Research
‘Overoptimism’ a factor in house price bubbles, Danish paper finds
Authors highlight how sentiment can become “decoupled” from economic fundamentals under certain circumstances
Hedging demand can cause covered interest parity violations – BIS paper
US dollar forward hedging demand can cause covered interest parity to fail even when markets are calm, authors say, helping explain this post-2012 anomaly
Commodity prices create ‘strong pressure’ to lower interest rates – paper
Policy response to commodity price fluctuations has been stronger in the US, paper finds; commodity price shocks follow two cycles, with the most recent having impacts on policy rates
Macro-prudential policy can guard against global volatility – BoE paper
Tighter macro-prudential policies appear to reduce the sensitivity of capital flows to global volatility, paper finds
Bundesbank paper models spillover effects of risk shocks in financial crisis
Paper finds spillover effects of general risk are stronger than spillovers in response to bailouts
Bundesbank paper looks at financial shocks’ impact on inflation
Shocks that cause output and inflation to diverge can worsen trade-offs for central banks, paper says
BIS paper adds evidence on macro-prudential spillovers
Tighter macro-prudential measures in one country tend to increase international lending, authors find
Public sector balance sheet poses risks for Dominican Republic – paper
IMF working paper analyses balance sheet developments in the South American nation’s economy; foreign currency exposure could amplify risks, authors say
‘Strong’ correlation between leverage and financial connectivity – paper
Irish paper shows interconnected banks experience 'sharper contractions' in lending when faced with a shock; findings could have consequences for Basel III
Output gap in euro area is much larger than official estimates – paper
Official estimates predict output gap 3–4% less negative than author’s results; current models do not “adequately capture” inflation developments
Rand volatility not driven by South African economic ‘surprises’ – IMF paper
IMF working paper finds that surprises in commodity prices, domestic politics and US economics impact the volatility of the South African rand rather than economic surprises in South Africa or China
Bank of Italy issues latest economic bulletin
Non-performing loan ratios improving at five largest banking groups, central bank argues
Foreign investment ‘restored’ exchange rates after policy shocks – paper
Data from Colombian central bank shows foreign exchange intervention have “short-lived effects” on prices; over the medium term, foreign capital flows push exchange rate back to original level
Bank of Spain paper explores links between fiscal consolidation and private deleveraging
Larger and faster fiscal consolidations have greater impact on output, authors argue
Belgian paper studies work of pioneer of regional economics
Robert Triffin was the “architect” of the European Payments Union
BoE paper tackles ‘sectoral co-movement puzzle’
Adding labour market frictions and habit formation helps to solve the problem of models implying a monetary contraction produces little response in output
BoE paper tests agent-based model of macro-prudential policy
Researchers use agent-based model to capture diversity of behaviour between different housing market participants, pointing to risks from larger buy-to-let sector
Learning errors slow recovery from financial crises – paper
Researchers examine information rigidity in financial markets and incorporate the learning behaviour of investors into a DSGE model
Paper examines effects of financial crisis on European long-term debt issuance
Bank of Spain paper uses large database on most frequent issuers of long-term debt
Demographics could explain entire drop in real rate – Fed paper
Authors find ageing population can explain most – or even all – of the estimated decline in the long-run real interest rate, implying low rates are here to stay
‘Moral suasion’ and yield-seeking intensified sovereign debt crisis – ECB paper
Researchers use information on 226 eurozone banks; publicly owned, recently bailed-out and less strongly capitalised banks engaged increased sovereign bond holdings during crisis
Danish economist updates DSGE model with financial frictions
Jesper Pedersen adds imperfectly competitive banking system and housing market to improve model’s ability to explain crises
ECB paper aims to improve small-scale models for assessing policy shocks
Paper outlines a structural factor model, which the authors say better accounts for the asset price impact of monetary policy shocks
US spillovers stronger for some countries than others – IMF paper
Paper assesses how US normalisation will spill across borders, identifying conditions where countries are most likely to be affected