|
on Banking |
| By: | Robert J. Barro; Francesco Bianchi |
| Abstract: | The fiscal theory of the price level (FTPL) has been active for 30 years, and the interest in this theory grew with the recent global surges in inflation and government spending. This study applies the FTPL to 37 OECD countries for 2020-2022. The theory’s centerpiece is the government’s intertemporal budget constraint, which relates a country’s inflation rate in 2020 2022 (relative to a baseline rate) to a composite government-spending variable. This variable equals the cumulative increase in the ratio of government expenditure to GDP from 2020 to 2022, divided by the ratio of public debt to GDP in 2019 and the duration of the debt in 2019. This specification has substantial explanatory power for recent inflation rates across 20 non-Euro-zone countries and an aggregate of 17 Euro-zone countries. The estimated coefficients of the composite spending variable are significantly positive, implying that 40-50% of effective government financing came from the inverse effect of unexpected inflation on the real value of public debt, whereas 50 60% reflected conventional public finance (increases in current or future taxes or cuts in future spending). Within the Euro area, inflation reacts mostly to the area-wide government-spending variable, not to individual values. |
| JEL: | E3 H20 H5 H60 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31838&r=ban |
| By: | Jonathan Alexander Muñoz-Martínez; David Orozco; Mario A. Ramos-Veloza |
| Abstract: | This study follows a novel approach proposed by Angelico et al. (2022) using Twitter to measure inflation perception in Colombia in real time. By applying machine learning techniques, we implement two real-time indicators of inflation perception and show that both exhibit a dynamic similar to inflation and inflation expectations for the sample period January 2015 to March 2023. Our interpretation of these results suggests that our indicators are closely linked to the underlying factors that drive inflation perception. Overall, this approach provides a valuable instrument for gauging public sentiment towards inflation and complements the traditional inflation expectations measures used in the inflation–targeting framework. **** RESUMEN: Este estudio sigue un enfoque novedoso propuesto por Angelico et al. (2022) para la medición en tiempo real de la percepción de la inflación en Colombia utilizando Twitter. Mediante la aplicación de técnicas de aprendizaje automático, calculamos dos indicadores en tiempo real de la percepción de la inflación y mostramos que exhiben una dinámica comparable a la inflación y las expectativas de inflación, lo que sugiere que nuestros indicadores están estrechamente relacionados con los factores subyacentes que impulsan la percepción de la inflación entre enero de 2015 y marzo de 2023. En general, este enfoque proporciona un medio valioso para evaluar el sentimiento público hacia la inflación y ofrece una perspectiva complementaria a las medidas de expectativas de inflación tradicionales utilizadas en el marco de la política de inflación objetivo. |
| Keywords: | Inflation perceptions, Twitter, Real-time data, Central banks, Percepción de inflación, Twitter, medición en tiempo real, Bancos centrales. |
| JEL: | E31 E37 E52 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1256&r=ban |
| By: | Angela Guo; Mark E. Schweitzer |
| Abstract: | This paper applies loan-level information from Paycheck Protection Program loans to analyze the coverage of this extraordinary lending program. We show that loans went to a large share of small businesses across most industries in the US, especially to industries that were most negatively impacted by COVID-19 stay-at-home orders. We geocode the loans and then identify that 2021 loans were more concentrated in low- and moderate-income communities, along with census tracts where minority residents are a majority of the population. The growth of nonemployer loans and fintech lending in the program were key components of the broadened reach of the program. |
| Keywords: | small business lending; credit access; fintech; discrimination |
| JEL: | G21 L5 R3 J71 |
| Date: | 2023–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:97246&r=ban |
| By: | Gara Afonso; Gabriele La Spada; Thomas M. Mertens; John C. Williams |
| Abstract: | This paper provides an analytically tractable theoretical framework to study the optimal supply of central bank reserves when the demand for reserves is uncertain and nonlinear. We fully characterize the optimal supply of central bank reserves and associated market equilibrium. We find that the optimal supply of reserves under uncertainty is greater than that absent uncertainty. With a sufficient degree of uncertainty, it is optimal to supply a level of reserves that is abundant (on the flat portion of the demand curve) absent shocks. The optimal mean spread between the market interest rate and administered rates under uncertainty may be higher or lower than that absent uncertainty. Our model is consistent with the observation that the variability of interest rate spreads is a function of the level of reserves. |
