Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector Rodolphe Blavy

ISBN: 9781282843240

Published: September 30th 2005

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32 pages


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Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector  by  Rodolphe Blavy

Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector by Rodolphe Blavy
September 30th 2005 | ebook | PDF, EPUB, FB2, DjVu, AUDIO, mp3, RTF | 32 pages | ISBN: 9781282843240 | 6.13 Mb

This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfareMoreThis paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfare through two channels.

First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the countrys need to hold foreign assets as precautionary savings (or by improving the countrys ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.



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