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 are temporary. Over the longer[…]
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 (ROE) prior to a crisis[…]
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 to the recent literature that[…]
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, we study the impact of[…]
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 with incidental truncation that jointly[…]
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 non-industrial countries. Finally we examine[…]
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 structure and the policy instruments[…]
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, there remains a significant gap[…]
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 rates. We find that these[…]
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 consumers with an alternative to[…]