nep-cba New Economics Papers
on Central Banking
Issue of 2023‒12‒18
thirteen papers chosen by
Sergey E. Pekarski, Higher School of Economics

  1. The Monetary Policy Haircut Rule By Althanns, Markus; Gersbach, Hans
  2. Quantitative Easing During the COVID-19 Pandemic: A Cross-Country Study By Maciej Stefański
  3. Monetary Rules, Financial Stability and Welfare in a non-Ricardian Framework By Adame Espinosa Francisco
  4. This paper investigates the effects of macroprudential policies on the net interest margins (NIM) in the 28 European countries over the period of 1996-2019 using the unique narrative database on macroprudential policy actions collected by the experts at the ECB and national central banks (MaPPED). Employing data covering over 22000 observations on over 3000 commercial and cooperative banks, we find a general negative effect of macroprudential policy on the NIM. A tightening of macroprudential policy results in an immediate decrease of net interest margin denoting a 1.3% change from the mean level of NIM, with even stronger effects observed in subsequent annual and bi-annual changes. We also find that the effect of macroprudential policy depends on the instrument types, with lending standards restrictions exerting the most significant immediate impact on NIM levels. Other instrument types have a delayed effect on NIM, with liquidity requirements and limits on currency mismatches resulting in the strongest declines in NIM. Furthermore, we identify that the impact of these policy instruments varies based on the credit risk and, in certain cases, the cost of credit risk for individual banks. By Malgorzata OLSZAK; Christophe J. GODLEWSKI; Iwona KOWALSKA; Agnieszka WYSOCKA
  5. The Energy-Price Channel of (European) Monetary Policy By Ider, Gökhan; Kriwoluzky, Alexander; Kurcz, Frederik; Schumann, Ben
  6. Macroprudential stance assessment: problems of measurement, literature review and some comments for the case of Croatia By Tihana Škrinjarić
  7. Central Bank Digital Currency and Privacy: A Randomized Survey Experiment By Syngjoo Choi; Bongseob Kim; Young-Sik Kim; Ohik Kwon
  8. Accounting Changes and Enforcement of Bank Capital Requirements in a Crisis By Kostic, Natalija; Muthsam, Viktoria; Laux, Christian
  9. Examining the Effect of Monetary Policy and Monetary Policy Uncertainty on Cryptocurrencies Market By Mohammadreza Mahmoudi
  10. Leaning against housing booms fueled by credit By Carlos Canizares Martinez
  11. Natural Rate of Interest in a Small Open Economy with Application to CEE Countries By Maciej Stefański
  12. Natural Language Processing for Financial Regulation By Ixandra Achitouv; Dragos Gorduza; Antoine Jacquier
  13. Implicit and Explicit Deposit Insurance and Depositor Behavior By Sümeyra Atmaca; Karolin Kirschenmann; Steven Ongena; Koen Schoors

  1. By: Althanns, Markus; Gersbach, Hans
    JEL: E42 E50 E51 E52 E58 G21
    Date: 2023
  2. By: Maciej Stefański
    Abstract: This paper estimates the financial market and macroeconomic effects of central bank asset purchases (quantitative easing, QE) in 16 economies which have launched asset purchases for the first time in response to the COVID-19 pandemic. We opt for regression-based methods rather than event studies, which enable us to estimate the effects of QE on government bond yields and stock prices over the first year of the pandemic rather than only at the time of the programme announcement. These estimates are inputted into Bayesian vector autoregressive models using Structural Scenario Analysis to obtain the effects on GDP and inflation. Contrary to most of the previous literature, we find that QE has a strong and robust impact on stock prices (raising them by 40% on average), but only a muted and on average neutral impact on bond yields. This translates into usually positive, but rather muted and often statistically insignificant impact on GDP of 0.4% on average and an insignificant impact on prices. Analysing the cross-country differences in the results we find that QE tends to be more effective in countries with more credible monetary and fiscal policies, which suggests that it is a useful tool primarily in advanced economies.
