March 21, 2018

Working Papers

  • CEPR Working Paper: US Monetary Policy and International Risk Spillovers

    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 …
  • CEPR Working Paper: The Limits of Monetary Economics: On Money as a Medium of Exchange in Near-Cashless Credit Economies

    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 …
  • CEPR Working Paper: Chinese Financial Conditions and their Spillovers to the Global Economy and Markets

    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 …
  • CEPR Working Paper: Rules versus Discretion in Bank Resolution

    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 …
  • NBER Working Paper: A Macroprudential Theory of Foreign Reserve Accumulation

    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. …
  • CEPR Working Paper: Macroprudential Policy with Leakages

    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 …
  • NBER Working Paper: The Natural Level of Capital Flows

    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 …
  • CEPR Working Paper: China’s Overseas Lending

    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 …
  • IMF Working Paper: Capital Flows: The Role of Bank and Nonbank Balance Sheets

    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 …
  • BIS Working Paper: Are international banks different? Evidence on bank performance and strategy

    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 …
  • ECB Working Paper: The procyclicality of banking: evidence from the euro area

    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 …
  • BIS Working Paper: Are international banks different? Evidence on bank performance and strategy

    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 …
  • IMF Working Paper: CoMap: Mapping Contagion in the Euro Area Banking Sector

    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 …
  • BIS Working Paper: How does the interaction of macroprudential and monetary policies affect cross-border bank lending?

    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 …
  • ECB Working Paper: Rules and discretion(s) in prudential regulation and supervision: evidence from EU banks in the run-up to the crisis

    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 …
  • ECB Working Paper: Cross-border effects of prudential regulation: evidence from the euro area

    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 …
  • ECB Working Paper: Macroprudential policy in a monetary union with cross-border banking

    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 …
  • NBER Working Paper: The Transmission of Shocks in Endogenous Financial Networks: A Structural Approach

    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 …
  • NBER Working Paper: Does a Currency Union Need a Capital Market Union? Risk Sharing via Banks and Markets

    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 …
  • CEPR Working Paper: Financial Crises and Liberalisation: Progress or Reversals?

    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 …
  • NBER Working Paper: Boom-Bust Capital Flow Cycles

    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 …
  • NBER Working Paper: Interbank Connections, Contagion and Bank Distress in the Great Depression

    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 …
  • NBER Working Paper: The Currency Composition of International Reserves, Demand for International Reserves, and Global Safe Assets

    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, …
  • CEPR Discussion Paper: Welfare State, Inequality, and Globalization: Role of International-capital-flow Direction

    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 …
  • BIS Working Paper: FX intervention and domestic credit: Evidence from high-frequency micro data

    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 …
  • IMF Working Paper – Digging Deeper–Evidence on the Effects of Macroprudential Policies from a New Database

    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 …
  • CEPR Discussion Paper: Host-Country Financial Development and Multinational Activity

    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 …
  • BIS Working Paper: An examination of initial experience with the global systemically important bank framework

    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 …
  • CEPR Discussion Paper – Banks’ Systemic Risk and Monetary Policy

    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 …
  • CEPR Discussion Paper – The Trials of the Trilemma: International Finance 1870-2017

    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 …
  • BIS Working Paper – Global Banking, Financial Spillovers, and Macroprudential Policy Coordination

    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 …
  • IMF Working Paper: Can Good Governance Lower Financial Intermediation Costs?

    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 …
  • IMF Working Paper – The Micro Impact of Macroprudential Policies: Firm-Level Evidence

    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 …
  • IMF Working Paper: Borrowing Costs and The Role of Multilateral Development Banks: Evidence from Cross-Border Syndicated Bank Lending

    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 …
  • IMF Working Paper: China’s Bond Market and Global Financial Markets

    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 …
  • BIS Working Paper: Gross capital flows by banks, corporates and sovereigns

    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 …
  • BIS Working Paper: Foreign currency borrowing, balance sheet shocks and real outcomes

    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 …
  • IMF Working Paper: House Price Synchronicity, Banking Integration, and Global Financial Conditions

    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 …
  • ECB Working Paper: Bank to sovereign risk spillovers across borders: evidence from the ECB’s Comprehensive Assessment

    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 …
  • ECB Working Paper: Monetary policy and bank equity values in a time of low interest rates

    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 …
  • BIS Working Paper: The effects of prudential regulation, financial development and financial openness on economic growth

    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 …
  • CEPR Discussion Paper: Are Banking and Capital Markets Union Complements? Evidence from Channels of Risk Sharing in the Eurozone

    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 …
  • CEPR-Discussion Paper: What are the consequences of global banking for the international transmission of shocks? A quantitative analysis

    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 …
  • IMF Working Paper: Cross-border Banking and the Circumvention of Macroprudential and Capital Control Measures

    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 …
  • BIS Working Paper: What drives local lending by global banks?

    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 …
  • NBER Working Paper: International Spillovers and ‘Ex-ante’ Efficient Bailouts

    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 …
  • NBER Working Paper: The Costs of Macroprudential Policy

    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 …
  • CEPR Discussion Paper: Foreign Expansion, Competition and Bank Risk

    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. …
  • BIS Working Paper: Financial stress in lender countries and capital outflows from emerging market economies

    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 …
  • CEPR Discussion Paper: Banks Defy Gravity in Tax Havens

    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 …
  • CEPR Discussion Paper: Foreign Expansion, Competition and Bank Risk

    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. …
  • FSB Report: FSB Correspondent Banking Data Report − Update.

    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 …