IVO KRZNAR - Academia.edu (original) (raw)

Papers by IVO KRZNAR

The goal of this paper is to assess the effectiveness of the policy measures taken by Canadian au... more The goal of this paper is to assess the effectiveness of the policy measures taken by Canadian authorities to address the housing boom. We find that the the last three rounds of macroprudential policies implemented since 2010 were associated with lower mortgage credit growth and house price growth. The international experience suggests that-in addition to tighter loan-to-value limits and longer amortization periods-lower caps on the debt-to-income ratio and higher risk weights could be effective if the housing boom were to reignite. Over the medium term, the authorities could consider structural measures to further improve the soundness of housing finance.

Departmental Paper, Apr 1, 2022

This paper explores the nexus between the financial cycle and business cycle in Brazil. Cycles ar... more This paper explores the nexus between the financial cycle and business cycle in Brazil. Cycles are estimated using a variety of commonly-used statistical methods and with a small, semistructural model of the Brazilian economy. An advantage of using the model-based approach is that financial and business cycles can be jointly estimated, allowing information from all key economic relationships to be used in a consistent way. The results show that Brazil is now in the downturn phase of the financial cycle. Moreover, the results underscore the importance of macro-financial linkages and highlight risks to the recovery going forward.

Social Science Research Network, 2019

This paper assesses the costs of internal trade barriers and proposes policies to improve interna... more This paper assesses the costs of internal trade barriers and proposes policies to improve internal trade. Estimates suggest that complete liberalization of internal trade in goods can increase GDP per capita by about 4 percent and reallocate employment towards provinces that experience large productivity gains from trade. The positive impact highlights the need for federal, provincial and territorial governments to work together to reduce internal trade barriers. There is significant scope to build on the new Canadian Free Trade Agreement to more explicitly identify key trade restrictions, resolve differences, and agree on cooperative solutions.

TDX (Tesis Doctorals en Xarxa), Sep 16, 2009

This paper develops a simple model of precautionary foreign reserves in a dollarized economy subj... more This paper develops a simple model of precautionary foreign reserves in a dollarized economy subject to a sudden stop shock that occurs in hand with a bank run. By including speci…c features of the Croatian economy in our model we extend the framework of Goncalves (2007). An analytical expression of optimal reserves is derived and calibrated for Croatia in order to evaluate the adequacy of the Croatian National Bank foreign reserves. We show that the precautionary demand for reserves is consistent with the trend of strong accumulation of foreign reserves over the last 10 years. Whether this trend was too strong or whether the actual reserves were lower than the optimal reserves depends on the possible reaction of the parent banks during a crisis. We show that for plausible values of parameters, the Croatian National Bank has enough reserves to …ght a possible crisis of magnitude of the 1998/1999 sudden stop with banking crisis episode. This result holds in a "more favourable" scenario only, in which parent banks assume the role of lenders of last resort. We also show how using the two standard indicators of "optimal" reserves, the Greenspan-Guidotti and the 3-months-of-imports rules, might lead to an unrealistic assessment of the foreign reserves optimality in the case of Croatia. (JEL F31, F32, F37, F41) Essay 3. "The Impact of the USD/EUR Exchange Rate on In ‡ation in CEE Countries" (joint with Ljubinko Jankov, Davor Kunovac and Maroje Lang) iii List of Tables vi List of Figures viii (standardized series). viii 2.3 Euro deposits withdrawal and foreign bu¤ers drop (mil. EUR) during the sudden stop with banking crisis. 2.4 Short term foreign currency debt and euro deposits in % of foreign reserves in the period 1998-2008. 2.5 Reserves to short-term external debt ratio (%) and Reserves in months of imports. 2.6 Benchmark calibration-Actual reserves, optimal reserves where parent banks act as the lenders of last resort (LOR), optimal reserves where parent banks participate in a crisis (mil. EUR). 2.7 Decomposition of optimal reserves (mil. EUR) where parent banks act as the lenders of last resort. 2.8 Decomposition of optimal reserves (mil. EUR) where parent banks participate in sudden stop. 2.9 Optimal reserves (mil. EUR) and kuna reserve requirenment relief (pp). 2.10 Actual and optimal reserves with Greenspan-Guidotti and 3-months-ofimports rules (mil. EUR). 2.11 Optimal reserves, Greenspan-Guidotti rule and 3-months-of-imports rule (mil. EUR) with di¤erent values of output loss (%). 2.12 Optimal reserves, Greenspan-Guidotti rule and 3-months-of-imports rule (mil. EUR) with di¤erent values of fraction of deposit withdrawal (%). 3.1 The EUR/USD exchange rate and the principal component of 9 CEEC (Romania and Slovenia not included) annual in ‡ation rates. Both series are standardised. 3.2 Correlations beetwen CPI items (averaged across CEEC) and USD/EUR exchange rate. 3.3 Correlation between CPI in ‡ation in Lithuania and the USD/EUR exchange rate.

