Working Papers

Author(s):Ralph De Haas, Mikhail Mamonov, Alexander Popov & Iliriana Shala Date:December 7, 2024 Abstract: How do violent conflicts affect cross-border lending? Using data on syndicated loans by over 14,000 creditors to firms in 179 countries between 1989-2020, we find that when violent conflict erupts in a country, foreign banks reduce …

Author(s):Rustam Jamilov, Tobias König, Karsten Müller, and Farzad Saidi Date:November, 2024 Abstract: We study bank runs using a novel historical cross-country dataset that covers 184 countries since 1800 and combines a new narrative chronology with statistical indicators of bank deposit withdrawals. We document the following facts: (i) the unconditional likelihood …

Author(s):Gustavo Cortes and Cameron LaPoint Date:November, 2024 Abstract: Does the housing market lead the financial cycle? We address this question by creating a new hand-collected database spanning a century of monthly building permit quantities and valuations for all U.S. states and the 60 largest MSAs. We show that the option …

Author(s):Swapan-Kumar Pradhan, Előd Takáts and Judit Temesvary Date:November 15, 2024 Abstract: We use a rarely accessed BIS database on bilateral cross-border bank claims by bank nationality to examine the interaction of monetary and fiscal policies. We find significant interactions: the transmission of the monetary policies of major currency issuers is …

Author(s):Sebastian Doerr Date:November 11, 2024 Abstract: The recent banking turmoil has renewed focus on banks’ branch networks and deposit taking activity. This paper provides novel evidence that the geographic diversification of banks’ deposit base enhances their funding stability. I establish that banks with greater diversification exhibit higher dispersion in deposit …

Author(s):Bryan Hardy, Felipe Saffie & Ina Simonovska Date:8 October 2024 Abstract: Large firms borrow in foreign currency and are net providers of trade credit to firms in their supply chains. We model the transmission of exchange rate risk via firm balance sheets along the supply chain. Trade credit loosens borrowing constraints and allows …

Author(s):Sergio A. Correia, Stephan Luck & Emil Verner Date:September 2024 Abstract: Why do banks fail? We create a panel covering most commercial banks from 1865 through 2023 to study the history of failing banks in the United States. Failing banks are characterized by rising asset losses, deteriorating solvency, and an …

Author(s):Sergio Correia, Stephan Luck, and Emil Verner Date:September 2024 Abstract: Why do banks fail? We create a panel covering most commercial banks from 1865 through 2023 to study the history of failing banks in the United States. Failing banks are characterized by rising asset losses, deteriorating solvency, and an increasing …

Author(s):Giovanni Donato, Cédric Tille Date:July 2024 Abstract: Financial globalization has led to a large increase in international asset holdings. While the rise of associated dividend and interest flows has until now been muted by the decreasing trend in interest rates, this pattern could change, leading to a larger role of …

Author(s):Mariassunta Giannetti, Jotikasthira Chotibhak, Andreas Rapp, Martin Waibel Date:July 2024 Abstract: We show that after the introduction of the leverage ratio constraints on bank-affiliated dealers, bond mutual funds have engaged in more liquidity provision in investment-grade corporate bonds and that the performance of funds with liquidity-supplying strategies has benefited. Not …

Author(s):Eugenio Cerutti, Stijn Claessens Date:July 2024 Abstract: We quantify the importance of the Global Financial Cycle (GFCy) in domestic credit and various local asset prices and compare it with that in capital flows. Using 2000-2021 data for 76 economies and a simple methodology, we find that each respective series’ common …

Author(s):Clemens M. Graf von Luckner, Josefin Meyer, Carmen M. Reinhart & Christoph Trebesch Date:June 2024 Abstract: We study sovereign external debt crises over the past 200 years, with a focus on creditor losses, or “haircuts”. Our sample covers 327 sovereign debt restructurings with external private creditors over 205 default spells …

Author(s):Marco Cipriani, Thomas M. Eisenbach and Anna Kovner Date:May 2024 Abstract: We use high-frequency interbank payments data to trace deposit flows in March 2023 and identify twenty-two banks that suffered a run, significantly more than the two that failed but fewer than the number that experienced large negative stock returns. …

Author(s):Carlos Madeira Date:May 2024 Abstract: This paper analyses the causal impact of macroprudential policies on growth, using industry-leveldata for 89 countries for the period 1990 to 2021. The small industry size creates an exogenous identification and avoids reverse-causality. I find that macroprudential tightening measures have a negative impact on manufacturing …

Author(s):Stephen G. Cecchetti & Jens Hilscher Date:May 2024 Abstract: In response to the Global Financial Crisis, central banks engaged in large-scale asset purchases funded by the issuance of reserves. These “unconventional” policies continued during the pandemic, so that by 2022 central banks’ balance sheets had grown up to ten-fold. As …

Author(s):Joao Granja, Erica Xuewei Jiang, Gregor Matvos, Tomasz Piskorski, Amit Seru Date:April 2024 Abstract: In the face of rising interest rates in 2022, banks mitigated interest rate exposure of the accounting value of their assets but left the vast majority of their long-duration assets exposed to interest rate risk. Data …

Author(s):Rashad Ahmed Date:March 2024 Abstract: Foreign deposits are a key funding source for US commercial banks but subject to a different degree of interest rate risk than domestic deposits. Specifically, foreign deposit betas are significantly larger than domestic deposit betas, implying that the former has shorter effective duration. Larger foreign …

Author(s):Greg Buchak, Gregor Matvos, Tomasz Piskorski & Amit Seru Date:February 2024 Abstract: The traditional model of bank-led financial intermediation, where banks issue demandable deposits to savers and make informationally sensitive loans to borrowers, has seen a dramatic decline since 1970s. Instead, private credit is increasingly intermediated through arms-length transactions, such …

Author(s):Claudia M. Buch, Linda S. Goldberg Date:March 2024 Abstract: Global liquidity flows are largely channeled through banks and nonbank financial institutions. The common drivers of global liquidity flows include monetary policy in advanced economies and risk conditions. At the same time, the sensitivities of liquidity flows to changes in these …

Author(s):Roland Beck, Antonio Coppola, Angus J. Lewis, Matteo Maggiori, Martin Schmitz & Jesse Schreger Date:March 2024 Abstract: We assess the pattern of Euro Area financial integration adjusting for the role of “onshore offshore financial centers” (OOFCs) within the Euro Area. The OOFCs of Luxembourg, Ireland, and the Netherlands serve dual …

Author(s):Matthew S. Jaremski, Steven Sprick Schuster Date:March 2024 Abstract: The lack of universal deposit insurance coverage can create liquidity risk during financial crises. This aspect of deposit insurance is hard to test in modern data because of the broad coverage of most systems. We, therefore, study the role that the …

Author(s):Viral Acharya, Nicola Cetorelli, Bruce Tuckman Date:March 2024 Abstract: In recent years, assets of non-bank financial intermediaries (NBFIs) have grown significantly relative to those of banks. These two sectors are commonly viewed either as operating in parallel, performing different activities, or as substitutes, performing substantially similar activities, with banks inside …

Author(s):Sandra Eickmeier, Josefine Quast, Yves Schüler Date:March 2024 Abstract: We examine how natural disasters impact the US economy and financial markets using monthly data since 2000. Our analysis reveals large sustained adverse effects of disasters on overall economic activity, with significant implications across various sectors including labor, production, consumption, investment, …

Author(s):Tommaso Gasparini, Vivien Lewis, Stéphane Moyen, Stefania Villa Date:March 2024 Abstract: Increases in firm default risk raise the default probability of banks while decreasing output and inflation in US data. To rationalize the empirical evidence, we analyse firm risk shocks in a New Keynesian model where entrepreneurs and banks engage …

Author(s):Ezra Oberfield, Esteban Rossi-Hansberg, Nicholas Trachter & Derek T. Wenning Date:March 2024 Abstract: We study the spatial expansion of banks in response to banking deregulation in the 1980s and 90s. During this period, large banks expanded rapidly, mostly by adding new branches in new locations, while many small banks exited. …

Author(s):Victoria Ivashina, Ṣebnem Kalemli-Özcan, Luc Laeven, Karsten Müller Date:March 2024 Abstract: Using a new dataset on sectoral credit exposures covering financial and non-financial sectors in 115 economies over the period 1940–2014, we document the following evidence that corporate debt plays a key role in explaining boom-bust cycles, financial crises, and …

Author(s):Charles W. Calomiris, Matthew S. Jaremski Date:March 2024 Abstract: The high social costs of financial crises imply that economists, policymakers, businesses, and households have a tremendous incentive to understand, and try to prevent them. And yet, so far we have failed to learn how to avoid them. In this article, …

Author(s):Patrick McGuire, Goetz von Peter and Sonya Zhu Date:March 2024 Abstract: Statistics used in international economics generally adopt a residence view, centred on an economy and the units located there. This is natural for understanding the geography of capital flows and other macroeconomic issues. However, the system of national accounts …

Author(s):Daniel Fricke, Stefan Greppmair, Karol Paludkiewicz Date:February 2024 Abstract: We show that the transmission of the European Central Bank’s (ECB) recent monetary policy tightening differs across banks depending on their level of excess reserves. Specifically, the net worth of reserve-rich banks may display a boost when the interest rate paid …

Author(s):Enrico Perotti, Edoardo D. Martino Date:February 2024 Abstract: The rapid escalation in uninsured deposit runs in March 2023 prompted calls for stronger ex-ante prudential measures, such as higher capital and liquidity norms, as well as an EU proposal aimed at increasing the use of the resolution process. This Policy Insight …

Author(s):Lina Lu, Marco Macchiavelli, Jonathan Wallen Date:December 2023 Abstract: We study the internal and external capital markets of large U.S. bank holding companies. Within the bank holding company, commercial bank and dealer divisions have different investment opportunities, raise capital externally and actively share some capital internally. We develop and test …

Author(s):Jonas Becker, Maik Schmeling, Andreas Schrimpf Date:January 2024 Abstract: We estimate the impact of banks’ cross-currency lending on exchange rates to shed light on the importance of flows as a major force affecting FX market outcomes. When non-US banks extend more loans in US dollars (USD) relative to US banks …

Author(s):Carol Bertaut, Valentina Bruno, Hyun Song Shin Date:January 2024 Abstract: We highlight the role of duration and exchange rate risks on portfolio flows by using a unique and comprehensive database of US investor flows into emerging market government bonds denominated in local currency. Borrowing long-term mitigates roll-over risk but amplifies …

Author(s):Jonas Becker, Maik Schmeling, Andreas Schrimpf Date:January 2024 Abstract: We estimate the impact of banks’ cross-currency lending on exchange rates to shed light on the importance of flows as a major force affecting FX market outcomes. When non-US banks extend more loans in US dollars (USD) relative to US banks originating foreign …

Author(s):Di Gong, Thomas Lambert, Wolf Wagner Date:November 2023 Abstract: This paper provides novel evidence for informational advantages of local bank supervision, outweighing biases due to the pursuit of local interests. For identification, we exploit a policy reform in China that moved supervision for a subset of bank branches from the …

