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on Banking |
| By: | Thanasis Stengos (Department of Economics and Finance, University of Guelph, Guelph ON Canada); Theodore Panagiotidis (University of Macedonia); Georgios Papapanagiotou (University of Macedonia) |
| Abstract: | This paper examines the effect of thirty-one variables on bitcoin returns over the period 2015-2021. We use a Bayesian LASSO model that accounts for stochastic volatility and leverage effect. We examine the impact of economic, financial and technological variables as well as uncertainty and attention indicators on bitcoin returns. Furthermore, we consider two recently proposed indicators (Central Bank Digital Currency (CBDC)) for uncertainty and attention. Our findings suggest that sentiment and technological factors have the most profound effect on bitcoin returns. Regarding economic/financial variables, stock market returns and volatility indices have the greatest impact on bitcoin returns. |
| Keywords: | Bitcoin, Cryptocurrency, LASSO, Bayesian, CBDC. |
| JEL: | G12 G15 C11 D80 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2023-02&r=ban |
| By: | Ricardo Nunes (University of Surrey); Ali Ozdagli (Federal Reserve Bank of Dallas); Jenny Tang (Federal Reserve Bank of Boston) |
| Abstract: | Interest rate surprises around FOMC announcements contain both pure policy shocks and interest rate movements driven by central bank information about the economy. By analysing interest rate changes on days of macroeconomic data releases, the impact of the central bank's information shocks can be identified and separated from the pure policy shocks. Results show that there is a significant central bank information component in the widely used policy rate surprise measure. Removing this component reveals that the contractionary effects of a positive pure policy shock are more pronounced relative to those estimated using the entire policy rate surprise. A positive information shock, on the other hand, is expansionary. |
| JEL: | C36 D83 E52 E58 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0923&r=ban |
| By: | Kris James Mitchener; Angela Vossmeyer |
| Abstract: | We examine how financial crises redistribute risk, employing novel empirical methods and micro data from the largest financial crisis of the 20th century – the Great Depression. Using balance-sheet and systemic risk measures at the bank level, we build an econometric model with incidental truncation that jointly considers bank survival, the type of bank closure (consolidations, absorption, and failures), and changes to bank risk. Despite roughly 9, 000 bank closures, risk did not leave the financial system; instead, it increased. We show that risk was redistributed to banks that were healthier prior to the financial crisis. A key mechanism driving the redistribution of risk was bank acquisition. Each acquisition increases the balance-sheet and systemic risk of the acquiring bank by 25%. Our findings suggest that financial crises do not quickly purge risk from the system, and that merger policies commonly used to deal with troubled financial institutions during crises have important implications for systemic risk. |
| JEL: | C3 E44 G21 N12 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31537&r=ban |
| By: | Jonathan Chiu (Bank of Canada); Thorsten V. Koeppl (Queen's University); Hanna Yu (Bank of Canada); Shengxing Zhang (Peking University HSBC Business School) |
| Abstract: | Decentralized Finance (DeFi) is composed of a variety of heterogeneous sectors that are interconnected through an input-output network of its tokens. We use a panel data set to empricially document the evolution of the DeFi network across its different sectors. We then employ a standard, theoretical production-network model to measure the value added and service outputs of different DeFi sectors which is fundamentally different from the commonly used metric of Total Value Locked (TVL). Our calibrated model is then used to study DeFi token prices and to predict the equilibrium effects of increasing network interconnectedness. |
| Keywords: | Blockchain, Crypto, Decentralized Finance, Production Network |
| JEL: | G2 L14 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1509&r=ban |
| By: | Adrien Auclert; Hugo Monnery; Matthew Rognlie; Ludwig Straub |
| Abstract: | This paper studies the macroeconomic effects of energy price shocks in energy-importing economies using a heterogeneous-agent New Keynesian model. When MPCs are realistically large and the elasticity of substitution between energy and domestic goods is realistically low, increases in energy prices depress real incomes and cause a recession, even if the central bank does not tighten monetary policy. Imported energy inflation can spill over to wage inflation through a wage-price spiral, but this does not mitigate the decline in real wages. Monetary tightening has limited effect on imported inflation when done in isolation, but can be powerful when done in coordination with other energy importers by lowering world energy demand. Fiscal policy, especially energy price subsidies, can isolate individual energy importers from the shock, but it has large negative externalities on other economies. |
