|
on Banking |
| By: | Saka, O.; Eichengreen, B.; Aksoy, C. G. |
| Abstract: | We ask whether epidemic exposure leads to a shift in financial technology usage and who participates in this shift. We exploit a dataset combining Gallup World Polls and Global Findex surveys for some 250,000 individuals in 140 countries, merging them with information on the incidence of epidemics and local 3G internet infrastructure. Epidemic exposure is associated with an increase in remote-access (online/mobile) banking and substitution from bank branch-based to ATM activity. Heterogeneity in response centers on the age, income and employment of respondents. Young, high-income earners in full-time employment have the greatest tendency to shift to online/mobile trans-actions in response to epidemics. These effects are larger for individuals with better exante 3G signal coverage, highlighting the role of the digital divide in adaption to new technologies necessitated by adverse external shocks. |
| Keywords: | epidemics; fintech; banking |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:cty:dpaper:21/03&r= |
| By: | Ryo Aoki (Bank of Japan); Kunimasa Antoku (Bank of Japan); Shunsuke Fukushima (Bank of Japan); Tomoyuki Yagi (Bank of Japan); Shinichiro Watanabe (Bank of Japan) |
| Abstract: | Most of the major Japanese banks have endeavored to stabilize their foreign currency funding by increasing long term market-based funding and corporate deposits while expanding their overseas lending. In March 2020, when tensions in the international financial and capital markets increased due to the spread of Covid-19, USD lending surged due to the drawdown of commitment lines and other factors. The efforts of individual banks to stabilize their USD funding, as well as the effectiveness of USD funds-supplying by the six major central banks, prevented a major disruption in Japanese banks' USD funding. However, the importance of enhancing the robustness of USD funding structures was reaffirmed, as evidenced by the apparent vulnerability of short-term market-based funding at the height of the stressed environment. Appropriate management of foreign currency liquidity risk is crucial, not only for the stable operation of individual banks but also for the stability of the financial system as a whole. Japanese banks, for which foreign currency funding is one of the most important management issues, need to maintain efforts to strengthen their funding base and upgrade their risk management. |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojrev:rev21e04&r= |
| By: | Mamadou Ndione (CREGO - Centre de Recherche en Gestion des Organisations [Dijon] - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE] - UB - Université de Bourgogne - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar) |
| Abstract: | The purpose of microfinance institutions (MFIs) is to lend money to populations that lack the means to access the formal banking system. The various actors involved with MFIs are liable to pursue different and sometimes conflicting goals and interests, which can cause inefficiencies. This article discusses the impact of MFI stakeholders on wealth creation among these institutions in the eight countries that make up the West African Economic and Monetary Union (UEMOA). While the volume of credit given to clients and the quality of each country's macro-governance index have a positive impact on MFI wealth creation, the results are less clear when it comes to the impact of owners' or shareholders' contributions, or public subsidies. In any case, savers, lenders, and female clientele have no significant impact on MFI wealth creation. |
| Abstract: | Las instituciones de microfinanzas (IMF) tienen por objetivo prestar dinero a las poblaciones que no disponen de recursos suficientes para acceder al sistema bancario formal. Estas IMF agrupan varios actores que pueden proseguir objetivos e intereses diferentes, e incluso conflictuales, lo que puede ser fuente de ineficiencia. El presente artículo se interesa al impacto de las partes interesadas de las IMF sobre la riqueza generada en su seno en los ocho países de la Unión económica y monetaria oeste-africana (UEMOA). El autor muestra que, si bien el volumen de los créditos acordados a los clientes y la cualidad del índice de macro-gobernanza de cada país tienen una influencia positiva en la riqueza creada por las IMF, los resultados son más desiguales respecto al impacto de las aportaciones de los propietarios o de los socios, así como de las subvenciones públicas. En cualquier caso, les ahorradores, los prestamistas y la clientela femenina no tienen influencia significativa en la creación de valor de estas IMF. |
| Abstract: | Les institutions de microfinance (IMF) ont pour objet de prêter de l'argent aux populations qui ne disposent pas de moyens suffisants pour accéder au système bancaire formel. Ces IMF regroupent plusieurs acteurs susceptibles de poursuivre des objectifs et des intérêts différents, voire conflictuels, ce qui peut être source d'inefficience. Cet article s'intéresse à l'impact des parties prenantes des IMF sur la richesse créée en leur sein dans les huit pays de l'Union économique et monétaire ouest-africaine (UEMOA). L'auteur montre que, si le volume des crédits accordés aux clients et la qualité de l'indice de macro-gouvernance de chaque pays ont une influence positive sur la richesse créée par les IMF, les résultats sont plus mitigés en ce qui concerne l'impact des apports des propriétaires ou des sociétaires, ainsi que des subventions publiques. Dans tous les cas, les épargnants, les prêteurs et la clientèle féminine n'ont aucune influence significative sur la création de valeur de ces IMF. |
| Keywords: | Institution de microfinance,UEMOA |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03121164&r= |
| By: | Ben-Gad, M.; Pearlman, J.; Sabuga, I. |
