nep-ban New Economics Papers
on Banking
Issue of 2023‒07‒31
33 papers chosen by
Sergio Castellanos-Gamboa, Tecnológico de Monterrey

  1. Monetary Policy Transmission Through Online Banks By Isil Erel; Jack Liebersohn; Constantine Yannelis; Samuel Earnest
  2. Impact of monetary policy on financial inclusion in emerging markets By Ozili, Peterson K
  3. Russia’s Monetary Policy in 2022 By Bozhechkova Alexandra; Trunin Pavel; Knobel Alexander
  4. The Geography of Climate Change Risk Analysis at Central Banks in Europe By Csaba Burger; Dariusz Wojcik
  5. Updated estimates of the role of the bank lending channel in monetary policy transmission in Poland By Mariusz Kapuściński
  6. Monetary policy transmission below zero By Fungáécová, Zuzana; Kerola, Eeva; Laine, Olli-Matti
  7. International Lending Channel, Bank Heterogeneity and Capital Inflows (Mis)Allocation By Lucas Argentieri Mariani; Silvia Marchesi
  8. The Credit Supply Channel of Monetary Policy Tightening and its Distributional Impacts By Joshua Bosshardt; Marco Di Maggio; Ali Kakhbod; Amir Kermani
  9. Geographic Disaggregation of House Price Stress Paths: Implications for Single-Family Credit Risk Measurement By Alexander N. Bogin; LaRhonda Ealey; Kirsten Landeryou; Scott Smith; Andrew Tsai
  10. Theories supporting central bank digital currency development and its usefulness By Ozili, Peterson K
  11. Monetary Policy Transmission under Financial Repression By Kaiji Chen; Yiqing Xiao; Tao Zha
  12. Whose inflation rates matter most? A DSGE model and machine learning approach to monetary policy in the Euro area By Stempel, Daniel; Zahner, Johannes
  13. Sistem Bunga dalam Bank menurut Al Qur'an dan Hadits By Mufakkir, Miqdad
  14. Macrofinancial Dynamics in a Monetary Union By Daniel Monteiro
  15. Financial Literacy and Mortgage Payment Delinquency? By Tran Huynh
  16. From bazooka to backstop: the political economy of standing swap facilities By Steininger, Lea; Richtmann, Mathis L.
  17. The effect of Farm Credit System mergers on agricultural banks: evidence from activity and markups By Albert Scott, Francisco
  18. Capital Controls, Corporate Debt and Real Effects: Evidence from Boom and Crisis Times By Andrea Fabiani; Martha López; José-Luis Peydró; Paul E. Soto
  19. Climate regulation and financial risk: The challenge of policy uncertainty By Berg, Tobias; Carletti, Elena; Claessens, Stijn; Krahnen, Jan Pieter; Monasterolo, Irene; Pagano, Marco
  20. Inflation, Monetary Policy and the Sacrifice Ratio:The Case of Southeast Asia By Leef H. Dierks
  21. Financial Shocks in an Uncertain Economy By Chiara Scotti
  22. Hukum pinjol dalam islam By Kholid, Muhammad Kholid
  23. Default Rates and Client Household Characteristics of Microfinance Institution in Eastern India By Chandra, Soumi
  24. Transition risk uncertainty and robust optimal monetary policy By Dück, Alexander; Le, Anh H.
  25. Investigating the inflation-output-nexus for the euro area: Old questions and new results By Gerdesmeier, Dieter; Reimers, Hans-Eggert; Roffia, Barbara
  26. Sistem Pembayaran Kredit Menurut Hukum Islam By Mufidah, Zahra Aulia; Kurniawan, Rachmad Risqy
  27. Interest rate pass-through to risk-free rates in Poland By Mariusz Kapuściński
  28. Impact of Expansion of Microfinance Institutions (MFIs) on Agricultural Output By Poudel, Biswo N.; Paudel, Krishna P.
