Four Essays on Financial Stability

• Thesis title in Czech: Čtyři eseje o finanční stabilitě
• Thesis title in English: Four Essays on Financial Stability
• Key words: stresové testování, systémové riziko, makroprudenční politika, Rusko, banka, procykličnost, efekt zpětného dopadu, bankovní regulace, pokles úvěrování, kreditní cyklus, finanční obtíže domácností, insolvence, selhání domácností, agregátní spotřeba
• English key words: stress testing, systemic risk, macroprudential policy, bank, Russia procyclicality, feedback loop, bank regulation, deleveraging, credit cycle, households’ distress, insolvency, household default, aggregate consumption
• Academic year of topic announcement: 2011/2012
• Thesis type: dissertation
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: prof. Ing. Oldřich Dědek, CSc.
• Author: hidden - assigned by the advisor
• Date of registration: 03.08.2012
• Date of assignment: 03.08.2012
• Date and time of defence: 17.10.2012 17:00
• Venue of defence: Opletalova 26, 110 00 Praha 1, místnost 109
• Date of electronic submission: 14.08.2012
• Date of proceeded defence: 17.10.2012
• Opponents: prof. Ing. Michal Mejstřík, CSc.

References

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Preliminary scope of work

Nedávné období finanční nestability motivovalo výzkumníky i tvůrce hospodářských politik ke zintenzivnění výzkumu v oblasti finanční stability. Tato disertační práce rozšiřuje současné poznání a diskuze rozpracováním a empirickým testováním metodologií, které mohou být využity pro měření zranitelnosti finančního sektoru a identifikaci potenciálních rizik pro finanční stabilitu. Dále se zaměřuje na vztah mezi reálným a finančním sektorem a možné dopady finančních obtíží domácností na agregátní ekonomiku. Společně s navrhovanou metodologií poskytujeme přehled současné literatury na tato témata i empirické výsledky. Argumentujeme ve prospěch stresového testování zahrnujícího klíčová rizika v bilancích bank, které je možno použít i pro nově se rozvíjející trhy s omezenou dostupností dat. Pro tyto ekonomiky je statický přístup předpokládající konstantní rovahovové položky zcela nevhodný díky vysoké volatilitě růstu úvěrů. Dále práce ukazuje, že tzv. efekt zpětného dopadu mezi finančním sektorem a reálnou ekonomikou může hrát za určitých předpokladů důležitou roli, a proto by měl být brán v úvahu tvůrci hospodářských politik. Tento efekt se objevuje také v samotném reálném sektoru, protože potenciální nestabilita může pramenit z bilancí domácností a promítat se do agregátní ekonomiky prostřednictvím dodatečného poklesu jejich spotřeby.

Preliminary scope of work in English

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 be related to households’ distress and have an impact on the aggregate economy via additional decrease in household consumption.