Research
BIS paper flags spillovers from bank dividends
Dividend payments create a channel through which one bank’s capital policy can affect the equity value and risk of default of others, giving capital the attributes of a public good
Recessions nearly tripled amount of Italian NPLs, paper argues
Italian bad debt levels would be almost one third of their current levels without the sub-prime and sovereign debt crises, a counterfactual analysis argues
Chinese financial spillovers to Asia-Pacific on the rise – BIS paper
Working paper finds Chinese equity markets now have almost as much of an impact on Asia-Pacific as the US, though the effects differ in stressed and placid times
ECB paper finds ‘sizeable’ impact from QE
Authors find empirical evidence of various channels through which asset purchases affect the eurozone economy, before testing them in a general equilibrium model
Falling natural rates impacted by common global factors – Fed paper
Research by Kathryn Holston, Thomas Laubach and John Williams finds no sign of natural rate decline reversing; advanced economies jointly affected by global factors
‘Neural network’ could help construct early warning systems – Colombian paper
Model can detect identity of bank by analysing features of its balance sheet, which the authors say can be coupled with other financial stress indicators to help classify banks by their fragility
HKMA researchers dig into persistent covered interest parity deviation
Authors posit forex swap dealers filter out counterparty risk from money market rates when setting swap prices; risk adjustment continues even in non-stressed periods
Major economies show clear credit price cycles, researchers say
Housing markets are a key influence on credit prices cycles in the US and major European economies, an ECB paper argues
Asset managers becoming key drivers of policy transmission – BIS research
Asset managers in the eurodollar futures market play a role in helping, or hindering, the transmission of policy, and have begun to respond more to Fed announcements than the macroeconomy
Working paper examines interactions between credit defaults and monetary policy
Countercyclical capital buffers can lessen macroeconomic fluctuations but increase the length of slumps, author argues; bank recapitalisation “overcomes this trade-off”
Countries’ capital flows differ substantially since financial crisis – ECB paper
Macro-prudential policies could be a long-term impediment to capital flows, according to the authors of an ECB paper
US credit constraints heighten global propagation of financial shocks, researchers argue
Normal credit conditions in domestic US economy greatly lessen the global impact of American financial shocks, a European Central Bank paper argues
Signs of ‘de-anchoring’ inflation expectations in eurozone – ECB paper
Study finds professional forecasts are paying more attention to ECB inflation projections and less to the target; authors suggest “extensive use of forward guidance” could help
Unconventional monetary policy should be supported on structural and fiscal fronts – ECB paper
Authors examine the effects of supply- and demand-side policies; results point to “positive synergies” between policies
Anticipation effects can make lower bound a self-fulfilling prophecy – BoJ paper
New Keynesian model implies an economy can be drawn on to the zero lower bound more quickly when people expect it; negative rates have only a small impact on duration
Frontier markets need framework to strengthen capital flow resilience – IMF paper
Frontier markets are affected by capital flows in similar ways to emerging markets, the paper argues, suggesting a change in the “landscape” of capital flows could have policy implications
Canadian working paper examines effect of downward nominal wage rigidity on wage growth
Average wage growth higher due to DNWR after recession, authors note; signs of heterogeneity in DNWR effects
IMF working paper encourages Italian banks to clean up balance sheets
Italian banks are likely to become more profitable as economy recovers, authors say, though their capacity to lend is linked to capital buffers
Explicit communication from Sarb helped agents predict rate hikes – paper
Authors compare forecasts from 2013 and 2014 to identify whether specific terminology affected forecasting; “rising cycle” talk shaped expectations, paper shows
Borrowers’ characteristics are key to successful mortgage restructuring, paper argues
How mortgage was restructured is less important than distressed borrowers’ own characteristics in determining whether loan is repaid, Bank of Ireland paper says
Fiscal stimulus works even in debt-driven recessions – Cleveland Fed paper
Study uses defence spending to estimate fiscal multiplier, finding it is higher in areas with larger debt burdens, contrary to the fears of some economists
RBNZ better at forecasting growth and inflation than exchange rate, notes study
Economists compare judgement-based forecasts with benchmark set by suite of statistical models, finding judgement tends to work well, but both types of forecast struggle with exchange rates
Regulations gave eurozone banks incentives to downplay credit risks, paper argues
Bank of Slovenia paper analyses whether banks correctly assessed corporate borrowers’ creditworthiness before the financial crisis, and what incentives they faced
Definitions matter when using DTI ratios – Riksbank paper
How regulators define debt and income can affect the outcome of financial stability analysis and the use of macro-prudential tools, authors say