Research
Mortgage interest tax deduction can increase market volatility – DNB paper
Making interest payments on housing loans tax-deductible can raise the debt levels of households and their chances of default, and increase housing market volatility in response to outside shocks
Temporary price changes affecting inflation more – BoJ paper
Working paper explores how frequent micro-level price changes can be reconciled with macro-price stickiness; temporary price changes happening more, and increasingly in one direction, authors say
Bank of Italy sees Brexit having little impact on country
Commercial and financial links between Britain and Italy are much more limited than other European countries, argues the Bank of Italy in its latest economic bulletin
ECB publishes guide to its macroeconomic projections
European Central Bank publishes guide to how its staff research and publish their regular projections for the eurozone economy; gives details of models and tools used
Short-sale disclosure rules can distort securities prices, Bundesbank paper says
European Union transparency conditions may have led to distortions in the prices of German securities by deterring short-sellers, discussion paper argues
ECB paper explores capital-based macroprudential measures
Dampened credit and asset price growth can have a “sizable” impact on predicted crisis probabilities, authors note; they present an early warning global autoregressive model
ECB paper presents ‘news’ and ‘noise’ model of US housing market
A new model of the US property market differentiates between “news and noise shocks”; latter can have significant effects and policy-makers should consider pro-cyclical property taxes, author says
Inflation expectations shaped by different forces in short and long term – BoE research
UK households are influenced by perceptions of actual inflation, but other factors grow in importance in the longer run, quarterly bulletin article finds
Model-based regulation in Germany had unintended consequences, researchers say
The move to model-based banking regulation in Germany studied in working paper; loan default and loss rates rose for loans created under new regime
Network analysis sheds light on systemic risk – BoE paper
Pilot study of derivatives markets makes use of CDS data to map network of interlinkages, finding more than just immediate counterparty ties matter for systemic risk
IMF paper explores impact of financial development on wealth dispersion
Authors focus on China between 1995 and 2002; suggest lower access barriers and a deeper market can “greatly improve” welfare
Balance sheet policy matters for credibility – Norges Bank paper
Researcher argues a central bank’s financial strength may affect its ability to meet its monetary policy mandate, based on evidence from the UK’s gold standard period
US Phillips Curve “not broken” – IMF paper
Working paper finds economic behaviour since the crisis reflects different sources of disturbances, and not a change in the dynamics of the Phillips curve
Policy-makers should base analysis on broad set of monetary aggregates, paper argues
Analysis of the stability of demand for components of monetary aggregates in the eurozone argues against reliance on a single measure, researcher says
Colombian paper explores forex intervention announcements
In present of imperfect credibility it is not possible for central banks to achieve ‘desired’ exchange rate level without changing international reserve position, paper finds
Releases of monetary data aid market rate expectations – paper
Working paper published by ECB shows releases of monetary data is helpful to financial markets in forming rate expectations
IMF paper examines factors affecting US wage growth
US labour market changing “more fundamentally” than before, author finds; wage growth expected to accelerate in near term
Central bank should consider sticky-price inflation as target variable – paper
South African working paper argues central bank should consider sticky price inflation as target variable; sticky prices more persistent and less volatile
State Bank of Pakistan sees financial sector ‘flourish’
Financial stability review highlights record after-tax profit and high capital adequacy ratio, as well as improvement in asset quality
Sweden’s FI gauges impact of debt-to-income limit
Financial regulator tries to attach values to the growth and stability impact of DTI limits, one potential tool for tackling rising household indebtedness
Effective lower bound has ‘tail risk’ influence on monetary policy, ECB paper argues
The ‘tail risk’ induced by the possibility of rates reaching their effective lower bound can cause serious undershooting of inflation targets, an ECB working paper argues
Irish paper proposes three-phase model of volatility in bond markets
Irish paper finds ‘good’, ‘bad’ and ‘ugly’ phases in eurozone sovereign debt markets from 2003 to 2014; crisis not caused by changes to the shock mechanism, but by pre-existing cross-country links
BoJ paper models impact of guidance on expectations
Announcing forward guidance before reaching the effective lower bound can help to “positively influence” inflation and output growth, the author finds
News impacts stock prices through more than transient sentiment, paper finds
Working paper uses textual processing to examine more than 900,000 news stories; negative stories have a longer and more delayed reaction, authors find