Research
BIS report ‘takes stock' of central bank collateral policy developments
Central bank collateral policy has responded to financial market shocks in different ways, though common principles underpin new frameworks
IMF paper contrasts European countries’ capital accounts
Finds capital accounts rebalanced faster in emerging European countries than in the periphery; attributes difference to faster wage and public sector adjustment
BoJ researchers find Japanese banks hold too many stocks and too few bonds
Working paper analyses optimal ratio of stocks to bonds for banks to hold; finds most Japanese financial institutions are overweight equities
Australia adjusting well to ‘profound impact’ of strong Asian growth, says paper
Research examines consequences of strong Asia-Pacific growth on Australian economy, finding currency appreciation and anchored inflation helped economy adjust
Dutch paper analyses changes in unsecured overnight money market
Study examines changes to the ECB’s monetary policy framework in the mid-2000s; finds they reduced volatility in Dutch segment of Target II system
IMF research identifies ‘strong macro-financial linkages’ in eastern Europe
Working paper finds macroeconomic factors closely tied to non-performing loans in central, eastern and southeast Europe; warns of ‘strong feedback effects’ between banks and economy
CNB paper formulates optimal policy for transition to euro
Working paper examines how Czech monetary policy should respond to uncertainty during the transition to the euro; finds exchange rate should be stabilised if transition is likely to be long
CNB research finds exchange rate moves dampen shocks
Working paper finds exchange rate shocks are only minor contributors to the variance of output and inflation; says koruna-euro exchange rate is a shock absorber for the economy
French paper quantifies cost of implicit bank insurance
Research examines the cost of implicit insurance given to systemically important financial institutions by EU countries; assesses costs in terms of increased taxes
Korean paper says welfare cost of inflation is ‘underestimated’
Study contends that treating assets within M1 – the measure of cash and liquid assets in the economy – as non-interest-bearing in models fails to take into account full cost of inflation
BoJ researcher finds need for heterogeneous response to credit flows
Working paper shows global common factors account for a ‘quantitatively important’ portion of cross-border credit, but vary between regions; suggests need for tailored policy responses
RBI paper develops method for estimating counterfeit volumes
Researchers redesign inverse sampling statistical method, aiming to measure extent of counterfeiting in India with ‘credible precision’
Banque de France research proposes framework to address stress-test failings
Researchers use statistical tests for detection of outliers to characterise severity and duration of stressed periods; suggests length of shock depends on the initial variables
IMF paper says competition is a motive for forex intervention by emerging markets
Study examines activity of emerging market economies in foreign exchange markets; finds competitiveness can be a motivating factor
Icelandic paper finds country's response to banking crisis was optimal
Research by Central Bank of Iceland looks at various alternatives to Iceland’s handling of the 2008 banking collapse, but finds none yield better outcomes than the baseline scenario
BoE research warns of coming financing problems for private equity firms
Quarterly bulletin article highlights problems on the horizon for private equity firms that over-leveraged before the financial crisis, as their debt comes to maturity under much tighter conditions
IMF attempts to sculpt better stress tests
Stress tests are ‘more art than science’ but can be improved and expanded, according to IMF study; cannot be standardised across countries
IMF research warns short-term fiscal consolidation pain could become more serious
Paper says short-term growth impact from fiscal tightening could be worsened if markets or policy-makers overreact; emphasises this does not mean budget cuts should be scrapped
Dutch central bank paper examines impact of capital controls on currency crises
Study finds lower capital controls reduce the probability of a currency crisis, particularly in advanced economies where there is greater institutional development
Bundesbank paper raises concerns over accuracy of systemic risk measures
Researchers find market-based systemic risk measures may give a façade of safety even as banks enter ‘major tail risks’
Bank of Finland highlights ‘astonishing’ lack of information on Chinese government debt
Researcher warns opaque debt statistics are to China’s detriment and could threaten renminbi internationalisation; urges government to begin politically difficult process of improving transparency
Irish paper finds more spending could help government’s ‘precarious’ finances
Central Bank of Ireland research technical paper suggests country’s close sovereign-bank link means government spending to reduce mortgage arrears will have a greater effect than previously thought
IMF paper advocates hybrid discretion and rules-based macro-prudential policy
Researchers say discretionary systems can be gamed but rules struggle to properly account for risk; combination of ‘strong baseline’ and time-varying component gives best results
ECB researcher views liquidity shocks through enhanced DGE lens
Model aims to more accurately capture equity premia, finding that this amplifies liquidity shocks and explains a ‘significant fraction’ of business cycle fluctuations