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Discussion by Dr. Edward Offenbacher Director, Monetary/Finance Div. Research Dept.

Monetary Policy, Banking and Systemic Risk in Open Economies by Jaromir Benes, Andrea Gerali and David Vavra. Discussion by Dr. Edward Offenbacher Director, Monetary/Finance Div. Research Dept. Bank Of Israel October 2009. Super-brief summary:.

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Discussion by Dr. Edward Offenbacher Director, Monetary/Finance Div. Research Dept.

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  1. Monetary Policy, Banking and Systemic Risk in Open Economies by Jaromir Benes, Andrea Geraliand David Vavra Discussion by Dr. Edward Offenbacher Director, Monetary/Finance Div. Research Dept. Bank Of Israel October 2009

  2. Super-brief summary: • Small, open-economy DSGE model with financial intermediation. • Captures some important features of financial system that developed into crisis, e.g., maturity mismatches. • Currency mismatches are key feature: may be realistic for central banks, but not for commercial banks. • Key role of financial intermediation is pooling of consumption loan risk; this is indeed a feature of actual FI, but probably not distinctive feature of banks, which is embedded in f(lamba) function. • Results, as far as they are presented, are interesting and should prove useful for policy analysis, especially regulatory issues. Example: Comparision of monetary policy regimes – IT vs. ERB. Output comparison sensible since ERB stabilizes nominal side more; NPL comparison questionable since currency mismatch not realistic.

  3. What’s Special About….an agendaWhat’s special about… • Financial intermediation (vis-à-vis other goods and services)? • Credit risk transfer (vis-à-vis originator holds) ? • Banks (vis-à-vis other FIs)? • Money, including SIPS and CCPs (vis-à-vis other financial instruments)? • The crisis (vis-à-vis “peacetime”)?

  4. Thanks

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