| Abstract: | We propose a general equilibrium framework that highlights the interaction of reserve requirements and a conventional monetary policy in a model that combines endogenous housing loan defaults and financial intermediation frictions due to the costs of enforcing contracts. We use the model to examine how the interaction of these policies affect (i) the credit and business cycle; (ii) the distribution of welfare between savers and borrowers; (iii) the overall welfare objectives when monetary and macroprudential policies are optimised together or separately. We find that models with an optimised reserve ratio rule are effective in reducing the sudden boom and bust of credit and the business cycle. We also find that there are a distributive implications of the introduction of reserve ratio where borrowers gain at the expense of savers. However, there is no difference in the overall welfare results whether monetary and macroprudential policies are optimised together or separately. |
| Keywords: | Reserve requirements; endogenous loan defaults; welfare |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:cty:dpaper:21/04&r= |
| By: | Radoslav Raykov |
| Abstract: | This paper explores the extent to which correlated investments in the futures market concentrated systemic risk on large Canadian banks around the 2008 crisis. We find that core banks took positions against the periphery, increasing their systemic risk as a group. On the portfolio level, position similarity was the main systemic risk driver for core banks, while cross-price correlations drove the systemic risk of noncore banks. Core banks were more diversified, but their portfolios also overlapped more. By contrast, non-core banks were less diversified, but also overlapped less. This significantly nuances the debate on concentration versus diversification as systemic risk sources. |
| Keywords: | Financial institutions; Financial markets |
| JEL: | G10 G20 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-50&r= |
| By: | Hongyan Liang (Faculty of Business Administration Gies College of Business University of Illinois Urbana-Champaign Champaign IL 61820, USA Author-2-Name: Zilong Liu Author-2-Workplace-Name: Discover Financial Service Riverwoods IL 60015, USA Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | "Objective - This paper uses a sample of annual observations of European banks to examine whether the liquidity risk affects a bank's risk-taking behavior and its future loan growth. Methodology – A sample of European banks (27 member countries of the European Union plus U.K.) over the period of 2005 to 2019 are used in this study. Liquidity risk is measured by the ratio of liquid assets to total assets. Given the longitudinal nature of the data, the authors use panel regression with bank fixed effects to control for unobserved characteristics that might affect the dependent variable. Findings – The authors find that banks holding more liquid assets take less risk and show a higher subsequent loan growth rate. These results hold for both small and large banks. Novelty – To the authors' best knowledge, this is one of the earliest studies to carefully examine the effects of liquidity risk on risk-taking behavior and loan growth rate for European banks. Our research suggests that the current Basel III requirement on liquidity ratio can decrease bank's risking-taking behavior while not necessarily impact their future loan growth. Type of Paper - Empirical" |
| Keywords: | Bank Liquidity Risk; Risk-taking Behavior; Loan Growth; Basel III |
| JEL: | G21 G01 G18 |
| Date: | 2021–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr187&r= |
| By: | Capraro, Santiago; Panico, Carlo; Torres-Gonzalez, Luis Daniel |
| Abstract: | Interest rates in the USA and in other countries have experienced persistent and generalised declines since the 1980s. The main interpretations of this phenomenon ignore the role of monetary factors, such as financial and monetary policy. The essay proposes an alternative interpretation based on the choice of the Federal Reserve (FED) to conduct monetary policy by attributing high priority to financial-stability. The interaction between changes in financial regulation, the transformation of "specialized" banking into "universal", and the FED's concern with financial instability have led the central bank to add to the role of "lender of last resort" that of "lender of first resort" that systematically provides liquidity at a low cost to financial firms. This new conduct of monetary policy has produced the downward trend in interest rates. |
| Keywords: | interest rates, monetary policy, financial stability, change of financial regulation. |
| JEL: | E11 E12 E43 E44 E52 E58 G01 G21 |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110181&r= |
| By: | Jahan Abdul Raheem (University of Waikato); Gazi M. Hassan (University of Waikato); Mark J. Holmes (University of Waikato) |
| Abstract: | This study analyses the impact of remittances on the monetary transmission mechanism (MTM) of the Sri Lankan economy during its conflict and post-conflict eras, using monthly data from 1996 to 2009. In addition, the study focuses on how the impact of remittances varied over different intermediate transmission channels, especially credit, asset prices, and exchange rate, in transmitting monetary policy shocks to the economy. The SVAR model is used to analyse the impact of remittances in the transmission of monetary policy shock to real economic variables. The empirical findings reveal that remittances affect the MTM of Sri Lanka in the post-conflict period significantly and their impact on bank credit and asset prices is relatively more intense than the exchange rate channel in the post-conflict period. The findings of this study also suggest that conflict-driven migration and the consequent increase in the inflow of remittances could impact monetary policy measures through wealth and liquidity effects more after the end of the conflict. |
| Keywords: | remittances;monetary policy;transmission channels;conflict |
| JEL: | E5 E52 F24 D74 |