| Keywords: | monetary policy implementation; rate control; federal funds rate |
| JEL: | E52 E58 E41 E42 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:97290&r=ban |
| By: | Vivek Sharma |
| Abstract: | This paper presents a Two-Agent New Keynesian (TANK) model with collateral- constrained borrowers and a time-varying shock to loan-to-value (LTV) ratios. A temporary tightening in lending standards in this model leads to a sizable drop in macroeconomic aggregates and significant macroeconomic fluctuations. The analysis shows that effects of shocks to LTV ratios are highly non-linear and state-dependent in the sense that amplification of shocks depends crucially on steady-state LTV ratios. Shocks when LTV ratios are already high lead to effects which are substantially stronger than when the steady-state LTV ratios are comparatively lower. The results in this paper also show that permanent LTV shocks lead to permanent decline in housing prices – a 10 percentage point decline in steady-state LTV ratio from 0.95 results in more than 0.3% decline in housing prices. A novel finding in this paper is that a permanent tightening in lending standards leads to a permanent decline in wages. Additionally, other shocks such as TFP shocks, housing demand shocks and labor supply shocks also show clear state dependence and have highly persistent effects. |
| Keywords: | Loan-to-Value (LTV) Shocks, Housing Price, Macroeconomic Fluctuations |
| JEL: | E32 E44 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2023-58&r=ban |
| By: | Thomas R. Cook; Sophia Kazinnik; Anne Lundgaard Hansen; Peter McAdam |
| Abstract: | This study evaluates the performance of local large language models (LLMs) in interpreting financial texts, compared with closed-source, cloud-based models. We first introduce new benchmarking tasks for assessing LLM performance in analyzing financial and economic texts and explore the refinements needed to improve its performance. Our benchmarking results suggest local LLMs are a viable tool for general natural language processing analysis of these texts. We then leverage local LLMs to analyze the tone and substance of bank earnings calls in the post-pandemic era, including calls conducted during the banking stress of early 2023. We analyze remarks in bank earnings calls in terms of topics discussed, overall sentiment, temporal orientation, and vagueness. We find that after the banking stress in early 2023, banks tended to converge to a similar set of topics for discussion and to espouse a distinctly less positive sentiment. |
| Keywords: | data; large language models; quantitative methods; banking and finance |
| JEL: | C45 G21 |
| Date: | 2023–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:97255&r=ban |
| By: | Barros, Gustavo |
| Abstract: | The second coffee valorization was atypical among other valorization operations of the First Republic. The context in which it was undertaken, marked by the First World War and its repercussions on international trade and financial markets, forced the support of coffee prices to be financed with internal resources, which were generated by means of paper-money emissions. This circumstance displaced tensions to the internal political field, with its implications for the conflicts and negotiations associated to the program. This article aims at examining the second valorization from this perspective, focusing on the parliamentary clashes and bargains surrounding the "national defense" decree of 1917, which authorized the emissions and thus generated the resources for the defense of coffee. The second valorization was more contentious than usually portrayed by the literature, and was subject to resistance to the use of paper-money for this purpose and, specially, to disputes over the allocation of resources from emission, as well as to regional bargains which would reverberate on the government policy for the steel and coal sectors in the following decade. |
| Keywords: | Coffee valorization; First World War; Monetary policy; Fist Republic; Brazil |
| JEL: | N16 N46 N56 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119179&r=ban |
| By: | Steve BILLON (LaRGE Research Center, Université de Strasbourg); Natalia ANDRIES (ERUDITE, Université Paris-Est) |