  29. Realistic Synthetic Financial Transactions for Anti-Money Laundering Models By Erik Altman; B\'eni Egressy; Jovan Blanu\v{s}a; Kubilay Atasu
  30. Optimizing Credit Limit Adjustments Under Adversarial Goals Using Reinforcement Learning By Sherly Alfonso-S\'anchez; Jes\'us Solano; Alejandro Correa-Bahnsen; Kristina P. Sendova; Cristi\'an Bravo
  31. BILATERAL INTERNATIONAL INVESTMENTS:THE BIG SUR? By Fernando Broner; Tatiana Didier; Sergio L. Schmukler; Goetz von Peter
  32. Moral Money in Sub-Saharan Africa? On ensuring ethics to drive sustainable investment By Kohnert, Dirk
  33. Mapping institutional arrangements for infrastructure governance in OECD countries By Ana Maria Ruiz Rivadeneira; Patrick Mcmaster

  1. By: Isil Erel; Jack Liebersohn; Constantine Yannelis; Samuel Earnest
    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 banks increase rates that they offer on deposits significantly more than traditional banks do. A 100 basis points increase in the federal fund rate leads to a 30 basis points larger increase in rates of online banks. Consistent with the rate movements, online bank deposits experience inflows, while traditional banks experience outflows during monetary tightening in 2022. The findings are consistent across banking markets of different competitiveness and demographics. Our findings shed new light on the role of online banks in interest rate pass-through and deposit channel of monetary policy.
    JEL: E52 E58 G21 G23 G28
    Date: 2023–06
  2. By: Ozili, Peterson K
    Abstract: The study investigates the impact of monetary policy on the level of financial inclusion in the big-five emerging market countries from 2004 to 2020. Several indicators of financial inclusion and the central bank interest rate were used in the analysis. It was found that the monetary pol-icy rate has a mixed effect on financial inclusion, and the effect depends on the dimension of fi-nancial inclusion examined. Specifically, a high monetary policy rate has a significant negative impact on financial inclusion through a reduction in the number of depositors in commercial banks. A high monetary policy rate also has a significant positive impact on financial inclusion through greater bank branch expansion. The policy implication is that both contractionary and expansionary monetary policies lead to positive improvements in specific indicators of financial inclusion, because increase in interest rate leads to bank branch expansion which is beneficial for financial inclusion and decrease in interest rate leads to increase in the number of depositors in commercial banks which is also beneficial for financial inclusion. It was also found that the rising monetary policy rate has a negative effect on all indicators of financial inclusion in the post-financial crisis period. Overall, the effect of monetary policy on financial inclusion seem to depend on the monetary policy tool used by the monetary authority and the dimension of financial inclusion examined. The monetary authorities should pay attention to how their monetary policy choices might affect the level of financial inclusion and reduce the benefits that society gains from financial inclusion.
    Keywords: monetary policy, interest rate, financial inclusion, access to finance, emerging markets
    JEL: E51 E52 E58 G21
    Date: 2023–06–19
  3. By: Bozhechkova Alexandra (Gaidar Institute for Economic Policy); Trunin Pavel (Gaidar Institute for Economic Policy); Knobel Alexander (Gaidar Institute for Economic Policy)
    Abstract: In 2022, the Russian economy experienced a profound negative shock associated with the imposition of sanctions against Russia by a number of developed countries, including the freeze of the Bank of Russia’s international reserve assets, Russian banks being cut out of international payment systems, restrictions on imports of Russian goods and services and exports of technologies to Russia, and some other measures. The shock gave rise to pronounced instability in Russia’s financial market and forced the Central Bank of the Russian Federation to sharply tighten its monetary policy in order to prevent the outflow of funds from the banking system.
    Keywords: Russian economy, monetary policy, money market, exchange rate, inflation, balance of payments, fiscal policy
    JEL: E31 E43 E44 E51 E52 E58
    Date: 2023
  4. By: Csaba Burger (Magyar Nemzeti Bank (the Central Bank of Hungary)); Dariusz Wojcik (University of Oxford, School of Geography and the Environment)
    Abstract: Incorporating climate change considerations in central bank decisions has been fraught with legal and technical controversies. Legal, because interpretations of central bank mandates in relation to sustainability has been widely cited as hurdles to the discussion of climate change; and technical, because no methodology used to exist to assess and to measure the impact of climate risks on financial stability. This paper first analyses the spatial and temporal process climate change-related risk analysis spread among central banks by text mining - counting relevant bigrams - in 941 European financial stability reports of 39 central banks in Europe. It then maps climate risk relevant references of these reports. The study argues that geographical proximity played a significant role in the spread of the climate friendly central bank mandate interpretations. It also shows that the ECB, together with representatives of EU national central banks and their technical know-how, played a pivotal role in turning an innovation from being a novel research method into an accepted analytical framework. At the beginning of 2023, it now paves the way a towards a Basel-conform banking regulation within the EU, which reflects climate change risks too.