| Date: | 2021–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:21/10&r= |
| By: | Ishizu, Mina |
| Abstract: | The paper aims to offer an introduction to provincial financial agents as the key components in provincial-metropolitan integration of money markets. It establishes that PFAs engaged in de facto banking and played an important role in local money markets. Both in England and in Tokugawa Japan, they were responsible for making decisions whether or not to establish a connection with financial agents in the commercial centres. The paper also considers some of the financial services facilitated by the existence of financial connections between metropolitan and provincial financial agents. In both countries, remittances and (particularly in England) investment were important financial activities facilitated by such connections, while bill-rediscounting appears to have been relevant only in the English case. On the other hand, in Japan domain-related business activity forged financial links with the commercial centres, links in which provincial financial agents played a major role. Also the expansion of inter-domainal private trade may have further stimulated the inter-regional financial linkages in the late Tokugawa period. |
| Keywords: | financial agents; provincial towns; inter-regional financial linkages;; early industrialisation |
| JEL: | N20 N23 N25 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:103159&r= |
| By: | Hyun, Sang Baek (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Na, Suyeob (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Youngsun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Cho, Ko Un (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Seo, Bongkyo (Dongguk University) |
| Abstract: | 본 보고서에서는 중국 금융개방의 환경 변화를 분석하였다. 대내적으로는 금융개방 관련 정책 및 제도의 변화를 살펴보았고, 대외적으로는 미·중 갈등 심화가 중국 금융개방에 미치는 영향을 분석하였다. 산업·기술 측면으로는 중국 디지털 금융 발전에 따른 미·중 금융 플랫폼 헤게모니 경쟁에 대해 살펴보았다. 마지막으로 중국 금융개방을 평가하고 한국의 대응방향과 한·중 금융협력에 대한 정책 시사점을 제안하였다. China's financial opening has progressed at a very slow pace, unlike the manufacturing and trade sectors that have pushed for an active opening to the outside world. The Chinese economy has been growing rapidly while serving as a global production base, but since 2012, it has become necessary to modify its approaches to achieve growth as it enters the so-called “New Normal (新常態)”, an era of medium-speed growth. Recently, new reform and opening measures have been taken in various fields to improve the quality of the Chinese economy, and the need for reform and opening in the financial sector has also increased. Internally, the financial system centered on China's state-owned commercial banks has focused on indirect financing, which has served as a major obstacle to upgrading China's economy and industry to the next level, further increasing the need for reform and opening of the financial sector. Moreover, externally, the U.S.-China conflict which began in earnest in 2018, is applying strongly pressure toward reform and opening in China’s financial sector. The Chinese government began to show a proactive attitude toward financial opening amid such internal needs and external pressure, and an important development was seen in China’s financial opening when President Xi Jinping declared further opening measures at the Boao Forum in April 2018. The Chinese financial authorities have prepared follow-up measures related to financial opening, and the Chinese government’s efforts toward financial opening in the three years from 2018 to 2020 yielded more results than the ten-year opening period since its accession to the WTO. (the rest omitted) |
| Keywords: | USA; China; Chinese; financial opening; ecomony; New Normal; |
| Date: | 2020–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieppa:2020_009&r= |
| By: | Leibniz-Institut für Finanzmarktforschung SAFE (Ed.) |
| Abstract: | Nach der Bundestagswahl am 26. September 2021 wird sich die künftige Bundesregierung mit einer Reihe drängender Herausforderungen befassen müssen. Aus Sicht des Leibniz-Instituts für Finanzmarktforschung SAFE haben die folgenden, miteinander verbundenen Einzelpunkte dabei Priorität: 1. Schaffung eines ordnungspolitischen Pakets zur Sicherung globaler Gemeinschaftsgüter, wie etwa des Klimas 2. Initiative zum Aufbau notwendiger Datensätze und Standards für eine zielgenaue Nachhaltigkeitsgestaltung an den Finanzmärkten 3. regulatorischer Fahrplan zur Erfassung, Ermöglichung und Einhegung einer digitalen Transformation des Finanzsystems 4. Vollendung der Bankenunion, insbesondere durch einen 'europäischen Schlussstein': der Schaffung einer einheitlichen Aufsicht und Letztabsicherung 5. Durchbrechung des 'Doom-Loop' zwischen Staaten und Banken in Europa, insbesondere durch Begrenzung des Umfangs, in dem eigene Staatsanleihen im Portfolio von Banken liegen dürfen 6. ernsthafter Versuch zur Schaffung eines einheitlichen und integren europäischen Kapitalmarkts mit einer Aufsicht nach US-Vorbild 7. Banken- und Kapitalmarktunion als wesentliche Bausteine für eine grundlegende Reform der Altersversorgung mit mehr Teilhabe aller Bürger:innen an der Leistungsentwicklung der Volkswirtschaft. |
| Keywords: | Klimawandel,Green Finance,Digitalisierung,Finanzstabilität,Bankenunion,Kapitalmarktunion,Altersversorgung |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safepl:91&r= |
| By: | Marozzi, Armando |
| Abstract: | This paper proposes an econometric framework for nowcasting the monetary policy stance and decisions of the European Central Bank (ECB) exploiting the ow of conventional and textual data that become available between two consecutive press conferences. Decompositions of the updated nowcasts into variables' marginal contribution are also provided to shed light on the main drivers of the ECB's reaction function at every point in time. In out-of-sample nowcasting experiments, the model provides an accurate tracking of the ECB monetary policy stance and decisions. The inclusion of textual variables contributes significantly to the gradual improvement of the model performance. JEL Classification: E37, E47, E52 |