| Abstract: | This paper provides a theoretical model that examines the effect of deposit insurance pricing on monetary policy transmission. An increase in the key policy rate benefits bank deposits when the deposit insurance premium is lower than the fair value. This leads firms to withdraw from the capital market and boosts their demand for bank lending. Thus, a lower than the fair value deposit insurance premium strengthens the monetary policy transmission on bond returns and bank interest rates. In contrast, a fair valuation of risks ensures the neutrality of the deposit insurance on the interest rate pass-through. |
| Keywords: | Deposit insurance, Monetary policy transmission, Bank imperfect competition |
| JEL: | E52 G21 G22 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2023-03&r=ban |
| By: | Arturo Anton; Kaniska Dam; Rajdeep Sengupta |
| Abstract: | Shadow banks are widely believed to be a creation of financial regulation and regulatory arbitrage. We show that bank and nonbank modes of financing can emerge endogenously in a simple borrower-lender framework absent regulatory arbitrage or policy interventions. The coexistence of banks and shadow banks in the absence of regulatory intervention speaks to the importance of shadow banks as alternative modes of financial intermediation. We explore the scope of regulation in determining the size and location of shadow banking, as opposed to how regulation can be designed to curtail shadow bank activities. |
| Keywords: | banking and finance; monetary policy; shadow banks; regulatory arbitrage; financial regulations |
| JEL: | D82 G21 G28 G32 L25 |
| Date: | 2023–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:97256&r=ban |
| By: | Hall, Robert E. (Stanford University); Kudlyak, Marianna (Federal Reserve Bank of San Francisco) |
| Abstract: | We propose that the natural rate of unemployment has an active role in the business cycle, in contrast to the prevailing view that the rate is essentially constant. We demonstrate that this tendency to treat the natural rate as near-constant would explain the surprisingly low slope of the Phillips curve. We show that the natural rate closely tracked the actual rate during the long recovery that began in 2009 and ended in 2020. We explain how the common finding of research in the Phillips-curve framework of low – often extremely low – response of inflation to unemployment could be the result of fairly close tracking of the natural rate and the actual rate in recoveries. Our interpretation of the data contrasts to that of most Phillips-curve studies, that conclude that inflation has little relation to unemployment. We suggest that the flat Phillips curve is an illusion caused by assuming that the natural rate of unemployment has little or no movement during recoveries. |
| Keywords: | business cycle, recovery, unemployment, recession, monetary policy, natural rate of unemployment, inflation anchor, NAIRU |
| JEL: | E32 J63 J64 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16581&r=ban |
| By: | Ferrari, Alessandro; Loseto, Marco |
| Abstract: | Using administrative data on mortgages issued in Italy between 2018 and 2019, this paper estimates loan demand elasticities to maturity and interest rate. We findthat households are responsive to both contract terms: a 1% decrease in interestrate increases the average loan size by 0.22% whereas a commensurable increasein maturity increases loan demand by 0.30%. This evidence suggests that creditconstraints are relevant in this market. Things change substantially when movingalong the distribution of contract maturities: short term borrowers are unresponsive to their contract lengthwhile maturity elasticities are higher for long term borrowers. JEL Classification: D12, D14, D15, G11, G51 |
| Keywords: | credit demand, household finance, maturity, mortgage |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20232859&r=ban |
| By: | Susan M. Collins |
| Abstract: | President Collins shared charts with graduate students and faculty at an economics seminar at Harvard University, covering aspects of the economy she recently discussed at Wellesley College and as part of the Boston Fed’s 22nd Annual Regional & Community Bankers Conference. |
| Keywords: | monetary policy; FOMC; inflation; labor; federal funds rate; personal consumption expenditures (PCE); Summary of Economic Projections (SEP); COVID-19 |
| Date: | 2023–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbsp:97262&r=ban |
| By: | Ricardo Correa; Julian di Giovanni; Linda S. Goldberg; Camelia Minoiu |
| Abstract: | This paper uses U.S. loan-level credit register data and the 2018–2019 Trade War to test for the effects of international trade uncertainty on domestic credit supply. We exploit cross-sectional heterogeneity in banks’ ex-ante exposure to trade uncertainty and find that an increase in trade uncertainty is associated with a contraction in bank lending to all firms irrespective of the uncertainty that the firms face. This baseline result holds for lending at the intensive and extensive margins. We document two channels underlying the estimated credit supply effect: a wait-and-see channel by which exposed banks assess their borrowers as riskier and reduce the maturity of their loans, and a financial frictions channel by which exposed banks facing relatively higher balance sheet constraints contract lending more. The decline in credit supply has real effects: firms that borrow from more exposed banks experience lower debt growth and investment rates. These effects are stronger for firms that are more reliant on bank finance. |
