting its policy? This question is analyzed in an economy with an agreed-upon social welfare function that depends on the randomly fluctuating state of the economy. The monetary authority has private information about that state. In the model, well-designed rules trade off society's desire to give the monetary authority discretion to react to its private information against society's need to guard against the time inconsistency problem arising from the temptation to stimulate the economy with unexpected inflation. Although this dynamic mechanism design problem seems complex, society can implement the optimal policy simply by legislating an inflation cap that specifies the highest allowable inflation rate. The more severe the time inconsistency problem, the more tightly the cap constrains policy and the smaller is the degree of discretion. As this problem becomes sufficiently severe, the optimal degree of discretion is none.
Topic:
Civil Society, Economics, Government, and International Trade and Finance
Political Geography:
Europe

4. Broad Money Demand and Financial Liberalization in Greece

Author:
Neil R. Ericsson and Sunil Sharma
Publication Date:
07-1996
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper develops a constant, data-coherent, error correction model for broad money demand (M3) in Greece. This model contributes to a better understanding of the effects of monetary policy in Greece, and of the portfolio consequences of financial innovation in general. The broad monetary aggregate M3 was targeted until recently, and current monetary policy still uses such aggregates as guidelines, yet analysis of this aggregate has been dormant for over a decade.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
Europe