Guillaume A. Khayat*, Sameera Awawda**

Internal seminars
phd seminar

Guillaume A. Khayat*, Sameera Awawda**

AMSE
Heterogeneous Interbank Frictions, Excess Reserves & the Corridor*
Assessing the Potential Welfare, Macroeconomic Effects and Intergenerational Inequality of Universal Health Coverage**
Venue

VC Salle A

Centre de la Vieille-Charité - Salle A

Centre de la Vieille Charité
2 rue de la Charité
13002 Marseille

Date(s)
Tuesday, May 2 2017| 12:30pm to 2:00pm
Contact(s)

Edward Levavasseur: edward.levavasseur[at]univ-amu.fr
Lara Vivian: lara.vivian[at]univ-amu.fr

Abstract

*Credit institutions borrow liquidity from the central bank's (CB) lending facility and deposit (excess) reserves at the CB's deposit facility. The CB controls directly the corridor: non-market policy interest rates of its lending and deposit facilities. Modifying the corridor impacts the interbank market and allows the central bank to set the short term interest rate in the economy. In this paper, monetary policy is implemented through the CB's facilities and the corridor. This paper shows that the characteristics and the investment returns of a financial intermediary relatively to other intermediaries are the two determinants of its decision to use each facility. Furthermore, it shows that heterogeneous frictions on the interbank market are sufficient to explain the interest rate paid on retail deposits being higher than the interest rate paid on reserves. Finally, results from the quantitative assessment suggest that in an economy where the financial sector holds excess reserves at the central bank, the interest rate paid on reserves has a significant potential for monetary policy implementation.

**The implementation of “Universal Health Coverage” (UHC) poses serious challenges. Some of these stem from the macro-fiscal space considerations while others relate to the micro-behavioral sphere. The paper seeks to assess the macro-fiscal conduciveness of UHC-oriented reforms in developing countries using a dynamic microsimulation-based Computable General Equilibrium (CGE) approach. Overall, UHC-oriented reform appears to enhance social welfare and economic growth. However, a parallel expansion in the breadth and width of coverage can have a sizeable budgetary impact. Transferring this budgetary burden to future generations may increase intergenerational inequality. A set of policy measures, which can help achieve UHC in a financially sustainable and equitable manner will be advanced.