    Keywords: financial geography, central bank mandates, climate change, financial stability, text mining, bigram search, fiduciary duty
    JEL: E58 Q54 G17 G21 L38
    Date: 2023
  5. By: Mariusz Kapuściński (Narodowy Bank Polski)
    Abstract: In this research note I provide updated estimates of the role of the bank lending channel in monetary policy transmission in Poland. Previous estimates were described in Kapuściński (2017). The bank lending channel is defined following Disyatat (2011), as the amplification of the effect of monetary policy on bank lending, due to its impact on bank balance sheet strength. As before, the estimates are based on counterfactual impulse response functions from panel vector autoregressive models. Differences include not only the longer time series dimension of available data, but also enhancements in terms of the number of banks covered, data processing and coefficient uncertainty coverage. I find the bank lending channel to operate differently in cooperative and commercial banks. Nevertheless, estimates for the latter, significantly larger part of the banking sector are broadly in line with previous ones. 18 percent of a decline in bank lending after the tightening of monetary policy can be attributed to the bank lending channel.
    Keywords: transmission mechanism of monetary policy, bank lending channel.
    JEL: E52 G21
    Date: 2023
  6. By: Fungáécová, Zuzana; Kerola, Eeva; Laine, Olli-Matti
    Abstract: This study considers the pass-through of different ECB monetary policy measures to bank corporate lending rates of different maturities during 2010-2020. We find changes in the pass-through as policy rates first dip below zero in 2014 and again when negative interest rates become more persistent during the "low-for-long" period beginning in 2016. Overall, the transmission of monetary policy to bank lending rates appears to have become less efficient below zero, particularly in the case of corporate loans with short maturities. The effect is most pronounced for banks that did not lower their own retail deposit rates below zero or held significant amounts of negative interest-bearing central bank deposits. We see a reversal in the pass-through during the low-for-long period with banks raising their lending rates as monetary policy is eased. Unconventional monetary policy measures such as targeted longer-term refinancing operations (TLTROs) and quantitative easing (QE) appear to have mitigated these contractionary effects, even during the low-for-long period. In our examination of below-zero policy tools, we provide evidence that negative policy rates and TLTROs complement each other, while negative policy rates and QE do not.
    Keywords: negative interest rates, unconventional monetary policy, lending rates, bank lending channel, euro area
    JEL: E52 E58 G21
    Date: 2023
  7. By: Lucas Argentieri Mariani; Silvia Marchesi
    Abstract: This paper explores the role of banks’ heterogeneity in international lending and its impacts on capital inflows allocation across firms by exploiting the inclusion of South Africa into the Citi Group’s World Government Bond Index (WGBI). Using bank-level data, we provide evidence that banks holding sovereign bonds before the inclusion increase credit supply to non-financial firms after the shock. Moreover, less capitalized banks drive these effects. Using firm-level data in South Africa, we then show that credit is allocated to less financially constrained and less productive firms. Consistent with zombie-firms behavior, we find no evidence of a significant improvement in real outcomes after the increase of credit supply to those firms. Our paper adds to the literature by analyzing the interplay between banks’ heterogeneity, capital inflows shocks and capital misallocation.
    Keywords: Capital inflows, Sovereign Debt, International Lending Channel, Misallocation
    JEL: F21 F36 G21
    Date: 2023–06
  8. By: Joshua Bosshardt (Federal Housing Finance Agency); Marco Di Maggio (Harvard University); Ali Kakhbod (University of California, Berkeley); Amir Kermani (University of California, Berkeley)
    Abstract: This paper studies how tightening monetary policy transmits to the economy through the mortgage market and sheds new light on the distributional consequences at both the individual and regional levels. We find that mortgage supply factors, specifically restrictions on the debt-to-income (DTI) ratio, account for the majority of the decline in mortgages. These effects are even more pronounced for young and middle-income borrowers who find themselves excluded from the credit market. Also, regions with historically high DTI ratios exhibited greater reductions in mortgage originations, house prices, and consumption.
    Keywords: interest rates, mortgage lending, house prices, debt-to-income (DTI)
    JEL: G21 E43 G51
  9. By: Alexander N. Bogin (Federal Housing Finance Agency); LaRhonda Ealey (Federal Housing Finance Agency); Kirsten Landeryou (Federal Housing Finance Agency); Scott Smith (Federal Housing Finance Agency); Andrew Tsai (Federal Housing Finance Agency)
    Abstract: We explore the impact of geographic disaggregation of house price stress paths on single-family credit risk measurement. Specifically, we focus on the value added of moving from national, to state-level, to core-based statistical area (CBSA)-level house price paths on estimates of mortgage credit related stress losses. To ensure the robustness of our results, we estimate losses across two different loan portfolios and three credit models. We find that CBSA-level paths provide additional insight on localized credit risk and can be reliably constructed using quarterly house price indices. Further, the variation in results across credit models suggests an implicit confidence interval around any one stress loss estimate. Accounting for this uncertainty through a model risk add-on could potentially offer a more conservative view of portfolio credit risk.
