Browsing by Author "Mayes, David G."

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  • Mayes, David G. (1997)
    Suomen Pankin keskustelualoitteita 18/1997
    Viimeisen vuosikymmenen pankkikriisit ovat herättäneet huolestumista monissa teollisuusmaissa.Tässä raportissa tarkastellaan Uudessa-Seelannissa vuonna 1996 käyttöön otetun, julkistamisperiaatteeseen nojautuvan pankkivalvontajärjestelmän etuja.Vaikka Uudella-Seelannilla on monia erityispiirteitä, jotka tekevät uudesta järjestelmästä juuri sille erityisen soveliaan, soveltuvat järjestelmän kaikki pääperiaatteet muuhunkin OECD-alueeseen, myös nykyisen EU-lainsäädännön yhteyteen.Nämä periaatteet ovat seuraavat: 1) yritysjohdon kontrollin laadun varmistaminen ja laadukkaat laskentatoimen ja riippumattoman tilintarkastuksen standardit rahoituslaitoksissa, jotka haluavat pankkitoimiluvan 2) markkinakurin edellyttämän konkreettisen informaation julkistaminen yksittäisten pankkien riskinotosta; informaatioon on sisällyttävä pankkien koko toimintaa koskevat value-at-risk -laskelmat 3) pankkien johdon ja hallinnon pitäminen vastuullisina pankkien liiketoiminnan asiaankuuluvasta varovaisuudesta; tähän kuuluvat rangaistukset ja taloudellinen vastuu virheellisistä tiedoista 4) veronmaksajien varojen vaarantamisen välttäminen antamalla ymmärtää, että mikään pankki ei ole liian iso kaatumaan, ja keskittämällä valvontaviranomaisten toimet sen varmistamiseen, että ne voivat puuttua asioihin ja estää koko rahoitusjärjestelmän kannalta haitalliset seuraukset yksittäisen pankin joutuessa vaikeuksiin. Näillä keinoin voidaan merkittävästi vähentää pankkivalvontaan liittyvää moraalikatoa ja valvonnan kustannuksia. Asiasanat: rahoitusmarkkinoiden valvonta, markkinakuri, järjestelmän vakaus
  • Mayes, David G. (2008)
    Suomen Pankki. BoF online 2008/11
    1 Introduction 3 2 Context 4 3 Price-level and inflation targets 6 4 Communicating the Price Level Target 11 5 Intermediate regimes 13 6 Uncertainty and Robust Policy 13 7 Changing the Regime 14 8 Concluding remark 16 List of charts Chart 1. Price level path targets and inflation targets contrasted 7 Chart 2. Inflation Experience Compared to a Price Level Target 8 Chart 3. Reacting to Shocks under Inflation and Price level Targets 9
  • Mayes, David G. (2004)
    Suomen Pankin keskustelualoitteita 4/2004
    Published in Journal of Banking and Finance, Vol. 29, No. 1 (Special Issue), January 2005: 161-181
    In the light of the inequity of the way losses from bank insolvencies and their avoidance through intervention by the authorities have been distributed over creditors, depositors, owners and the population at large in transition and emerging economies, this paper explores a number of regulatory reforms that would alter the balance between seeking to avoid insolvency and lowering the costs of insolvency should it occur.In particular it considers whether a lex specialis for dealing with banks that are in trouble through prompt corrective action and if necessary resolving them if their net worth falls to zero, at little or no cost to the taxpayer can be applied in the institutional framework of transition and emerging economies. Key words: insolvency, banks, transition, emerging economies JEL classification numbers: K23, G21, O16, G28, E53
  • Mayes, David G.; Virén, Matti (2000)
    Suomen Pankin keskustelualoitteita; Bank of Finland. Discussion papers 11/2000
    Published in Economic Modelling, Vol. 22, No 2, March 2005: 219-251
    This paper highlights the implications for EU macroeconomic policy at a relatively disaggregated level when key economic relationships are nonlinear or asymmetric.Using data for the EU and OECD countries we show that there are considerable non-linearities and asymmetries in the Phillips and Okun curves.High unemployment has a relatively limited effect in pulling inflation down while low unemployment can be much more effective in driving it up.Downturns in the economy are both more rapid and sustained in driving unemployment up than recoveries are in bringing it down.There is considerable variety in these relationships and in IS curves across not just countries but also sectors and regions. Key words: aggregation, asymmetry, monetary policy, nonlinear models, Okun curve, Phillips curve
  • Crowley, Patrick M.; Mayes, David G. (2005)
    Bank of Finland. Bulletin 4
    The wavelet approach looks beyond the more usual areas of growth pattern analysis of trends and cycles.Comparative analyses show considerable similarities in euro area growth rates, particularly at business cycle frequencies, most notably among the original. European Community founding members.Non-business cycle frequencies highlight some concerns for policy-making.
