Research
Riksbank paper examines mixed forecast performance
Researchers find the central bank has tended to be overly optimistic on foreign economic performance, but makes similar errors to other institutions
Information content of capital flows affects exchange rate impact, SNB paper finds
Private information conveyed by different kinds of capital flows affects the impact on the exchange rate, a working paper published by the Swiss National Bank finds
‘Closed’ nature of eurozone banks increases vulnerability, Portuguese paper says
Commercial banks in the eurozone are more likely to be hit by country-specific shocks compared to US given fewer foreign branches; greater use of asset-backed securities may be a solution
Asset purchases having ‘sizeable’ impact on prices in eurozone, ECB paper finds
Working paper says ostensibly puzzling result can be explained by low levels of ‘market distress’ weakening some transmission channels but bolstering others
Research assesses South Africa’s vulnerability to Fed hike
Countries with large ratios of external financing needs to foreign exchange could be more vulnerable to Fed rate hikes, working paper finds
Paper explores whether governments prefer under-capitalised banks in crises
Governments may prefer banks to be weakly capitalised as this increases the likelihood they will act as buyers of last resort for domestic debt; paper considers impact on regulation
Norges Bank paper tries to extract high-frequency forecasts from low-frequency data
Researchers find low-frequency information can be important in forecasting high-frequency variables, designing a model that outperforms a random walk benchmark
BoE researchers unearth further evidence of electronic trading driving liquidity shocks
Study of market liquidity finds episodes of volatility have centred on fast, electronic markets, and says broad trend has been towards greater use of electronic platforms
Countries under credit stress should ‘front-load’ fiscal consolidation, says ECB paper
Front-loading will bring confidence effects, the working paper suggests
Tightening bank loans explains much of ‘Great Recession’ in eurozone
Tightening bank loans and increases in bond premia explain much of the recent contraction in the eurozone, paper argues
Adaptive learning models offer route out of liquidity traps, paper argues
An adaptive learning-based macro model shows monetary easing policies can end a liquidity trap under certain conditions; empirical studies of easing differ widely on its effects
‘First empirical survey of European forbearance’ uses asset quality review data
Weak macroeconomic conditions, supervisory regimes and the weakness of individual banks drive the amount of forbearance on loans practised by European banks, working paper argues
Asymmetric credit growth drove pre-crisis eurozone imbalances, paper argues
Credit growth and competitiveness major causes of current account deficits, researcher says
ECB working paper links tight credit conditions to large investment cancellations
Industries most reliant on bank debt in eurozone worst hit by negative bank credit supply shocks, ECB paper finds
Threshold-based forward guidance can work at the zero lower bound, BoE paper says
Private sector industries have to understand how threshold-based forward guidance will be used in order for it to be effective, BoE working paper notes
Eurozone prices to rise in the long term, survey of forecasters says
The eurozone’s long-term inflation rate will rise, and GDP will grow ‘gradually’, professional forecasters tell ECB survey; falling energy prices expected to push short-term inflation down
Cycles in Korean unemployment explained ‘mostly’ by domestic shocks, paper finds
Working paper estimates a new Keynesian model with labour market frictions, designed to mirror the Korean economy, to study relationship between different shocks and dynamics
Macro-prudential measures may restrict financial integration, ECB paper says
Macro-prudential policies may partly explain recent fall in European and global financial integration, paper argues
‘Great moderation’ due to weaker recoveries, paper argues
The ‘great moderation’ in the US economy is still significant if analysed using a longer data set than previously, researchers argue; one of two significant falls in US volatility since 1875
Research moots greater regulation of US Treasury market
The authors discuss the potential for incentivised or mandated liquidity provision by primary dealers and the introduction of designated market-makers to counter greater instability
Eurozone monetary policy works through credit channel, paper argues
Strong evidence eurozone monetary policy works through the credit channel rather than the interest rate channel, paper says; unconventional monetary policy strongest in crisis
Models using service inflation better at predicting economic trends, Cleveland Fed paper finds
Researchers find economic forecasting accuracy improves when based on models that tie together the unemployment rate with inflation in services
No clear evidence for always using trend inflation in models, paper says
Adding positive steady-state inflation to new Keynesian DSGE models improves analysis of high-inflation periods but otherwise does not significantly alter results, paper argues
Sovereign debt holdings ‘significant’ driver of insurer risk, Bundesbank paper says
Insurance companies at risk from holdings of sovereign debt, and current regulation does not adequately deal with problem, paper argues