Author(s):Karsten Müller & Emil Verner Date:June 2023 Abstract: We study the relationship between credit expansions, macroeconomic fluctuations, and financial crises using a novel database on the sectoral distribution of private credit for 117 countries since 1940. We document that, during credit booms, credit flows disproportionately to the non-tradable sector. Credit …

Author(s):Yadav Gopalan, Joao Granja Date:September 2023 Abstract: We investigate how effective was bank supervision before, during, and after the monetary tightening of 2022. We find that bank supervisors were aware of the interest rate risks that were emerging in the banking system and began downgrading the ratings of banks with …

Author(s):Sergio Florez-Orrego, Matteo Maggiori, Jesse Schreger, Ziwen Sun, Serdil Tinda Date:September 2023 Abstract: We survey the literature on global capital allocation. We begin by reviewing the rise of cross-border investment, the shift towards portfolio investment, and the literature focusing on aggregate patterns in multilateral and bilateral positions. We then turn …

Author(s):Balduin Bippus, Simon Lloyd & Daniel Ostry Date:September 2023 Abstract: Using data on the external assets and liabilities of global banks based in the UK, the world’s largest centre for international banking, we identify exogenous cross-border banking flows by constructing novel granular instrumental variables. In line with the predictions of …

Author(s):Erica Jiang, Gregor Matvos, Tomasz Piskorski & Amit Seru Date:March 2020 (revised September 2023) Abstract: We ask how much leverage banks would choose in the absence of safety nets tied to insured deposits. Using uniquely assembled data on capital structure decisions of shadow banks – intermediaries that provide banking services …

Author(s):Hans Degryse, Mike Mariathasan, Carola Theunisz Date:September 2023 Abstract: This paper investigates the intra-group transmission of stricter capital regulation imposed at the banking group level. Specifically, we study how a policy-induced increase in the regulatory capital ratio impacts the capital adequacy composition, lending and risk-taking of the affiliated subsidiaries. Using …

Author(s):Anatoli Segura, Javier Suarez Date:September 2023 Abstract: We study restructuring solutions to the debt overhang problem faced by banks with a deteriorated loan portfolio in the presence of asymmetric information on loan quality. Classical liability restructuring solutions fail to work because banks can overstate the severity of their bad loan …

Author(s):Damiano Sandri, Francesco Grigoli, Yuriy Gorodnichenko, Olivier Coibion Date:September 2023 Abstract: Using a survey with information treatments conducted in the aftermath of SVB’s collapse, we study households’ perspectives on bank stability, the potential for panic-driven bank runs, and the role of public communication. When informed about SVB’s collapse, households become …

Author(s):Sandra Eickmeier, Benedikt Kolb, Esteban Prieto Date:August 2023 Abstract: Using a narrative identification strategy, we trace the dynamic effects of higher US capital requirements to bank lending and the real economy. In the short run, banks deleverage and reduce lending, which in turn lowers real economic activity. However, these effects …

Author(s):Ben S. Meiselman, Stefan Nagel, Amiyatosh Purnanandam Date:August 2023 Abstract: In competitive capital markets, risky debt claims that offer high yields in good times have high systematic risk exposure in bad times. We apply this idea to bank risk measurement. We find that banks with high accounting return on equity …

Author(s):Sergio Florez-Orrego, Matteo Maggiori, Jesse Schreger, Ziwen Sun, Serdil Tinda Date:August 2023 Abstract: We survey the literature on global capital allocation. We begin by reviewing the rise of cross-border investment, the shift towards portfolio investment, and the literature focusing on aggregate patterns in multilateral and bilateral positions. We then turn …

Author(s):Maria Arakelyan, Adam Gersl, Martin Schindler Date:August 2023 Abstract: In this paper we assess the effectiveness of macroprudential policies and capital controls in supporting financial stability. We construct a large and granular dataset on prudential and capital flow management measures covering 53 countries during 1996-2016. Conditional on a credit boom, …

Author(s):Kris James Mitchener, Angela Vossmeyer Date:August 2023 Abstract: We examine how financial crises redistribute risk, employing novel empirical methods and micro data from the largest financial crisis of the 20th century – the Great Depression. Using balance-sheet and systemic risk measures at the bank level, we build an econometric model …

Author(s):Menzie D. Chinn, Hiro Ito Date:July 2023 Abstract: We assess market mediated financial integration over the last fifty years. We first systematically lay out several definitions of financial integration, and then review the evidence regarding whether covered interest parity, uncovered interest parity, and real interest parity hold across industrial and …

Author(s):Fernando Arce, Julien Bengui, Javier Bianchi Date:July 2023 Abstract: In this paper, we revisit the scope for macroprudential policy in production economies with pecuniary externalities and collateral constraints. We study competitive equilibria and constrained-efficient equilibria and examine the extent to which the gap between the two depends on the production …

Author(s):Li Lian Ong, Christian Schmieder, Min Wei Date:June 2023 Abstract: Credit risk has played a significant role as a catalyst or key factor in many financial crises, including the great financial crisis. More recently, the COVID-19 pandemic highlighted the importance of potential bank credit losses to the private sector. However, …

Author(s):Isil Erel, Jack Liebersohn, Constantine Yannelis, Samuel Earnest Date:June 2023 Abstract: Financial technology has reshaped commercial banking. It has the potential to radically alter the transmission of monetary policy by lowering search costs and expanding bank markets. This paper studies the reaction of online banks to changes in federal fund …

Author(s):Toni Ahnert, Peter Hoffmann, Agnese Leonello, Davide Porcellacchia Date:June 2023 Abstract: What is the effect of Central Bank Digital Currency (CBDC) on financial stability? We answer this question by studying a model of financial intermediation with an endogenously determined probability of a bank run and a remunerated CBDC that provides …

Author(s):Toni Ahnert, Gideon DuRand, Co-Pierre Georg Date:June 2023 Abstract: We examine the incidence of financial contagion, bank choices, welfare, and regulation when interconnected banks anticipate an aggregate liquidity shock. Revisiting the seminal paper of Allen and Gale (2000), interbank deposits allow banks to co-insure against regional liquidity shocks but can …

Author(s):Puriya Abbassi, Rajkamal Iyer, Jose-Luis Peydro, Paul E. Soto Date:April 2023 Abstract: We study short-term and medium-term changes in bank risk-taking as a result of supervision, and the associated real effects. For identification, we exploit the European Central Bank’s asset-quality-review (AQR) in conjunction with security and credit registers. After the …

Author(s):Ziang Li, Jihong Song Date:February 2023 Abstract: We document a novel fact about the cross-section of banks’ risk-taking behavior — banks with high deposit market power take on significantly less credit risk. In particular, the loan portfolios of high-market-power banks are much safer than those of low-market-power banks. This persistent …

Author(s):Kristian Blickle, Cecilia Parlatore, Anthony Saunders Date:March 2023 Abstract: Using supervisory data on the loan portfolios of large US banks, we document that these banks specialize by concentrating their lending disproportionately in a few industries. This specialization is consistent with banks having industry-specific knowledge, reflected in reduced risk of loan …

Author(s):Carlo Wix Date:March 2023 Abstract: I study the long-run effects of credit market disruptions on real firm outcomes and how these effects depend on nominal wage rigidity at the firm level. Exploiting variation in firms’ refinancing needs during the global financial crisis, I trace out firms’ investment and growth trajectories …

Author(s):Kamelia Kosekova, Angela Maddaloni, Melina Papoutsi, Fabiano Schivardi Date:June 2023 Abstract: We document the structure of firm-bank relationships across eleven euro area countries and present new stylised facts using data from the Eurosystem credit registry – AnaCredit. We look at the number of banking relationships, reliance on the main bank, …

Author(s):Tomás E. Caravello, Pedro Martinez-Bruera, Iván Werning Date:June 2023 Abstract: This study explores the consequences of dollarizing an economy with an initial dollar shortage. We show that the resulting transitional dynamics are tantamount to that of a “sudden stop”: consumption of tradable goods fall, the real exchange rate depreciates abruptly …

Author(s):Michael Ehrmann, Phillipp Gnan, Kilian Rieder Date:May 2023 Abstract: Leaks of confidential information emanating from public institutions have been the focus of a longstanding line of research. Yet, their determinants as well as their potential impact on public views and on policy effectiveness remain elusive. We construct a database of …

Author(s):Sergi Basco, Giulia Felice, Bruno Merlevede, Martí Mestieri Date:May 2023 Abstract: This paper empirically examines the effects of financial crises on the organization of production of multinational enterprises. We construct a panel of European multinational networks from 2003 through 2015. We use as a financial shock the increase in risk …

Author(s):Kristin Forbes, Christian Friedrich, Dennis Reinhardt Date:May 2023 Abstract: This paper explores the relationship between different funding structures—including the source, instrument, currency, and counterparty location of funding—and the extent of financial stress experienced in different countries and sectors during the sharp risk-off shock in early 2020 when Covid-19 spread globally. …

Author(s):Matthew S. Jaremski, David C. Wheelock Date:May 2023 Abstract: This paper provides quantitative evidence on interbank transmission of financial distress in the Panic of 1907 and ensuing recession. Originating in New York City, the panic led to payment suspensions and emergency currency issuance in many cities. Data on the universe …

Author(s):Katharina Bergant, Prachi Mishra, Raghuram Rajan Date:May 2023 Abstract: We find that financial conditions in the core have significant spillover effects on cross-border mergers and acquisitions (M&As). On average, a 1 percentage point easing of the IMF US Financial Conditions Index is associated with approximately a 10% higher volume of …

Author(s):Katharina Bergant, Francesco Grigoli, Niels-Jakob Hansen and Damiano Sandri Date:May 2023 Abstract: We show that macroprudential regulation significantly dampens the impact of global financial shocks on emerging markets. Specifically, a tighter level of regulation reduces the sensitivity of GDP growth to capital flow shocks and movements in the VIX. A …

Author(s):Bryan Hardy and Felipe Saffie Date:April 2023 Abstract: We use unique firm-level data from Mexico to document that non-financial corporations engage in carry trades by borrowing in foreign currency (FX) and lending in domestic currency, largely in the form of trade credit, accumulating currency risk in the process. We show …

Author(s):Lihong McPhail, Philipp Schnabl & Bruce Tuckman Date:April 2023 Abstract: We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and securities. To this end, we use regulatory data on individual swap positions for the largest 250 U.S. banks. We find …

Author(s):Michael B. Devereux, Charles Engel & Steve Pak Yeung Wu Date:April 2023 Abstract: We construct a two-country New Keynesian model in which US government debt has an advantage as a superior collateral asset in the balance sheets of banks. The model can account for the observed response of the US …

Author(s):Ugo Panizza Date:March 2023 Abstract: This paper builds a dataset on bank ownership that covers more than 6,500 banks in181 countries (59 low-income economies, 72 middle-income economies, and 50 high-income economies) over 1995-2020. I show that until 2010, there was a reduction instate-ownership of banks and an increase foreign ownership. …

Author(s):Cookson, J. Anthony, C. Fox, J. Gil-Bazo, J. F. Imbet, and C. Schiller Date:April 2023 Abstract: Social media fueled a bank run on Silicon Valley Bank (SVB), and the effects were felt broadly in the U.S. banking industry. We employ comprehensive Twitter data to show that preexisting exposure to social …