| Keywords: | trade uncertainty; bank loans; trade finance; global value chains; trade war |
| JEL: | F34 F42 G21 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:97289&r=ban |
| By: | Issing, Otmar |
| Abstract: | In his speech at the conference "The SNB and its Watchers", Otmar Issing, member of the ECB Governing Council from its start in 1998 until 2006, takes a look back at more than twenty years of the conference series "The ECB and Its Watchers". In June 1999, Issing established this format together with Axel Weber, then Director of the Center for Financial Studies, to discuss the monetary policy strategy of the newly founded central bank with a broad circle of participants, that is academics, bank economists and members of the media on a "neutral ground". At the annual conference, the ECB and its representatives would play an active role and engage in a lively exchange of view with the other participants. Over the years, Volker Wieland took over as organizer of the conference series, which also was adopted by other central banks. In his contribution at the second conference "The SNB and its Watchers", Issing summarizes the experience gained from over twenty years of the ECB Watchers Conference. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:imfswp:279792&r=ban |
| By: | Victor Medina-Olivares; Finn Lindgren; Raffaella Calabrese; Jonathan Crook |
| Abstract: | In credit risk analysis, survival models with fixed and time-varying covariates are widely used to predict a borrower's time-to-event. When the time-varying drivers are endogenous, modelling jointly the evolution of the survival time and the endogenous covariates is the most appropriate approach, also known as the joint model for longitudinal and survival data. In addition to the temporal component, credit risk models can be enhanced when including borrowers' geographical information by considering spatial clustering and its variation over time. We propose the Spatio-Temporal Joint Model (STJM) to capture spatial and temporal effects and their interaction. This Bayesian hierarchical joint model reckons the survival effect of unobserved heterogeneity among borrowers located in the same region at a particular time. To estimate the STJM model for large datasets, we consider the Integrated Nested Laplace Approximation (INLA) methodology. We apply the STJM to predict the time to full prepayment on a large dataset of 57, 258 US mortgage borrowers with more than 2.5 million observations. Empirical results indicate that including spatial effects consistently improves the performance of the joint model. However, the gains are less definitive when we additionally include spatio-temporal interactions. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.04008&r=ban |
| By: | Donato Masciandaro |
| Abstract: | Politicians can be more or less active in pursuing financial education policies in order to strength the financial literacy of the citizens, and consequently their trust. This paper explores the role of financial education 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 education policy and as financial-literacy deficits are more likely in a period of financial innovation, we assume that constituencies more or l ess 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 education 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 education, 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:cbafwp23208&r=ban |
| By: | Preziuso, Massimo; Koefer, Franziska; Ehrenhard, Michel |
| Abstract: | In the European Union (EU), the revised Payment Services Directive (PSD2) aims to provide more convenient and customized financial products through open banking (OB) platforms. However, little attention has been paid to the role of OB in improving the financial well-being of the growing number of the EU's underserved groups, which currently constitute approximately a quarter of its population. This study examines how the PSD2 and OB impact inclusive finance in the EU based on the perspectives of the Netherlands' ecosystem, one of the leaders in the EU's financial technology (FinTech) landscape. A fundamental distinction can be drawn between the OB users and the ecosystem's players. Regarding the impact of financial services on the users' inclusivity, while the PSD2 strengthens the infrastructure necessary for financial inclusion, many challenges remain, mainly because it was not designed