Research
Monetary union hampers current account adjustment, say Bundesbank economists
Paper examines current account dynamics in countries with fixed and floating exchange rates, and countries in a monetary union; find evidence that monetary union might aggravate existing imbalances
San Fran Fed letter highlights impact of oil prices on inflation expectations
Researchers from the Federal Reserve Bank of San Francisco say consumers update their inflation expectations using a ‘few simple rules of thumb’ – one of which is linked to the price of oil
Polish paper explains perceptions of higher inflation
Economists at the National Bank of Poland construct a consumer perceived price index that reflects the population’s loss aversion to price increases
IMF paper highlights benefits of model-based approach to monetary policy analysis in LICs
New paper taking Kenya as an example finds benefits of a model-based approach to monetary policy analysis in low-income countries, including in countries with money-targeting frameworks
Diminishing importance of US in world economy mutes knock-on effects, finds BoJ paper
Tightening monetary policy in the US in the 1990s had significant adverse effects in the rest of the world - but the following decade, despite increased global integration, the effects were less
Greek paper finds Turkish economy bucks EU trends
Academics use a GVAR model to examine interlinkages between southeast European economies and how they react to eurozone macroeconomic policy; Turkey bucks trends followed by EU members
ECB paper proposes new metrics for competitiveness
Researchers say that conventional indicators of competitiveness are losing their relevance as production spreads across borders, and propose two new measures based on concept of global value chains
Canadian paper calls for ‘simple and digestible’ communication on financial stability issues
The paper says central banks should use plain language and build a coherent narrative when communicating financial stability concerns or policies
'Sticky' deposit rates could cost US households dearly when Fed raises rates
Unwillingness among retail banks in the US to pass on rising market interest rates to depositors costs the country's poorest savers up to $100 million a year, Fed economists find
Currency peg speculation can 'damage' balance sheets
Researchers find that questions over the credibility of a currency peg can have ‘damaging effects’ on bank balance sheets – consistent with monetary mismatch theory
BoE paper proposes new sovereign debt instruments
Economists from the UK and Canadian central banks says that sovereign cocos and GDP-linked bonds could help reduce the likelihood of liquidity and solvency crises
Polish economists say rate cuts damaged trust in ECB
Working paper says central bank interest rate cuts can damage public trust if they come at a time when households have ‘pessimistic expectations'
Belgian paper posits method for robust optimal monetary policy
Working paper suggests way of supplementing optimal monetary policy with elements of a rules-based policy, punishing policy-makers for deviation but not preventing them from exercising discretion
Using assets as collateral increases volatility of returns, Buba paper finds
Bundesbank discussion paper uses model comprising agents differing in their level of risk aversion; negative economic shocks substantially alter wealth distribution between the two
Belgian paper warns central bank policies could worsen financial shocks
Working paper studies optimal monetary policy configurations for price and financial stability in Eastern Europe; finds central banks may worsen credit shocks by taking action against them
Banks respond differently to capital target deviations, ECB paper shows
Working paper finds banks tend to reshuffle risk-weighted assets or increase holdings when above Tier I ratio, but more inclined to increase equity levels when below target
Bundesbank research seeks to disentangle recession and depression
Discussion paper isolates unique features of depressions and booms to separate them out from recessions and expansions; results suggest recent ‘Great Recession’ was not a depression
Spanish economist urges IMF to complete its ‘metamorphosis’
Bank of Spain economic study says the International Monetary Fund needs to test its new surveillance and lending policies before it can take its place as the ‘guarantor’ of the new economic order
IMF paper backs stress test ‘rules of thumb’
Researchers from the IMF and BIS say rough guides to the typical relationships between credit levels and bank solvency can be useful tools in bank stress tests
Collateral could be useful tool at zero lower bound, says ECB paper
Working paper shows broader collateral eligibility makes funding conditions easier for banks; notes this could be useful for policy, but central banks should not forget sound risk management
Minneapolis paper finds stable Phillips curve in regional data
Researchers find relationship between unemployment and inflation holds in regional data but breaks down at national level; suggest this could be used for policy-making
NY Fed researchers study how, and how not, to co-ordinate policy
Staff report looks at best ways to co-ordinate monetary and macro-prudential policy, and highlights a number of potential pitfalls; model suggests macro-prudential policy should lead
Fed retains credibility following forward guidance, says Dutch paper
Dutch researcher says the Federal Reserve’s forward guidance resulted in a ‘significant reduction’ in Treasury yields as a whole, but did not change the relationship between real and nominal yields
Italian interbank market kept working through crisis
A study of interbank lending in Italy from 2007-2011 finds the hypothesis of liquidity hoarding in times of crisis did not apply in the instance examined