| JEL: | E52 F42 Q43 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31543&r=ban |
| By: | Maulik Jagnani (University of Colorado, Denver); Claire Duquennois (University of Pittsburgh) |
| Abstract: | Do people worried about their personal finances experience lower-quality sleep? Using a regression discontinuity research design, we find that eligible household heads surveyed just after the disbursement of an unconditional cash transfer in Indonesia report a 0.3 standard-deviation improvement in sleep quality as compared with those surveyed just before the cash disbursement. The cash transfer appears to have alleviated financial concerns amongst household heads, who are responsible for satisfying the daily necessities of the household. Immediately after disbursement, eligible households report an increase in savings, and eligible household heads report feeling less worried, frustrated, and tired. Consistent with evidence from sleep medicine, eligible household heads displayed improved performance on memory and attention tests but not on reasoning or problem-solving tests. These patterns of results are not observed for household heads ineligible for the cash transfer, which suggests that our results are not driven by seasonal confounders or aggregate shocks. These results are also not observed for other members of eligible households, who are not responsible for satisfying the households' financial needs. We also argue that nutrition, time in bed, and labor supply cannot explain our results. |
| Date: | 2023–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:boc:fsug23:09&r=ban |
| By: | Markus K. Brunnermeier; Jonathan Payne |
| Abstract: | This paper studies strategic decision making by a private currency ledger operator, which faces competition from public money and/or other ledgers. A monopoly ledger operator can incentivize contract enforcement across the financial sector by threatening exclusion, but it can also impose markups through its pricing power. Currency competition limits rent extraction, but also makes coordinated contract enforcement more fragile. The emergent market structure bundles the provision of ledger and platform trading technologies. Regulation to ensure platform cooperation on contract enforcement and competition on markup setting is effective so long as agents can easily switch between platforms. |
| JEL: | E4 E42 E5 E50 E59 F39 G21 G23 L10 L13 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31561&r=ban |
| By: | Michelle W. Bowman |
| Date: | 2023–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgsq:96599&r=ban |
| By: | Vasiliki Dimakopoulou; George Economides; Apostolis Philippopoulos; Vanghelis Vassilatos |
| Abstract: | We investigate what happens when the fiscal authorities do not react to rising public debt so that the unpleasant task of fiscal sustainability falls upon the Central Bank (CB). In particular, we explore whether the CB’s bond purchases in the secondary market can restore stability and determinacy in an otherwise unstable model. This is investigated in a DSGE model calibrated to the Euro Area (EA) and where monetary policy is conducted subject to the numerical rules of the Eurosystem (ES). We show that given the recent situation in the ES, and to the extent that a relatively big shock hits the economy and fiscal policy remains active, there is no room left for further quasi-fiscal actions by the ECB; there will be room only if the ES’ rules are violated. We then search for policy mixes that can respect the ES’s rules and show that debt-contingent fiscal and quantitative monetary policies can reinforce each other; this confirms the importance of policy complementarities. On the negative side, bond purchases by the CB worsen income inequality and the unavoidable reversal, in the form of QT, will come at a real cost. |
| Keywords: | central banking, fiscal policy, debt stabilization, Euro Area |
| JEL: | E50 E60 O50 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10603&r=ban |
| By: | Franklin Allen; Gadi Barlevy; Douglas Gale |
| Abstract: | Galí (2014) showed that a monetary policy rule that raises interest rates in response to bubbles can paradoxically lead to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising interest rates aggressively enough. This result is different from the Miao, Shen and Wang (2019) comment on Galí’s paper. They argue Galí’s model contains additional equilibria in which more aggressive rules dampen bubbles. We show that for these equilibria, more aggressive rules involve threats to raise interest rates more than actual rate increases. |