for this purpose. This study identifies several areas of improvement that include adjustments to the know your customer (KYC) and anti-money laundering (AML) processes for underserved customers, innovative ways to communicate the PSD2's potential, and the regulation of technology providers' activities to build trust. Meanwhile, from the ecosystem's position, there is a need to strengthen and improve microfinance regulation according to the opportunities provided by the PSD2 to support microfinance institutions (MFIs) in scaling up and reaching underserved clients across borders with innovative services. OB improvements can also be achieved by organizations formed by MFIs and FinTechs in collaboration with banks. Such hybrid institutions will combine the best features of each of them: knowledge of the needs of local underserved clients from MFIs, technological innovations from FinTechs, and large and trusted customer bases, infrastructures, and access to institutional investments and governments from banks. Finally, an EU inclusive OB sector depends on the centrality of trusted regulators as coordination bodies. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eifwps:279536&r=ban |
| By: | Scheicher, Martin |
| Abstract: | The trading of bonds and swaps largely relies on bank dealers as core market-makers. Dealers provide liquidity and trade the instruments with smaller or less active firms, in part by using their own balance sheets for inventory holding or hedging purposes. The reforms carried out in the aftermath of the global financial crisis (GFC) and the low interest rate environment have extensively changed the mechanisms and costs of trading fixed income instruments. This paper sets out to analyse the structure of trading in key over-the-counter (OTC) fixed income markets. We focus on three questions: (1) how are bonds and swaps currently traded and how liquid are these markets?, (2) how do the structural changes affect the dealer business model and market functioning?, and (3) how did the coronavirus (COVID-19) shock in March 2020 affect the OTC bond and swap market in its new post-reform set-up? To answer these questions, we combine an institutional and research perspective with a focus on key EU markets. We use public data and findings from the rich body of academic literature to describe the dealer business model and its post-GFC evolution. Overall, we argue that OTC fixed income trading is becoming “faster” due to the progress of electronic trading and the rise of non-bank traders, which has led bank dealers to make some adjustments to their market-making activities. The ongoing challenges faced in ensuring resilient provision of liquidity were also highlighted by the US bond market dislocation in March 2020. JEL Classification: G12, G15 |
| Keywords: | bonds, dealers, fixed income, liquidity, market structure, swaps |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkops:202324&r=ban |
| By: | Tatiana Evdokimova (Joint Vienna Institute); Piroska Nagy Mohacsi (London School of Economics and Political Science); Olga Ponomarenko (Caplight); Elina Ribakova (Peterson Institute for International Economics) |
| Abstract: | This paper uses innovative natural language processing techniques to analyze central bank communication in emerging-market (EM) central banks and compare it with that of the Federal Reserve (Fed) and the European Central Bank (ECB). Once laggards of the central banking policy scene, EM central banks have made remarkable progress in improving their policy frameworks in the past two decades. They adopted many of the principles of advanced-economy (AE) central banks both in policy conduct and communication, but with modifications that reflect their specific circumstances of capital flow volatility, financial dollarization, and traditionally weaker credibility. The authors find that EM central banks' transparency has improved dramatically; their statements' readability has overall been better than in AEs; their focus on inflation has been sharper; and they have used data-shy "forward guidance" sparingly and flexibly. Worryingly though, most central banks do not communicate on inflationary pressures until after inflation already happens. EMs have outperformed AEs in two critical respects recently: addressing rising post-COVID inflationary pressures in a timely manner and, related, avoiding banking sector stress during the monetary policy tightening cycle. Systemic support in the form of currency swaps and repo operations by the Fed and the ECB with powerful signaling at times of acute market stress also helped. EM central banks have also started moving towards easing monetary policy already, ahead of the Fed and the ECB. Bringing down inflation fast and sustainably will be the ultimate test for the quality of EM central bank frameworks. The authors conclude with policy lessons for both EM and AE central banks. These include better forecasting and communication of inflation by the majority of central banks; more consistent delivery by EM central banks of communicated policy action; discarding pure "forward guidance" that hampers data dependency and thus fast policy action particularly at times of rapid change; consistent focus on supply-side factors of inflation; and for multiple-goal central banks, a clear choice and communication of policy priorities at times of possible conflict among some of the goals. The paper also suggests a more transparent communication of coordination with fiscal authorities that would improve the credibility of both the monetary and fiscal authorities. |