Author(s):Mary Chen, Seung Jung Lee, Daniel Neuhann, and Farzad Saidi Date:March 2023 Abstract: Bank deregulation in the form of the repeal of the Glass-Steagall Act facilitated the entry of non-bank lenders into the market for syndicated loans during the pre-2008 credit boom. Institutional investors disproportionately purchase tranches of loans originated …

Author(s):Puriya Abbassi, Rajkamal Iyer, José-Luis Peydró, and Paul Soto Date:March 2023 Abstract: We study short-term and medium-term changes in bank risk-taking as a result of supervision, and the associated real effects. For identification, we exploit the European Central Bank’s asset-quality- review (AQR) in conjunction with security and credit registers. After …

Author(s):Itamar Drechsler, Alexi Savov, Philipp Schnabl & Olivier Wang Date:April 2023 Abstract: Motivated by the regional bank crisis of 2023, we model the impact of interest rates on the liquidity risk of banks. Prior work shows that banks hedge the interest rate risk of their assets with their deposit franchise: …

Author(s):Anusha Chari Date:April 2023 Abstract: Over the last two decades, the unprecedented increase in non-bank financial intermediation, particularly open-end mutual funds and ETFs, accounts for nearly half of the external financing flows to emerging markets exceeding cross-border lending by global banks. Evidence suggests that investment fund flows enhance risk-sharing across …

Author(s):Viral V. Acharya, Richard Berner, Robert F. Engle III, Hyeyoon Jung, Johannes Stroebel, Xuran Zeng & Yihao Zhao Date:April 2023 Abstract: We explore the design of climate stress tests to assess and manage macro-prudential risks from climate change in the financial sector. We review the climate stress scenarios currently employed …

Author(s):Johannes Breckenfelder, Marie Hoerova Date:April 2023 Abstract: Are central bank tools effective in reaching non-banks with no access to the lender-of-last-resort facilities? Using runs on mutual funds in March 2020 as a laboratory, weshow that, following the announcement of large-scale purchases, funds with higher exante shares of assets eligible for …

Author(s):Asli Demirguc-Kunt, Balint L. Horvath, Harry Huizinga Date:April 2023 Abstract: This paper examines the impact of international differences in capital regulation on multinationalbanks’ loan origination location decisions. International loan location decisions represent a keybanking margin that has previously not been examined in the literature on regulatory arbitrage bybanks. Our estimation …

Author(s):Sebastian Horn, Christoph Trebesch Date:March 2023 Abstract: This paper shows that China has launched a new global system for cross-border rescue lending to countries in debt distress. We build the first comprehensive dataset on China’s overseas bailouts between 2000 and 2021 and provide new insights into China’s growing role in …

Author(s):Roland Beck, Antonio Coppola, Angus Lewis, Matteo Maggiori, Martin Schmitz, Jesse Schregger Date:March 2023 Abstract: We reassess the pattern of Euro Area financial integration adjusting for the role of “onshore offshore financial centers” (OOFCs) within the Euro Area. While the Euro Area records large levels of international investment both within …

Author(s):Andrew Metrick, Paul Schmelzing Date:March 2023 Abstract: U.S. and European banking institutions were hit by a wave of distress in March 2023. Policymakers on both sides of the Atlantic reacted with an array of interventions, some targeting individual institutions, others designed to shore up the banking sector as a whole. …

Author(s):Michael Kumhof, Marco Pinchetti, Phurichai Rungcharoenkitkul, Andrej Sokol Date:March 2023 Abstract: We study the consequences for business cycles and welfare of introducing an interest-bearing retail CBDC, competing with bank deposits as medium of exchange, into an estimated 2-country DSGE environment. CBDC issuance of 30% of GDP increases output and welfare …

Author(s):Daniel Dimitrov, Sweder van Wijnbergen Date:March 2023 Abstract: We propose a credit portfolio approach for evaluating systemic risk and attributing it across institutions. We construct a model that can be estimated from high-frequency CDS data. This captures risks from publicly traded banks, privately held institutions, and cooperative banks, extending approaches …

Author(s):Javier Bianchi and César Sosa-Padilla Date:March 2023 Abstract: This paper surveys the recent empirical literature on historical banking crises, defined as events taking place before 1980. Advances in data collection and identification have provided new insights into the causes and consequences of crises both immediately and over the long run. …

Author(s):Javier Bianchi and César Sosa-Padilla Date:March 2023 Abstract: This paper investigates the implications of international financial sanctions for the reserve currency status of the US dollar. We propose a simple model of a reserve currency, demonstrate how the anticipation of financial sanctions can weaken the dollar’s status, and evaluate the …

Author(s):Katharina Bergant, Gian Maria Milesi-Ferretti, and Martin Schmitz Date:February 2023 Abstract: We provide stylized facts on nonresident holdings of emerging market bonds and analyze the determinants of euro area investors’ purchases of such securities, using a comprehensive security-level dataset that tracks net transactions of individual bonds issued by emerging market …

Author(s):Maurice Obstfeld and Haonan Zhou Date:February 2023 Abstract: The U.S. dollar’s nominal effective exchange rate closely tracks global financial conditions, whichthemselves show a cyclical pattern. Over that cycle, world asset prices, leverage, and capital flowsmove in concert with global growth, especially influencing the fortunes of emerging and developingeconomies (EMDEs). This …

Author(s):Mert Onen, Hyun Song Shin and Goetz von Peter Date:February 2023 Abstract: This paper introduces a new dataset on emerging market sovereign bonds, distinguishing between the currency of denomination and the residence of investors. Our dataset is on long-term government bonds and provides a more complete coverage of bonds issued …

Author(s):Desislava Andreeva, Andra Coman, Mary Everett, Maren Froemel, Kelvin Ho, Simon Lloyd, Baptiste Meunier, Justine Pedrono, Dennis Reinhardt, Andrew Wong, Eric Wong and Dawid Żochowski Date:January 2023 Abstract: We study the effects of negative interest rate policies (NIRP) on the transmission of monetary policy through cross-border lending. Using bank-level data …

Author(s):Maximilian Grimm, Òscar Jordà, Moritz Schularick, and Alan M. Taylor Date:February 2023 Abstract: Do periods of persistently loose monetary policy increase financial fragility and the likelihood of a financial crisis? This is a central question for policymakers, yet the literature does not provide systematic empirical evidence about this link at …

Author(s):Paul Bergin, Woo Jin Choi, and Ju H. Pyun Date:February 2023 Abstract: While substantial empirical research has evaluated the question of whether capital account openness promotes economic growth, this paper finds empirical evidence for cases where the opposite is true—that a policy of capital controls can promote economic growth, when …

Author(s):Toni Ahnert, Peter Hoffmann, Agnese Leonello, and Davide Porcellacchia Date:February 2023 Abstract: What is the effect of Central Bank Digital Currency (CBDC) on financial stability? We answer this question by studying a model of financial intermediation with an endogenously determined probability of a bank run, using global games. As an …

Author(s):Iñaki Aldasoro, Sebastian Doerr, and Haonan Zhou Date:February 2023 Abstract: This paper shows that non-banks curtail their syndicated credit by significantly more than banks during crises, even after accounting for time-varying lender and borrower characteristics. We provide novel evidence that differences in the value of lending relationships explain most of …

Author(s):Desislava Andreeva, Andra Coman, Mary Everett, Maren Froemel, Kelvin Ho, Simon Lloyd, Baptiste Meunier, Justine Pedrono, Dennis Reinhardt, Andrew Wong, Eric Wong, and Dawid Żochowski Date:January 2023 Abstract: We study the effects of negative interest rate policies (NIRP) on the transmission of monetary policy through cross-border lending. Using bank-level data …

Author(s):Wenqian Huang, Angelo Ranaldo, Andreas Schrimpf, and Fabricius Somogyi Date:February 2023 Abstract: We study dealers’ liquidity provision in the currency market. We show that at times when dealers’ intermediation capacity is constrained their cost of liquidity provision increases disproportionately relative to dealer-provided volume. As a result, the elasticity of dealers’ …

Author(s):Clemens Graf von Luckner, Carmen Reinhart, and Kenneth Rogoff Date:January 2023 Abstract: This paper employs high frequency transactions data on the world’s two oldest and most extensive centralized peer-to-peer Bitcoin markets, which enables trade in the currencies of more than 160 countries. We develop an algorithm that allows us, with …

Author(s):Niall Ferguson, Martin Kornejew, Paul Schmelzing, and Moritz Schularick Date:January 2023 Abstract: This paper studies the evolution of central bank balance sheets over the past 400 years across 17 major economies. The size of central bank balance sheets has varied substantially over time relative to economic and financial activity. Major …

Author(s):Linda S. Goldberg & Signe Krogstrup Date:January 2023 Abstract: The risk sensitivity of international capital flow pressures is explored using a new Exchange Market Pressure index that combines pressures observed in exchange rate adjustments with model-based estimates of incipient pressures that are masked by foreign exchange interventions and policy rate …

Author(s):Asli Demirguc-Kunt, Alvaro Pedraza, Fredy Pulga, and Claudia Ruiz-Ortega Date:December 2022 Abstract: What is the response of bank foreign subsidiaries to climate policy in their host countries? This paper finds that global banks with high environmental performance increase their presence in countries after local authorities strengthen their climate-related actions. Through …

Author(s):Julien Bengui and Louphou Coulibaly Date:November 2022 Abstract: Are unregulated capital flows excessive during a stagflation episode? We argue that they likely are, owing to a macroeconomic externality operating through the economy’s supply side. Inflows raise domestic wages through a wealth effect on labor supply and cause unwelcome upward pressure …

Author(s):Mikhail Mamonov, Anna Pestova, and Steven Ongena Date:December 2022 Abstract: We study the impact of global financial sanctions on banks and their corporate borrowers in Russia. Financial sanctions were consecutively imposed between 2014 and 2019, allowing targeted (but not yet sanctioned) banks to adapt their international and domestic exposures in …

Author(s):Carlos Cantú, Catherine Casanova, Rodrigo Alfaro, Fernando Chertman, Gerald Cisneros, Toni dos Santos, Roberto Lobato, Calixto López, Facundo Luna, David Moreno, Miguel Sarmiento and Rafael Nivin Date:November 2022 Abstract: We explore the mechanism that links capital inflows from abroad with domestic bank lending. Five Latin American countries use their credit …

Author(s):Rashad Ahmed and Alessandro Rebucci Date:October 2022 Abstract: This paper shows that the price impact of foreign official (FO) purchases or sales of U.S. Treasuries (USTs) is about twice as large as previously reported in the literature once critical sources of endogeneity are addressed. We also show that prevailing estimates …

Author(s):Alan M. Taylor, James S. Cloyne, and Patrick Hürtgen Date:October 2022 Abstract: Identifying exogenous variation in monetary policy is crucial for investigating central bank policy transmission. Using newly-collected archival real-time data utilized by the Central Bank Council of the German Bundesbank, we identify unexpected changes in German monetary policy from …

Author(s):J. Scott Davis and Andrei Zlate Date:April 2022 Abstract: We estimate the heterogeneous effect of the global financial cycle on exchange rates and cross-border capital flows during the COVID-19 pandemic, using weekly exchange rate and portfolio flow data for a panel of 48 advanced and emerging market economies. We begin …

