Research
Sector-specific variables more relevant than thought in determining default risk
The effect and magnitude of risk drivers across sectors is highly heterogeneous, which should be taken into account when designing stress-testing analytical tools, research paper argues
Croatia among EU members whose spreads are most affected by fundamentals
While spillovers from external shocks remain the dominant factor in spreads EU-wide, Croatia is among those where fundamentals are playing an increasingly influential role
Bofit paper says depositor sensitivity to market rumours increased in crisis
Bank of Finland discussion paper analyses market discipline in Central European countries; finds depositors were increasingly influenced by market rumours during the financial crisis
Fall in equities most significant global impact of euro crisis, says ECB paper
Working paper measures impact of euro debt crisis on global financial markets; says the transmission ‘hinges more on trade than on finance’
Bundesbank paper says EU convergence is a myth
Researchers identify a split between old and new, western and eastern member states; incomes are converging between smaller groups of countries rather than the EU collective
US households stick with favourite payment methods
According to a recent study, households use ‘one or at most two' of cash, cheque and card when paying the bills
Competition makes mutuals safer, commercial banks riskier
Bank of Korea research paper shows higher concentration in a less competitive loan market has increased default risks of mutual savings banks since the recent crisis
Spanish paper preaches caution over DSGE models
Researcher finds that DSGE models would not have proved any more use to policy-makers in the 1970s than their ‘old-style’ Phillips curves; warns against putting too much faith in their prescriptions
Bundesbank paper says media exposure shapes inflation expectations
Discussion paper examines how and why inflation expectations differ between the German population; where people go for news is an important factor
International banks pose risk to global financial system, NY Fed paper finds
Evidence from 2007 suggests banks can more easily deal with a credit crunch in their home jurisdiction than they can overseas, which could be a weak point in the global system, paper finds
‘Striking similarities' between eurozone and the pre-1914 gold standard
Both monetary arrangements provide underdeveloped peripheral countries with easy access to capital from the core countries, triggering asset price booms via the banking system in peripheral countries
Philadelphia paper models export dynamics after large devaluations
Working paper says that exports responds ‘sluggishly’ to a large currency depreciation; creates a model to capture these dynamics and explore their macroeconomic impacts
Financial fragmentation persistent in face of loose monetary policy stance
ECB article provides evidence of heterogeneous interest rate pass-through in the four largest eurozone economies, based on new models
Form of fractional reserve banking guarantees solvency for member banks
Research paper claims joint-liability bank coalition is a welfare-improving mechanism that allows members of society to achieve better allocation of resources, making it a ‘truly superior form of banking'
SNB researchers find modified Arima model predicts inflation better
Estimating Arima models for individual CPI expenditure items and aggregating the forecasts from these models gives better results than directly applying the Arima method to the total CPI, paper finds
Monetary union leads to too much fiscal discipline, research paper finds
Paul de Grauwe and Yuemei Ji argue that sovereignty lost with the creation of the eurozone prompted dramatic effects that were largely overlooked by the currency area's designers
Laffer curve changes shape when government debt varies
The Laffer curve changes depending whether transfers or government debt are varied to balance the government budget constraint, Banque de France paper shows; curve looks like horizontal 'S' when debt varies
Low correlation between relative consumption and price not due to market inefficiency
Central Bank of Luxembourg paper attempts to explain why the correlation between real exchange rates and relative consumption is either low or negative
German paper proposes new method for identifying time-invariant regressors
Discussion paper says existing techniques used to identify time-invariant regressors in dynamic panel data models are ‘quite biased’ and proposes a two-stage alternative
NY Fed researchers explore long-term rate rise
Ten-year Treasury yields rose ‘sharply’ between April and July; researchers attribute this to an increase in the compensation investors were demanding to hold them
Currency appreciation not just bad news for exporters
The use of cheaper imported intermediates compensates for 0.2 percentage points of a 1% currency appreciation followed by proportionate drop in export sales, Czech National Bank study shows
Adopting electronic retail payments boosts real economy, says ECB paper
Working paper says efficient electronic retail payment infrastructure boosts GDP, trade and consumption; integrating and harmonising different markets amplifies these effects
Bundesbank paper confirms O-ring theory effect for FDI
Paper written by two economists at the University of Munich finds that the position of a country's industry on the value chain is just as important in determining FDI as is the country's productivity
Dutch study uses neuroscience to dissect consumers’ payment choices
The Netherlands Bank uses an MRI scanner to examine what is going on in consumers’ minds as they choose whether to pay by cash or card