| Date: | 2023–07–23 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:96631&r=ban |
| By: | Mitja Stefancic; Silvio Goglio |
| Abstract: | After showing remarkable resilience to the negative effects of the 2007-2009 global financial crisis, cooperative banks have undergone a process of reform and structural consolidation almost everywhere in Europe over the past decade. Recognizing these changes, the paper provides an account of the main concepts and trends in research that has focused on cooperative banks since 2010. At the same time, it sketches current trends with an aim to anticipate new research trajectories by setting some directions for new research efforts on cooperative banks operating in Europe. Sustainability, green finance and digitalisation are all concepts that have recently emerged in cooperative-banking-related research and which shall be further investigated in relation to their business model. Other potentially fruitful research topics include an investigation into the critical elements of the cooperative model of bank governance as well as the multifaceted differences between the cooperative bank patterns in Europe, which still need to be properly understood and assessed. |
| Keywords: | European cooperative banks, Research trends, Sedimented knowledge, Emerging knowledge, Content analysis |
| JEL: | G01 G21 G28 G34 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpeu:23129&r=ban |
| By: | David Peón (Universidade da Coruna) |
| Abstract: | Seeking to identify frictions to the possible implementation of CBDCs, I explore potential behavioral drivers for people to use cash or alternative payment methods in retail transactions. I conducted an online survey targeting adults in sub-Saharan Africa, a continent characterized by lower levels of banking penetration, intensive use of cash, and popularity of mobile money accounts to overcome financial exclusion. I obtained robust evidence that the affect heuristic is the only relevant behavioral trait against the use of cash and of credit cards. This adds to criticisms of behavioral finance for frequently neglecting emotional drivers. Cognitive traits, such as mental accounting, fungibility bias, and habit do not mediate in the overall preference but in which contexts people prefer to use one payment method or another. I find no behavioral drivers against the use of electronic payments but robust evidence that higher per capita income reduces their preference. All results are robust to alternative econometric specifications: multinomial logistic, ordered logistic, and logit regressions. My research provides a clear message for policy making: authorities might better favor ensuring that a wide variety of payment alternatives are available for people to use, including cash, and let them choose. |
| Date: | 2023–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:boc:csug23:09&r=ban |
| By: | Sushant Acharya; William Chen; Marco Del Negro; Keshav Dogra; Aidan Gleich; Shlok Goyal; Donggyu Lee; Ethan Matlin; Reca Sarfati; Sikata Sengupta |
| Abstract: | We provide a toolkit for efficient online estimation of heterogeneous agent (HA) New Keynesian (NK) models based on Sequential Monte Carlo methods. We use this toolkit to compare the out-of-sample forecasting accuracy of a prominent HANK model, Bayer et al. (2022), to that of the representative agent (RA) NK model of Smets and Wouters (2007, SW). We find that HANK’s accuracy for real activity variables is notably inferior to that of SW. The results for consumption in particular are disappointing since the main difference between RANK and HANK is the replacement of the RA Euler equation with the aggregation of individual households’ consumption policy functions, which reflects inequality. |
| Keywords: | HANK model; Heterogeneous-agent New Keynesian (HANK) model; Bayesian inference; sequential Monte Carlo methods |
| JEL: | C11 C32 D31 E32 E37 E52 |
| Date: | 2023–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:96600&r=ban |
| By: | Abbas, Zafer |
| Abstract: | Taxation and Profitability of Banks in Jordan: Investigating the influence of taxation policies on the financial performance and profitability of banks operating in Jordan's unique economic landscape |
| Date: | 2023–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:uwnjk&r=ban |
| By: | Chavleishvili, Sulkhan; Kremer, Manfred |