Author(s):Indraneel Chakraborty, Saketh Chityala, Apoorva Javadekar, and Rodney Ramcharan Date:July 2022 Abstract: This paper studies how interconnected plants distribute additional liquidity from banks through the supply chain. Using a spatially segmented bank branch expansion rule in India, we find that direct exposure to additional bank credit allows plants to hold …

Author(s):Marina Conesa, Giulia Lotti, and Andrew Powell Date:July 2020 Abstract: Theory suggests both resilience and fragility in banking networks. This paper finds both, exploiting a new database of cross-border syndicated lending to developing countries from 1993 to 2017. Shocks propagate via co-lenders driven by central players, but shocks impacting fringe …

Author(s):Shohini Kundu, Seongjin Park, and Nishant Vats Date:June 2022 Abstract: What are the aggregate effects of deposit shocks? We introduce a new fact regarding the within-bank geographic concentration of deposits — 30% of deposits are concentrated in a single county. We construct deposit shocks by combining the within-bank deposit concentration …

Author(s):Simon Baumgartner, Alex Stomper, Tom Schober, and Rudolf Winter-Ebmer Date:November 2022 Abstract: How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms’ local banks. The evidence comes from firms employing workers whose productivity depends on the weather. Weather-induced labor productivity …

Author(s):Barry Eichengreen, Ricardo Hausmann, and Ugo Panizza Date:November 2022 Abstract: Notwithstanding announcements of progress, “international original sin” (the denomination ofexternal debt in foreign currency) remains a persistent phenomenon in emerging markets.Although some middle-income countries have succeeded in developing markets in local-currencysovereign debt and attracting foreign investors, they continue to hedge …

Author(s):Josefine Quast Date:July 2022 Abstract: Basel III credit-to-GDP gaps are used to assess whether aggregate credit is excessive or not and inform macroprudential policymaking. Yet, estimates from Basel III’s prescribed detrending procedure are prone to continuous reevaluations that do not reflect changes in the data and exceed commonly discussed end-of-sample …

Author(s):Barry Eichengreen and Orkun Saka Date:December 2022 Abstract: Using hand-collected data spanning more than a decade on European banks’ sovereign debt portfolios, we show that the trust of residents of a bank’s countries of operation in the residents of a potential target country of investment has a positive, statistically significant, …

Author(s):Claudio Borio, Ilhyock Shim, and Hyun Song Shin Date:December 2022 Abstract: Since the 2008–9 Great Financial Crisis, major advanced economies (AEs) have used monetary and macroprudential policies to achieve macroeconomic and financial stability. Emerging market economies (EMEs) have, in addition, combined interest rate tools with FX intervention, macroprudential policy and, …

Author(s): Thomas Drechsel and Seho Kim Date: October 2022 Abstract: A large literature has studied optimal regulatory policy in macroeconomic models with collateral constraints. A common conclusion is that agents `over-borrow’ and optimal policy reduces debt positions through taxes. The reason is that agents do not internalize the effects of …

Author(s): Ṣebnem Kalemli-Özcan and Liliana Varela Date: May 2022 Abstract: We document five novel facts about Uncovered Interest Parity (UIP) deviations vis-à-vis the U.S. dollar for 34 currencies, during 1996-2018. 1) The UIP premium co-moves with global risk perception (VIX) for all currencies, whereas only for emerging market currencies there …

Author(s): Jean Imbs, Laurent Pauwels Date: April 2022 Abstract: We introduce a measure of exposure to foreign shocks -openness- that computes the fraction of output subjected to foreign shocks at any order. The measure is easy to obtain for any sector with input-output data; It implies that openness is much …

Author(s): Ricardo Correa , Julian di Giovanni, Linda S. Goldberg, and Camelia Minoiu Date: September 2022 Abstract: When trade uncertainty directly affects credit supply it can amplify other contractionary impulses from a deterioration in the international trade environment. Exploiting heterogeneity in banks’ ex-ante exposure to trade uncertainty and loan-level data …

Author(s): Zhengyang Jiang, Robert J. Richmond and Tony Zhang Date: July 2022 Abstract: We use a portfolio-based framework to understand what drives the decline of the U.S. net foreign asset (NFA) position and the reversal in returns earned on the US NFA (exorbitant privilege). We show that global savings gluts …

Author(s): Ozge Akinci, Sebnem Kalemli-Özcan, Albert Queralto Date: July 2022 Abstract: Foreign investors’ changing appetite for risk-taking have been shown to be a key determinant of the global financial cycle. Such fluctuations in risk sentiment also correlate with the dynamics of UIP premia, capital flows, and exchange rates. To understand how …

Author(s): Emmanuel Mourlon-Druol, Aliénor Cameron Date: July 2022 Abstract: Brexit and the rise of China as a leading international economic power have revived discussions about the geography of banking centres. This paper analyses the geographical evolution of banking centres since the 1970s, based on a database constructed from a ranking …

Author(s): Charles W. Calomiris, Mark Carlson Date: July 2022 Abstract: After an unprecedented number of banks suspended operations during the Panic of 1893, the head regulator of banks chartered by the United States government allowed about 100 banks to reopen after certifying their solvency. We evaluate whether actions by bank …

Author(s): Paul Konietschke, Steven Ongena, Aurea Ponte Marques Date: July 2022 Abstract: How do banks respond to changes in capital requirements as a result of the stress tests? Does the disclosure of stress test results matter? To answer these questions, we study the impact of European stress tests on banks’ …

Author(s): Christopher Clayton, Amanda Dos Santos, Matteo Maggiori and Jesse Schreger Date: July 2022 Abstract: We empirically characterize how China is internationalizing the Renminbi by selectively opening up its domestic bond market to foreign investors and propose a dynamic reputation model to explain this internationalization strategy. The Chinese government deliberately …

Author(s): Isabella Mueller, Eleonora Sfrappini Date: June 2022 Abstract: We identify the effect of climate change-related regulatory risks on credit reallocation. Our evidence suggests that effects depend borrower’s region. Following an increase in salience of regulatory risks, banks reallocate credit to US firms that could be negatively impacted by regulatory …

Author(s): William F. Bassett and David E. Rappoport Date: May 2022 Abstract: The use of stress testing for macroprudential objectives is advanced by modeling spillovers within the financial sector or between the real and financial sectors. In this chapter, we discuss several macroprudential elements that capture these spillovers and how …

Author(s): Priyank Gandhi and Amiyatosh Purnanandam Date: June 2022 Abstract: We show that the U.S. commercial banks have become increasingly similar in their risk exposure after the global financial crisis. Pairwise correlation in bank equity returns increased threefold after the enactment of annual stress tests under the Dodd-Frank Act (DFA). …

Author(s): Antonis Kotidis and Stacey L. Schreft Date: May 2022 Abstract: This paper studies the effects of a unique multi-day cyberattack on a technology service provider (TSP). Using several confidential daily datasets, we identify and quantify first- and second-round effects of the event. For banks using relevant services of the …

Author(s): Zafer Kanik Date: May 2022 Abstract: This paper revisits financial networks in a model of counterparty exposures, mandatory bail-ins and complementary bailouts. Under mandatory bail-ins, the network’s role is reshaped and beyond its previous contagion-related role, because counterparty obligations, in the first place, are used for bail-ins against idiosyncratic …

Author(s): Leonardo Martinez, Francisco Roch, Francisco Roldán, Jeromin Zettelmeyer Date: June 2022 Abstract: This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others. The answers relate to the …

Author(s): Carlo Altavilla, Miguel Boucinha, Lorenzo Burlon, Mariassunta Giannetti, Julian Schumacher Date: May 2022 Abstract: Exploiting the introduction of the ECB’s tiering system for remunerating excess reserve holdings, we document the importance of the access to the money market for bank lending. We show that the two-tier system produced positive …

Author(s): Xiang Fang, Bryan Hardy, Karen K Lewis Date: May 2022 Abstract: This paper studies the impact of investor composition on the sovereign debt market. We construct an aggregate data set of sovereign debt holdings by foreign and domestic bank, non-bank private, and official investors for 95 countries over twenty …

Author(s): Raphael Auer, Marc Farag, Ulf Lewrick, Lovrenc Orazem and Markus Zoss Date: May 2022 Abstract: The phenomenal growth of cryptocurrencies raises important questions about their footprint on the financial system. What role are traditional financial intermediaries playing in cryptocurrency markets and what drives their engagement? Are new nodes emerging? …

Author(s): Javier Bianchi and Louphou Coulibaly Date: May 2022 Abstract: This paper studies the transmission channels of monetary and macroprudential policies in an open economy framework and evaluates the normative implications for international spillovers and global welfare. An analytical decomposition uncovers the prominent role of expenditure switching for monetary policy, …

Author(s): Ralph De Haas, Sergei Guriev, Alexander Stepanov Date: May 2022 Abstract: Does state ownership hinder or help firms access credit? We use data on almost 4 million firms in 89 countries to study the relationship between state ownership and corporate leverage. Controlling for country-sector-year fixed effects and conventional firm-level …

Author(s): Stefan Avdjiev, Tsvetana Spasova Date: May 2022 Abstract: We conduct a comprehensive empirical investigation of the link between inequality and financial openness. We document that the relationship varies considerably not only over time, but also across the main components of total external liabilities, which have been largely overlooked by …

Author(s): Marc Flandreau, Stefano Pietrosanti, Carlotta E. Schuster Date: May 2022 Abstract: During the hypothecation “mania” of 1849-1875, many sovereign borrowers relied on the posting of collateral such as, famously, Peruvian guano. But in fact, such “securities” could not be repossessed. To explain the puzzling phenomenon of sovereign hypothecation, which …

Author(s): Ozge Akinci, Ṣebnem Kalemli-Özcan, and Albert Queralto Date: May 2022 Abstract: Foreign investors’ changing appetite for risk-taking have been shown to be a key determinant of the global financial cycle. Such fluctuations in risk sentiment also correlate with the dynamics of UIP premia, capital flows, and exchange rates. To …

Author(s): Linda S. Goldberg and Fabiola Ravazzolo Date: April 2022 Abstract: In March 2020, the Federal Reserve eased the terms on its standing swap lines in collaboration with other central banks, reactivated temporary swap agreements, and then introduced the new Foreign and International Monetary Authorities (FIMA) repo facility. We provide …

Author(s): Federico Cingano, Fadi Hassan Date: April 2022 Abstract: Using detailed bank-firm matched data, we study the impact of international financial flows on misallocation. We exploit a boom of capital inflows in Italy and identify the patterns of credit allocation by banks with different exposure to such boom. We find …

Author(s): Viral V. Acharya, Matteo Crosignani, Tim Eisertm, and Sascha Steffen Date: April 2022 Abstract: This paper surveys the theory on zombie lending incentives and the consequences of zombie lending for the real economy. It also offers a historical perspective by reviewing the growing empirical evidence on zombie lending along …

Author(s): Simona Malovaná, Martin Hodula, Zuzana Gric, Josef Bajzík Date: March 2022 Abstract: We surveyed experts from academia, central banks and other regulatory institutions on the preferred institutional setup of macroprudential policy and the underlying interactions stemming from the conduct of monetary and macroprudential policy. We find substantial support for …

