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: when interest rates rise, the[…]
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 borders and provide emerging markets[…]
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 by regulators, highlighting the need[…]
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 central bank purchases saw their[…]
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 relies on within-loan contribution variation[…]
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 the global financial system. A[…]
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 and outside of the currency[…]
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. This paper contextualizes events using[…]
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 by around 6% and 2%,[…]
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 that rely on information from[…]