    Keywords: geographic aggregation, credit modeling, countercyclical
    JEL: E44 G53 R30
    Date: 2023–06
  10. By: Ozili, Peterson K
    Abstract: This paper presents some theories that support central bank digital currency development and its usefulness. The theories provide useful explanations for the development and use of central bank digital currency in the economy. Some theories show that information about central bank digital currency, as well as the perceived usefulness and ease of use of central bank digital currency, are crucial for its success. Other theories show that central bank digital currency can facilitate the flow of funds to economic agents, and enhance the functioning of the economic system, thereby contributing to economic growth. These theories are useful to economists, policymakers and researchers who are interested in how central bank digital currency affects economic activities.
    Keywords: CBDC, central bank digital currency, theories.
    JEL: E51 E52 E58 E59 O31 O32
    Date: 2023
  11. By: Kaiji Chen; Yiqing Xiao; Tao Zha
    Abstract: According to the conventional bank lending channel of monetary policy, wholesale funding in economies with well-developed financial markets moves negatively with retail deposits in response to changes in the monetary policy rate, thereby weakening the transmission of monetary policy. We present a theoretical model to demonstrate that in economies with financial repression, (i) retail deposits and wholesale funding comove positively in response to changes in the policy rate and (ii) wholesale funding strengthens, rather than weakens, the transmission of monetary policy to bank loans. We support these findings by bank-level evidence with deposit rate ceilings.
    JEL: E02 E5 G11 G12 G28
    Date: 2023–06
  12. By: Stempel, Daniel; Zahner, Johannes
    Abstract: In the euro area, monetary policy is conducted by a single central bank for 20 member countries. However, countries are heterogeneous in their economic development, including their inflation rates. This paper combines a New Keynesian model and a neural network to assess whether the European Central Bank (ECB) conducted monetary policy between 2002 and 2022 according to the weighted average of the inflation rates within the European Monetary Union (EMU) or reacted more strongly to the inflation rate developments of certain EMU countries. The New Keynesian model first generates data which is used to train and evaluate several machine learning algorithms. They authors find that a neural network performs best out-of-sample. They use this algorithm to generally classify historical EMU data, and to determine the exact weight on the inflation rate of EMU members in each quarter of the past two decades. Their findings suggest disproportional emphasis of the ECB on the inflation rates of EMU members that exhibited high inflation rate volatility for the vast majority of the time frame considered (80%), with a median inflation weight of 67% on these countries. They show that these results stem from a tendency of the ECB to react more strongly to countries whose inflation rates exhibit greater deviations from their long-term trend.
    Keywords: New Keynesian Models, Monetary Policy, European Monetary Union, Neural Networks, Transfer Learning
    JEL: E58 C45 C53
    Date: 2023
  13. By: Mufakkir, Miqdad
    Abstract: Interest can be interpreted as the price that must be paid by the bank to the customer (who has deposits) and the price that must be paid by the customer to the bank (if the customer obtains a loan facility). Al-Quran and hadith state that the interest system in Islam is not permissible/haram . This study aims to analyze the views of fiqh regarding bank interest and the solutions provided by the Islamic economic system. In Islam, interest is a system that is prohibited in the Koran and hadith because it includes usury. However, the system run by modern banking is not yet known in Islam, so there are differences of opinion among Muslims. This study used a descriptive qualitative method with a library research approach.
    Date: 2023–06–21
  14. By: Daniel Monteiro
    Abstract: We develop a dynamic stochastic general equilibrium model of a monetary union and employ it to study in an integrated manner different macrofinancial disturbances and related policy options. The model is calibrated to the euro area, comprises two regions subject to real, nominal and financial rigidities, and features microfounded regional banking sectors and portfolio selection mechanisms allowing for empirically-consistent properties. Among the questions to which we devote our analysis are the transmission of conventional and unconventional monetary policy, the effects of private- and government-sector default risk, the implications of different macroprudential policies, the endogenous emergence of country risk premia in a context of crossborder financial flows, and the stabilising properties of joint sovereign debt issuance.
