Robin Döttling
- 8 May 2023
- WORKING PAPER SERIES - No. 2812Details
- Abstract
- We analyze jointly optimal carbon pricing and leverage regulation in a model with financial constraints and endogenous climate-related transition and physical risks. The socially optimal emissions tax is below the Pigouvian benchmark (equal to the direct social cost of emissions) when emissions taxes amplify financial constraints, or above this benchmark if physical climate risks have a substantial impact on collateral values. Additionally introducing leverage regulation can be welfare-improving only if tax rebates are not fully pledgeable. A cap-and-trade system or abatement subsidies may dominate carbon taxes because they can be designed to have a less adverse effect on financial constraints.
- JEL Code
- D62 : Microeconomics→Welfare Economics→Externalities
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies - Network
- ECB Lamfalussy Fellowship Programme
- 17 July 2020
- WORKING PAPER SERIES - No. 2444Details
- Abstract
- We contrast how monetary policy affects intangible relative to tangible investment. We document that the stock prices of firms with more intangible assets react less to monetary policy shocks, as identified from Fed Funds futures movements around FOMC announcements. Consistent with the stock price results, instrumental variable local projections confirm that the total investment in firms with more intangible assets responds less to monetary policy, and that intangible investment responds less to monetary policy compared to tangible investment. We identify two mechanisms behind these results. First, firms with intangible assets use less collateral, and therefore respond less to the credit channel of monetary policy. Second, intangible assets have higher depreciation rates, so interest rate changes affect their user cost of capital relatively less.
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill - Network
- Research Task Force (RTF)
- 16 June 2020
- WORKING PAPER SERIES - No. 2422Details
- Abstract
- How do near-zero interest rates affect optimal bank capital regulation and risk-taking? I study this question in a dynamic model, in which forward-looking banks compete imperfectly for deposit funding, but households do not accept negative deposit rates. When deposit rates are constrained by the zero lower bound (ZLB), tight capital requirements disproportionately hurt franchise values and become less effective in curbing excessive risk-taking. As a result, optimal dynamic capital requirements vary with the level of interest rates if the ZLB binds occasionally. Higher inflation and unconventional monetary policy can alleviate the problem, though their overall welfare effects are ambiguous.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies - Network
- ECB Lamfalussy Fellowship Programme