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The role of bank loans to non-financial corporations in a business cycle
Kavalírek, Jan ; Mandel, Martin (advisor) ; Kovanda, Lukáš (referee)
The theoretical part of the thesis introduces Austrian theory of business cycles and analyses equilibrium of savings and investments together with the transmission mechanism between savings, deposits, loans and investments. The practical part of the thesis explores business cycle and credit cycle. It analyses an excessive loan expansion of commercial banks together with a excessively expansive policy of central bank. The thesis deals with a procyclical action of commercial banks and contemporary tools of central bank with their limited effectiveness. Furthermore, the thesis analyses the possible adjustments of monetary policy with the emphasis on the macroprudential policy and its individual credit indicators. The end of the thesis deals with the method of credit rationing and with the imbalance between demand and supply at the credit market of non-financial corporations, which is modelled using the technique of disequilibrium model.
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Impact of Securitization on House Price Dynamics in Spain
Hejlová, Hana ; Hlaváček, Michal (advisor) ; Buzková, Petra (referee)
The thesis tries to explain different nature of the dynamics during the upward and downward part of the last house price cycle in Spain, characterized by important rigidities. Covered bonds are introduced as an instrument which may accelerate a house price boom, while it may also serve as a source of correction to overvalued house prices in downturn. In a serious economic stress, lack of investment opportunities motivates investors to buy the covered bonds due to the strong guarantees provided, which may in turn help to revitalize the credit and housing markets. To address such regime shift, house price dynamics is modelled within a framework of mutually related house price, credit and business cycles using smooth transition vector autoregressive model. Linear behaviour of such system is rejected, indicating the need to model house prices in a nonlinear framework. Also, importance of modelling house prices in the context of credit and business cycles is confirmed. Possible causality from issuance of covered bonds to house price dynamics was identified in this nonlinear structure. Finally, threat to financial stability resulting from rising asset encumbrance both in the upward and downward part of the house price cycle was identified, stressing the need to model impact of the covered bonds on house prices in...
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Four Essays on Financial Stability
Jakubík, Petr ; Dědek, Oldřich (advisor) ; Mejstřík, Michal (referee) ; Kodera, Jan (referee) ; Peltonen, Tuomas (referee)
Recent episodes of financial instability have motivated researchers as well as policy makers to intensify research on financial stability. This thesis contributes to current research and policy discussion by elaborating and empirically testing methodologies, which can be used to measure financial sector vulnerabilities and identify potential risks for financial stability. It further focuses on the link between real and the financial sector as well as possible implications of household financial distress on the aggregate economy. Together with the proposed framework we provide the survey of the current literature on these topics as well as the empirical results. We argue in favour of stress testing methodologies covering the key risks on banks' balance sheets. These frameworks can also be used for emerging markets where data availability is typically limited. It is shown that due to high volatility of credit growth in emerging economies, the static approach assuming constant balance sheet items is not very appropriate. Furthermore, the feedback effect between the financial sector and the real economy might play an important role under certain assumptions, and therefore it should be taken into account by policy makers. This effect can also emerge in the real sector itself as potential instability can...
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Impact of Securitization on House Price Dynamics in Spain
Hejlová, Hana ; Hlaváček, Michal (advisor) ; Buzková, Petra (referee)
The rigorous thesis tries to explain different nature of the dynamics during the upward and downward part of the last house price cycle in Spain, characterized by important rigidities. Covered bonds are introduced as an instrument which may accelerate a house price boom, while it may also serve as a source of cor- rection to overvalued house prices in downturn. In a serious economic stress, lack of investment opportunities motivates investors to buy the covered bonds due to the strong guarantees provided, which may in turn help to revitalize the credit and housing markets. To address such regime shift, house price dynam- ics is modelled within a framework of mutually related house price, credit and business cycles using smooth transition vector autoregressive model. Linear behaviour of such system is rejected, indicating the need to model house prices in a nonlinear framework. Also, importance of modelling house prices in the context of credit and business cycles is confirmed. Possible causality from is- suance of covered bonds to house price dynamics was identified in this nonlinear structure. Finally, potential threat to financial stability resulting from rising asset encumbrance both in the upward and downward part of the house price cycle was identified, stressing the need to model impact of the...
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Financial cycle and its indicators
Lešková, Michaela ; Blahová, Naděžda (advisor) ; Pour, Jiří (referee)
Subject of the diploma thesis is a broad analysis of financial cycles that are often behind other financial topics and their clear and precise understanding is still not sufficient, despite their high significance, and indeed a critical issue for financial stability. The paper will discuss indicators of financial cycles, we can ask ourselves how each financial cycles, meaning equity, credit and real estate prices, are synchronized with each other, but also toward the economic cycle, and what consequences this synchronization brings looking at different scenarios. The turning point in the boom phase is often triggered by the financial crisis, so we look if it is possible to predict these breaks in time. We discuss the recommended adaptations of policies to the financial cycle and in the final phase of diploma work will focus on the analysis of financial cycle in the Czech Republic.
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Limited Liability, Asset Price Bubbles and the Credit Cycle: The Role of Monetary Policy
Matějů, Jakub ; Kejak, Michal
This paper suggests that the dynamics of the non-fundamental component of asset prices are one of the drivers of the credit cycle. The presented model builds on the financial accelerator literature by including a stock market where investors with limited liability trade stocks of productive firms with stochastic productivities. Investors borrow funds from the banking sector and can go bankrupt. Their limited liability induces a moral hazard problem which shifts demand for risk and drives prices of risky assets above their fundamental value. Embedding the contracting problem in a New Keynesian general equilibrium framework, the model shows that expansionary monetary policy induces loose credit conditions and leads to a rise in both the fundamental and non-fundamental components of stock prices. A positive shock to the non-fundamental component triggers a credit cycle: collateral value rises, and lending and default rates decrease. These effects reverse after several quarters, inducing a credit crunch. The credit boom lasts only while stock market growth maintains sufficient momentum. However, monetary policy does not reduce the volatility of inflation and the output gap by reacting to asset prices.
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Relationship between credit and business cycle
Jůza, Jaromír ; Czesaný, Slavoj (advisor) ; Titze, Miroslav (referee)
Excessive lending activity of banks is considered to be one of the causes of the recent financial and economic crisis. The theme of this thesis is to evaluate the relation of credit and the business cycle in the euro area countries and explore the differences which have been among these countries recorded. The primary objective of this work is the analysis of the credit cycle in these countries and its develoment from 2000 to the present. The paper will address further the question of whether financial markets can create for themselves economic imbalances through endogenous credit "booms". First part will deal with the theory off business cycles, then with alternative approaches, namely the Financial Instability Hypothesis of Hyman Minsky and followed by the latest theoretical knowledge on the issue of credit cycles. The next part will focus on identifying and analysing factors playing the significant role in the development of the economy in the pre-crisis period. The following section will be devoted to the international comparison of the credit and business cycles in the euro area (selection of those states that were more resistant to crisis and those sensitive to the crisis). The conclusion will address some recommendations for the policies of central banks, which may in turn reduce the pro-cyclical effects of developing leverage.
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