    JEL: E32 E44 E52 F36 F45 G28 H63
    Date: 2023–06
  15. By: Tran Huynh (Friedrich Schiller University Jena)
    Abstract: This study investigates the causal effect of financial literacy on mortgage payment delinquency. Using an Instrumental-Variable (IV) approach, we find that increased financial literacy significantly reduces the probability of mortgage delinquency. The identified causal effect is robust to different specifications of the IV and cannot be explained by formal education, income, and many other individual characteristics. Our study also examines the heterogeneity of the impact across various demographic groups. We find that the effect of financial literacy on delinquency likelihood is negative and significantly different from zero for any age, gender, income, or education level. However, the magnitude of the effect decreases with age and is higher in states where the population’s financial literacy is low, as compared with high-literate states.
    Keywords: financial literacy, mortgage delinquency, NFCS surveys, instrumental variables
    JEL: G51 G53
    Date: 2023–07–04
  16. By: Steininger, Lea; Richtmann, Mathis L.
    Abstract: The permanent international lender of last resort consists of a swap line network between six major central banks (C6), centring around the US Federal Reserve. Arguably, this network is a solution to a long-debated problem as it provides public emergency liquidity provision to the world’s largest financial market, the Eurodollar market. Drawing on exclusive interviews with monetary technocrats as well as a textual analysis of Federal Open Market Committee meeting transcripts over the course of 14 years, we reconstruct how this facility came into being. Building on Kalyanpur and Newman (2017) and Braun (2015), we develop an interpretive framework of bricolage to contextualise its formation: in times of crisis, central bankers rely on retrospection, experimentation and creative re-deployment to develop their tools. In non-crisis times, however, the tools that prevail are those that offer what we call ‘bureaucratic familiarity’: the C6 swap line network became a permanent feature of international finance because technocrats had got used to it.
    Date: 2023–07–08
  17. By: Albert Scott, Francisco
    Keywords: Agricultural Finance, Marketing, Agricultural and Food Policy
    Date: 2023
  18. By: Andrea Fabiani; Martha López; José-Luis Peydró; Paul E. Soto
    Abstract: We show that capital controls (CC), by slowing-down firm debt-growth in the boom, improve firm performance during crises. Exploiting a tax on foreign-currency (FX) debt inflows in Colombia before the Global Financial Crisis (GFC) and multiple firm-level and loan-level administrative datasets, we find that CC reduce FX-debt inflows. Firms with weaker local banking relation nships cannot fully substitute FX-debt with domestic-debt, thereby reducing firm-level total debt and imports during the boom. However, by preemptively reducing firm-level debt, CC boost exports and employment during the subsequent GFC, especially for financially-constrained firms. Moreover, CC do not significantly alter credit allocation between productive and unproductive firms. **** RESUMEN: Mostramos que los controles de capital (CC), al desacelerar el crecimiento de la deuda de las empresas en el auge, mejoran el desempeño en firmas durante las crisis. Aprovechando un impuesto sobre las entradas de deuda en moneda extranjera (ME) en Colombia antes de la Crisis Financiera Global (CFG) y múltiples bases de datos administrativos a nivel de empresa y préstamo, encontramos que CC reduce las entradas de deuda en ME. Las empresas con relaciones bancarias locales más débiles no pueden sustituir completamente la deuda en divisas por deuda local, lo que reduce la deuda total a nivel de empresa y las importaciones durante el auge. Sin embargo, al reducir de manera preventiva la deuda a nivel de empresa, CC impulsa las exportaciones y el empleo durante la CFG, especialmente para las empresas con limitaciones financieras. Además, CC no altera significativamente la asignación de crédito entre empresas productivas e improductivas.
    Keywords: capital controls, firm FX-debt, real effects, macroprudential policy, capital inflows, crises, controles de capital, deuda en moneda extranjera, efectos reales, política macroprudencial, entradas de capital, crisis
    JEL: E58 F34 F38 G01 G21
    Date: 2023–07
  19. By: Berg, Tobias; Carletti, Elena; Claessens, Stijn; Krahnen, Jan Pieter; Monasterolo, Irene; Pagano, Marco
    Abstract: Climate risk has become a major concern for financial institutions and financial markets. Yet, climate policy is still in its infancy and contributes to increased uncertainty. For example, the lack of a sufficiently high carbon price and the variety of definitions for green activities lower the value of existing and new capital, and complicate risk management. This column argues that it would be welfare-enhancing if policy changes were to follow a predictable longer-term path. Accordingly, the authors suggest a role for financial regulation in the transition.