Author(s): Iñaki Aldasoro, John Caparusso and Yingyuan Chen Date: February 2022 Abstract: Banks operate internationally through networks of branches and subsidiaries, also known as foreign banking offices (FBOs). Newly collected system- and entity-level data across two dozen host countries confirm stylised facts on these entities’ balance sheets and establish new …

Author(s): Iñaki Aldasoro, Sebastian Doerr and Haonan Zhou Date: March 2022 Abstract: Non-bank lenders are an important source of syndicated credit to non-financial corporates in most regions and industries. Their loan origination, however, is more concentrated by location and sector than that of banks and it is also more volatile. …

Author(s): Valentina Bruno and Hyun Song Shin Date: August 2015 Abstract: We conduct a firm-level analysis of borrowing in US dollars by non-financial corporatesfrom outside the United States. The dataset combines bond issuance data with firm-levelfinancial information. We find that firms with already high cash holdings are more likelyto issue …

Author(s): Gabriel Soderberg, Marianne Bechara, Wouter Bossu, Natasha X Che, John Kiff, Inutu Lukonga, Tommaso Mancini Griffoli, Tao Sun, and Akihiro Yoshinaga Date: February 2022 Abstract: Central banks are increasingly pondering whether to issue their own digital currencies to the general public, so-called retail central bank digital currency (CBDC). The …

Author(s): Thorsten Beck, Consuelo Silva-Buston, Wolf Wagner Date: January 2022 Abstract: Using data on 113 banking groups, spanning 116 host and 40 home countries, we find that cross-border banks increase lending in a foreign subsidiary when the degree to which their other (foreign) subsidiaries are covered by supervisory cooperation agreements …

Author(s): Kenza Benhima, Rachel Cordonier Date: February 2022 Abstract: We examine empirically the effect of two types of shocks related to expectations – “news” (increases in expected future productivity) and “sentiment” (surges in optimism unrelated to future productivity) – on gross capital flows. These two shocks together explain more than …

Author(s): Iñaki Aldasoro, Sebastian Doerr, and Haonan Zhou Date: January 2022 Abstract: This paper provides first cross-country evidence on non-bank lending during crises. We show that non-banks contract their syndicated lending by over 50% more than banks during financial shocks in borrower countries. Establishing that non-banks serve riskier borrowers globally, …

Author(s): Alexander Plekhanov and Marta Skrzypińska Date: January 2022 Abstract: This paper sheds light on the effectiveness of policies addressing high non-performing loans (NPLs). Using data on ownership of subsidiaries of foreign banks in Emerging Europe, we first show that changes in NPLs of parent banks are associated with changes in …

Author(s): Stefan Avdjiev, and Maximilian Jager Date: January 2022 Abstract: We investigate the patterns and implications of bank opacity in Europe using a rich bank-level data set. Employing a novel event study methodology, we document that public data releases by the European Banking Authority (EBA) on banks’ exposures to individual …

Author(s): Falko Fecht, Roman Inderst, Sebastian Pfeil Date: January 2022 Abstract: We offer a theory of the “boundary of the firm” tailored to banks as it builds on a single risk-shifting inefficiency and takes into account interbank lending, as an alternative to integration, and insured deposit financing. It explains why deeper …

Author(s): Anusha Chari, Karlye Dilts Stedman, Kristin Forbes Date: January 2022 Abstract: The effects of macroprudential policy on portfolio flows vary considerably across the global financial cycle. A tighter ex-ante macroprudential stance amplifies the impact of global risk shocks on bond and equity flows, increasing outflows significantly more during risk-off episodes …

Author(s): Gyöngyi Lóránth, Anatoli Segura, Jing Zeng Date: January 2022 Abstract: We study supervisory interventions in cross-border banks under different institutional architectures in a model in which a bank may provide voluntary support to an impaired subsidiary using resources in a healthy subsidiary. While a supranational architecture permits voluntary support, a …

Author(s): Ergys Islamaj, M. Ayhan Kose Date: November 2021 Abstract: Cross-border capital flows are expected to lead to increased international risk sharing by facilitating borrowing and lending in global financial markets. This paper examines risk-sharing outcomes of various types of capital flows (foreign direct investment, portfolio equity, debt, remittance, and …

Author(s): Javier Bianchi, Saki Bigio & Charles Engel Date: November 2021 Abstract: We develop a theory of exchange rate fluctuations arising from financial institutions’ demand for dollar liquid assets. Financial flows are unpredictable and may leave banks “scrambling for dollars.” Because of settlement frictions in interbank markets, a precautionary demand …

Author(s): Emanuela Benincasa, Gazi Kabas, Steven Ongena Date: October 2021 Abstract: We provide evidence that banks increase cross-border lending in response to higher climate policy stringency in their home countries. Saturating with granular set of fixed effects and including a rich set of control variables, we show that the increase in …

Author(s): Sebastian Edwards Date: October 2021 Abstract: This paper deals with COVID and macroprudential regulations in emerging markets. I document the build-up of a sturdy macroprudential structure during 2009-2019, and the relaxation of regulations in 2020-2021, as part of the effort to deal with the sanitary emergency. I show that …

Author(s):Tobias Berg, Andreas Fuster, Manju Puri Date:October 2021 Abstract: In this paper, we review the growing literature on FinTech lending – the provision of credit facilitated by technology that improves the customer-lender interaction or lenders’ screening and monitoring of borrowers. FinTech lending has grown rapidly, though in developed economies like …

Author(s): Joel F. Houston, Jongsub Lee, and Felix Suntheim Date: October 2017 Abstract: We show that banks with shared social connections partner more often in the global syndicated loan market and that central banks in the network play dominant roles in various interbank transactions, indicating that social connections facilitate business …

Author(s): Katharina Bergant and Kristin Forbes Date: October 2021 Abstract: This paper uses the initial phase of the COVID-19 pandemic to examine how macroprudential frameworks developed over the past decade performed during a period of heightened financial and economic stress. It discusses a new measure of the macroprudential stance that …

Author(s): Ambrogio Cesa-Bianchi and Fernando Eguren-Martin Date: July 2021 Abstract: Within-firm variation of corporate bond spreads around the Covid-19 outbreak shows that US dollar‑denominated bonds experienced larger increases in spreads relative to non-dollar bonds, especially at short maturities. Differently, in the non-dollar sample it was the spreads of longer maturity …

Author(s): Silvia Miranda-Agrippino, Hélène Rey Date: September 2021 Abstract: We review the literature on the empirical characteristics of the global financial cycle and associated stylized facts on international capital flows, asset prices, risk aversion and liquidity in the financial system. We analyse the co-movements of global factors in asset prices …

Author(s): Eva Schliephake, Joel Shapiro Date: September 2021 Abstract: We examine a model in which depositor learning exacerbates bank runs. Informed depositors can quickly withdraw when the bank has low-quality assets. Uninformed depositors may decide to wait, which allows them to learn by observing informed depositors’ actions. However, learning that …

Author(s): Andrew Metrick and Paul Schmelzing Date: September 2021 Abstract: We present a new database of banking-crisis interventions since the 13th century. The database includes 1886 interventions in 20 categories across 138 countries, covering interventions during all of the crises identified in the main banking-crisis chronologies, while also cataloguing a …

Author(s): Galina Hale and Luciana Juvenal Date: September 2021 Abstract: At the onset of the COVID-19 economic crisis, as in other crisis episodes, the flight to safety was accompanied by a rapid appreciation of “safe haven” currencies. We quantify currency-induced balance sheet effects for total external positions as well as …

Author(s): M. Ayhan Kose, Franziska L. Ohnsorge, Carmen M. Reinhart and Kenneth S. Rogoff Date: September 2021 Abstract: Debt in emerging market and developing economies (EMDEs) is at its highest level in half a century. In about nine out of 10 EMDEs, debt is higher now than it was in …

Author(s): Hans Degryse, Roman Goncharenko, Carola Theunisz, Tamas Vadasz Date: September 2021 Abstract: We investigate whether and how the environmental consciousness (greenness for short) of firms and banks is reflected in the pricing of bank credit. Using a large international sample of syndicated loans over the period 2011-2019, we find …

Author(s): Elisabeth Kempf, Mancy Luo, Larissa Schaefer and Margarita Tsoutsoura Date: September 2021 Abstract: Does partisan perception shape the flow of international capital? We provide evidence from two settings, syndicated corporate loans and equity mutual funds, to show that ideological alignment with foreign governments affects the cross-border capital allocation by …

Author(s): J. Scott Davis and Eric van Wincoop Date: September 2021 Abstract: We develop a theory to account for changes in prices of risky and safe assets and gross and net capital flows over the global financial cycle (GFC). The multi-country model features global risk-aversion shocks and heterogeneity of investors …

Author(s): Juan M. Londono, Stijn Claessens and Ricardo Correa Date: September 2021 Abstract: We investigate how central banks’ governance frameworks influence their financial stability communication strategies and assess the effectiveness of these strategies in preventing a worsening of financial cycle conditions. We develop a simple conceptual framework of how central …

Author(s):Mircea Epure, Irina Mihai, Camelia Minoiu and José-Luis Peydró Date: September 2021 Abstract: We show that macroprudential policies dampen the impact of global financial conditions on local credit cycles. For identification, we exploit exogenous variation in the U.S. VIX and household and business credit registers in a small open economy, …

Authors: Doyne Farmer, Charles A Goodhart and Alissa M. Kleinnijenhuis Date: September 2021 Abstract: The 2007-2008 financial crisis forced governments to choose between the unattractive alternatives of either bailing out a systemically important bank (SIB) or allowing it to fail disruptively. Bail-in has been put forward as an alternative that potentially addresses …

Authors: Andrea Fabiani, Martha Lopéz Piñeros, José Luis Peydró and Paul Soto Date: September 2021 Abstract: We study how capital controls and domestic macroprudential policy tame credit supply booms, respectively targeting foreign and domestic bank debt. For identification, we exploit the simultaneous introduction of capital controls on foreign exchange (FX) …

Authors: Kilian Rieder Date: August 2021 Abstract: I exploit a single natural experiment to estimate the comparative causal effects of different financial stability policies on bank-level credit. In 1920, four Federal Reserve Banks hiked their interest rate indiscriminately to safeguard financial stability. Another four Reserve Banks employed targeted rate action …

Author(s): Shekhar Aiyar and Manasa Patnam Date: May 2021 Abstract: This paper examines whether IMF lending is associated with increases in outflows to offshore financial centers (OFCs), known for bank secrecy and asset protection, relative to other international destinations. Using quarterly data from the BIS on bilateral bank deposits, we …

Author(s): Amir Sufi and Alan M. Taylor Date: August 2021 Abstract: Financial crises have large deleterious effects on economic activity, and as such have been the focus of a large body of research. This study surveys the existing literature on financial crises, exploring how crises are measured, whether they are …

Author(s):Lawrence Christiano, Husnu Dalgic and Armen Nurbekyan Date:August 2021 Abstract: We present data that suggests financial dollarization is primarily a device for reallocating business cycle income risk between different people within emerging market economies, rather than across different countries. Although we identify sources of fragility in some aspects of dollarization, …