RePEc: Research Papers in Economics, Jun 1, 2008

This paper explores the impact of frictions in the market for final goods and factors of producti... more This paper explores the impact of frictions in the market for final goods and factors of production on international transmission of business cycles. In particular, I analyze the role of habits in consumption, capital adjustment costs and labor market frictions in the form of habits in leisure or labor adjustment costs, in a standard international real business cycles model with complete markets. Overall, these frictions that help explain many salient facts of a closed-economy have less success in resolving international comovement puzzles. Specifically, I find that capital adjustment costs together with consumption habits help explain positive investment comovement only – in combination with capital adjustment costs, consumption habits provide a channel through which capital adjustment costs become larger than the opportunity costs of not investing in a more productive country. However, resolving the investment puzzle comes at the expense of aggravating other comovement problems. In addition, I find that frictions in the labor market do not help to explain factor comovements such as the employment and investment puzzle. Furthermore, while both labor adjustment costs and leisure habits increase the output correlation, only the effects of the latter present forces toward resolving the consumption cross-correlation puzzle (although not actually resolving it). This mainly comes as a result of leisure habits reducing the consumption correlation through amplified effects on the nonseparability of consumption and leisure.

RePEc: Research Papers in Economics, Apr 1, 2013

The main aim of this paper is to analyse the interrelation between domestic and external financia... more The main aim of this paper is to analyse the interrelation between domestic and external financial conditions and economic activity. For this purpose, an overall Financial Conditions Index (FCI) for Croatia was constructed, together with two subcomponents-domestic and foreign-used to estimate a VAR model of interdependence between financing conditions and real economic activity in Croatia and in the eurozone. The results of the estimated model indicate that financing conditions in Croatia are primarily determined by domestic GDP and external financial conditions, while a variance decomposition estimate, with these two variables, also points to foreign GDP as an important determinant of the variability of domestic economic and financial activity indicators.

U ovom je radu razvijen jednostavan model optimalnih međunarodnih pričuva kao mjere osiguranja u ... more U ovom je radu razvijen jednostavan model optimalnih međunarodnih pričuva kao mjere osiguranja u dolariziranom gospodarstvu podložnom naglom zastoju u priljevima inozemnog kapitala i bankarskoj krizi. Uključivanjem specifičnosti hrvatskoga gospodarstva u model proširili smo struktutru modela iz Goncalves (2007). Izveli smo analitičku formulu za optimalne pričuve, koju smo kalibrirali na hrvatskim podacima, da bismo odredili adekvatnost međunarodnih pričuva Hrvatske narodne banke. Pokazali smo da je potražnja pričuva kao mjere osiguranja u skladu s trendom snažne akumulacije međunarodnih pričuva u posljednjih deset godina. Je li taj trend bio presnažan ili su stvarne pričuve ispod razine optimalnih, ovisi o mogućoj reakciji banaka majki za vrijeme krize. Za razumne vrijednosti parametara modela Hrvatska narodna banka ima dovoljno pričuva da se nosi s mogućom krizom koja magnitudom odgovara naglom zastoju u priljevima inozemnog kapitala i bankarskoj krizi iz 1998/99. Taj zaključak vri...

Istraživanja - Hrvatska narodna banka - I-25, 2010

Two-country real business cycle models with time-separable preferences and complete markets predi... more Two-country real business cycle models with time-separable preferences and complete markets predict that cross-country investment correlations are negative. The opposite is true in the data. This phenomenon has been coined by Backus, Kehoe and Kydland (1995) as a quantity anomaly. In this paper we propose to address this discrepancy by allowing nonseparability of preferences over time. To do so we incorporate habit formation in consumption. We calibrate the model to the US data and examine the role of free parameters in the specification of habits. Our model predicts empirically plausible value of cross-country investment correlation without deteriorating other business cycle statistics. Contrary to the predictions of the models with financial frictions, our results are robust to the degree of spillovers and persistence in the specification of the productivity stocks.