    Keywords: Climate Change, Financial Regulation and Banking
    Date: 2023
  20. By: Leef H. Dierks (Lübeck University of Applied Sciences, Germany)
    Abstract: Motivated by the 2022 uptick in headline inflation and the marked shift towards more restrictive monetary policies globally, this paper examines the sacrifice ratio, i.e., the percentage cost of actual production lost to every one percentage point decrease in (trend) inflation, for selected Southeast Asian economies. Results indicate that upon adopting a contractive monetary policy, GDP growth dropped by up to 0.5%, confirming that monetary authorities’ disinflationary policies typically trigger declines in both output and employment. However, as even minor adjustments to the way of determining the sacrifice ratio lead to varying results, caution ought to be applied when deriving potential (monetary) policy recommendations.
    Keywords: Monetary Policy, Interest Rates, Inflation, Sacrifice Ratio, (Trend) Output
    JEL: E31 E52 E58 E65 E71
    Date: 2023–07
  21. By: Chiara Scotti
    Abstract: The past 15 years have been eventful. The Global Financial Crisis (GFC) reminded us of the importance of a stable financial system to a well-functioning economy, one with low and stable inflation and maximum employment. Given the recent banking stress, we ponder this issue again. The pandemic was a huge shock surrounded by much uncertainty, making precise forecasts within traditional models difficult. And more recently, there has been continuous talk of a soft landing and recession risks. In this paper, I focus on some of the lessons we have learned over the years: (i) uncertainty and tail risk have cyclical variation; (ii) financial shocks can have a significant effect on macroeconomic outcomes; (iii) the impact of shocks is stronger in periods of high volatility. These lessons have important implications for policymakers in today’s environment.
    Keywords: uncertainty; tail risk; stochastic volatility; monetary policy; financial stability
    JEL: C32 E44
    Date: 2023–07–07
  22. By: Kholid, Muhammad Kholid
    Abstract: Abstrak: The purpose of this study is to find out how the perspective of Islamic law on online loans has in its development become the choice of many people in meeting their needs. This is due to the ease and speed of the process. However, this raises a new problem, namely the many online loan services that are unregistered or illegal, so that their existence is very detrimental to people who make loans, because these loans are carried out by providing unreasonable interest charges. In Islamic law, lending and borrowing is a muamalah activity that is permissible, but on the other hand, usury is prohibited. This study aims to analyze legal protection for users of illegal online loan services and illegal online loans in the perspective of positive law and Islamic law
    Date: 2023–06–21
  23. By: Chandra, Soumi
    Keywords: Agricultural Finance, Research Methods/Statistical Methods, Community/Rural/Urban Development
    Date: 2023
  24. By: Dück, Alexander; Le, Anh H.
    Abstract: Climate change has become one of the most prominent concerns globally. In this paper, we study the transition risk of greenhouse gas emission reduction in structural environmental-macroeconomic DSGE models. First, we analyze the uncertainty in model prediction on the effect of unanticipated and pre-announced carbon price increases. Second, we conduct optimal model-robust policy in different settings. We find that reducing emissions by 40% causes 0.7% - 4% output loss with 2% on average. Pre-announcement of carbon prices affects the inflation dynamics significantly. The central bank should react slightly less to inflation and output growth during the transition risk. With optimal carbon price designs, it should react even less to inflation, and more to output growth.
    Keywords: Climate change, Environmental policy, Optimal policy, Transition risk, Model uncertainty, DSGE models
    JEL: Q58 E32 Q54 C11 E17 E52
    Date: 2023
  25. By: Gerdesmeier, Dieter; Reimers, Hans-Eggert; Roffia, Barbara
    Abstract: The relationship between inflation and real GDP growth is one of the most widely researched topics in macroeconomics. At the same time, it is certainly not exaggerated to claim that this nexus also stands at the heart of monetary policy, given the fact that low inflation in combination with high and sustained output growth should be the central objective of any sound economic policy. The latter notion becomes even more obvious, when taking account of the fact that many central banks all over the world have selected target levels for inflation and communicated them to the public. Against this background, it is of utmost importance for central banks to know more about the nature and form of the relationship between inflation and real GDP. This study tries to shed more light on the concrete shape of this relationship for the euro area and, more specifically, on the issue of possible regime shifts therein. The analysis provides strong evidence for non-linear effects in the euro area. As a by-product, the methods used allow for a quantification of the point of switch across the different regimes and it is found that this breakpoint closely matches the ECB's previous definitions of price stability and its new inflation target of 2%. While these results look encouraging, further research in this area seems warranted.
