Research
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
Capital flows are 'fickle' and always have been, paper finds
Capital flow volatility is a fact of life for all economies at all points in time, say IMF researchers, who point out that bigger advanced economies are best placed to deal with ebb and flow
Norwegian paper explores financial stability trade-off
Working paper identifies trade-off between increasing rates to mitigate financial imbalances and lowering rates to reduce the risk of bank insolvency
Czech paper dissects central bank inflation reports
Researchers find the inflation reports produced by a sample of eight central banks are ‘generally of good quality’ but warn their analytical power cannot be taken for granted
BIS researchers use profit-elasticity method to measure China bank competition
Working paper finds competition has increased among China's banks; new PE indicator produces result consistent with financial sector reform
Terms of trade volatility exacerbates shock effects for small open economies
Research conducted at the Reserve Bank of Australia says big fluctuations in terms of trade compound the effects of a terms of trade shock in small, open economies
LCRs in low-liquidity settings lead to big externalities
RBA research paper suggests introducing a liquidity coverage ratio in certain settings leads to large liquidity premiums and pushes the risk-free rate to the floor of the interest rate corridor
Unemployment strongest predictor of mortgage default in the US
Atlanta Fed research finds that individual unemployment increases the probability of mortgage default by 5 to 13 percentage points compared with average sample
Swelling profits explain rebound in risk appetite, San Fran Fed paper suggests
Research indicates corporate profit growth explains 40% of the decline in the spread between risky and risk-free bonds, according to economic letter by research vice-president