Research
Capital controls ineffective at handling policy trilemma, ECB paper finds
Emerging market capital controls have a limited impact on monetary policy trilemma variables and come with spillover effects, the authors warn
Inflation targeting should be improved, not replaced, RBA paper says
Rather than a ‘fundamental re-engineering’ of inflation targeting, central banks should adopt a flexible approach that pays some heed to output, authors argue
Limited liability distorts incentives for disaster planning, paper argues
Consequences of recent events with catastrophic financial ramifications have been greatly aggravated by policy-makers’ failure to prepare, says ECB working paper
Strategic default helps explain crises in advanced economies, ECB paper finds
Sovereign debt and financial re-allocation are linked by the use of government bonds as collateral on the interbank lending market, paper notes
BIS researchers dissect emerging market fire sales
Working paper picks apart the channels through which asset management impacts on emerging bond markets, finding evidence of procyclical behaviour
RBA paper finds distribution matters when assessing impact of wealth effects
Example of car buying highlights how different households adjust consumption in response to housing wealth effects, although channels remain unclear
Leverage is key factor in threat posed by bubbles, study finds
A San Francisco Fed study of 17 bubbles over the past 140 years provides empirical support for the idea that leveraged bubbles have most potential for damage
Stress indexes have widely varying signal benefits, Fed paper says
Cleveland’s index gives the best picture of current financial stress conditions, but few indexes have value in predicting future problems, Cleveland Fed study says
Fed data gives model of banks’ settlement service choices, paper argues
Data from the Fed’s Fedwire payment service shows that banks select payment services based on average rather than marginal cost, study finds
Trawl through BoJ archives reveals emergence of current policy-making
Study of failures and successes of BoJ policy-making in the 1980s reveals the emergence of current thinking about how best to conduct monetary policy
FOMC forecasts perform better in short- than long-term, Fed paper finds
Forecasts prepared ahead of FOMC meetings from 1997-2008 considerably outperform benchmarks at short horizons, but the results are much more mixed in the longer term
IMF paper: capital inflows work differently on credit for households and firms
The composition of capital inflows affects whether and how they cause credit growth, IMF working paper says
Regulators face trade-off over publishing stress test results
Regulators publishing stress test results may inhibit frankness by bankers, a Philadelphia Fed working paper argues, but confidentiality brings its own risks
CoCo bonds decrease banks’ appetite for risk, paper argues
Convertible bonds decrease banks’ incentives to take risks in highly-leveraged states, a DNB working paper argues
Irish central bank paper finds high cost to hasty austerity
Economists find most of the costs of fiscal consolidation from 2011-13 could have been avoided if policy-makers waited until the zero lower bound was no longer a constraint
New York Fed researchers shine light on process of giving policy advice
Economists including head of research explain the process of briefing William Dudley ahead of FOMC meetings
Public support works when big and well-aimed, study finds
Large-scale public sector support operations for distressed borrowers work best when they are large and have strong conditionality, according to DNB paper
IMF paper finds standard risk metrics perform poorly with low financial depth
Authors find ‘excess credit’ is a better early warning indicator for financial instability than credit-to-GDP where countries have limited financial depth
Sarb research updates forecasting model
Refinements to central bank’s semi-structural general equilibrium model aim to better reflect the South African economy over the inflation-targeting period
ECB paper finds fiscal targets are useful for forecasting
Ex-ante fiscal targets can convey useful information to forecasters despite the possibility of bias, researchers find
RBI paper explores challenges in public debt management
Research identifies a ‘narrow investor base’ as one hurdle and considers how to encourage greater participation from retail investors in the market for government securities
Icelandic paper looks for early-warning signals across past crises
Working paper identifies six clusters of financial crises in the country since 1875; finds macroeconomic variables give a ‘more robust warning signal’ than financial alternatives
Bank of Canada paper flags risk of spillovers from emerging to developed economies
Researchers show how a search for safe assets could transmit instability to developed economies as capital flows out of emerging markets
Lobbying softens regulatory treatment of distressed banks in US, paper finds
Under-capitalised US banks are less likely to be rigorously supervised if they have exercised political or regulatory influence, a working paper published by the ECB finds