  • Mayes, David G. (2009)
    Bank of Finland Research Discussion Papers 17/2009
    The present crisis has revealed that, as expected, much of the safety net for handling failures in the banking system is deficient, particularly for cross-border banks, and the present problems had to be handled by a range of ad hoc measures. The principal new measure that needs to be undertaken in most countries is the implementation of a satisfactory special resolution regime for banks. This paper, however, deals with two further steps that could assist the operation of the safety net. The first is to ensure earlier intervention so there is more time to put a satisfactory rescue or resolution in place. The second is to implement a regime of prompt corrective action (structured early intervention and resolution, SEIR) so that both supervisors and banks know that a regime of increasing intensity will take place according to a strict timetable that will end in the authorities stepping into the bank while it still has positive capital, if the earlier stages are not effective. The paper evaluates the means of doing this in a European environment making use of the experience in the United States. It concludes that, while a lot can be done even within the current framework of national supervision, particularly through pre-positioning, cross-border banks can be better treated either by revising the home-host responsibilities or by moving to a supranational level of responsibility for SEIR for those banks whose continued operation is considered necessary for financial stability in any member state.
  • Mayes, David G. (1998)
    Suomen Pankin keskustelualoitteita 2/1998
    This paper argues that, despite the substantial independence offered by the Maastricht Treaty, the ESCB will wish to bind itself by a set of voluntary rules in the conduct of monetary policy.This binding will occur because of the demands of policy itself.The ESCB as such has no history of a successful pursuit of price stability, although it can borrow some reputation in this from the existing national central banks.The ESCB will therefore need to make a H5 and verifiable precommitment about how it will run monetary policy if it is to be seen as highly credible by all those who can affect prices.The paper surveys the types of rules and rule systems adopted by other central banks and draws conclusions for the ESCB, which require it to be open, straightforward and highly transparent in its conduct of policy.This openness will not only help to dispel any fears that the ESCB will be subject to covert influence to follow objectives other than price stability but it will at the same time help fill the "democratic deficit" attached to such an independent institution.It will need to persuade the public at large and governments, the European Parliament and financial markets in particular that it is pursuing price stability effectively and at minimum cost.Thus, although external sanctions may appear limited, the ESCB is likely to choose to make itself highly "accountable" in the conduct of policy and hence dispel much of the deficit.The paper concludes that action is required now to commit the ESCB to this approach. Keywords: European Central Bank, monetary policy, transparency, accountability, voluntary rules
  • Mayes, David G. (2008)
    Suomen Pankki. BoF online 2008/9
    This note explores the progress of financial integration in Asia by comparison with the EU. In the process of development the Asian countries have focused more on access to the main markets of the world than to each other. Only more recently after the experience of unwelcome contagion in the crises of 1997 1998 has there been a concerted effort to develop instruments to promote greater financial stability in the face of external shocks. Many initiatives are currently underway to improve regional financial integration and there is a movement to achieve monetary integration. However, the region is very heterogenous and inequalities in size and development will make full integration difficult. The process is thus likely to be drawn out but there is a clear direction
  • Mayes, David G. (1998)
    Suomen Pankin keskustelualoitteita 23/1998
    This paper explains how banking supervision within the EU, and in Finland in particular, can be improved by the implementation of greater market discipline and related changes.Although existing EU law, institutions, market structures and practices of corporate governance restrict the scope for change, substantial improvements can be introduced now while there is a window of opportunity for change.The economy is growing strongly and the consequences of the banking crises of the early 1990s have been worked through.Greater market discipline, in the form of a regime of quarterly public disclosure by banks of their capital adequacy, peak exposures and risk management systems, along with improved incentives, will help improve the prudential management of banks, reduce the costs of supervision, enable supervisors to focus on systemic risks and help customers determine the risks they face.Banking inherently involves the taking of risks, but transparency and improved public information about them will help all concerned manage the risks more effectively and greatly reduce the chance that the taxpayer will again be called upon to help rescue the banking system. Keywords: Banking supervision, market discipline, disclosure, systemic risk, financial system oversight
  • Kontulainen, Jarmo; Mayes, David G.; Tarkka, Juha (2004)
    Bank of Finland. Bulletin 78 ; 4
    Good monetary policy is always forward looking and forecasts are therefore a necessary input to monetary policy decisions.Forecasts become a means of providing a high degree of transparency, which in turn is seen as one of the essential prerequisites of successful monetary policy.