    Keywords: unconventional monetary policy, large-scale asset purchases, QE, GDP, inflation, stock prices, government bond yields, credibility, comparative study
    JEL: E52 E58
    Date: 2023–06
  3. By: Adame Espinosa Francisco
    Abstract: This work is based on a new Keynesian theoretical model for an advanced economy, which incorporates overlapping generations to analyze a channel through which fluctuations in household financial wealth influence aggregate demand. The optimal monetary policy, corresponding to that of a central planner maximizing households' welfare, aims to mitigate financial fluctuations while simultaneously reducing variability in inflation and the output gap. The model is calibrated for the United States and reproduces the effect of variations in the price of financial assets on aggregate demand. The results show, first, that in the presence of productivity, financial, and demand shocks, optimal monetary policy significantly improves aggregate welfare by stabilizing financial fluctuations that impact households' wealth. Secondly, in the face of productivity and financial shocks, an augmented monetary rule responding explicitly to fluctuations in the price of financial assets, in addition to inflation and output gaps, can reproduce the welfare achieved under optimal monetary policy. However, this is not the case for demand shocks.
    Keywords: Monetary Policy;Monetary Rules;Overlapping Generations
    JEL: E21 E44 E52 E58
    Date: 2023–11
  4. By: Malgorzata OLSZAK (Wydzial Zarzadzania, Uniwersytet Warszawski); Christophe J. GODLEWSKI (LaRGE Research Center, Université de Strasbourg); Iwona KOWALSKA (Uniwersytet Warszawski); Agnieszka WYSOCKA (Uniwersytet Warszawski)
    Keywords: net interest margin, macroprudential policy instruments, credit risk
    JEL: E44 E58 G21 G28
    Date: 2023
  5. By: Ider, Gökhan; Kriwoluzky, Alexander; Kurcz, Frederik; Schumann, Ben
    JEL: C22 E31 E52 Q43
    Date: 2023
  6. By: Tihana Škrinjarić (Bank of England, United Kingdom)
    Abstract: This paper contributes to the literature on macroprudential stance assessment in two ways. Firstly, it gives a comprehensive review of related literature to see the current directions research and policy practice, alongside the problems. Secondly, it empirically evaluates different aspects and issues when assessing the macroprudential stance. The empirical part of the paper focuses on country that has a fairly active macroprudential policy to establish the initial framework for assessing the effectiveness of macroprudential policy in Croatia. Results show that somewhat different results could be obtained based on variable definition and selection. This means that measuring macroprudential stance is difficult, as it depends on the definition of the macroprudential policy variable, selection of other important variables in the analysis, as well as other methodological factors.
    Keywords: systemic risk, macroprudential policy, financial stability, financial conditions, quantile regression, policy assessment, macroprudential stance, Q-VAR, growth at risk
    JEL: E32 E44 E58 G01 G28 C22
    Date: 2023–11–08
  7. By: Syngjoo Choi; Bongseob Kim; Young-Sik Kim; Ohik Kwon
    Abstract: Privacy protection is among the key features to consider in the design of central bank digital currency (CBDC). Using a nationally representative sample of over 3, 500 participants, we conduct a randomized online survey experiment to examine how the willingness to use CBDC as a means of payment varies with the degree of privacy protection and information provision on the privacy benefits of using CBDC. We find that both factors significantly increase participants' willingness to use CBDC by up to 60% when purchasing privacy-sensitive products. Our findings provide useful insights regarding the design and the public's adoption of CBDC.
    Keywords: central bank digital currency (CBDC), privacy, randomized online survey experiment
    JEL: E40 E50 C90
    Date: 2023–11
  8. By: Kostic, Natalija; Muthsam, Viktoria; Laux, Christian
    JEL: G21 G28 M41 M48
    Date: 2023
  9. By: Mohammadreza Mahmoudi
    Abstract: This study investigates the influence of monetary policy and monetary policy uncertainties on Bitcoin returns, utilizing monthly data of BTC, and MPU from July 2010 to August 2023, and employing the Markov Switching Means VAR (MSM-VAR) method. The findings reveal that Bitcoin returns can be categorized into two distinct regimes: 1) regime 1 with low volatility, and 2) regime 2 with high volatility. In both regimes, an increase in MPU leads to a decline in Bitcoin returns: -0.028 in regime 1 and -0.44 in regime 2. This indicates that monetary policy uncertainty exerts a negative influence on Bitcoin returns during both downturns and upswings. Furthermore, the study explores Bitcoin's sensitivity to Federal Open Market Committee (FOMC) decisions.