| Abstract: | This paper proposes a general statistical framework for systemic financial stress indices which measure the severity of financial crises on a continuous scale. Several index designs from the financial stress and systemic risk literature can be represented as special cases. We introduce an enhanced daily variant of the CISS (composite indicator of systemic stress) for the euro area and the US. The CISS aggregates a representative set of stress indicators using their time-varying cross-correlations as systemic risk weights, computationally similar to how portfolio risk is computed from the risk characteristics of individual assets. A boot-strap algorithm provides test statistics. Single-equation and system quantile growth-at-risk regressions show that the CISS has stronger effects in the lower tails of the growth distribu-tion. Simulations based on a quantile VAR suggest that systemic stress is a major driver of the Great Recession, while its contribution to the COVID-19 crisis appears to be small. JEL Classification: C14, C31, C43, C53, E44, G01 |
| Keywords: | Financial crisis, Financial stress index, Macro-financial linkages, Quantile VAR, Systemic risk |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20232842&r=ban |
| By: | Abhiman Das; Ejaz Ghani; Arti Grover Goswami; William R. Kerr; Ramana Nanda |
| Abstract: | We use data from Reserve Bank of India to study the impact of India's Golden Quadrilateral (GQ) highway project on finance-dependent activity. Loan volumes increase by 20-30% in districts along GQ and are stronger in industries more dependent upon external finance. Loan growth begins with increases in average branch size and in places with more pre-GQ loan activity. New branch openings come later, consistent with short-run adjustment costs to expanding branch networks. These patterns are not evident in placebo tests using delayed investments in NS-EW highways. Results suggest the depth of initial financial infrastructure shapes how infrastructure investments impact localities. |
| JEL: | G21 H4 O18 R12 R14 R33 R42 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31590&r=ban |
| By: | Ilias Filippou; James Mitchell; My T. Nguyen |
| Abstract: | Using close to 40 years of textual data from FOMC transcripts and the Federal Reserve staff's Greenbook/Tealbook, we extend Romer and Romer (2008) to test if the FOMC adds information relative to its staff forecasts not via its own quantitative forecasts but via its words. We use methods from natural language processing to extract from both types of document text-based forecasts that capture attentiveness to and sentiment about the macroeconomy. We test whether these text-based forecasts provide value-added in explaining the distribution of outcomes for GDP growth, the unemployment rate, and inflation. We find that FOMC tales about macroeconomic risks do add value in the tails, especially for GDP growth and the unemployment rate. For inflation, we find value-added in both FOMC point forecasts and narrative, once we extract from the text a broader set of measures of macroeconomic sentiment and risk attentiveness. |
| Keywords: | monetary policy; sentiment; uncertainty; risk; forecast evaluation; FOMC meetings; textual analysis; machine learning; quantile regression |
| JEL: | F31 G11 G15 |
| Date: | 2023–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:96636&r=ban |
| By: | Soyoung Lee |
| Abstract: | I study debt relief as a stimulus policy using a dynamic stochastic general equilibrium model that captures the rich heterogeneity in households’ balance sheets. In this environment, a large-scale mortgage principal reduction can amplify a recovery, support house prices and lower foreclosures. The nature of the intervention, in terms of its eligibility, liquidity and financing, shapes its macroeconomic impact. This impact rests on how resources are redistributed across households that vary in their marginal propensities to consume. The availability of bankruptcy on unsecured debt quantitatively changes the macroeconomic response to large-scale mortgage relief by reducing precautionary savings. |
| Keywords: | Business fluctuations and cycles; Credit and credit aggregates; Debt management; Housing |
| JEL: | E21 E32 E6 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:23-48&r=ban |
| By: | Matthias Hafner; Marco Henriques Pereira; Helmut Dietl; Juan Beccuti |
| Abstract: | Stablecoins have gained significant popularity recently, with their market cap rising to over $180 billion. However, recent events have raised concerns about their stability. In this paper, we classify stablecoins into four types based on the source and management of collateral and investigate the stability of each type under different conditions. We highlight each type's potential instabilities and underlying tradeoffs using agent-based simulations. The results emphasize the importance of carefully evaluating the origin of a stablecoin's collateral and its collateral management mechanism to ensure stability and minimize risks. Enhanced understanding of stablecoins should be informative to regulators, policymakers, and investors alike. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.07041&r=ban |
| By: | Donato Masciandaro |