This paper explores the impact of frictions in the market for final goods and factors of producti... more This paper explores the impact of frictions in the market for final goods and factors of production on international transmission of business cycles. In particular, I analyze the role of habits in consumption, capital adjustment costs and labor market frictions in the form of habits in leisure or labor adjustment costs, in a standard international real business cycles model with complete markets. Overall, these frictions that help explain many salient facts of a closed-economy have less success in resolving international comovement puzzles. Specifically, I find that capital adjustment costs together with consumption habits help explain positive investment comovement only – in combination with capital adjustment costs, consumption habits provide a channel through which capital adjustment costs become larger than the opportunity costs of not investing in a more productive country. However, resolving the investment puzzle comes at the expense of aggravating other comovement problems. I...

The main aim of this paper is to analyse the interrelation between domestic and external financia... more The main aim of this paper is to analyse the interrelation between domestic and external financial conditions and economic activity. For this purpose, an overall Financial Conditions Index (FCI) for Croatia was constructed, together with two subcomponents – domestic and foreign – used to estimate a VAR model of interdependence between financing conditions and real economic activity in Croatia and in the eurozone. The results of the estimated model indicate that financing conditions in Croatia are primarily determined by domestic GDP and external financial conditions, while a variance decomposition estimate, with these two variables, also points to foreign GDP as an important determinant of the variability of domestic economic and financial activity indicators.

This paper assesses house prices in 11 Canadian Census Metropolitan Areas (CMA) using the borrowi... more This paper assesses house prices in 11 Canadian Census Metropolitan Areas (CMA) using the borrowing-capacity and the net-present-value approaches. The results indicate that by the end of 2018, house prices in most metropolitan areas are aligned with macroeconomic fundamentals. However, in Hamilton, Toronto, and Vancouver house prices have increased beyond the values implied by the fundamentals. JEL Classification Numbers: G1, G12, E37

Esta tesis consiste en tres ensayos independientes. Aunque unidos bajo un titulo, varian en los t... more Esta tesis consiste en tres ensayos independientes. Aunque unidos bajo un titulo, varian en los temas considerados y metodo escogido. El primer ensayo presenta un modelo de ciclos reales internacionales con rigideces reales que hoy constituyen una parte considerable de teoria RBC de economia cerrada con mercados completos. En general, estas rigideces tienen menos exito al resolver problemas de correlaciones internacionales. Encontramos que los costes de ajuste del capital, junto con habitos de consumo, ayudan a explicar solo correlacion positivo de inversion - en combinacion con costes principales de ajuste, habitos de consumo proporcionan un canal por el que los costes principales de ajuste llegan a ser mas grandes que los costes de oportunidad de no invertir en un pais mas productivo. Ademas, se demuestra que las rigideces en el mercado de trabajo no ayudan a explicar correlaciones de factores, como por ejemplo el problema de empleo e inversion. Ademas, mientras tanto los costes d...

Staff Climate Notes

The IMF Notes Series aims to quickly disseminate succinct IMF analysis on critical economic issue... more The IMF Notes Series aims to quickly disseminate succinct IMF analysis on critical economic issues to member countries and the broader policy community. The IMF Staff Climate Notes provide analysis related to the impact of climate change on macroeconomic and financial stability, including on mitigation, adaptation, and transition. The views expressed in IMF Staff Climate Notes are those of the author(s), although they do not necessarily represent the views of the IMF, or its Executive Board, or its management.

The Macroprudential Framework : Policy Responsiveness and Institutional Arrangements, Jul 17, 2013

This paper gauges if, and how, institutional arrangements are correlated with the use of macropru... more This paper gauges if, and how, institutional arrangements are correlated with the use of macroprudential policy instruments. Using data from 39 countries, the paper evaluates policy response time in various types of institutional arrangements for macroprudential policy and finds that the macroprudential framework that gives the central bank an important role is associated with more timely use of macroprudential policy instruments. Policymakers may also tend to use macroprudential instruments more quickly if the ability to conduct monetary policy is somehow constrained. This finding points to the importance of coordination between macroprudential and monetary policy.