| Keywords: | dynamic factor model, forecasting, monetary policy, natural language processing |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212609&r= |
| By: | Nicola Cetorelli |
| Abstract: | Should open-end mutual funds experience redemption pressures, they may be forced to sell assets, thus contributing to asset price dislocations that in turn could be felt by other entities holding similar assets. This fire-sale externality is a key rationale behind proposed and implemented regulatory actions. In this post, I quantify the spillover risks from fire sales, and present some preliminary results on the potential exposure of U.S. banking institutions to asset fire sales from open-end funds. |
| Keywords: | open end funds; banks; liquidity; COVID-19; bank holding companies (BHCs) |
| JEL: | G2 G21 |
| Date: | 2021–10–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:93170&r= |
| By: | Banco de España Strategic Plan 2024: Risk identification for the financial and macroeconomic stability (Banco de España) |
| Abstract: | For central banks, it is crucial to develop and maintain risk identification frameworks that allow them to detect in good time and address potential threats to financial stability with the most appropriate policy tools. This paper reviews the main indicators developed for this purpose by the Banco de España and by other central banks and prudential authorities. In this way, this stocktaking exercise contributes to improving the transparency and effective communication of the financial stability-related tasks carried out at the Banco de España. Some of the indicators are used in regular Banco de España surveillance activities, whereas others pertain to specific research activities. We classify our set of measures into two broad categories depending on the risk monitored: standard or systemic risks. Given the multidimensional nature of systemic risk, its identification goes beyond the sum of the standard risks explored in this paper (namely credit, macroeconomic, market, and liquidity and bank risks). This survey also classifies indicators by the type of institutional segment that triggers risks; namely, sovereigns, households, non-financial corporations, banks, non-bank financial sector, residential real estate and the financial markets. This work shows how the measures developed and regularly used at the Banco de España allow potential vulnerabilities to be comprehensively monitored. Nevertheless, maintaining an adequate risk-identification framework requires continuous adaptation to new theoretical developments and econometric tools, and, more importantly, to emerging challenges. In this respect, there is a current drive to develop new indicators to assess potential risks arising from climate change and those linked to the risk of system-wide cyber incidents. It is expected that the monitoring needs related to these risks will increase in the future. |
| Keywords: | risk identification, systemic risk, systemic risk indicators, standard risk indicators, financial stability |
| JEL: | E58 C43 G10 G21 G32 G50 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:2125&r= |
| By: | Bryan Teoh Phern Chern (Tunku Abdul Rahman University College, Jalan Genting Klang, 53300, Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia. Author-2-Name: Author-2-Workplace-Name: Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | "Objective - The personal financial planning and advice industry has been a growing industry for the past years and will continue to experience growth as the general wealth of the public increases, along with the economic recovery post Covid-19. This industry includes registered investment advisors (RIA) which are licensed by a locally approved institution, and financial educators and influencers that do not require licensing by a regulatory body. Methodology – There are many benefits that these parties can bring towards the financial health of their clients and viewers such as having a thorough personal financial plan, investment strategies, and retirement planning. However, this industry has also received many negative feedbacks and experiences from clients regarding the general system of the industry or specific areas within the sector. One of the objectives of this article is to evaluate the evolution of the personal financial planning industry over the years, how it has transitioned from traditional methods into current industry standards, and where it might be heading in the coming years. Findings – The findings of the paper provide clarity and insight into the mature industry which can benefit current and potential consumers, promoting healthier industry development. Novelty – The next objective is to investigate the risk and rewards of the current personal financial planning and advice industry towards consumers. This paper will critically review the past literature and evaluate contemporary views from various perspectives to achieve the above objectives. Type of Paper - Review" |
| Keywords: | Conflicts of interest; Financial advice; Financial planning; Influencers; Personal finance |
| JEL: | G20 I22 |
| Date: | 2021–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr186&r= |
| By: | Rowena Pecchenino (Department of Economics, Maynooth University.); Eoin McLaughlin Author-Workplace-University College Cork |
| Abstract: | Pawnbroking, one of the oldest and most accessible forms of credit, was a common feature of life in pre-famine and famine Ireland. This paper studies the role of pawnbroking in the Irish financial system during this important period, applying insights from modern studies on fringe banking to analyse pawnbroking in Ireland. In the period under study, a formal tiered financial system existed; regulated joint stock banks offered services to industry and the better off, while fringe banks provided financial services largely, but not exclusively, to unbanked groups. The main findings are that pawnbrokers provided a steady source of credit throughout the island of Ireland and that this credit stream was more durable than that provided by alternative financial service providers in the fringe banking market, especially during the famine. Our findings suggest a nuanced interpretation is needed as we find strong interrelationships between the various financial service providers. Classification-G21, G51, N23 |