    JEL: E31 E52 E58
    Date: 2023
  26. By: Mufidah, Zahra Aulia; Kurniawan, Rachmad Risqy
    Abstract: Lately buying and selling on credit has been carried out by the public. In this case, the buyer pays for the desired item in installments according to the agreed timeframe where the item is received in non-cash at a higher price than the cash price at the time the transaction occurred. Many scholars have different opinions on this matter, some say it is haram, halal and even doubtful. So in this study it will be discussed how the law of the credit payment system according to Islamic law uses the legal Istinbat method. Based on this research, it can be concluded that buying and selling with a credit system is permissible according to Syari’ah as long as there is no tyranny in it, there is no usury and it is done on a voluntary basis. The purpose of this study is to find out the sale and purchase of credit (installments), and how the law is according to Shari’ah.
    Date: 2023–06–21
  27. By: Mariusz Kapuściński (Narodowy Bank Polski)
    Abstract: In this research note I provide the first estimates of the transmission of monetary policy in Poland to risk-free rates, WIRON rates. I take into account the effects of changes in the policy rate, in the width of the standing facilities corridor and in the reserve position of the banking sector. I also make comparisons to the transmission to POLONIA and WIBOR rates. I find both the overnight and term WIRON rates to be affected by interest rate policy and other components of the operational framework of Narodowy Bank Polski. This makes the transmission similar as to the POLONIA rate, but to some extent different than to WIBOR rates. For the term rates, by construction, there are differences in transmission lags. This might have implications for the transmission mechanism of monetary policy in Poland in the future. The extent will depend on the character of changes in the policy rate (unexpected versus expected), and the term of the rate chosen for financial contracts and instruments. Given the limited number of observations, the conclusions should be treated with caution.
    Keywords: transmission mechanism of monetary policy, interest-rate pass through, risk-free rates, interest rate benchmark reform.
    JEL: E43 E52
    Date: 2023
  28. By: Poudel, Biswo N.; Paudel, Krishna P.
    Keywords: Agribusiness, Agricultural Finance, Agricultural and Food Policy
    Date: 2023
  29. By: Erik Altman; B\'eni Egressy; Jovan Blanu\v{s}a; Kubilay Atasu
    Abstract: With the widespread digitization of finance and the increasing popularity of cryptocurrencies, the sophistication of fraud schemes devised by cybercriminals is growing. Money laundering -- the movement of illicit funds to conceal their origins -- can cross bank and national boundaries, producing complex transaction patterns. The UN estimates 2-5\% of global GDP or \$0.8 - \$2.0 trillion dollars are laundered globally each year. Unfortunately, real data to train machine learning models to detect laundering is generally not available, and previous synthetic data generators have had significant shortcomings. A realistic, standardized, publicly-available benchmark is needed for comparing models and for the advancement of the area. To this end, this paper contributes a synthetic financial transaction dataset generator and a set of synthetically generated AML (Anti-Money Laundering) datasets. We have calibrated this agent-based generator to match real transactions as closely as possible and made the datasets public. We describe the generator in detail and demonstrate how the datasets generated can help compare different Graph Neural Networks in terms of their AML abilities. In a key way, using synthetic data in these comparisons can be even better than using real data: the ground truth labels are complete, whilst many laundering transactions in real data are never detected.
    Date: 2023–06
  30. By: Sherly Alfonso-S\'anchez; Jes\'us Solano; Alejandro Correa-Bahnsen; Kristina P. Sendova; Cristi\'an Bravo
    Abstract: Reinforcement learning has been explored for many problems, from video games with deterministic environments to portfolio and operations management in which scenarios are stochastic; however, there have been few attempts to test these methods in banking problems. In this study, we sought to find and automatize an optimal credit card limit adjustment policy by employing reinforcement learning techniques. In particular, because of the historical data available, we considered two possible actions per customer, namely increasing or maintaining an individual's current credit limit. To find this policy, we first formulated this decision-making question as an optimization problem in which the expected profit was maximized; therefore, we balanced two adversarial goals: maximizing the portfolio's revenue and minimizing the portfolio's provisions. Second, given the particularities of our problem, we used an offline learning strategy to simulate the impact of the action based on historical data from a super-app (i.e., a mobile application that offers various services from goods deliveries to financial products) in Latin America to train our reinforcement learning agent. Our results show that a Double Q-learning agent with optimized hyperparameters can outperform other strategies and generate a non-trivial optimal policy reflecting the complex nature of this decision. Our research not only establishes a conceptual structure for applying reinforcement learning framework to credit limit adjustment, presenting an objective technique to make these decisions primarily based on data-driven methods rather than relying only on expert-driven systems but also provides insights into the effect of alternative data usage for determining these modifications.