| Keywords: | central banking, monetary policy, emerging markets, Federal Reserve, ECB, communication, inflation-targeting, currency swaps, supply-side inflation, forward guidance, Chat GPT, AI |
| JEL: | B22 C55 E42 E52 E58 |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp23-10&r=ban |
| By: | Bednarek, Peter; Briukhova, Olga; Ongena, Steven; von Westernhagen, Natalja |
| Abstract: | What is the impact of a sudden and sizeable increase in bank capital requirements on the lending activity by directly affected banks and by non-affected non-bank financial institutions (NBFIs)? To answer this question, we apply a difference-in-differences methodology around the capital exercise by the European Banking Authority (EBA) in 2011 with German credit register data. We find that insurance companies, financial enterprises, and factoring companies - but not leasing companies - and Non-EBA banks expand their corporate lending relative to EBA banks. In particular, NBFIs use the opportunity to expand their credit activities, in riskier and more competitive borrower segments, but NBFIs do not seem to rely on increased bank funding to finance this expansion. |
| Keywords: | non-bank financial intermediation, bank capital requirements, EBA capital exercise |
| JEL: | E50 G21 G23 G28 C33 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:279547&r=ban |
| By: | James Conklin; Kristopher Gerardi; Lauren Lambie-Hanson |
| Abstract: | This paper documents large racial disparities in the ability of homeowners to access their housing wealth without moving. During the 2018–2021 period, Black homeowners’ mortgage equity withdrawal (MEW) product applications were rejected at almost double the rate of White homeowners (44% versus 23%), while Hispanic and Asian homeowners also experienced significantly higher denial rates (32% and 30%, respectively). These racial disparities in denials are much larger than those associated with purchase and rate/term refinance mortgage applications. Controlling for loan and borrower characteristics commonly used in the underwriting process significantly reduces the MEW disparities, with the Black-White denial rate gap falling by approximately 83%, and the Hispanic-White gap falling by 73%. Credit scores and debt-to-income ratios are the most important factors explaining the racial gaps, while differences in loan-to-value ratios contribute only modestly. Large disparities remain after controlling for underwriting factors, and these “residual” disparities vary significantly across lenders. While there are numerous potential drivers of the residual disparities, the pa per shows that they tend to be larger in geographic areas characterized by more racial animus, which suggests that discriminatory forces may play a role. |
| Keywords: | housing wealth; mortgage; home equity; racial disparities |
| JEL: | G21 G51 J15 |
| Date: | 2023–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:97266&r=ban |
| By: | Ghislain Deleplace (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis) |
| Abstract: | The purpose of the chapter is to challenge two widely-held myths about Ricardo's theory of money and to suggest another view in which the relationship between the value and the quantity of money owes nothing to a commodity-theory of money (Section 2) or to the Quantity Theory of Money (Section 3) but puts the market price of the standard of money centre-stage (Section 4). Ricardo's applied pronouncements on money then appear as direct consequences of this theory (Section 5). |
| Keywords: | Ricardo David, Money, Standard of money, Quantity theory of money, Monetary policy |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04257033&r=ban |
| By: | Calef, Andrea; Chzhen, Sya In; Mandas, Marco; Motoki, Fabio |
