2005 Fiscal Year Final Research Report Summary
Monetary Policy and the Optimal Size of the Banking Sector in General Equilibrium
| Project/Area Number |
15530118
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Economic theory
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| Research Institution | The University of Tokyo |
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Principal Investigator |
BRAUN Richard Anton The University of Tokyo, Faculty of Economics, Associate Professor, 大学院・経済学研究科, 助教授 (90329334)
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| Project Period (FY) |
2003 – 2005
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| Keywords | Money / Banking / Saving / Demographics |
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| Research Abstract |
My research on banking, money and the macroeconomy has focused on three topics. The first topic considers determinants of the supply of deposits. It is well known that household's are the principal suppliers of deposits. This research investigates how demographies, mortality risk and technology shocks affect household demand of alternative asset classes and thus the supply of deposits. In Braun, Ikeda and Joines (2006, work in progress) we develop a computational OLG model that incorporates the above elements. Households are active for 80 years and make labor supply decisions. We evaluate the performance of the model using data from 1960 on and model time variation in fertility rates, taxes, technology, mortality risk and government debt. This paper provides detailed age specific information on savings rates but is silent on the asset allocation decision. In other research with Keiichi Kubota and Kenji Wada (2004) I consider the asset allocation decision of households. This research us
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es data going back to the turn of the century to investigate the interaction of demographics and excess returns of different asset classes. Taken together these two research projects provide information on the overall size and demographic distribution of the supply of bank deposits.
A second topic considers how increases in monetary supply affects the economy in a low nominal interest rate environment. In Braun and Waki (2006) we formulate a sticky price model and produce a specification that can account for the real and nominal facts from Japan during the 1990s. We find that the ability of monetary policy to stabilize the economy breaks down when the nominal interest rate is zero and that the welfare costs of a binding zero nominal interest rate are large. In Braun and Shioji (2006a, 2006b) I investigate the effects of Japanese monetary policy on the yield curve and perform an international comparison of the credit channel of monetary policy in Japan, the U.S. and Korea.
The third topic ties these strands together and investigates the interaction of monetary policy and the health of the banking sector. In (Braun and Gillman (2006) we investigate the implications of a decline in inflation on bank health and household welfare. We also evaluate the implications of alternative government policies according to their implications for household welfare and banking sector profitability. Less
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