nep-cba New Economics Papers
on Central Banking
Issue of 2022‒11‒21
nine papers chosen by
Sergey E. Pekarski
Higher School of Economics

  1. Endogenous Money, Excess Reserves and Unconventional Monetary Policy By Böhl, Gregor
  2. Cacophony in Central Banking? Evidence from euro area speeches on monetary policy By Martin Feldkircher; Paul Hofmarcher; Pierre L. Siklos
  3. The Eurosystem's asset purchase programmes, securities lending and Bund specialness By Baltzer, Markus; Schlepper, Kathi; Speck, Christian
  4. Effectiveness of Central Bank Swap Lines in Alleviating the Mispricing of FX Swaps at the Start of the COVID-19 Pandemic By Kai Schellekens; Patty Duijm
  5. Impacts of ECB Unconventional Monetary Policy onEurozone sovereign risk: A Cross-Country Analysis By Dobson, Anya
  6. Going below zero - How do banks react? By Michaelis, Henrike
  7. Basel III and SME bank finance in Germany By Marek, Philipp; Stein, Ingrid
  8. Whatever it Takes to Understand a Central Banker – Embedding their Words Using Neural Networks. By Zahner, Johannes; Baumgärtner, Martin
  9. Determinants of TARGET2 transactions of European banks based on micro-data By Drott, Constantin; Goldbach, Stefan; Jochem, Axel