| Abstract: | Carlson et al. (2022) examine the causal impact of banking competition by investigating a unique circumstance in the National Banking Era of the nineteenth century in the US, where a discontinuity in bank capital requirements occurred. On the one hand, their findings suggest that banks operating in markets with fewer barriers to entry tend to increase their lending activities, promoting real economic growth. On the other hand, banks in less restricted markets also exhibit a higher propensity for risk-taking, posing risks to financial stability. First, we fully reproduce the paper's outcomes apart from a minor discrepancy in the estimate of Table 9 attributed to issues in the provided codes. Second, we test the robustness of the results by (i) changing the ranges used to select the sample of cities included in the analysis, (ii) adopting different options to address outliers' potential issues and (iii) introducing additional control variables. We observe that the estimation results remain mostly consistent when subjecting them to various robustness checks. However, it is worth highlighting that the results can be partially influenced by the criteria used to select the sample of cities and the inclusion of control variables. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:i4rdps:81&r=ban |
| By: | Alejandro Werner (Peterson Institute for International Economics) |
| Abstract: | Latin America's central banks acted promptly and decisively to contain the medium-term consequences of the global inflation shock. Since then, however, headline and core inflation have come down within the region, real growth has slowed, and the US Federal Reserve appears to have settled on a (however brief) pause of its own tightening cycle. Werner says the time has come for a gradual return to looser financial conditions in Latin America. Brazil, Chile, and Peru have already started the process of cutting rates, and there seems to be significant space to continue; Mexico should follow, with Colombia waiting for more clear signals. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb23-16&r=ban |
| By: | Brandon Goldstein; Julapa Jagtiani; Catharine Lemieux |
| Abstract: | A growing portion of consumer credit has recently been devoted to unsecured personal installment loans. Fintech firms have been active players in this market, with an increasing market share, while the market share of banks has declined. Studies of fintech lending have shown that their digital access and ability to leverage alternative data have increased accessibility in underserved areas, enabled consumers with thin credit files to obtain credit, and provided a lower cost alternative to long-term credit card financing. This paper exams three questions: (1) Do proprietary loan rating systems accurately predict the likelihood of default? (2) Can a proprietary loan rating system, leveraging alternative data, that was developed in a favorable economic period continue to perform well under adverse economic conditions (such as the COVID-19 pandemic)? (3) Have fintechs been “cream skimming, ” i.e., underpricing the cost of credit to top-tier customers? This study uses data from LendingClub, one of the largest fintech lenders in the personal loan market. We find that LendingClub’s loan rating system is superior to traditional measures of credit risk when predicting the likelihood of default and that the loan rating system continued to perform well during the pandemic period. Finally, we find no evidence of cream skimming. |
| Keywords: | Fintech; peer-to-peer (P2P); alternative data; financial inclusion; credit access; COVID-19; fintech loan default; cream skimming; fintech loan rate |
| JEL: | G21 G28 G18 L21 |
| Date: | 2023–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:97272&r=ban |
| By: | Leonardo Gambacorta; Salvatore Polizzi; Alessio Reghezza; Enzo Scannella |
| Abstract: | This study examines whether the level of environmental disclosure in banks' financial reports matches less brown lending portfolios. Using granular credit register data and detailed information on firm-level greenhouse gas emission intensities, we find a negative relationship between environmental disclosure and brown lending. However, this effect is contingent on the tone of the financial report. Banks that express a negative tone, reflecting genuine concern and awareness of environmental risks, tend to lend less to more polluting firms. Conversely, banks that express a positive tone, indicating lower concern and awareness of environmental risks, tend to lend more to polluting firms. These findings highlight the importance of increasing awareness of environmental risks, so that banks perceive them as a critical and urgent pressing threat, leading to a genuine commitment to act as environmentally responsible lenders. |
| Keywords: | green banking, brown lending, banking, environmental disclosure, environmental risks, climate change |
| JEL: | G20 G21 M41 Q56 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1143&r=ban |
| By: | Hoffmann, Mathias; Mönch, Emanuel; Pavlova, Lora; Schultefrankenfeld, Guido |