  • Mayes, David G. (2007)
    Suomen Pankki. BoF online 2007/12
    1 Three versions of inflation targeting 5 2 Exchange rate fluctuations 6 3 Stabilising prices 9 4 Choosing an operational focus 10 5 Setting out the possible future path of policy 13 6 Concluding remark 15 References 16 List of charts Chart 1. Inflation, Interest Rates and the Real Exchange Rate in Australia 18 Chart 2. Inflation, Interest Rates and the Real Exchange Rate in Canada 19 Chart 3. Inflation, Interest Rates and the Real Exchange Rate in New Zealand 20
  • Mayes, David G.; Nieto, Maria J.; Wall, Larry (2007)
    Bank of Finland Research Discussion Papers 7/2007
    Published in Journal of Financial Stability, Volume 4, Issue 3, September 2008, pp. 232-257
    Prompt Corrective Action (PCA) provides a more efficient mechanism for dealing with problem banks operating in more than one European country. In a PCA framework, a bank's losses are likely to be substantially reduced. This reduction in the losses to deposit insurance and governments will improve the problem of allocating those losses across the various insurance schemes and make it less likely that any deposit insurer will renege on its obligations in a cross-border banking crisis. This paper explores the institutional changes needed in Europe if PCA is to be effective in resolving the cross-border agency problems that arise in supervising and resolving cross-border banking groups. The paper identifies these changes starting with enhancements in the availability to prudential supervisors of information on banking groups' financial condition. Next, the paper considers collective decision-making by prudential supervisors with authority to make discretionary decisions within the PCA framework as soon as a bank of a cross-border banking group falls below the minimum capital standard. Finally, the paper analyses the coordination measures that should be implemented if PCA requires the bank to be resolved. JEL classification numbers: G28, K23, F20 Keywords: banking supervision, European Union, Prompt Corrective Action
  • Mayes, David G. (2002)
    Bank of Finland. Bulletin 76 ; 1
  • Mayes, David G. (2002)
    EURO & TALOUS 1
    Nykyaikainen, entistä nopeammin muuttuva talous voi lisätä sosiaalista syrjäytymistä.Syrjäytymistä ei pystytä täysin estämään, mutta sitä voidaan vähentää.David G.Mayes tarkastelee artikkelissaan erilaisia tapoja lisätä sosiaalista yhteen-kuuluvuutta ilman että talouden vakaus siitä kärsii.