    Date: 2023–06
  31. By: Fernando Broner (CREI and Universitat Pompeu Fabra Ramon Trias Fargas); Tatiana Didier (World Bank Group); Sergio L. Schmukler (Economics Research World Bank Group); Goetz von Peter (Bank for International Settlements (BIS))
    Abstract: This paper presents novel stylized facts about the rise of the South in global finance using country-tocountry data. To do so, the paper assembles comprehensive bilateral data on cross-border bank loans and deposits, portfolio investment, foreign direct investment, and international reserves from 2001 to 2018. The main findings are that investments involving the South, and especially within the South, have grown faster than those within the North. By 2018, South-to-South investments accounted for 8% of total international investments, while investments between the South and the North accounted for an additional 26%. The fastest growth occurred in portfolio investment and international reserves, whereas the slowest growth was in banking. These trends are not driven by China, any particular South region, or offshore financial centers. South-to-South investments grew the fastest even after controlling for regional GDP growth. The extensive margin played a significant role in the growth of investments within the South.
    Keywords: emerging economies; foreign direct investment; international banking; international capital flows; international financial integration; portfolio investment.
    JEL: F21 F36 G15
    Date: 2023–07
  32. By: Kohnert, Dirk
    Abstract: Money rules the world. But the importance of money is far greater than conventional economic theory and its heroic equations suggest. People have invented their own forms of currency, they have used money in ways that baffle market theorists, they have incorporated money into friendship and family relationships, and they have changed the process of spending and saving. Individuals, families, governments and businesses have given money a social meaning in ways that economists could not even dream of before. A century ago, Georg Simmel, in his Philosophy of Money, pointed to various systems of exchange for goods and services that made possible the existence of incomparable value systems (land, food, honour, love, etc.) that supposedly made personal freedom possible. More recently, Ariel Wilkis brought Pierre Bourdieu's sociology of power into dialogue with Viviana Zelizer's sociology of money. He showed that money is a crucial symbol used to negotiate not only material possessions but also the political, economic, class, gender and generational ties between people. The growing threat of international terrorism has raised awareness that its existence is in itself an economic fact, as it is financed in various ways. The Moral Money Summit Africa, to be held in Johannesburg, South Africa, in November 2023, aims to unlock capital to promote sustainable growth in Sub-Saharan Africa (SSA). This is overdue, considering that multinational companies in SSA have been polluting the environment for decades and that corruption, money laundering, investments in conflict diamonds, arms and drug trafficking are widespread. The summit aims to answer questions such as: What role can Africa play in the global decarbonisation dilemma? How can ethics be ensured in commodity supply chains? How can ethical investors avoid investing in "sin stocks" such as "blood diamonds", arms and drug trafficking? However, given the unbroken power of multinational corporations and investment managers, the outcome of such summits is questionable. Comparative analyses of ESG awareness and frameworks in Anglophone, Francophone and Lusophone African countries reveal significant differences. The most powerful three global asset managers, BlackRock, Vanguard and State Street, still show "rational restraint", especially with regard to firm-specific sustainability activism. Also they can use their power to engage in "rational hypocrisy", similar to corporate
    Keywords: Ethical banking;ESG; International financial institutions; norm entrepreneur; international development; commercial banks; Sub-Saharan Africa; sustainable development; post-colonialism; informal sector; international trade; ODA; South Africa; Nigeria; Senegal; Angola; African Studies;
    JEL: D63 E26 F18 F22 F35 F54 I31 L25 N17 N27 O17 O35 O55 P16 Z13
    Date: 2023–06–28
  33. By: Ana Maria Ruiz Rivadeneira; Patrick Mcmaster
    Abstract: Multiple institutions are responsible for and contribute to ensuring that infrastructure investments meet policy objectives. The responsibilities of these institutions have evolved over time and vary from country to country, depending on tradition, constitutional arrangements, and government capacities. While they are often complementary, sometimes these responsibilities overlap, creating an additional level of complexity.Understanding the impact of the institutions involved with infrastructure will allow policymakers to make informed decisions. This paper explores both the ‘why’ and the ‘what’ of institutional arrangements. It provides a snapshot of the various institutions involved in the planning, financing, and delivery of infrastructure across OECD Member countries and identifies three broad types of institutional arrangements. The paper contributes to a better understanding of current trends in institutional change, the strengths and challenges of these institutional arrangements, and the potential for sharing experience and expertise among institutions and countries.
    Keywords: infrastructure, infrastructure banks, infrastructure commissions, infrastructure governance, institutional arrangements
    JEL: F55 H54 O18 D02
    Date: 2023–07–18

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