| Abstract: | We study how households adjust their medium-term inflation expectations under the new ECB strategy. We find that survey respondents make little difference between the previous strategy of targeting inflation rates close to but below 2% and the new strategy with a symmetric 2% target. Yet, participants informed that the ECB might tolerate rates exceeding the target for some time, expect somewhat higher medium-term inflation. Respondents asked to assume inflation currently running below target place a significantly higher probability on outcomes above 2% in the medium term. Participants do not expect an undershooting when inflation is currently running above target. |
| Keywords: | Monetary Policy Strategy, Household Inflation Expectations, Randomized Control Trial, Survey Data |
| JEL: | F33 E31 E32 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:279574&r=ban |
| By: | John Caparusso; Leonardo Ulf Lewrick; Nikola Tarashev |
| Abstract: | We derive a tight link between the profitability, valuation and resilience of global systemically important banks (G-SIBs). We measure profitability using return on equity (ROE), valuation with the price-to-book ratio and resilience through the capital headroom above regulatory requirements ("management buffer"). We find that price-to-book ratios increase in analysts' ROE forecasts and in banks' management buffers. We also document that low-valued G-SIBs maintain management buffers by reducing risk-weighted assets and cater to investors by paying out their entire profits. However, the resilience of low-valued G-SIBs could prove precarious as they frequently incur substantial losses that trigger significant negative stock-market reactions. |
| Keywords: | financial stability, price-to-book ratio, banking regulation |
| JEL: | G21 G28 C25 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1144&r=ban |
| By: | Lloyd, Simon; Fernández-Gallardo, Álvaro; Manuel, Ed |
| Abstract: | We estimate the causal effects of macroprudential policies on the entire distribution of GDP growth for advanced European economies using a narrative-identification strategy in a quantile-regression framework. While macroprudential policy has near-zero effects on the centre of the GDP-growth distribution, tighter policy brings benefits by reducing the variance of future growth, significantly boosting the left tail while simultaneously reducing the right. Assessing a range of channels through which these effects materialise, we find that macroprudential policy particularly operates through ‘credit-at-risk’: it reduces the right tail of future credit growth, dampening booms, in turn reducing the likelihood of extreme GDP-growth outturns. JEL Classification: E32, E58, G28 |
| Keywords: | growth-at-risk, macroprudential policy, narrative identification, quantile local projections |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkwps:2023145&r=ban |
| By: | Patrick T. Harker |
| Abstract: | During a presentation at the Mortgage Bankers Association Annual Convention and Expo in Philadelphia, Patrick Harker, Philadelphia Fed president and CEO, said that his position on “holding the policy rate steady is the prudent one to take.” Harker also said that he believes “such a resolute, but patient, stance of monetary policy will allow us to achieve the soft landing that we all wish for our economy.” He noted that he continues “to see strong underpinnings for our economy overall, ” adding that this “economy is proving to be nothing if not resilient. I expect this to continue.” |
| Date: | 2023–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpsp:97146&r=ban |
| By: | Wilhelm, Maike; Aydemir, Ali; Rohde, Clemens |
| Abstract: | Previous international climate change agreements have primarily been driven by states, such as the UN Conference on Environment and Development in Rio de Janeiro in 1992, followed by the Kyoto Protocol in 1997 and the Paris Agreement in 2015. Perhaps due to the national focus of these agreements, discussions and actions to date have mainly centred on direct carbon emissions from households, transport and industry. However, it is important not to overlook the significant potential for the financial industry to contribute towards combating climate change. Through their lending activities, they determine which economic activities receive financing and which do not. This economic power is needed to achieve the Paris climate goals. While Germany's Climate Protection Act provides a framework for meeting these goals, it does not impose specific requirements on banks. However, German banks have voluntarily committed to fulfilling their responsibilities in regards to climate policy. In this study, we analyze the goals and measures that German banks plan to pursue in their efforts to combat climate change based on self-statements found in their strategy papers. |
| Keywords: | green finance, sustaible finance, policy measures |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisisi:279796&r=ban |