| Keywords: | Fringe banking, financialisation, pawnbroking, Ireland |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:may:mayecw:n313-21.pdf&r= |
| By: | Faizan Khan Sherwani (Jamia Hamdard University New Delhi, India Author-2-Name: Sanaa Zafar Shaikh Author-2-Workplace-Name: University of Houston Taxas, U.S.A Author-3-Name: Zoya Zafar Shaikh Author-3-Workplace-Name: University of Houston Taxas, U.S.A Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | " Objective - The purpose of this study is to examine the impact of interest-free microfinance arrangements on the livelihood of women in India. Studies reveal that the existence of interest-free microfinance, as well as its outcome on the livelihood of weaker sections of society (particularly women), overall improved their well-being. Methodology – Exploratory and cross-section analysis is used to understand the satisfaction level among non-conventional microfinance arrangements. Survey of non-conventional microfinance beneficiaries exposes the status of women's' earnings, financial literacy, skills development, employment generation, household savings and poverty alleviation. Findings – Interest-free microfinance products like Zakat, Sadaqah, and KarzeHasna will successfully meet micro-financing core objectives of poverty alleviation, women empowerment, gender equality, prosperity, and employment. The analysis showed that the performance of interest-free microfinance consumers is better than conventional microfinance consumers. Novelty – This study is an original which is based on the demographic, sociocultural and regulatory framework of interest-free micro finance systems to identify the acceptability in the Indian financial system. The discussions in the study are mainly concerned with the empirical review of the impact and effect of interest-free microfinance on the lifestyle of female microfinance users after obtaining a loan i.e., their income, expenditure, saving, entrepreneurship, consumption, and women participation in earning income in India. Type of Paper - Empirical" |
| Keywords: | Entrepreneurship; Livelihood; Education Development; Living Standards; Women Empowerment |
| JEL: | G20 G21 |
| Date: | 2021–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr188&r= |
| By: | Blattner, Laura; Farinha, Luísa; Nogueira, Gil |
| Abstract: | We provide evidence that the strength of the bank lending channel varies considerably across three major events in the European sovereign debt crisis - the Greek debt restructuring (PSI), outright monetary transactions (OMT), and quantitative easing (QE). We study how lending responds to each shock using detailed bank, firm, and household data from Portugal, a country that was directly exposed to the three events. While the price of sovereign debt securities increased in all three events, banks reduced sovereign debt holdings and realized accumulated capital gains only after QE. As a result, lending to final borrowers reacted more strongly to QE than to the PSI or OMT events. Our results suggest that asset purchases were more effective than signalling events at stimulating the bank lending channel. JEL Classification: E52, E58, G18, G21 |
| Keywords: | asset purchases, bank lending channel, OMT, PSI, QE |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212607&r= |
| By: | Ashworth, Jonathan; Goodhart, C. A. E. |
| Abstract: | There is a debate about the effect of the extremely low, or even negative, interest rate regime on bank profitability. On the one hand it raises demand and thereby adds to bank profits, while on the other hand it lowers net interest margins, especially at the Zero Lower Bound. In this paper we review whether the prior paper by Altavilla, Boucinha and Peydro (2018) on this question for the Eurozone can be generalized to other monetary blocs, i.e. USA and UK. While our findings have some similarity with their earlier work, we are more concerned about the possible negative effects of this regime, not only on bank profitability but also on bank credit extension more widely. |
| Keywords: | cash; banknote issue and withdrawal; Covid-19; panic response; coronavirus |
| JEL: | E40 E41 E49 N10 N20 |
| Date: | 2021–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112432&r= |
| By: | Tomoki Isa (Visiting Scholar, Policy Research Institute, Ministry of Finance Japan.) |
| Abstract: | Although the Bank of Japan has continued unconventional monetary easing over the years, it is still far from achieving the inflation target set by the central bank. On the back of this, there has been a growing interest in the relationship between demography and inflation, a relationship which conventional macroeconomics has not discussed much. Analyzing Japanese prefectural panel data, this paper examines demographic effects on inflation with linear regression based on the Phillips curve with some demographic variables. The result shows that the aging population has inflationary pressure on prices, while the declining population has deflationary pressure. The aging population also reduces the impact of population change and economic variation on prices, flattening the Phillips curve. As a result, this paper clarifies a multifaceted relationship between demography and inflation, suggesting that demography is not the main cause of deflation and low inflation in Japan. |
| Keywords: | inflation, deflation, Philipps curve, monetary policy, demography, aging population, population decline, old-age dependency ratio, Japanese economy |
