Research
'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
ECB paper questions quantity theory of money in low-inflation countries
Researchers say evidence for the theory is 'just not there' in countries with low or moderate inflation, but becomes a ‘better fit' when correcting for variation in output growth
Focus on non-linearity can improve macro estimates, research finds
Czech National Bank working paper argues considering non-linearity can advance probabilistic economic assessments; focuses on relationship between credit markets and the rest of the economy
Fed has moved ‘considerably closer’ to flexible inflation target, paper finds
Federal Reserve researchers say the central bank has moved closer to a flexible inflation targeting framework through a series of steps taken to improving the communication of its policy objectives
Dollarisation and institutional weakness hamper Congolese monetary policy
IMF paper highlights 'fiscal dominance' and 'lack of authority' as among reasons for central bank's ineffectiveness; strengthening current policy framework remains 'first-best option'
ECB paper finds value in high-frequency trading
Working paper suggests high-frequency trading aids price discovery, such that regulatory restrictions could damage market efficiency
Overburdened central banks may become ‘repoliticised’, says Orphanides
Former Central Bank of Cyprus governor warns overreliance on central banks may eventually ‘diminish and compromise’ their independence, in a paper published by the Boston Fed
Fed paper trials new model for estimating trend inflation
Researchers at the Federal Reserve generate lower estimates of trend inflation in advanced economies by using a multivariate model; still struggle to outperform random walk forecasts
Tax relief for debt finance helps banks and non-banks, IMF paper finds
There is no significant difference in corporate tax bias towards debt finance between banks and non-banks, according to IMF working paper; Size and leverage levels of firms matter