  • Mayes, David G.; Korhonen, Vesa (2007)
    BOFIT Discussion Papers 16/2007
    Published in International Economics, No 107, Issue 3, 2006
    We consider the likely economic impact and prospects for monetary integration among Belarus, Kazakhstan, the Russian Federation and Ukraine as part of the Single Economic Space they have agreed to set up. A monetary union among these countries poses three interesting issues for the structure and process of integration: they have already been members of a wider currency union that collapsed, so it is necessary to handle the problems of history; secondly the union would be of very unequal size with the Russian Federation outweighing the others taken together, so we must consider how the national interests would be balanced; lastly natural resources, particularly oil and gas pose problems for dependence and for the determination of the external exchange rate. JEL codes: F16, E63, E42 Key words: Monetary union, CIS, economic integration
  • Mayes, David G.; Virén, Matti (1998)
    Suomen Pankin keskustelualoitteita 27/1998
    Using information from a variety of sources, including our own estimates from quarterly data for each of the countries over the period 1972-1997, this paper suggests that the exchange rate will play an important role in the transmission of the impact of monetary policy through to the real economy and inflation in the euro area.Although the share of external trade in the euro area's GDP is only around 10 per cent this is only one factor that affects the transmission mechanism and the role of the exchange rate is likely to be substantially greater when all factors are taken into account.As a first approximation it would be reasonable to assume that an increase in the real 90-day interest rate of 100 basis points would have approximately the same effect on demand pressure two years later as a 3.5 per cent fall in the real euro exchange rate.This implies that the euro area will tend to behave like a large open economy rather than a closed economy and hence that it would be helpful in informing monetary policy to construct a Monetary Conditions Index (MCI) using these weights.A separate paper (Mayes and Virén 1998) suggests how an MCI provides a useful summary of high frequency information to assist monetary policy and financial markets in short run decisions.. Keywords: monetary conditions index, exchange rate, monetary policy, euro area
  • Bohl, Martin T.; Mayes, David G.; Siklos, Pierre L. (2009)
    Bank of Finland Research Discussion Papers 31/2009
    With a few unfortunate exceptions the last three decades have seen reductions in inflation around the world to the point that many would argue that further improvements in price stability would offer only limited welfare gains. This experience is the result of many factors, some of which are country-specific. In this paper we seek to isolate one of the factors, namely, the improvement in the quality of monetary policy. There are two novel aspects to the study. Firstly, we essentially estimate a gravity-like model. Secondly, we propose generally a more exhaustive analysis of the potential role of a large number of institutional factors than has been done before. Briefly, we find that institutional factors play a role in explaining inflation relative to the US experience, which is used as the benchmark. Nevertheless, any reduction in inflation stemming from greater central bank autonomy is a feature of the 1980s and early 1990s. Thereafter, central banks in the OECD look very much alike.
  • Llewellyn, David T.; Mayes, David G. (2003)
    Suomen Pankin keskustelualoitteita 21/2003
    This paper considers the conditions that are necessary for market discipline to complement prompt corrective action (PCA) by the authorities in handling problem banks.We initially consider precisely what market discipline means in this context, who exercises it and the preconditions that are necessary for it to operate effectively.We explore the incentives that are necessary for PCA and market discipline to reinforce rather than cancel each other and in particular consider the limits to market discipline in this context from corporate governance and from difficulties in valuation.While our analysis is primarily aimed at advanced countries, we also examine problems in emerging markets and how deposit insurance arrangements might conflict with the aims of both PCA and market discipline. Key words: market discipline, banks, prompt corrective action
  • Paloviita, Maritta; Mayes, David G. (2004)
    Suomen Pankin keskustelualoitteita 16/2004
    Published in The North American Journal of Economics and Finance, Volume 16, Issue 3, December 2005: 415-434
    The dynamics of the Phillips Curve in New Keynesian, Expectations Augmented and Hybrid forms are extremely sensitive to the choice, timing and restrictions on variables.An important element of the debate revolves round what information decision-makers took into account at the time and round what they thought was going to happen in the future.The original debate was conducted using up to date, revised estimates of the data as in the most recent official publications.In this paper, however, we explore how much three aspects of the specification of the information available at the time affect the performance of the various Phillips curves and the choice of the most appropriate dynamic structures.First we consider the performance of forecasts, published at the time, as representations of expectations.Second, we explore the impact of using r real time data in the sense of what were the most recently available estimates of the then present and past.Finally we review whether it helps to use the information that was available at the time in the choice of instruments in the estimation of the relationships rather than the most up to date estimate of the data series that has been published.Thus different datasets are required in the instrument set for every time period.We use a single consistent source for real-time data on the past, estimates of the present and forecasts, from OECD Economic Outlook and National Accounts.We set this up as a panel for the euro area countries covering the period since 1977.Our principal conclusions are (1) that the most important use of real time information in the estimation of the Phillips curve is in using forecasts made at the time to represent expectations; (2) real time data indicate that the balance of expectations formation was more forward than backward-looking; (3) by contrast using the most recent, revised, data suggests more backward-looking and less well-determined behaviour. Key words: real-time data, Phillips curve, euro area JEL classification numbers: E31
  • Tarkka, Juha; Mayes, David G. (2000)
    Bank of Finland. Bulletin 74 ; 1