| JEL: | C33 E31 E52 J11 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:mof:wpaper:ron342&r= |
| By: | Girotti Mattia,; Salvadè Federica |
| Abstract: | This paper studies whether greater competition can mitigate agency problems within banks. We measure the intensity of the agency conflict within a bank by the volume of loans that the bank lends to its insiders (e.g., executives). We first check that these loans are a form of private benefit. By exploiting interstate branching deregulation, we then show that banks react to greater competition by reducing insider lending, especially when the entry of new competitors may more strongly affect bank profitability. Results are robust to using various identification approaches and alternative indicators of agency conflict. We conclude that competitive pressure reduces managerial self-dealing. |
| Keywords: | Banks, Agency Problems, Private Benefits, Competition, Insider Loans |
| JEL: | G21 G28 G38 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:831&r= |
| By: | Michael Woodford; Yinxi Xie |
| Abstract: | This paper reconsiders the degree to which macroeconomic stabilization is possible when the zero lower bound is a relevant constraint on the effectiveness of conventional monetary policy, under an assumption of bounded rationality. In particular, we reconsider the potential role of countercyclical fiscal transfers as a tool of stabilization policy. Because Ricardian equivalence no longer holds when planning horizons are finite (even when relatively long), we find that fiscal transfers can be a powerful tool to reduce the contractionary impact of an increased financial wedge during a crisis and can even make possible complete stabilization of both aggregate output and inflation under certain circumstances, despite the binding lower bound on interest rates. However, the power of such policies depends on the degree of monetary policy accommodation. We also show that a higher level of welfare is generally possible if both monetary and fiscal authorities commit themselves to history-dependent policies in the period after the financial disturbance that causes the lower bound to bind has dissipated. |
| Keywords: | Business fluctuations and cycles; Central bank research; Fiscal policy; Monetary policy |
| JEL: | E52 E63 E7 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-51&r= |
| By: | Juliane Begenau; Saki Bigio; Jeremy Majerovitz; Matias Vieyra |
| Abstract: | We propose a dynamic bank theory with a delayed loss recognition mechanism and a regulatory capital constraint at its core. The estimated model matches four facts about banks’ Tobin’s Q that summarize bank leverage dynamics. (1) Book and market equity values diverge, especially during crises; (2) Tobin’s Q predicts future bank profitability; (3) neither book nor market leverage constraints are binding for most banks; (4) bank leverage and Tobin’s Q are mean reverting but highly persistent. We examine a counterfactual experiment where different accounting rules produce a novel policy tradeoff. |
| Keywords: | banks, leverage dynamics, market vs. book values, delayed accounting |
| JEL: | G21 G32 G33 E44 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9356&r= |
| By: | Moder, Isabella |
| Abstract: | This paper provides a comprehensive analysis of the interest rate pass-through of euro area monetary policy to retail rates outside the euro area, contributing to the literature on the consequences of unofficial financial euroisation and on the transmission channels of monetary policy spillovers. The results suggest that in the long run, more than one third of all euro retail rates in euroised countries of central, eastern and south-eastern Europe (CESEE) are linked to the euro area shadow rate. Compared to euro area monetary policy, the share of cointegration of the domestic monetary policy rate is lower, suggesting that domestic central banks in euroised countries with independent monetary policy can only partially control the `euro part´ of the interest rate channel. Furthermore, euro area monetary policy shocks are fast and persistently transmitted into euro retail rates outside the euro area, which constitutes an additional channel of international shock transmission. JEL Classification: C22, C32, E43, E52, F42 |
| Keywords: | EU integration, international monetary policy spillovers, monetary policy transmission, unofficial financial euroisation |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212611&r= |
| By: | Pierre Jacquet (ENPC - École des Ponts ParisTech) |
| Abstract: | Beyond its indisputable success as a financial niche, the concept of "green finance" exhibits several inconsistencies that reflect tensions with the current rules of financial capitalism and question the potential of green finance to engineer and sustain societal change. However, the interaction between the development of green finance, the pressures from civil society (that underlie changes in societal values), and the validation through tax and regulatory policies, holds a real potential for green transformation. Green finance brings a threefold contribution through that interaction: measure and communication of impacts; standardization of approaches, criteria and instruments; progressive normalization of green investment principles. Yet, taxation and regulation play a crucial role in validating these evolutions and introducing supportive incentives. |
| Abstract: | En dépit d'incontestables succès de niche, le concept de finance verte présente plusieurs zones de flou et incohérences qui soulignent les tensions avec les règles de fonctionnement du capitalisme financier et amènent à relativiser son potentiel de transformation de l'économie et de la société. Cependant, l'interaction entre le développement de la finance verte, les pressions de la société civile (qui font évoluer les valeurs de la société et instaurent de nouvelles normes), ainsi que les politiques réglementaires et fiscales (qui valident ces évolutions), peut soutenir la dynamique de transformation verte. La finance verte y contribue dans trois domaines : la mesure et la communication des impacts ; la standardisation des approches, des critères et des instruments ; la normalisation progressive de nouveaux principes d'investissement. Mais la fiscalité et la réglementation jouent aussi un rôle déterminant pour ancrer ces changements et créer les incitations adéquates. |