The goal of this paper is to assess the effectiveness of the policy measures taken by Canadian au... more The goal of this paper is to assess the effectiveness of the policy measures taken by Canadian authorities to address the housing boom. We find that the the last three rounds of macroprudential policies implemented since 2010 were associated with lower mortgage credit growth and house price growth. The international experience suggests that-in addition to tighter loan-to-value limits and longer amortization periods-lower caps on the debt-to-income ratio and higher risk weights could be effective if the housing boom were to reignite. Over the medium term, the authorities could consider structural measures to further improve the soundness of housing finance.

Departmental Paper, Apr 1, 2022

This paper explores the nexus between the financial cycle and business cycle in Brazil. Cycles ar... more This paper explores the nexus between the financial cycle and business cycle in Brazil. Cycles are estimated using a variety of commonly-used statistical methods and with a small, semistructural model of the Brazilian economy. An advantage of using the model-based approach is that financial and business cycles can be jointly estimated, allowing information from all key economic relationships to be used in a consistent way. The results show that Brazil is now in the downturn phase of the financial cycle. Moreover, the results underscore the importance of macro-financial linkages and highlight risks to the recovery going forward.

Social Science Research Network, 2019

This paper assesses the costs of internal trade barriers and proposes policies to improve interna... more This paper assesses the costs of internal trade barriers and proposes policies to improve internal trade. Estimates suggest that complete liberalization of internal trade in goods can increase GDP per capita by about 4 percent and reallocate employment towards provinces that experience large productivity gains from trade. The positive impact highlights the need for federal, provincial and territorial governments to work together to reduce internal trade barriers. There is significant scope to build on the new Canadian Free Trade Agreement to more explicitly identify key trade restrictions, resolve differences, and agree on cooperative solutions.

TDX (Tesis Doctorals en Xarxa), Sep 16, 2009

This paper develops a simple model of precautionary foreign reserves in a dollarized economy subj... more This paper develops a simple model of precautionary foreign reserves in a dollarized economy subject to a sudden stop shock that occurs in hand with a bank run. By including speci…c features of the Croatian economy in our model we extend the framework of Goncalves (2007). An analytical expression of optimal reserves is derived and calibrated for Croatia in order to evaluate the adequacy of the Croatian National Bank foreign reserves. We show that the precautionary demand for reserves is consistent with the trend of strong accumulation of foreign reserves over the last 10 years. Whether this trend was too strong or whether the actual reserves were lower than the optimal reserves depends on the possible reaction of the parent banks during a crisis. We show that for plausible values of parameters, the Croatian National Bank has enough reserves to …ght a possible crisis of magnitude of the 1998/1999 sudden stop with banking crisis episode. This result holds in a "more favourable" scenario only, in which parent banks assume the role of lenders of last resort. We also show how using the two standard indicators of "optimal" reserves, the Greenspan-Guidotti and the 3-months-of-imports rules, might lead to an unrealistic assessment of the foreign reserves optimality in the case of Croatia. (JEL F31, F32, F37, F41) Essay 3. "The Impact of the USD/EUR Exchange Rate on In ‡ation in CEE Countries" (joint with Ljubinko Jankov, Davor Kunovac and Maroje Lang) iii List of Tables vi List of Figures viii (standardized series). viii 2.3 Euro deposits withdrawal and foreign bu¤ers drop (mil. EUR) during the sudden stop with banking crisis. 2.4 Short term foreign currency debt and euro deposits in % of foreign reserves in the period 1998-2008. 2.5 Reserves to short-term external debt ratio (%) and Reserves in months of imports. 2.6 Benchmark calibration-Actual reserves, optimal reserves where parent banks act as the lenders of last resort (LOR), optimal reserves where parent banks participate in a crisis (mil. EUR). 2.7 Decomposition of optimal reserves (mil. EUR) where parent banks act as the lenders of last resort. 2.8 Decomposition of optimal reserves (mil. EUR) where parent banks participate in sudden stop. 2.9 Optimal reserves (mil. EUR) and kuna reserve requirenment relief (pp). 2.10 Actual and optimal reserves with Greenspan-Guidotti and 3-months-ofimports rules (mil. EUR). 2.11 Optimal reserves, Greenspan-Guidotti rule and 3-months-of-imports rule (mil. EUR) with di¤erent values of output loss (%). 2.12 Optimal reserves, Greenspan-Guidotti rule and 3-months-of-imports rule (mil. EUR) with di¤erent values of fraction of deposit withdrawal (%). 3.1 The EUR/USD exchange rate and the principal component of 9 CEEC (Romania and Slovenia not included) annual in ‡ation rates. Both series are standardised. 3.2 Correlations beetwen CPI items (averaged across CEEC) and USD/EUR exchange rate. 3.3 Correlation between CPI in ‡ation in Lithuania and the USD/EUR exchange rate.