    Date: 2023–10
  10. By: Carlos Canizares Martinez (National Bank of Slovakia)
    Abstract: This study aims to empirically identify the state of the US housing market and establish a countercyclical state-dependent macroprudential policy rule. I do so by estimating a Markov switching model of housing prices, in which mortgage debt affects house prices nonlinearly and drives state transition probabilities. Second, I propose a state-contingent policy rule fed with the probability of being in each state, which I apply to setting a housing countercyclical capital buffer, a mortgage interest deduction, and a dividend payout restriction. Finally, I show that such hypothetical tools contain early warning information in a forecasting exercise to predict the charge-off rates of real estate residential loans and a financial stress index. The significance of this study is that it informs policymakers about the state of the housing market mechanically, while also providing a general rule to implement a state-contingent and timely macroprudential policy. We propose a new method of dealing with the end point problem when filtering economic time series. The main idea is to replace filtered quarterly observations at the end of the sample with static forecasts from a MIDAS regression using higher frequency time series. This method is capable to improve stability of output gap estimates or other cyclical series, as we confirm by empirical analysis on selected CEE countries and the United States. We find that stability may still be violated due to structural breaks in business cycles, or by an excessive amount of short-term noise. While MIDAS regressions have the potential to improve output gap estimates compared to the HP filter approach, the country-specific circumstances play a considerable role and need to be considered.
    JEL: C22 C24 G51 R21 R31
    Date: 2023–11
  11. By: Maciej Stefański
    Abstract: This paper extends the Laubach-Williams (2003) framework, which is widely used to estimate the natural rate of interest, to make it more suitable for studying small open economies. The model is augmented with consumer inflation expectations, foreign output gap, the exchange rate, energy prices and a lending spread. It also uses survey data to improve the accuracy of output gap and potential growth estimates. This model is subsequently applied to CEE countries (Poland, Czechia and Hungary) and the euro area. The natural interest rate is found to be relatively volatile and pro-cyclical; it fell following the global financial crisis, but rebounded in recent years; however, while it remains lower than before the crisis, it is positive for all analysed economies. The model gives more precise and robust estimates than the standard Laubach-Williams framework, but ex-post revisions remain substantial.
    Keywords: natural interest rate, small open economy, CEE, Kalman filter
    JEL: E43 E52 C32
    Date: 2023–09
  12. By: Ixandra Achitouv; Dragos Gorduza; Antoine Jacquier
    Abstract: This article provides an understanding of Natural Language Processing techniques in the framework of financial regulation, more specifically in order to perform semantic matching search between rules and policy when no dataset is available for supervised learning. We outline how to outperform simple pre-trained sentences-transformer models using freely available resources and explain the mathematical concepts behind the key building blocks of Natural Language Processing.
    Date: 2023–11
  13. By: Sümeyra Atmaca; Karolin Kirschenmann; Steven Ongena; Koen Schoors
    Abstract: We employ proprietary data from a large bank to analyze how – during crisis – deposit insurance affects depositor behavior. Our focus is on Belgium where the government increased explicit deposit insurance coverage and implemented implicit deposit insurance arrangements. Estimating sorting below the respective insurance limits shows that depositors are aware of and understand these interventions. Difference-in-differences estimates show that both the increase in the explicit deposit insurance limit and the implicit deposit insurance had the intended calming effect on depositors. Close depositor-bank relationships mitigate these effects, while political trust seems to boost the general effectiveness of such government policies.
    Keywords: deposit insurance; coverage limit; implicit deposit guarantee; bank nationalization; depositor heterogeneity
    JEL: G21 G28 H13 N23
    Date: 2023–11

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