| Date: | 2021–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03365358&r= |
| By: | Andrea BERNARDI (Oxford Brookes University (United Kingdom)); Cécile BERRANGER (Manchester Metropolitan University (United Kingdom)); Anita MANNELLA (Roma Tre University (Italy)); Salvatore MONNI (Roma Tre University (Italy)); Alessio REALINI (Roma Tre University (Italy)) |
| Abstract: | Cooperatives are increasingly being recognized as important contributors to inclusive, sustainable and fair development. However, the cooperative movement faces a multitude of challenges, including lack of access to credit. The Italian cooperative sector features an important financing tool: the solidarity funds (Fondi Mutualistici in Italian). In 1992, Law 59 established these financial institutions that are owned by the cooperative associations. By law, all co-operatives have to transfer to the mutual funds (or to the Government if they do not belong to any co-operative association) 3% of their profits. In the past 25 years, the solidarity funds have been allocating large resources creating a financial virtuous cycle that could be inspiring for other nations. The solidarity funds promote innovative and inclusive cooperative practices as well as training and university education. Examples of similar initiatives can be found in other countries, mostly where the cooperation culture is more established. In this paper we look at Canada, France and the United Kingdom to further explore the nature and relevance of mutualistic finance. |
| Keywords: | Non-bank financial institutions; Venture capital; Co-operatives; Labour managed firms; Employee ownership; mutual funds |
| JEL: | G23 G34 J54 L24 L31 N24 O16 P13 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:2101&r= |
| By: | Sabrina T. Howell; Theresa Kuchler; David Snitkof; Johannes Stroebel; Jun Wong |
| Abstract: | We explore the sources of racial disparities in small business lending by studying the $806 billion Paycheck Protection Program (PPP), which was designed to support small business jobs during the COVID-19 pandemic. PPP loans were administered by private lenders but federally guaranteed, largely eliminating unobservable credit risk as a factor in explaining differential lending by race. We document that even after controlling for a firm’s zip code, industry, loan size, PPP approval date, and other characteristics, Black-owned businesses were 12.1 percentage points (70% of the mean) more likely to obtain their PPP loan from a fintech lender than a traditional bank. Among conventional lenders, smaller banks were much less likely to lend to Black-owned firms, while the Top-4 banks exhibited little to no disparity after including controls. We use novel data to show that the disparity is not primarily explained by differences in pre-existing bank or credit relationships, firm financial positions, fintech affinity, or borrower application behavior. In contrast, we document that Black-owned businesses’ higher rate of borrowing from fintechs compared to smaller banks is particularly large in places with high racial animus, pointing to a potential role for discrimination in explaining some of the racial disparities in small business lending. We find evidence that when small banks automate their lending processes, and thus reduce human involvement in the loan origination process, their rate of PPP lending to Black-owned businesses increases, with larger effects in places with more racial animus. |
| JEL: | G21 G23 G28 G41 J15 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29364&r= |
| By: | Françoise Drumetz; Christian Pfister |
| Abstract: | In the last few years in the U.S. and especially since the publication of Stephanie Kelton’s book, The Deficit Myth (Kelton, 2020) in Europe, the so-called Modern Monetary Theory (MMT) has been gaining prominence in the media and the public. This paper exposes the main proposals of MMT in the light of their doctrinal sources, also confronting them with economic facts and with other currents of economic thought. The first part deals with the approach to money and monetary policy developed by MMT, the second part with its recommendations regarding fiscal policy and aggregate demand management, the third part with the structural policies it advocates, the fourth part with the international aspects of MMT. The fifth part concludes. Overall, it appears that MMT is based on an outdated approach to economics and that the meaning of MMT is a more that of a political manifesto than of a genuine economic theory. |
| Keywords: | Chartalism, Fiscal Policy, Functional Finance, Modern Monetary Theory, Money, Monetary Policy, Structural Policies |
| JEL: | B52 E12 E42 E43 E51 E52 E62 E63 H39 H62 H63 I38 J68 Q58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:833&r= |
| By: | Whelsy Boungou; Paul Hubert |
| Abstract: | Faced with a potential zero lower bound on deposit interest rates, how do banks pass on the fall in net interest income due to negative interest rates? This paper aims to investigate the different channels of banks’ responses to negative interest rates using a detailed breakdown of the profit and loss account of 3637 banks in 59 countries from 2011 to 2018. We find that the decrease in interest income due to negative interest rates is mitigated by an increase in non-interest income, but only partially. We find that banks respond to that shock by reducing the interest paid on non-customer deposit liabilities and their personnel expenses. We also show that banks’ responses are not instantaneous and that they adjust their response as negative interest rates persist over time such that how long negative interest rates are implemented matters. Finally, our results suggest that large banks with higher deposits and higher leverage ratios are the most affected by the implementation of negative interest rates. |