RePEc: Research Papers in Economics, Jun 1, 2008

This paper explores the impact of frictions in the market for final goods and factors of producti... more This paper explores the impact of frictions in the market for final goods and factors of production on international transmission of business cycles. In particular, I analyze the role of habits in consumption, capital adjustment costs and labor market frictions in the form of habits in leisure or labor adjustment costs, in a standard international real business cycles model with complete markets. Overall, these frictions that help explain many salient facts of a closed-economy have less success in resolving international comovement puzzles. Specifically, I find that capital adjustment costs together with consumption habits help explain positive investment comovement only – in combination with capital adjustment costs, consumption habits provide a channel through which capital adjustment costs become larger than the opportunity costs of not investing in a more productive country. However, resolving the investment puzzle comes at the expense of aggravating other comovement problems. In addition, I find that frictions in the labor market do not help to explain factor comovements such as the employment and investment puzzle. Furthermore, while both labor adjustment costs and leisure habits increase the output correlation, only the effects of the latter present forces toward resolving the consumption cross-correlation puzzle (although not actually resolving it). This mainly comes as a result of leisure habits reducing the consumption correlation through amplified effects on the nonseparability of consumption and leisure.

RePEc: Research Papers in Economics, Apr 1, 2013

The main aim of this paper is to analyse the interrelation between domestic and external financia... more The main aim of this paper is to analyse the interrelation between domestic and external financial conditions and economic activity. For this purpose, an overall Financial Conditions Index (FCI) for Croatia was constructed, together with two subcomponents-domestic and foreign-used to estimate a VAR model of interdependence between financing conditions and real economic activity in Croatia and in the eurozone. The results of the estimated model indicate that financing conditions in Croatia are primarily determined by domestic GDP and external financial conditions, while a variance decomposition estimate, with these two variables, also points to foreign GDP as an important determinant of the variability of domestic economic and financial activity indicators.

U ovom je radu razvijen jednostavan model optimalnih međunarodnih pričuva kao mjere osiguranja u ... more U ovom je radu razvijen jednostavan model optimalnih međunarodnih pričuva kao mjere osiguranja u dolariziranom gospodarstvu podložnom naglom zastoju u priljevima inozemnog kapitala i bankarskoj krizi. Uključivanjem specifičnosti hrvatskoga gospodarstva u model proširili smo struktutru modela iz Goncalves (2007). Izveli smo analitičku formulu za optimalne pričuve, koju smo kalibrirali na hrvatskim podacima, da bismo odredili adekvatnost međunarodnih pričuva Hrvatske narodne banke. Pokazali smo da je potražnja pričuva kao mjere osiguranja u skladu s trendom snažne akumulacije međunarodnih pričuva u posljednjih deset godina. Je li taj trend bio presnažan ili su stvarne pričuve ispod razine optimalnih, ovisi o mogućoj reakciji banaka majki za vrijeme krize. Za razumne vrijednosti parametara modela Hrvatska narodna banka ima dovoljno pričuva da se nosi s mogućom krizom koja magnitudom odgovara naglom zastoju u priljevima inozemnog kapitala i bankarskoj krizi iz 1998/99. Taj zaključak vri...

Istraživanja - Hrvatska narodna banka - I-25, 2010

Two-country real business cycle models with time-separable preferences and complete markets predi... more Two-country real business cycle models with time-separable preferences and complete markets predict that cross-country investment correlations are negative. The opposite is true in the data. This phenomenon has been coined by Backus, Kehoe and Kydland (1995) as a quantity anomaly. In this paper we propose to address this discrepancy by allowing nonseparability of preferences over time. To do so we incorporate habit formation in consumption. We calibrate the model to the US data and examine the role of free parameters in the specification of habits. Our model predicts empirically plausible value of cross-country investment correlation without deteriorating other business cycle statistics. Contrary to the predictions of the models with financial frictions, our results are robust to the degree of spillovers and persistence in the specification of the productivity stocks.

