Financial crisis
Andrew Sheng: The new politics of central banking
Extraordinary policy actions by the world’s leading central banks have left them politicised and entangled in an increasingly awkward operating environment
BoE paper questions dominance of Normal distribution
Using the t distribution and time-varying variance improves a vector autoregression’s fit with the data and forecasting performance, researchers find
BoE research warns failure to capture money creation distorts DSGE models
Working paper offers ‘essential ingredients’ of a DSGE model that recognises bank lending as the source of money creation, with significant implications for economic modelling
Assessing the value of financial stability reports
More than 90 central banks now produce financial stability reports. Emrah Uslu and Eyup Kahveci look at the various approaches they take as well as appraising their usefulness.
Book notes: Smart Money, by Andrew Palmer
An important attempt to show how financial innovation is “reshaping our world for the better” all the more important
Book notes: The media and financial crises, by Steve Schifferes and Richard Roberts
A fascinating book, which gives a very different perspective on the financial crisis and its predecessors
Book notes: Hall of mirrors, by Barry Eichengreen
A scholarly, but readable narrative that interleaves an account of the build-up to and course of the Great Depression with the similar course of events in the Global Financial Crisis
ECB paper highlights stability and growth benefits of market-based finance
Researchers suggest high bank leverage may be amplifying booms and busts, damaging both financial stability and economic growth, with one solution being more market-based finance
Bank of Korea paper investigates link between liquidity and commodity prices
Researchers find certain commodity prices became more sensitive to global liquidity following the 2008 financial crisis
RBA paper builds new model of banks’ credit losses
Model draws on new dataset and focuses on interactions between portfolio-level and macro variables in attempt to explain historical bank credit losses in Australia
BIS research posits test for unsustainable credit growth
Authors link long-run credit growth with leverage and debt service ratio, proposing a model they claim would have helped predict the 2008 financial crisis three years before it struck
Glenn Stevens flags capital market risks
RBA governor says the growing role of asset managers and lower market liquidity are cause for concern; combined with cross-border capital flows, this could trigger an abrupt sell-off
Varoufakis defends reshaped Greek reform agenda
Greek finance minister says extension bought time for a ‘serious conversation’ with creditors and outlines ways in which he wants reforms to differ from troika prescriptions
Fed research: Three channels of shadow banking fragility
Working paper models the increased fragility created by shadow banks, even though they provide higher levels of credit to the economy
Balkanisation of bank lending has made recipient countries safer, says IMF
Analytical chapter from upcoming financial stability report highlights benefits of reduction in certain cross-border credit flows
Bundesbank's Dombret: shadow banking oversight is 'miles away'
Regulators may never be able to fully monitor the risks created by shadow banking, says Bundesbank board member
Expectations have variable impact, finds ECB paper
Working paper suggests there have been ‘significant changes’ in the degree to which expectations have driven unemployment, with a particularly large effect during 2008 financial crisis
Romer and Romer find financial crisis impact ‘not large’
NBER working paper constructs new series on financial distress in advanced economies to better capture degrees of financial crisis; finds output declines are ‘moderate and largely temporary’
BIS committee urges central banks to consider collateral policies ahead of time
Central banks should be aware of the effects of their policies on collateral markets, and use this knowledge to prepare in advance for crises, CGFS report finds
Haldane studies finance through lens of ‘complexity theory’
BoE chief economist sets out thesis in favour of viewing finance as a layered ‘system of systems’, with implications for the way risks are identified and managed
Risks in commercial property have fallen, RBNZ research finds
Article in latest RBNZ bulletin finds less leverage is being used to fund new purchases and developments, while market is showing signs of a ‘robust’ recovery
ECB paper emphasises importance of time horizons for early-warning models
Working paper finds the selection of a particular time horizon can have ‘considerable implications’ for the performance of economic variables in predicting bank crises
RBA research finds CCP rules are effective in containing severe shocks
Paper tests central counterparties under extreme ‘tail of tail’ scenarios and finds new rules designed to promote their stability are effective
BIS charts ‘boundaries of the unthinkable’ as risks rise
Quarterly review flags growing vulnerabilities and signs of credit booms in some economies; research finds limited impact of deflation on growth, pointing to importance of financial sector