Debt
Book notes: Debtonator, by Andrew McNally
A lucid book questioning society’s bias towards debt and against equity
High debt tends to reduce consumption growth – Norges Bank memo
Research tries to capture diversity of household balance sheets, finding consumption tends to grow more slowly among those with high debt levels
Debt repayment problems have ‘severe consequences’ on consumption, paper finds
Quarterly consumption 30% lower when debt repayment problems arise, research suggests, while recovery after the arrears is smaller than the initial decline
Dudley says US households responding more cautiously to house price growth
New York Fed report finds housing debt has been relatively flat over past few years despite house prices rising steeply over the period; points to higher principal debt repayments
Research compares borrower-based macro-pru tools
Debt service-to-income caps generate ‘less pronounced macro feedback’ in the short term than loan-to-value limits, working paper finds
Bank recapitalisation is a ‘powerful’ policy instrument, paper suggests
Economy likely to remain in an ‘anaemic state’ until certain conditions met, research says; bank recapitalisation more effective than fiscal expansion in encouraging aggregate demand
Research considers impact of fiscal consolidation on debt-to-GDP ratio
Working paper published by ECB finds fiscal consolidation conducted through a revenue increase, rather than a spending cut, is ‘self-defeating austerity’
BoE’s Cunliffe: UK may be close to debt sustainability limit
Deputy governor says analysis of recent UK credit cycle suggests rises in debt may leave the economy vulnerable; Cunliffe would consider action if debt-to-GDP ratio rises
Riksbank pushes for FSA to gain stronger tools amid delays
Amortisation requirement looks set to enter force in June, but more powerful tools for Swedish FSA may be delayed; government says negotiations take time, and it fears triggering crisis
Low income households ‘highly’ vulnerable to changes in interest rates, paper shows
Banks and regulators require the use of ‘richer’ information to understand consumer debt, a Central Bank of Chile paper finds; new model would help evaluate economic policies
Jamaican officials point to management plans as debt falls
Jamaica set to reduce debt-to-GDP ratio to 125% in pursuit of 90% target; officials from central bank and debt management branch welcome changes in past year
Dutch paper explores price level dispersion
‘Idiosyncratic shocks’ have greater impact on price level dispersion within the eurozone than in the US, authors say
Bank of England's Vlieghe wants more nuanced approach to monetary policy
Bank of England policy-maker says high levels of debt, ageing population and distribution of income combine to make him ‘patient' about rate hike; questions modelling based on representative agents
Kaplan urges careful consideration of volatility
Federal Reserve Bank of Dallas president Robert Kaplan warns of the potential for further market volatility as normalisation continues
Czech Republic chooses not to set target date for euro adoption
Government decision follows central bank and ministry of finance advice; authorities cite need for greater real economic convergence as a ‘main barrier’ to adoption
Riksbank steps up debt warnings in stability report
An absence of measures to address high asset prices and rising debt could result in a ‘serious’ shock with ‘great’ consequences for the economy, Swedish central bank warns
Short-term funding developments put Norwegian banks at risk, report finds
Parts of the Norwegian economy remain a source of vulnerability for banks, says deputy governor Nicolaisen at launch of latest financial stability report
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
Swedish economists add voices to criticism of leaning against the wind
Current and former Riksbank deputy governors Martin Flodén and Lars Svensson warn against the large rate hikes necessary to address financial stability concerns
BoE paper explores link between mortgage debt and consumption
Tighter credit conditions and concern over debt repayments may have led to a 2% drop in aggregate private consumption following the crisis, working paper says
FSB pushes for better tools to tackle high corporate debt
Report to G20 outlines some tools that could be used to tackle high and rising corporate debt, but the design process is still ongoing
Danish paper explores prevalence of interest-only mortgages
Interest-only loans lead some families ‘to save less and increase their leverage’ assets, which could pose a financial stability risk, research shows
Safe as houses: designing a more stable mortgage
A conference at the New York Fed earlier this year looked at some innovative mortgage designs that could boost financial stability. Central Banking approached some of the speakers to learn more
Finnish deputy: international competition will change mortgage lending
Bank of Finland deputy argues conditions for international competition in mortgage lending are ‘improving’ and there is the potential for a ‘substantial impact’ in the eurozone