Research
FOMC policy rate guidance pushes up US equity prices
Netherlands Bank research paper finds policy rate guidance also leads to significant reduction in implied volatility for US government bonds
Surpluses of Germany and China feed global imbalances, BIS research finds
Bank for International Settlements paper compares current account and creditor positions of Germany and China, finding Germany’s surpluses to be more resilient in the face of the global financial crisis
Fed minutes ‘significantly affect’ US asset prices
New York Fed economic policy review finds that US asset price volatility increases when the Fed releases minutes from policy meetings, but less so since FOMC has become more transparent
Customers of failing banks less likely to trust other people
DNB working paper says mistrust prompted by experience of crisis increases likelihood of bank runs and undermines long-term growth
Implicit government guarantees leads to increased risk-taking at banks
Fed discussion paper argues that strengthening market discipline by reducing bank complexity is needed to address moral hazard
BIS economists find Fed's QE helps curb tail risk perception
Paper published today finds the effect of the Fed's announcing unconventional monetary policy measures is strongest when used in conjunction with forward guidance on low interest rates
NY Fed staff say effect of policy changes depend on risk environment
New staff report argues that macro policy announcements affect asset prices to different extents depending on the existing economic outlook; when risk is elevated, the impact is reduced
Financial crisis caused significant shift in the euro area Beveridge curve
ECB paper finds that labour market consequences of the crisis have been heterogeneous across countries, with Spain and Germany diverging the most
IMF paper considers impact of China’s capital account liberalisation
Researchers suggest that reduced capital control will likely lead to net outflows from equity and bond markets as domestic investors look to diversify
New York Fed paper wary of higher inflation targets
Staff report finds that pursuing a higher trend rate of inflation would likely create a ‘more volatile and unstable’ economy and unseat inflation expectations
Financial contagion function of reputation rather than size of banks
Bank clustering and large in-coming interbank loan more important than leverage ratios, while central bank intervention reduce contagion only slightly, Bank of Finland discussion paper finds
Ireland economists construct new business-cycle indicator
Economic letter published by Central Bank of Ireland presents an indicator to provide policy-makers with ‘real-time’ signals; index has declined in recent months as domestic demand remains weak
German banks move to lower-risk sovereign bonds
Deutsche Bundesbank discussion paper investigates banks exposures to sovereign debt and finds they are increasingly investing in bonds from larger countries with lower inflation
Segmented structure of Russian interbank market leads to volatile interest rates
Liquidity-absorbing and liquidity-provision operations are conducted by the biggest banks, reducing credit risk but also restraining market development, according to Bank of Finland discussion paper
Polish paper presents new method for constructing fan charts
Fan charts are an increasingly popular tool for depicting forecasts; working paper proposes a new method for formulating the charts that incorporates 'a mix of judgment and statistics'
Sovereign default spreads drove European bank risk exposures during crisis
Systemic risk of European banks reached its height in late 2011 at around €500 billion, based on a measure introduced in a recent Fed working paper
IMF paper finds less tail risk in immediate aftermath of QE
IMF working paper finds ‘strong evidence' that unconventional monetary policy led to a reduction in market uncertainty, in turn contributing to an easing in financial conditions
Irish households exhibit ‘relatively large' wealth effect from housing
Housing wealth effect particularly strong for Irish households in negative equity, central bank researchers find
Reserve accumulation enhances welfare if coupled with capital controls
Foreign reserve accumulation is part and parcel of a growth strategy based on strong capital investment in a financially constrained economy, according to a Banque de France research paper
Forward guidance successful in mitigating downside risks to price stability
Provision of time-based forward guidance reduces downside price stability risks but may result in upside risks during the medium term, finds ECB working paper
Adherence to Islamic financing principles could benefit credit unions
Islamic savings products would make institutions more resilient, and possibly strengthen incentives for good governance, IMF working paper argues
Czech study finds DFM ‘nowcasting' adds value in calculating real-time GDP
Dynamic Factor Model ‘nowcasting' is as accurate as the judgemental method currently used by the Czech National Bank; a simple average of the two results is more accurate than either on its own
ECB research highlights Greenspan’s powers of persuasion
Researchers say Alan Greenspan was a ‘dominant’ chairman of the FOMC who frequently managed to convince regional Fed presidents to walk his own policy line
Time series of financial market prices appear to exhibit fractal properties
BoE research paper suggests market price dynamic may be caused by the interactions of agents with different investment horizons and differing interpretations of information