The macroeconomic role of the collateral constraint in resource-rich countries

Occupation: Head of the Laboratory on economic processes mathematical modeling
Affiliation:
Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow
Gaidar Institute
Address: Russian Federation

Journal name

Ekonomika i matematicheskie metody

Edition

Volume 59 No. 1

Pages

93-104

Abstract

In this paper, we consider DSGE model of a small open economy highly dependent on resource export. The aim of the study is to identify the role of the collateral constraint in the terms-of-trade (TOT) shock transmission. The model contains two non-linear constraints in the form of inequalities: the collateral constraint and the zero lower bound constraint. We have found that if the monetary policy is not inertial, then under a series of unidirectional TOT shocks, the response of the economy is highly skewed with respect to positive and negative shocks. Both inequalities bind and reduce the positive impact of the TOT shock. If the monetary policy is inertial or the central bank reacts poorly to inflation change, then only the collateral constraint binds, and the effect of asymmetry almost disappears

Keywords

DSGE, non-linear models, collateral constraint, terms of trade, asymmetry, ZLB

Acknowledgment

The study was supported by grant No. 21-78-10020 from the Russian Science Foundation https://rscf.ru/en/project/21-78-10020/

Received

13.05.2022

Publication date

29.03.2023

Number of characters

27025

Cite

GOST	Andreyev M., Polbin A. The macroeconomic role of the collateral constraint in resource-rich countries // Ekonomika i matematicheskie metody – 2023. – V. 59. – No. 1 C. 93-104 [Electronic resource]. URL: https://emm.jes.su/S042473880020147-0-1 (circulation date: 19.04.2024). DOI: 10.31857/S042473880020147-0
MLA	Andreyev, Mikhail, Polbin, Andrey "The macroeconomic role of the collateral constraint in resource-rich countries." Ekonomika i matematicheskie metody 59.1 (2023):93-104. DOI: 10.31857/S042473880020147-0
APA	Andreyev M., Polbin A. (2023). The macroeconomic role of the collateral constraint in resource-rich countries. Ekonomika i matematicheskie metody 59(1), pp.93-104 DOI: 10.31857/S042473880020147-0

100 rub.

When subscribing to an article or issue, the user can download PDF, evaluate the publication or contact the author. Need to register.

Number of purchasers: 0, views: 172

Readers community rating: votes 0

1. Andreyev M.Yu., Polbin A.V. (2019). Studying the financial accelerator effect in a two-sector DSGE model for an export-oriented economy // The Journal of the New Economic Association. Vol 44. P. 12-49. [in Russian]

2. Karev M.G. (2011). Identification of the Bank of Russia’s Preferences. A Simulation Approach // The Journal of the New Economic Association. Vol. 9. P. 72-97. [in Russian]

3. Polbin A.V. (2014). Econometric estimation of a structural macroeconomic model for the Russian economy // Applied Econometrics. Vol. 33. No. 1. P. 3-29. [in Russian]

4. Aastveit K.A., Anundsen A.K. (2017). Asymmetric effects of monetary policy in regional housing markets. Working Paper 2017/25, Norges Bank.

5. Andres J., Arce O., Thomas C. (2013). Banking Competition, Collateral Constraints, and Optimal Monetary Policy // Journal of Money, Credit and Banking. Vol. 45(s2). P. 87-125.

6. Andreyev M., Polbin A. (2021). Optimal simple monetary policy rules for a resource-rich economy and the Zero Lower Bound. Bank of Russia Working Paper Series wps81, Bank of Russia.

7. Aruoba B., Cuba-Borda P., Schorfheide F. (2018). Macroeconomic Dynamics Near the ZLB: A Tale of Two Countries // Review of Economic Studies. Vol. 85. No. 1. P. 87-118.

8. Bernanke B.S., Gertler M., Gilchrist S. (1999). The financial accelerator in a quantitative business cycle framework // Handbook of macroeconomics, vol. 1. The Netherlands: North-Holland. P. 1341-1393.

9. Brzoza-Brzezina M., Kolasa M., Makarski K. (2013). The anatomy of standard DSGE models with financial frictions // Journal of Economic Dynamics and Control. Vol. 37. No. 1. P. 32-51.

10. Cover J. (1992). Asymmetric effects of positive and negative money supply shocks // Quarterly Journal of Economics. Vol. 107. No. 4. P. 1261–1282.

11. Davis S., Presno I. (2017). Capital controls and monetary policy autonomy in a small open economy // Journal of Monetary Economics. Vol. 85(C). P. 114-130.

12. Elliott G., Komunjer I., Timmermann A. (2008). Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss? // Journal of the European Economic Association. Vol. 6. No. 1. P. 122-157.

13. Gertler M., Kiyotaki N., Queralto A. (2012). Financial crises, bank risk exposure and government financial policy // Journal of Monetary Economics. Vol. 59(S). P. 17-34.

14. Gertler M., Kiyotaki N., Prestipino A. (2020). Credit Booms, Financial Crises, and Macroprudential Policy // Review of Economic Dynamics. Vol. 37. P. 8-33.

15. Guerrieri L., Iacoviello M. (2015). OccBin: A toolkit for solving dynamic models with occasionally binding constraints easily // Journal of Monetary Economics. Vol. №70(C). P. 22-38.

16. Guerrieri L., Iacoviello M. (2017). Collateral constraints and macroeconomic asymmetries // Journal of Monetary Economics. Vol. 90(C). P. 28-49.

17. Hirose Y., Inoue A. (2016). The Zero Lower Bound and Parameter Bias in an Estimated DSGE Model // Journal of Applied Econometrics. Vol. 31. No. 4. P. 630-651.

18. Iiboshi H., Shintani M., Ueda K. (2020). Estimating a Nonlinear New Keynesian Model with the Zero Lower Bound for Japan. Working Papers e154, Tokyo Center for Economic Research.

19. Holden T. (2016). Computation of solutions to dynamic models with occasionally binding constraints. EconStor Preprints 130143, ZBW - Leibniz Information Centre for Economics.

20. Karras G. (1996). Are the output effects of monetary policy asymmetric? Evidence from a sample of European countries // Oxford Bulletin of Economics and Statistics. Vol. 58. P. 267–278.

21. Kiyotaki N., Moore J. (1997). Credit cycles // Journal of political economy. Vol. 105. No. 2. P. 211-248.

22. Kocherlakota N. (2000). Creating business cycles through credit constraints // Federal Reserve Bank of Minneapolis. Quarterly Review. No. 24. P. 2-10.

23. Lepetyuk V., Maliar L., Maliar S. (2020). When the U.S. catches a cold, Canada sneezes: A lower-bound tale told by deep learning // Journal of Economic Dynamics and Control. Vol. 117(C).

24. Liu Z., Wang P., Zha T. (2013). Land‐Price Dynamics and Macroeconomic Fluctuations // Econometrica. Vol. 81. No. 3. P. 1147-1184.

25. Liu Z., Miao J., Zha T. (2016). Land prices and unemployment // Journal of Monetary Economics. Vol. 80(C). P. 86-105.