Author(s): Luis Garcia, Ulf Lewrick and Taja Sečnik Date: August 2021 Abstract: We study banks’ year-end window dressing in the European Union to assess how it affects the identification of global systemically important banks (G-SIBs) and the associated capital surcharges. We find that G-SIBs compress their balance sheet at year-end …

Author(s): Maurice Obstfeld Date: July 2021 Abstract: While the globalization of production has been a prominent target of anti-globalization backlash, globalized finance has seemed to be much less in the public bull’s-eye. The blueprint for the postwar international economy agreed at Bretton Woods in 1944 envisioned nothing like today’s extensive …

Author(s): Miguel Ampudia, Thorsten Beck and Alexander Popov Date: June 2021 Abstract: Using exogenous variation generated by the creation of the Single Supervisory Mechanism (SSM) in the euro area, we find that relative to firms borrowing from banks remaining under national supervision, firms borrowing from SSM-supervised banks reduce intangible assets …

Author(s): Mikhail Mamonov, Steven Ongena and Anna Pestova Date: May 2021 Abstract: We study the impact of global financial sanctions on the Russian banks and economy. Financial sanctions were consecutively imposed between 2014 and 2019, allowing potentially-targeted (but not yet sanctioned) banks to adjust their international and domestic exposures. Compared …

Author(s):Christoffer Kok, Carola Müller, Steven Ongena and Cosimo Pancaro Date:June 2021 Abstract: Using a difference-in-differences approach and relying on confidential supervisory data and an unique proprietary data set available at the European Central Bank related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny …

Author(s): Hans Degryse, Sotirios Kokas and Raoul Minetti Date: June 2021 Abstract: We study the impact of different dimensions of banks’ experience on the extent of banks’ moral hazard in loan markets. Using rich U.S. corporate loan-level data, we find that banks’ prior experience with borrowers and co-lenders reinforces their …

Author(s): Juan M. Morelli, Pablo Ottonello and Diego J. Perez Date: June 2021 Abstract: We study the role of global financial intermediaries in international lending. We construct a model of the world economy, in which heterogeneous borrowers issue risky securities purchased by financial intermediaries. Aggregate shocks transmit internationally through financial …

Author(s): Albert Banal-Estanol, Julian Kolm, Gyöngyi Lóránth Date: May 2021 Abstract: We study how bank resolution regimes affect investment. Banking groups create financing synergies by transferring excess financing capacity across units and lowering bankers’ agency rents. Single-point-of-entry (SPOE) resolution mutualizes losses, which permits ex-post efficient continuation of weaker units following …

Author(s): Christian Friedrich, Pierre Guerin and Danilo Leiva Date: May 2021 Abstract: We propose a new strength measure of the global financial cycle by estimating a regime-switching factor model on cross-border equity flows. We then assess how this measure affects monetary policy independence, defined as central banks’ responses to exogenous …

Author(s): Franklin Allen and Ansgar Walther Date: May 2021 Abstract: This paper studies the links between financial stability and the architecture of financial systems. We review the existing literature and provide organizing frameworks for analyzing three empirically important aspects of financial architecture: The rise of non-bank financial intermediaries, the regulatory …

Author(s): Mikhail Mamonov, Steven Ongena and Anna Pestova  Date: April 2021 Abstract: We study the impact of global financial sanctions on the Russian banks and economy. Financial sanctions were consecutively imposed between 2014 and 2019, allowing potentially-targeted (but not yet sanctioned) banks to adjust their international and domestic exposures. Compared …

Author(s): Silvia Miranda-Agrippino, Tsvetelina Nenova and Helene Rey Date: October 2020 Abstract: We study the international transmission of the monetary policy of the two world’s giants: China and the US. From East to West, the channels of global transmission differ markedly. US monetary policy shocks affect the global economy primarily …

Author(s): Carol C. Bertaut, Valentina Bruno and Hyun Song Shin Date: April 2021 Abstract: We explore the relationship between portfolio flows and financial conditions by using a unique and comprehensive database of US investor flows into emerging market government bonds. We find that mutual funds display a more procyclical pattern …

Author(s): Alyssa G. Anderson, Wenxin Du and Bernd Schlusche Date: April 2021 Abstract: We show that the role of unsecured, short-term wholesale funding for global banks has changed significantly in the post-financial-crisis regulatory environment. Global banks mainly use such funding to finance liquid, near risk-free arbitrage positions—in particular, the interest …

Author(s): Itay Goldstein, Chester S. Spatt and Mao Ye Date: March 2021 Abstract: Big data is revolutionizing the finance industry and has the potential to significantly shape future research in finance. This special issue contains articles following the 2019 NBER/ RFS conference on big data. In this Introduction to the …

Author(s): Alberto Martin, Caterina Mendicino and Alejandro Van der Ghote Date: February 2021 Abstract: The Global Financial Crisis fostered the design and adoption of macroprudential policies throughout the world. This raises important questions for monetary policy. What, if any, is the relationship between monetary and macroprudential policies? In particular, how …

Author(s): Shekhar Hari Kumar and Aakriti Mathur Date: February 2021 Abstract: In this paper, we study transmission of global funding shocks to emerging economies (EMs) from the perspective of interbank markets. Money markets enable banks to engage in risk-sharing against liquidity shocks and are sensitive to global funding conditions. Accordingly, …

Author(s):Mariassunta Giannetti and Yeejin Jang Date:January 2021 Abstract: We show that foreign lenders and low market share lenders extend more credit in comparison to other lenders during lending booms leading to banking crises, but not during other credit expansions. Less established lenders also increase the amount of credit they extend …

Author(s):Hans Degryse, Mike Mariathasan and Thi Hien Tang Date:January 2021 Abstract: Global Systemically Important Banks (GSIBs) benefit from implicit government guarantees but face additional capital requirements and oversight. This paper examines the effectiveness of the Financial Stability Board’s recently introduced GSIB-framework and its short-run implications for the real economy, by …

Author(s): Barry J. Eichengreen, Balazs Csonto, Asmaa A ElGanainy and Zsoka Koczan Date: January 2021 Abstract: We review the debate on the association of financial globalization with inequality. We show that the within-country distributional impact of capital account liberalization is context specific and that different types of flows have different …

Author(s): Sergio de Ferra, Kurt Mitman and Federica Romei Date: January 2021 Abstract: Capital flows from equal to unequal countries. We document this empirical regularity in a large sample of advanced economies. The capital flows are largely driven by private savings. We propose a theory that can rationalize these findings: …

Author(s): Carlo Altavilla, Luc Laeven, José Luis Peydró Date: December 2020 Abstract: We document that there are strong complementarities between monetary policy and macroprudential policy in shaping the evolution of bank credit. We use a unique loan-level dataset comprising multiple credit registers from several European countries and different types of …

Author(s): Pol Antràs Date: November 2020 Abstract: This paper evaluates the extent to which the world economy has entered a phase of de-globalisation, and it offers some speculative thoughts on the future of global value chains in the post-COVID-19 age. Although the growth of international trade flows relative to that …

Author(s): Marina Conesa, Giulia Lotti and Andrew Powell Date: November 2020 Abstract: Theory suggest s both resilience and fragility in banking networks . This paper finds both, exploiting a new database o f cross -border syndicated lending to developing countries from 1993 to 2017. Shocks propagate via co-lenders driven by …

Author(s): Matthieu Bussière, Jin Cao, Jakob de Haan, Robert Hills, Simon Lloyd, Baptiste Meunier, Justine Pedrono, Dennis Reinhardt, Sonalika Sinha, Rhiannon Sowerbutts and Konstantin Styrin Date: October 2020 Abstract: This paper presents the main findings of an International Banking Research Network initiative examining the interaction between monetary policy and macroprudential …

Author(s): Assaf Razin Date: October 2020 Abstract: International trade increased rapidly after 1990, fueled by the growth of a complex network of global value chains. Financial globalization gathered force. Trade globalization, however, reversed course since the Global Financial Crisis. The new trend is expected to endure after the Global Pandemic …

Author(s): Michael D. Bordo Date: October 2020 Abstract: The COVID-19 pandemic spawned a global liquidity crisis in March 2020. The global liquidity crisis was alleviated by the Federal Reserve and other advanced country central banks cooperating by extending the swap lines they developed in the Global Financial Crisis 2007-2008. Central …

Author(s): Olivier Jeanne and Damiano Sandri Date: October 2020 Abstract: We use a tractable model to show that emerging markets can protect themselves from the global financial cycle by expanding (rather than restricting) capital flows. This involves accumulating reserves when global liquidity is high to buy back domestic assets at …

Author(s):Salih Fendoglu, Eda Gulsen and José Luis Peydró Date:September 2020 Abstract: We show that global liquidity limits the effectiveness of local monetary policy on credit markets. The mechanism is via a bank carry trade in international markets when local monetary policy tightens. For identification, we exploit global (VIX, U.S. monetary …

Author(s): Martijn Adriaan Boermans and Rients Galema Date:July 2020 Abstract: We study how investor’s persistent preference to invest more in the home market — “home bias” — is affecting investor’s efforts to mitigate risks associated with climate change. When investors have a tendency to tilt their portfolio towards domestic assets, …

Author(s): Robin Koepke and Simon Paetzold Date: August 2020 Abstract: This paper provides an analytical overview of the most widely used capital flow datasets. The paper is written as a guide for academics who embark on empirical research projects and for policymakers who need timely information on capital flow developments …

Author(s): Kristin Forbes Date: August 2020 Abstract: Countries are using macroprudential tools more actively with the goal of improving the resilience of their broader financial systems. A growing body of evidence suggests that these tools can accomplish specific domestic goals and should reduce country vulnerability to many domestic and international …

Author(s): Ralph De Haas, Liping Lu and Steven Ongena Date: July 2020 Abstract: We interview 379 European bank CEOs to identify their banks’ main competitors. We then provideevidence on the drivers of bilateral bank competition, construct a novel competition measure at thelocality level, and assess how well it explains variation …

Author(s):Ricardo Correa and Linda S. Goldberg Date:July 2020 Abstract: Bank holding companies (BHCs) can be complex organizations, conducting multiple lines of business through many distinct legal entities and across a range of geographies. While such complexity raises the costs of bank resolution when organizations fail, the effect of complexity on …

Author(s): Ricardo Correa, Wenxin Du and Gordon Liao Date: July 2020 Abstract: We characterize how U.S. global systemically important banks (GSIBs) supply short-term dollar liquidity in repo and foreign exchange swap markets in the post-Global Financial Crisis regulatory environment and serve as the “lenders-of-second-to-last-resort”. Using daily supervisory bank balance sheet …

Author(s): Felipe Saffie, Liliana Varela, and Kei-Mu Yi Date: June 2020 Abstract: We empirically and theoretically study the effects of capital flows on resource allocation within sectors and cross-sectors. Novel data on service firms – in addition to manufacturing firms – allows us to assess two channels of resource reallocation. …

Author(s): Ralf Meisenzahl, Friederike Niepmann, and Tim Schmidt-Eisenlohr Date: June 2020 Abstract: We show that U.S. dollar movements affect syndicated loan terms for U.S. borrowers, even for those without trade exposure. We identify the effect of dollar movements using spread and loan amount adjustments during the syndication process. Using this …