| Abstract: | Politicians can be more or less active in pursuing financial-literacy policies. This paper explores the role of financial-literacy policy in modifying the financial-trust endowment of a given population taking the political cost-benefit analysis into account. As, in any period, each incumbent government can design and implement its own financial-literacy policy and as financial-literacy deficits are more likely in a period of financial innovation, we assume that constituencies more or less in favour of such policies are present in a given country. If this is the case, we can show that, in a democracy with political competition, the level of activism in implementing financial-literacy policies is positively associated with financial-instability risks, literacy benefits, and illiteracy costs. Moreover, preferences and constraints motivate the politician in charge. More specifically, a more longer time horizons, lower psychological attitudes towards the status quo, and a higher probability of re-election can increase financial-literacy efforts. |
| Keywords: | financial literacy, financial trust, fintech, financial crisis, loss aversion, political competition |
| JEL: | D72 G28 G53 H10 K00 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp23206&r=ban |
| By: | Dong Beom Choi (Seoul National University); Paul Goldsmith-Pinkham (Yale University and NBER); Tanju Yorulmazer (Koç University) |
| Abstract: | This paper analyzes the contagion effects associated with the failure of Silicon Valley Bank (SVB) and identifies bank-specific vulnerabilities contributing to the subsequent declines in banks’ stock returns. We find that uninsured deposits, unrealized losses in held-to-maturity securities, bank size, and cash holdings had a significant impact, while better-quality assets or holdings of liquid securities did not help mitigate the negative spillovers. Interestingly, banks whose stocks performed worse post SVB also had lower returns in the previous year following Federal Reserve interest rate hikes. The stock market partially anticipated risks associated with uninsured deposit reliance, but did not price in unrealized losses due to interest rate hikes nor risks linked to bank size. While mid-sized banks experienced particular stress immediately after the SVB failure, over time negative spillovers became widespread except for the largest banks. |
| Keywords: | Contagion, Banking crisis, Bank run, Systemic risk, Interest rate risk, Hidden losses, Held-to-maturity. |
| JEL: | G01 G21 G14 G28 E58 E43 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:2307&r=ban |
| By: | Isha Agarwal; Malin Hu; Raluca Roman; Keling Zheng |
| Abstract: | We propose a new conceptual framework for monetary policy transmission through shadow banks in the mortgage market that highlights the role of mortgage servicing in generating non-deposit funds for lending. We document that mortgage servicing acts as a natural hedge against interest rate shocks and dampens the effect of monetary policy on shadow bank mortgage lending. Higher interest rates reduce prepayment risk, increasing the collateral value of mortgage servicing assets and cashflow from servicing income. This enables shadow banks with greater exposure to mortgage servicing to obtain more funding. The mortgage servicing channel is weaker for traditional banks due to their reliance on deposit funding and the capital charge on mortgage servicing assets. Our estimates imply that the rising share of shadow banks in mortgage servicing has weakened the pass-through of monetary policy to aggregate mortgage lending. |
| JEL: | E52 G21 |
| Date: | 2023–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:96519&r=ban |
| By: | Efraim Benmelech; Joao Monteiro |
| Abstract: | We study the effectiveness of government aid to exporters by exploring an exogenous shock that affected the ability of the Export-Import Bank of the United States (EXIM) to provide aid to U.S. exporters through loan guarantees to importers. We focus on Boeing, the largest individual recipient of aid. We find that Boeing sales declined only modestly – despite Boeing’s significant reliance on EXIM for export credit. Moreover, we find that this decline is driven by financially constrained airlines or by airlines operating in countries with underdeveloped financial systems. We show that airlines in developed countries were easily able to substitute EXIM guaranteed loans for private credit and thus could still purchase Boeing aircraft despite the EXIM shock. Our results are consistent with the view that government-sponsored export credit is mostly relevant for importers in countries with underdeveloped financial systems, which represent a relatively small share of total EXIM aid. |
| JEL: | F14 F34 G28 G31 L93 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31562&r=ban |
| By: | Carlos Madeira; João Madeira; Paulo Santos Monteiro |