  1. By: Böhl, Gregor
    JEL: E63 C63 E58 E32
    Date: 2022
  2. By: Martin Feldkircher; Paul Hofmarcher; Pierre L. Siklos
    Abstract: Transparent communication is a prerequisite for delivering an effective monetary policy. In this paper, we examine over 3000 speeches from central bankers to investigate the topics euro area national banks and the ECB most frequently talk about. Text-based ideal point analysis enables us to estimate for each central bank a measure of its ideological position, which is based on differences in the tone they use to talk about the identified topics. As far as we are aware this methodology has not been applied in the present context. Our results are fourth-fold: Firstly, price stability and financial stability communication lie at the core of central bank communication in the euro area. Second, the ECB’s ideal points tend to lie systematically above that of other euro area national banks, which suggests differing outstanding, ideological position. This implies that we cannot think of the ECB’s ideal point as being formed by the ideological positions of its member states. Third, we observe variability in member states’ ideal points over time, whereas the ECB’s ideal point is rather stable. The latter finding suggests remarkable consistency in the ECB’s communication strategy through both normal and crisis times. Finally, in a VAR setting, we find that changes in ideological positions impact longer-run macroeconomic expectations.
    Keywords: Monetary policy; text-based ideal point model; central bankers’ speeches
    JEL: E58 E61 E31 E32
    Date: 2022–08
  3. By: Baltzer, Markus; Schlepper, Kathi; Speck, Christian
    Abstract: The Eurosystem's asset purchase programmes reduced the free float of German Bunds. Market participants feared impaired market functioning in the Bund market and monetary policymakers unintended consequences for monetary policy transmission. We study the intended and unintended consequences of asset purchases in the repo market with Bund collateral. Bunds that are eligible for APP purchases carry a repo specialness premium even when they are not purchased. This "eligibility premium" is larger than the actual flow effect of purchases identified in previous research. Securities lending (SecL) operations have a flow effect, but its magnitude is even smaller than the flow effect of APP purchases. Therefore, the impact of SecL in the repo market is only of a quite limited extent. Furthermore, the effects of APP and SecL on repo specialness are relatively small compared to those caused by banks' balance sheets window dressing at quarter ends and by the hedging pressure for Bund Futures.
    Keywords: Repos,Quantitative Easing,Securities Lending,Eurosystem,PSPP
    JEL: E43 E58 G12 G28
    Date: 2022
  4. By: Kai Schellekens; Patty Duijm
    Abstract: At the start of the COVID-19 pandemic the increased market volatility and risk aversion led to a deterioration of U.S. Dollar funding conditions in the Euro Area. The swap line interventions by the ECB and Federal Reserve on March 15, 2020 aimed to alleviate the mispricing of EUR/USD FX swaps. We find that these swap line interventions were effective since they alleviated part of the mispricing. The announcement effect of the interventions is however limited; the impact of the swap line interventions is larger and more significant closer to the implementation date. This study provides insight into the effectiveness of central bank interventions in the FX swap market during turbulent periods.
    Keywords: Central Bank Policy: FX Swaps: Financial Markets: Covid-19
    JEL: E58 G2 G15 H12
    Date: 2022–10
  5. By: Dobson, Anya (University of Warwick)
    Abstract: This paper investigates the impact of ECB Unconventional Monetary Policy an-nouncements on the 10-year sovereign bond yields of eleven Euro area countries. Thispaper uses event study methodology to examine expansionary UMP announcements between 1st January 2007 and 31st December 2021. Consistent with the literature, I findsignificant negative announcement effects on sovereign yields collectively examining all programmes. Differences in the magnitude and significance of individual countryreactions are closely related to their solvency status. This is persistent for the most recent programmes in response to the Covid-19 pandemic which extends the scope of current literature. This paper also incorporates intraday analysis to more closely examine the determinants of announcement effects on their respective dates.
    Keywords: Monetary Policy ; ECB ; government bond yields ; Covid-19 JEL Classification: G21 ; G28 ; E58 ; F45
    Date: 2022
  6. By: Michaelis, Henrike
    Abstract: Exploiting confidential data on individual German bank balance-sheets, I analyse what characterises a bank that opts to apply negative interest rates to corporate deposits. The results suggest that banks that are highly exposed to the negative interest rate policy (NIRP), i.e. funded by a larger share of household deposits, are more likely to apply negative corporate deposit rates. Furthermore, I examine whether banks adjusted their fee and commission strategy during the NIRP period and if they do what characterises those banks. My results show that banks adjusted their strategy in deposit business with households during the NIRP period. Compared with before, they generated higher net commission income on their outstanding household deposit holdings.
    Keywords: Monetary policy transmissions,negative rates,deposits,excess liquidity,interest rate pass-through,fees and commissions
    JEL: E52 E43 E44 E58 G20 G21
    Date: 2022
  7. By: Marek, Philipp; Stein, Ingrid
    Abstract: This paper examines how Basel III capital reforms affected bank lending in Ger- many. We focus on the increase of minimum risk-based capital requirements and the introduction of the leverage ratio. The announcement of stricter risk-based capital regulation significantly affected low capitalized banks. The impact depends on a bank's credit risk model, i.e. whether a bank applies the standardized approach (SA) or an internal ratings-based approach (IRBA) to determine risk weights. Low capitalized SA banks significantly cut lending whereas IRBA banks did not ad- just lending volumes. By contrast, low capitalized IRBA banks significantly in- creased collateralization while low capitalized SA banks adjusted collateralization only marginally. Moreover, the impact on SMEs and large companies also differs. In terms of lending, SMEs were affected more strongly, whilst in terms of collateralization the impact on large companies was bigger. The announcement of the leverage ratio had, however, a rather limited impact. We find some evidence that low capitalized banks reduced lending. Furthermore, low capitalized banks somewhat tightened collateral requirements, especially for large companies.
    Keywords: Basel III,bank lending,nancial regulation,small and medium-sizedenterprises (SMEs)
    JEL: D22 E58 G21
    Date: 2022
  8. By: Zahner, Johannes; Baumgärtner, Martin
    JEL: C45 C53 E52 Z13
    Date: 2022
  9. By: Drott, Constantin; Goldbach, Stefan; Jochem, Axel
    Abstract: This paper examines German and foreign bank factors that can explain cross-border central bank liquidity flows between Germany and the rest of the euro area. Using data from the German component of Eurosystem's real-time gross settlement system TARGET2 and BankFocus for the period between 2009 and 2021, we provide empirical evidence that only few balance sheet items and profit and loss accounts affect flows with Germany. We control for bilateral bank-specific relationships and time-varying macroeconomic country effects in our regressions. In general, German bank factors seem to be more important than characteristics of foreign banks. A German bank that exhibits relatively high claims against a central bank seems to attract less additional central bank liquidity from abroad than a German bank with fewer existing central bank claims. However, higher overall liquidity of a German credit institution corresponds to additional net inflows. Foreign bank factors only matter for central bank payments and intragroup payments. We also document heterogeneities across different types of transactions which influence the German TARGET2 balance. While customer payments, interbank payments and central bank payments have increased net flows to Germany in sum, intragroup payments and ancillary systems' transactions have led to net outflows.
    Keywords: Capital flows,TARGET2 transactions,central bank liquidity
    JEL: F3 F32 G15
    Date: 2022

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