Author(s): Viral V. Acharya, Katharina Bergant, Matteo Crosignani, Tim Eisert, and Fergal J. McCann Date: May 2020 Abstract: We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—affect residential mortgage credit and house prices as well as other asset classes not directly targeted by the …

Author(s):Juliana Dutra Araujo, Manasa Patnam, Adina Popescu, Fabian Valencia, and Weijia Yao Date:May 22, 2020 Abstract: This paper builds a novel database on the effects of macroprudential policy drawing from 58 empirical studies, comprising over 6,000 results on a wide range of instruments and outcome variables. It encompasses information on …

Author(s): Moritz Schularick, Lucas Ter Steege and Felix Ward Date: May 2020 Abstract: Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies the state-dependent effects of monetary policy on financial crisis risk. Based on the near-universe of …

Author(s): Michael R. Wickens Date: May 2020 Abstract: A feature of the financial crisis rarely mentioned in the academic literature is that forward interest rates remained persistently higher than future spot rates. Yet according to the expectations hypothesis forward interest rates are unbiased predictors of future spot rates. More general …

Author(s): Pauline Gandré, Mike Mariathasan, Ouarda Merrouche and Steven Ongena Date: May 2020 Abstract: We investigate regulatory arbitrage during the G20’s global derivatives market reform. We handcollect comprehensive data on the staggered reform process and show that its progress is primarily driven by structural time-invariant factors. Following the reform banks …

Author(s):Iñaki Aldasoro, Stefan Avdjiev, Claudio Borio and Piti Disyatat Date:May 2020 Abstract: We compare and contrast two prominent notions of financial cycles: a domestic variant, which focuses on how financial conditions within individual economies lead to boom-bust cycles there; and a global variant, which highlights how global financial conditions affect …

Author(s): Thorsten Beck, Deyan Radev, Isabel Schnabel Date: May 2020 Abstract: We assess the ability of bank resolution frameworks to deal with systemic banking fragility. Using a novel and detailed database on bank resolution regimes in 22 member countries of the Financial Stability Board, we show that systemic risk, as …

Author(s): Agostino Capponi, Felix C. Corell, and Joseph E. Stiglitz Date: May 2020 Abstract: Banks usually hold large amounts of domestic public debt which makes them vulnerable to their own sovereign’s default risk. At the same time, governments often resort to costly public bailouts when their domestic banking sector is …

Author(s): Laura Alfaro, Ester Faia, Ruth Judson, and Tim Schmidt-Eisenlohr Date: April 2020 Abstract: Using a unique confidential data set with industry disaggregation of official U.S. claims and liabilities, we find that dollar-denominated securities are increasingly inter mediated by tax havens financial centers (THFC) and by less regulated funds. These …

Author(s): Craig Doidge, G. Andrew Karolyi, and René M. Stulz Date: April 2020 Abstract: For the last two decades, non-US firms have lower valuations than similar US firms. We study the evolution of this valuation gap to assess whether financial markets are less integrated after the 2008 global financial crisis …

Author(s): Luc Laeven and Fabian Valencia Date: April 2020 Abstract: This paper updates the database on systemic banking crises presented in Laeven and Valencia (2013a). Drawing on 151 systemic banking crises episodes around the globe during 1970-2017, the database includes information on crisis dates, policy responses to resolve banking crises, …

Author(s):Antonio Coppola, Matteo Maggiori, Brent Neiman, and Jesse Schreger Date:March 2020 Abstract: Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their nationality in aggregate statistics. We associate the universe of traded securities with their issuer’s ultimate parent and restate bilateral investment positions to …

Author(s):Daniel Belton, Leonardo Gambacorta, Sotirios Kokas, and Raoul Minetti Date:March 25, 2020 Abstract: We empirically assess the responses of banks in the United States to a regulatory change that influenced the distribution of funding in the banking system. Following the 2011 FDIC change in the assessment base, insured banks found …

Author(s): Anna Gardella, Massimiliano Rimarchi and Davide Stroppa Date: February 2020 Abstract: Over the past decade, cross-border merger and acquisition(M&A)activity in the EU banking sector has remained far below its pre-crisis levels, despite the regulatory reforms implemented after the financial crisis. While the EU equipped itself with the Single Rulebook, convergent …

Author(s): Tobias Adrian, Peichu Xie Date: February 2020 Abstract: The USD asset share of non-U.S. banks captures the demand for dollars by these investors. An instrumental variable strategy identifies a causal link from the USD asset share to the USD exchange rate. Cross-sectional asset pricing tests show that the USD …

Author(s): Leonardo Gambacorta, Sergio Mayordomo and Jose-Maria Serena Garralda Date: February 2020 Abstract: We explore the link between firms’ dollar bond borrowing and their FX-hedged funding opportunities, as reflected in a positive corporate basis (the relative cost of local to synthetic currency borrowing). Consistent with previous research, we first document that …

Author(s): Carlos Cantú, Leonardo Gambacorta and Ilhyock Shim Date: February 2020 Abstract: Papers in this volume were prepared as part of a BIS research protocol project on measuring the effectiveness of macroprudential policies using supervisory bank-level data implemented by five Asia-Pacific central banks. One of the main challenges in implementing a …

Author(s): Matthieu Bussière, Robert Hills, Simon Lloyd, Baptiste Meunier, Justine Pedrono, Dennis Reinhardt and Rhiannon Sowerbutts Date: January 2020 Abstract: By combining analysis of two unique confidential datasets, we examine how euro-area (EA) monetary policy and recipient-country prudential policy interact to influence the cross-border lending of French banks from France and …

Author(s): Michael Brei, Leonardo Gambacorta, Marcella Lucchetta and Bruno Maria Parigi Date: January 2020 Abstract: The paper investigates whether impaired asset segregation tools, otherwise known as bad banks, and recapitalisation lead to a recovery in the originating banks’ lending and a reduction in non-performing loans (NPLs). Results are based on a …

Author(s): Maurice Obstfeld Date: February 2020 Abstract: Mark Twain is reputed to have remarked that history does not repeat itself, but it often rhymes. While the Global Financial Crisis of 2008-2009 was not a catastrophe on the order of World War I, there is a broad similarity in the sequelae …

Author(s): Jean-Edouard Colliard and Co-Pierre Georg Date: February 2020 Abstract: Despite a heated debate on the perceived increasing complexity of financial regulation, there is no available measure of regulatory complexity other than the mere length of regulatory documents. To fill this gap, we propose to apply simple measures from the computer …

Author(s): Linda Marlene Schilling Date: December 2019 Abstract: The paper provides a novel theory of how banks not only exploit but also cause being perceived as ‘too big to fail’. Bank creditors are also voters. Economic voting prompts politicians to grant bailouts given a bank failure. The bank’s capital structure …

Author(s): Ethan Ilzetzki, Kenneth Rogoff and Carmen M. Reinhart Date: January 2020 Abstract: On the twentieth anniversary of its inception, the euro has yet to expand its role as an international currency. We document this fact with a wide range of indicators including its role as an anchor or reference in …

Author(s): Itamar Drechsler, Alexi Savov, Philipp Schnabl Date: December 2019 Abstract: Between 2003 and 2006, the Federal Reserve raised rates by 4.25%. Yet it was precisely during this period that the housing boom accelerated, fueled by rapid growth in mortgage lending. There is deep disagreement about how, or even if, …

Author(s):  Christoffer Koch, Gary Richardson, Patrick Van Horn Date: January 2020 Abstract: Countercyclical capital buffers (CCyBs) are an old idea recently resurrected. CCyBs compel banks at the core of financial systems to accumulate capital during expansions so that they are better able to sustain operations during downturns. To gauge the …

Author(s): Sebnem Kalemli-Ozcan Date: October 2019 Abstract: I show that monetary policy divergence vis-a-vis the U.S. has larger spillover effects in emerging markets than advanced economies. The monetary policy of the U.S. affects domestic credit costs in other countries through its effect on global investors’ risk perceptions. Capital flows in …

Author(s): Ricardo Lagos, Shengxing Zhang Date: October 2019 Abstract: We study the transmission of monetary policy in credit economies where money serves as a medium of exchange. We find that-in contrast to current conventional wisdom in policy-oriented research in monetary economics-the role of money in transactions can be a powerful …

Author(s): Rong Fu, Jeremy Lawson, Carolina Martinez, Abigail Watt Date: October 2019 Abstract: Assessing financial conditions in China is challenging given the wide range of conventional and unconventional policy tools the authorities wield to influence economic and market variables. We utilise principal component analysis to construct a new index that …

Author(s): Lucy White and Ansgar Walther Date: October 2019 Abstract: Recent reforms give regulators broad powers to “bail-in” bank creditors during financial crises. We analyze efficient bail-ins and their  implementation. To preserve liquidity, regulators must avoid signaling negative private information to creditors. Therefore, optimal bail-ins in bad times depend only …

Author(s):Fernando Arce, Julien Bengui, Javier Bianchi Date:September 2019 Abstract: This paper proposes a theory of foreign reserves as macroprudential policy. We study an open economy model of financial crises, in which pecuniary externalities lead to overborrowing, and show that by accumulating international reserves, the government can achieve the constrained-efficient allocation. …

Author(s): Julien Bengui, Javier Bianchi Date: August 2019 Abstract: The outreach of macroprudential policies is likely limited in practice by imperfect regulation enforcement, whether due to shadow banking, regulatory arbitrage, or other regulation circumvention schemes. We study how such concerns affect the design of optimal regulatory policy in a workhorse …

Authors: John D. Burger, Francis E. Warnock, Veronica Cacdac Warnock Date: August 2019 Abstract: We put forward the notion that capital flows—specifically, gross portfolio flows—fluctuate around some natural level. Our particular measure of the natural level of capital flows, denoted by KF*, is a theory-based time-varying supply-side factor, much like …

Authors: Sebastian Horn, Carmen M. Reinhart, Christoph Trebesch Date: July 2019 Abstract: Compared with China’s dominance in world trade, its expanding role in global finance is poorly documented and understood. Over the past decades, China has exported record amounts of capital to the rest of the world. Many of these …

Authors: Yuko Hashimoto ; Signe Krogstrup Date: April  2019 Abstract: This paper assesses the role of bank and nonbank financial institutions’ balance sheet foreign exposures and risk management practices in driving capital flow responses to global risk. Using a unique and previously unexplored dataset on domestic and cross border balance …

Authors: Ata Can Bertay, Asli Demirgüç-Kunt and Harry Huizinga Date: June 2019 Abstract: This paper provides evidence on how bank performance and strategies vary with the degree of bank internationalization, using data for 113 countries over 2000-15. Over this period, bank internationalization is associated with lower valuations and lower returns …

Authors: Harry Huizinga, Luc Laeven Date: June 2019 Abstract: Loan loss provisions in the euro area are negatively related to GDP growth, i.e., they are procyclical. Loan loss provisions tend to be more procyclical at larger and better capitalized banks. The procyclicality of loan loss provisions can explain about two-thirds …

Authors: Mehmet Ziya Gorpe ; Giovanni Covi ; Christoffer Kok Date: May 2019 Abstract: This paper presents a novel approach to investigate and model the network of euro area banks’ large exposures within the global banking system. Drawing on a unique dataset, the paper documents the degree of interconnectedness and …