| Abstract: | We investigate how dissent in the FOMC is affected by structural macroeconomic shocks obtained using a medium-scale DSGE model. We find that dissent is less (more) frequent when demand (supply) shocks are the predominant source of inflation fluctuations. In addition, supply shocks are found to raise private sector forecasting uncertainty about the path of interest rates. Since supply shocks impose a trade-off between inflation and output stabilisation while demand shocks do not, our findings are consistent with heterogeneous preferences over the dual mandate among FOMC members as a driver of policy disagreement. |
| Keywords: | FOMC, committees, monetary policy, structural shocks, dissent |
| JEL: | E52 E58 D78 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1118&r=ban |
| By: | Deb Narayan Barik; Siddhartha P. Chakrabarty |
| Abstract: | In this article, we consider the problem of a bank's loan portfolio in the context of liquidity risk, while allowing for the limited liability protection enjoyed by the bank. Accordingly, we construct a novel loan portfolio model with limited liability, while maintaining a threshold level of haircut in the portfolio. For the constructed three-time step loan portfolio, at the initial time, the bank raises capital via debt and equity, investing the same in several classes of loans, while at the final time, the bank either meets its liabilities or becomes insolvent. At the intermediate time step, a fraction of the deposits are withdrawn, resulting in liquidation of some of the bank's assets. The liquidated portfolio is designed with the goal of minimizing the liquidation cost. Our theoretical results show that model with the haircut constraint leads to lesser liquidity risk, as compared to the scenario of no haircut constraint being imposed. Finally, we present numerical results to illustrate the theoretical results which were obtained. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.06525&r=ban |
| By: | Øistein Røisland; Tommy Sveen; Ragnar Torvik |
| Abstract: | We develop a theory for the optimal interaction between monetary and fiscal policy. While one might initially think that monetary and fiscal policy should pull in the same direction, we show within a simple model that this is not always the case. If there are small costs of changing the interest rate, it is optimal that monetary policy and fiscal policy pull in opposite directions when the economy is hit by an inflation or exchange rate shock. The reason is that monetary policy affects inflation through both the demand channel and the exchange rate channel, while fiscal policy only affects inflation through the demand channel. Therefore, monetary policy has a comparative advantage in stabilizing inflation, while fiscal policy has a comparative advantage in stabilizing output. Only when the costs of changing the interest rate are sufficiently high will it be optimal for monetary and fiscal policy to pull in the same direction. We also analyse how tax deduction for interest payments affects the monetary policy transmission. Such an interest subsidy improves goal achievement in response to inflation and exchange rate shocks, but the opposite is true in response to demand shocks. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:bny:wpaper:0118&r=ban |
| By: | Paul Gertler; Sean Higgins; Aisling Scott; Enrique Seira |
| Abstract: | Despite the importance of deposit financing for lending, banks in developing countries struggle to attract deposits. In a randomized experiment across 110 bank branches throughout Mexico, a lottery incentive based on net monthly deposits caused a 40% increase in the number of accounts opened and a 21% increase in the number of deposits during the lottery months. Nearly all new accounts (96%) were opened by households previously unbanked at any bank. The temporary two-month incentive had a persistent 2-3 year impact on the flow of deposits and stock of savings, and increased the present value of branch profits by 6%. |
| JEL: | G29 G41 O16 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31529&r=ban |
| By: | Ms. Natasha X Che; Alexander Copestake; Davide Furceri; Tammaro Terracciano |
| Abstract: | We examine fluctuations in crypto markets and their relationships to global equity markets and US monetary policy. We identify a single price component—which we label the “crypto factor”—that explains 80% of variation in crypto prices, and show that its increasing correlation with equity markets coincided with the entry of institutional investors into crypto markets. We also document that, as for equities, US Fed tightening reduces the crypto factor through the risk-taking channel—in contrast to claims that crypto assets provide a hedge against market risk. Finally, we show that a stylized heterogeneous-agent model with time-varying aggregate risk aversion can explain our empirical findings, and highlights possible spillovers from crypto to equity markets if the participation of institutional investors ever became large. |
| Keywords: | US Monetary Policy; Cryptoassets; Stock Markets. |