This paper explores the impact of frictions in the market for final goods and factors of producti... more This paper explores the impact of frictions in the market for final goods and factors of production on international transmission of business cycles. In particular, I analyze the role of habits in consumption, capital adjustment costs and labor market frictions in the form of habits in leisure or labor adjustment costs, in a standard international real business cycles model with complete markets. Overall, these frictions that help explain many salient facts of a closed-economy have less success in resolving international comovement puzzles. Specifically, I find that capital adjustment costs together with consumption habits help explain positive investment comovement only – in combination with capital adjustment costs, consumption habits provide a channel through which capital adjustment costs become larger than the opportunity costs of not investing in a more productive country. However, resolving the investment puzzle comes at the expense of aggravating other comovement problems. I...

The main aim of this paper is to analyse the interrelation between domestic and external financia... more The main aim of this paper is to analyse the interrelation between domestic and external financial conditions and economic activity. For this purpose, an overall Financial Conditions Index (FCI) for Croatia was constructed, together with two subcomponents – domestic and foreign – used to estimate a VAR model of interdependence between financing conditions and real economic activity in Croatia and in the eurozone. The results of the estimated model indicate that financing conditions in Croatia are primarily determined by domestic GDP and external financial conditions, while a variance decomposition estimate, with these two variables, also points to foreign GDP as an important determinant of the variability of domestic economic and financial activity indicators.

This paper assesses house prices in 11 Canadian Census Metropolitan Areas (CMA) using the borrowi... more This paper assesses house prices in 11 Canadian Census Metropolitan Areas (CMA) using the borrowing-capacity and the net-present-value approaches. The results indicate that by the end of 2018, house prices in most metropolitan areas are aligned with macroeconomic fundamentals. However, in Hamilton, Toronto, and Vancouver house prices have increased beyond the values implied by the fundamentals. JEL Classification Numbers: G1, G12, E37

Esta tesis consiste en tres ensayos independientes. Aunque unidos bajo un titulo, varian en los t... more Esta tesis consiste en tres ensayos independientes. Aunque unidos bajo un titulo, varian en los temas considerados y metodo escogido. El primer ensayo presenta un modelo de ciclos reales internacionales con rigideces reales que hoy constituyen una parte considerable de teoria RBC de economia cerrada con mercados completos. En general, estas rigideces tienen menos exito al resolver problemas de correlaciones internacionales. Encontramos que los costes de ajuste del capital, junto con habitos de consumo, ayudan a explicar solo correlacion positivo de inversion - en combinacion con costes principales de ajuste, habitos de consumo proporcionan un canal por el que los costes principales de ajuste llegan a ser mas grandes que los costes de oportunidad de no invertir en un pais mas productivo. Ademas, se demuestra que las rigideces en el mercado de trabajo no ayudan a explicar correlaciones de factores, como por ejemplo el problema de empleo e inversion. Ademas, mientras tanto los costes d...

Staff Climate Notes

The IMF Notes Series aims to quickly disseminate succinct IMF analysis on critical economic issue... more The IMF Notes Series aims to quickly disseminate succinct IMF analysis on critical economic issues to member countries and the broader policy community. The IMF Staff Climate Notes provide analysis related to the impact of climate change on macroeconomic and financial stability, including on mitigation, adaptation, and transition. The views expressed in IMF Staff Climate Notes are those of the author(s), although they do not necessarily represent the views of the IMF, or its Executive Board, or its management.

The Macroprudential Framework : Policy Responsiveness and Institutional Arrangements, Jul 17, 2013

This paper gauges if, and how, institutional arrangements are correlated with the use of macropru... more This paper gauges if, and how, institutional arrangements are correlated with the use of macroprudential policy instruments. Using data from 39 countries, the paper evaluates policy response time in various types of institutional arrangements for macroprudential policy and finds that the macroprudential framework that gives the central bank an important role is associated with more timely use of macroprudential policy instruments. Policymakers may also tend to use macroprudential instruments more quickly if the ability to conduct monetary policy is somehow constrained. This finding points to the importance of coordination between macroprudential and monetary policy.