Authors: Előd Takáts and Judit Temesvary Date: May 2019 Abstract: We combine a rarely accessed BIS database on bilateral cross-border lending flows with cross-country data on macroprudential regulations. We study the interaction between the monetary policy of major international currency issuers (USD, EUR and JPY) and  macroprudential policies enacted in …

Authors: Angela Maddaloni, Alessandro Scopelliti Date: May 2019 Abstract: Prior to the financial crisis, prudential regulation in the EU was implemented nonuniformly across countries, as options and discretions allowed national authorities to apply a more favorable regulatory  treatment. We exploit the national implementation of the CRD and derive a country …

Authors: Fabio Franch, Luca Nocciola, Dawid Żochowski Date: May 2019 Abstract: We analyse the cross-border propagation of prudential regulation in the euro area. Using the Prudential Instruments Database (Cerutti et al., 2017b) and a unique confidential database on balance sheets items of euro-area financial institutions we estimate panel models for …

Authors: Matthieu Darracq Pariès, Christoffer Kok, Elena Rancoita Date: March 2019 Abstract: We analyse the interaction between monetary and macroprudential policies in the euro area by means of a two-country DSGE model with financial frictions and cross-border spillover effects. We calibrate the model for the four largest euro area countries …

Authors:Jonas Heipertz, Amine Ouazad, Romain Rancière Date:July 2019 Abstract:The paper uses bank- and instrument-level data on asset holdings and liabilities to identify and estimate a general equilibrium model of trade in financial instruments. Bilateral ties are formed as each bank selects the size and the diversification of its assets and …

Authors: Joseba Martinez, Thomas Philippon, Markus Sihvonen Date: June 2019 Abstract: We compare risk sharing in response to demand and supply shocks in four types of currency unions: segmented markets; a banking union; a capital market union; and complete financial markets. We show that a banking union is efficient at …

Authors: Nauro F Campos, Paul De Grauwe, Yuemei Ji, Angelo Martelli, Orkun Saka Date: June 2019 Abstract: Financial crisis can trigger policy reversals, i.e. they can lead to a process of re- regulation of financial markets. Using a recent comprehensive dataset on financial liberalization across 94 countries for the period …

Authors:Graciela L. Kaminsky Date:May 2019 Abstract: This paper examines the new trends in research on capital flows fueled by the 2007-2009 Global Crisis. Previous studies on capital flows focused on current-account imbalances and net capital flows. The Global Crisis changed that. The onset of this crisis was preceded by a …

Authors: Charles W. Calomiris, Matthew S. Jaremski, David C. Wheelock Date: May 2019 Abstract: Liquidity shocks transmitted through interbank connections contributed to bank distress during the Great Depression. New data on interbank connections reveal that banks were much more likely to close when their correspondents closed. Further, after the Federal …

Authors: Joshua Aizenman, Yin-Wong Cheung, Xingwang Qian Date: June 2019 Abstract: This paper examines determinants of the international reserves (IR) currency composition before and after the Global Financial Crisis (GFC). Applying the annual data of 58 countries, we confirm that countries that trade more with the US, euro zone, UK, …

Authors: Assaf Razin, Efraim Sadka Date: April 2019 Abstract: Globalization, in the form of financial flows, which is always advantageous on an aggregative level, typically creates winners and losers, if left exclusively to market forces. The effects of financial globalization on income inequality depends on whether the country exports its …

Authors: Boris Hofmann, Hyun Song Shin and Mauricio Villamizar-Villegas Date: March 2019 Abstract: We employ a rarely available high-frequency micro data set to study the impact of foreign exchange intervention on domestic credit growth. We find that sterilised purchases of dollars by the central bank dampens the flow of new …

Authors: Zohair Alam, Adrian Alter, Jesse Eiseman, Gaston Gelos, Heedon Kang, Machiko Narita, Erlend Nier, and Naixi Wang Date: March 2019 Abstract: This paper introduces a new comprehensive database of macroprudential policies, which combines information from various sources and covers 134 countries from January 1990 to December 2016. Using these …

Authors: Kamran Bilir, Davin Chor, Kalina Manova Date: February 2019 Abstract: This paper evaluates the influence of host-country financial conditions on the global operations of multinational firms. Using detailed U.S. data, we establish that financial development in a country is associated with relatively more entry by multinational affiliates, as well …

Authors: / Date: February 2019 Abstract: This paper presents a first analysis of the experience to date with the global systemically important bank (G-SIB) framework, the methodology for assessing the systemic importance of G-SIBs. Several issues are examined. First, we investigate whether G-SIBs and non-G-SIBs have behaved differently since the …

Authors: Ester Faia, and Soeren Karau Date: January 2019 Abstract: The risk-taking channel of monetary policy acquires relevance only if it affects systemic risk. We find robust evidence of a systemic risk-taking channel using cross-country and time-series evidence in panel and proxy VARs for 29 G-SIBs from seven countries. We …

Authors: Barry Eichengreen, and Rui Esteves Date: January 2019 Abstract: In this paper we survey the history of international finance spanning a century and a half. We start by characterizing capital flows in the long run, organizing our discussion around six facts relating to the volume and volatility of capital …

Authors: Pierre-Richard Agénor and Luiz Awazu Pereira da Silva Date: January 2019 Abstract: The gains from international macroprudential policy coordination are studied in a two-region, core-periphery macroeconomic model with imperfect financial integration and cross-border banking. Financial frictions occur at two levels: between firms and banks in each region, and between …

Authors: Mariusz Jarmuzek and Tonny Lybek Date:December 2018Abstract: This paper argues that better governance practices can reduce the costs, risks and uncertainty of financial intermediation. Our sample covers high-, middle- and low-income countries before and after the global financial crisis (GFC). We find that net interest margins of banks are …

Authors: Meghana Ayyagari, Thorsten Beck and Maria Soledad Martinez Peria Date: December 2018 Abstract: Combining balance sheet data on 900,000 firms from 48 countries with information on the adoption of macroprudential policies during 2003-2011, we find that these policies are associated with lower credit growth. These effects are especially significant …

Authors: Daniel Gurara, Andrea Presbitero and Miguel Sarmiento Date: December 2018 Abstract: Cross-border bank lending is a growing source of external finance in developing countries and could play a key role for infrastructure financing. This paper looks at the role of multilateral development banks (MDBs) on the terms of syndicated …

Authors: Eugenio M Cerutti and Maurice Obstfeld Date: December 2018 Abstract: A cross-country comparative analysis shows that there is substantial room for further integration of China into global financial markets, especially in the case of the international bond market. A further successful liberalization of the Chinese bond market would encompass …

Authors: Stefan Avdjiev, Bryan Hardy, Sebnem Kalemli-Ozcan and Luis Servén Date: December 2018 Abstract: We construct a new data set of quarterly international capital flows by sector, with an emphasis on debt flows. Using our new data set, we establish four facts. First, the co-movement of capital inflows and outflows …

Authors: Bryan Hardy Date: November 2018 Abstract: Emerging market firms frequently borrow in foreign currency (FX), but their assets are often denominated in domestic currency. This behavior leads to an FX mismatch on firms balance sheets, which can harm their net worth in the event of a depreciation. I use …

Authors: Adrian Alter, Jane Dokko and Dulani Seneviratne Date: November 2018 Abstract: We examine the relationship between house price synchronicity and global financial conditions across 40 countries and about 70 cities over the past three decades. The role played by cross-border banking flows in residential property markets is examined as …

Authors: Johannes Breckenfelder, and Bernd Schwaab Date: November 2018 Abstract: We study spillovers from bank to sovereign risk in the euro area using difference specifications around the European Central Bank’s release of stress test results for 130 significant banks on October 26, 2014. We document that following this information release …

Authors: Miguel Ampudia and Skander Van den Heuvel Date: November 2018 Abstract: This paper examines the effects of monetary policy on the equity values of European banks. We identify monetary policy shocks by looking at changes in the EONIA one-month and two-year swap contract rates during narrow windows around the …

Authors: Pierre-Richard Agénor, Leonardo Gambacorta, Enisse Kharroubi and Luiz Awazu Pereira da Silva Date: October 2018 Abstract: This paper studies the effects of prudential regulation, financial development, and financial openness on economic growth. Using both existing models and a new OLG framework with banking and prudential regulation in the form …

Authors: Mathias Hoffmann, Egor Maslov, Bent E Sørensen and Iryna Stewen Date: October 2018 Abstract: The interplay of equity market and banking integration is of first-order importance for risk sharing in the EMU. While EMU created an integrated interbank market, “direct” banking integration (in terms of direct cross-border bank-to-real sector …

Authors: José L. Fillat, Stefania Garetto and Arthur V. Smith Date: October 2018 Abstract: The global financial crisis of 2008 was followed by a wave of regulatory reforms that affected large banks, especially those with a global presence. These reforms were reactive to the crisis. In this paper we propose …

Authors: Eugenio M Cerutti and Haonan Zhou Date: September 2018 Abstract: We analyze the joint impact of macroprudential and capital control measures on cross-border banking flows, while controlling for multidimensional aspects in lender-and-borrower-relationships (e.g., distance, cultural proximity, microprudential regulations). We uncover interesting spillover effects from both types of measures when …

Authors: Stefan Avdjiev, Uluc Aysun and Ralf Hepp Date: September 2018 Abstract: We find that the lending behaviour of global banks’ subsidiaries throughout the world is more closely related to local macroeconomic conditions and their financial conditions than to those of their owner-specific counterparts. This inference is drawn from a …

Authors: Marina Azzimonti, and Vincenzo Quadrini Date: September 2018 Abstract: We study how cross-country macroeconomic spillovers caused by sovereign default affect equilibrium bailouts. Because of portfolio diversification, the default of one country causes a macroeconomic contraction also in other countries. This generates a self-interest for these other countries to bailout …

Authors: Björn Richter, Moritz Schularick, and Ilhyock Shim Date: September 2018 Abstract: Central banks increasingly rely on macroprudential measures to manage the financial cycle. However, the effects of such policies on the core objectives of monetary policy to stabilise output and inflation are largely unknown. In this paper, we quantify …

Authors: Ester Faia, Sebastien Laffitte, and Gianmarco Ottaviano Date: September 2018 Abstract: Using a novel dataset on the 15 European banks classified as G-SIBs from 2005 to 2014, we find that the impact of foreign expansion on risk is always negative and significant for most individual and systemic risk metrics. …

Authors: Ilhyock Shim, and Kwanho Shin Date: September 2018 Abstract: We investigate if financial stress in countries where international banks are headquartered is a major driver of banking outflows from emerging market economies (EMEs). We find that when financial stress measured by sovereign or bank CDS spread or corporate bond …

Authors: Vincent Bouvatier, Gunther Capelle-blancard, and Anne-Laure Delatte Date: September 2018 Abstract: This paper provides the first quantitative assessment of the contribution of global banks in intermediating tax evasion. Applying gravity equations on a unique regulatory dataset based on comprehensive individual country-by-country reporting from all the Systemically Important Banks the …

Authors: Financial Stability Board (FSB) Date: March 2018 Abstract:  This mid-year update provides an overview of evolutions affecting correspondent banking, however with fewer details than the publications of July 2017, which presented full year data. The FSB has agreed with SWIFT to an arrangement under which SWIFT will provide six-monthly data updates …