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[…]
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 also lead to contagion—the mutual[…]
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 AQR announcement, reviewed banks reduce[…]
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 relationship is not driven by[…]