| Date: | 2023–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/163&r=ban |
| By: | Tristan Hennig; Mr. Plamen K Iossifov; Mr. Richard Varghese |
| Abstract: | We explore the early warning properties of a composite indicator which summarizes signals from a range of asset price growth and asset price volatility indicators to capture mispricing of risk in asset markets. Using a quarterly panel of 108 advanced and emerging economies over 1995-2017, we show that the combination of rapid asset price growth and low asset price volatility is a good predictor of future financial crises. Elevated levels of our indicator significantly increase the probability of entering a crisis within the next three years relative to normal times when the indicator is not elevated. The indicator outperforms credit-based early warning metrics, a result robust to prediction horizons, methodological choices, and income groups. Our results are consistent with the idea that measures based on asset prices can offer critical information about systemic risk levels to policymakers. |
| Keywords: | Early Warning Indicator; ROC; Financial Crises |
| Date: | 2023–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/157&r=ban |
| By: | Felix Brandt; Florian Grundbacher |
| Abstract: | Tournament solutions play an important role within social choice theory and the mathematical social sciences at large. We construct a tournament of order 36 for which the Banks set and the bipartisan set are disjoint. This implies that refinements of the Banks set, such as the minimal extending set and the tournament equilibrium set, can also be disjoint from the bipartisan set. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.01881&r=ban |
| By: | Jiménez-Rodríguez, Rebeca; Prats, María A. |
| Abstract: | This Special Issue brings together 13 papers that examine a variety of central topics in the field of international economics and finance. These papers were presented at the 23rd Conference on International Economics held in Málaga (Spain) on 16th–17th June 2022. The conference was organised by the Spanish Association of International Economics and Finance (AEEFI) and the University of Málaga. The selected papers make up an interesting and revealing set of information to study the new challenges of the international economics and finance in a context especially marked by the aftermath of the 2008 financial crisis, the climate change, the challenge posed by the COVID-19 crisis and the instability unleashed after the invasion of Ukraine in 2022. From different perspectives, the papers analyse how events that have particularly affected the evolution of the world economy have substantially altered the rules of international trade, foreign direct investment, as well as monetary, fiscal or sectoral policy. The conference included two keynote lectures by Per Krusell (Institute for International Economic Studies, Stockholm University) and Fabio Canova (Norwegian Business School and Budapest School for Central Banking Studies), as well as 97 selected contributions. |
| Keywords: | international economics; international finance |
| JEL: | F3 G3 J1 M40 |
| Date: | 2023–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120012&r=ban |
| By: | Àkos Aczél (Central Bank of Hungary); Lajos Szabó (Central Bank of Hungary) |
| Abstract: | We examine peer-effects in mortgage borrowing decisions. We find that having a financially literate colleague improves the borrowing decision of financially less literate co-workers. The interest rate of the mortgage loan of these co-workers is significantly lower than similar employees at other companies who do not have such a colleague. The magnitude of the effect is economically significant, roughly one-fourth of the standard deviation of mortgage loan interest rates. Placebo and robustness tests verify our results. Roughly one-third of the effect is due to which bank is chosen by the borrower. The results are heterogeneous in the strength of competition among banks. In those districts where the competition is lower, the peer effect is considerably higher. |
| Date: | 2023–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:boc:fsug23:20&r=ban |
| By: | Pierre Nkou Mananga; Shiqiang Lin; Hairui Zhang |
| Abstract: | We investigate the resilience of the South African banking system using a dynamic agent-based model and the DebtRank algorithm. This approach enables us to identify each banks importance and vulnerability in the interbank network and is not limited to listed banks, as previous studies were. We find that larger banks are more systemically important, but a banks interbank-lending-to-equity multiple is significantly correlated with its vulnerability. Our research offers policymakers a direct and practical indicator for improved monitoring of financial stability. |
| Date: | 2023–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:wpaper:11052&r=ban |