| Keywords: | Bank profitability, Interest flows, Non-interest flows, Deposits, Leverage |
| JEL: | C2 E5 G2 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:837&r= |
| By: | Hellqvist, Matti; Korpinen, Kasperi |
| Abstract: | The amount of central bank money, or liquidity, needed to settle payments, depends on the way the settlement is organized. It is largest when payments are settled individually on gross basis and smallest with settlement in one big netting cycle. Retail payments are increasingly processed in instant payment schemes and systems. We evaluate how the result of this transition affects the liquidity needs of the Finnish banks. For the analysis we generate artificial transaction level data, which mimics the Finnish retail payment flows processed in the STEP2 system. This allows us to estimate the difference between the liquidity needs for the settlement in a cycle based model and in a full instant payment mode. We also present a regression model for the bank level additional liquidity needs. A full migration to instant payments is expected to cause only a small aggregate increase in the liquidity needs. However, the variations between banks or between days can be significant and emphasize the need of liquidity buffers. |
| Keywords: | instant payments,liquidity needs,payment systems,netting |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bofecr:72021&r= |
| By: | Robert Jarrow; Philip Protter; Alejandra Quintos |
| Abstract: | This paper characterizes the probability of a market failure defined as the simultaneous default of two globally systemically important banks (G-SIBs), where the default probabilities are correlated. The characterization employs a multivariate Cox process across the G-SIBs. Various theorems related to market failure probabilities are derived, including the impact of increasing the number of G-SIBs in an economy and changing the initial conditions of the economy's state variables. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.10936&r= |
| By: | Benigno Pierpaolo; Canofari Paolo; Di Bartolomeo Giovanni; Messori Marcello |
| Abstract: | In response to the COVID-19 crisis, the ECB has relaunched a massive asset purchase programme within its combined-arms monetary strategy. This paper presents and discusses the theory and the evidence of the central bank’s asset purchases, mainly in the euro area. It analyses the role of asset purchase programmes in the ECB’s toolkit and the potential associated risks, focusing specifically on the problems of the programmes’ unwinding. Finally, the paper offers some possible alternatives to the asset purchase programme. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:00147&r= |
| By: | Cascino, Stefano; Correia, Maria; Tamayo, Ane |
| Abstract: | We study how the interplay of disclosure and regulation shapes capital allocation in reward crowdfunding. Using data from Kickstarter, the largest online reward crowdfunding platform, we show that, even in the absence of clear regulation and enforcement mechanisms, disclosure helps entrepreneurs access capital for their projects and bolsters engagement with potential project backers, consistent with the notion that disclosure mitigates moral hazard. We further document that, subsequent to a change in Kickstarter’s terms of use that increases the threat of consumer litigation, the association between project funding and disclosure becomes stronger. This evidence suggests that consumer protection regulation enhances the perceived credibility of disclosure. We find the effect of the change in terms of use to be more pronounced in states with stricter consumer protection regulations. Taken together, our findings yield important insights on the role of disclosure, as well as on the potential effects of increased regulation on crowdfunding platforms. |
| Keywords: | crowdfunding; Disclosure; Consumer Protection; Regulation; Enforcement |
| JEL: | G18 M41 O31 O38 |
| Date: | 2019–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:102103&r= |
| By: | Shvets, Serhii |
| Abstract: | Financial crises have been a challenge for sustainable growth, given the frequency and intensity of the crisis shocks and their destructive consequences taken place in the last decades. The paper aims to study how the endogenously created excess money supply can contribute to global financial crises. The money supply creation is examined from the Quantity Theory of Money (QTM) and endogenous money perspective, namely Horizontalism, Structuralism, and Modern Money Theory. Considering the prices are not flexible in the short term, advanced volatility in the money market hinders the short-run ready balance between money supply and output. The overall result of money supply accommodation may be unpredictable if monetary authority and commercial banks do not pool their interests, and the money demand volatility becomes extremely high. Examining the correlation between money supply and output has distinguished neutral countries in creating extra liquid assets and countries that can be a potential trigger for excessive money supply volatility. Monitoring the dynamics of M3 and GDP has revealed that before the significant crisis periods of 1997-1998, 2007-2008, and 2019-2020, the money supply growth is more than 8%. The established critical level validates the potential contribution of the endogenously created excess money supply to global financial crises. |
| Keywords: | the quantity theory of money; endogenous money; financial crisis; monetary policy; quantitative easing |
| JEL: | B26 E41 E51 E52 |
| Date: | 2021–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110191&r= |