|
on Financial Development and Growth |
| By: | Corpus, John Paul; Cassimon, Danny |
| Abstract: | We examine the effect of net capital inflows on industrialization in the ASEAN-4 countries of Indonesia, Malaysia, Philippines, and Thailand. Using panel data covering 1980–2018, we estimate the influence of both aggregate and disaggregated net capital inflows on the manufacturing sector’s share in employment and real output. We find that aggregate net capital inflows have a negative influence on the manufacturing share of employment. Disaggregating capital inflows reveals that the negative effects emanate from non-FDI inflows, particularly portfolio investment and portfolio debt inflows. Meanwhile, FDI inflows have a positive effect on the manufacturing share of output. Our findings are consistent with existing evidence on the effects of aggregate capital inflows and non-FDI inflows on the manufacturing sector. We make a novel contribution for the ASEAN-4 by tracing the negative effects of non-FDI inflows to portfolio investment and portfolio debt, and uncovering the positive ffect of FDI on manufacturing’s output share. Our findings imply that policymakers in developing countries must pay attention to the influence that capital inflows exert on structural change and their industrialization efforts. |
| Keywords: | capital inflows, structural change, premature deindustrialization, ASEAN-4 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iob:wpaper:2025.05 |
| By: | Silva Neira, Ignacio; Rodríguez González, Carlos; Pédussel Wu, Jennifer |
| Abstract: | Globalization has significantly influenced economic policy in Latin America. After the debt crisis of the 1980s, capital controls were removed leading to a substantial increase in Foreign Direct Investment (FDI) to the region. Chile, in particular, has extensively promoted free international integration, with the import of technology through FDI playing a major role in its economic development. During the 1990s, Chile experienced a period of rapid GDP growth, increased exports, and higher productivity. However, its productive dynamism has since stalled, trapping the country in an income plateau. Insights from evolutionary economics provide a framework for understanding this phenomenon, where neoclassical theory falls short. This study seeks to provide empirical evidence on whether FDI has promoted or hindered the innovative performance of domestic firms in Chile. Using firm-level data, the research employs the well-known CDM model to address selection bias in innovation efforts. The econometric analysis measures the impact of foreign competition on local innovation, specifically examining how foreign ownership and competition within economic sectors influence innovation outputs in local firms. The findings indicate that firms facing higher levels of foreign competition are less likely to implement new processes or products. These results offer valuable policy implications, highlighting the nuanced effects of FDI on host economies. The impact of FDI varies depending on the type of investment, the economic sector, and the technology introduced. Consequently, strategies aimed at leveraging FDI for economic catch-up must account for these variances and focus on fostering local innovation and technological advancement. |
| Keywords: | Foreign Direct Investment, CDM Model, Innovation, Technology transfer |
| JEL: | F21 O33 L25 O54 D22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ipewps:313642 |
| By: | Eduardo Polloni-Silva (Universidade Federal de Mato Grosso do Sul); Herick Fernando Moralles (Universidade Federal de São Carlos); Rosina Moreno (AQR-IREA, University of Barcelona) |
| Abstract: | Research shows that Foreign Direct Investment (FDI) can be beneficial/harmful to the host’s environment. However, the mechanisms that explain these contrasting effects are still unclear. By employing a regional dataset on FDI in the State of Sao Paulo, Brazil, this study verifies how the technological content of the FDI may impact the host region. Additionally, applying the promises from the institution-based view, the origins of FDI and the institutional quality of these home countries were included. The results reject the commonly employed ‘one size fits all’ approach towards FDI, since both high-technology and low-technology FDI can be beneficial for the host’s sustainable development. Yet, the origins of these investments matter, and receiving FDI from countries with weaker institutions can be harmful, regardless of the sector. These findings have important implications for policymakers and future research focused on emerging economies, and the promised expectations of FDI should be revisited |
| Keywords: | CO2 Emissions Intensity; Sustainability; Foreign Direct Investment; São Paulo; Brazil. JEL classification: F18; O13; Q56; R11 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:aqr:wpaper:202410 |
| By: | Bernhard C. Dannemann (University of Oldenburg, Department of Economics); Erkan Goeren (University of Oldenburg, Department of Economics) |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:old:dpaper:451 |
| By: | Charles M. Kahn; Anderson Caputo Silva; Gonzalo Martinez Torres |
| Keywords: | Finance and Financial Sector Development-Access to Finance Finance and Financial Sector Development-Financial Structures Macroeconomics and Economic Growth-Investment and Investment Climate |
| Date: | 2023–08 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wboper:40273 |
| By: | Matthias Burgert; Tobias Cwik; Joséphine Molleyres; Barbara Rudolf; Jörn Tenhofen |
| Abstract: | Obtaining reliable estimates of the natural rate of interest, r*, and understanding its drivers is key for assessing long-run trends in real interest rates. In turn, this plays a role in assessing the stance of monetary policy. Against this backdrop, we discuss the evolution of real interest rates in Switzerland and present a portfolio of models used by the Swiss National Bank (SNB) to estimate r* as well as investigate its drivers. Moreover, we discuss the implications of the r* estimates for monetary policy. We find that, consistent with the evolution of real interest rates globally and in Switzerland, all model estimates point to a significant decline in r* since the mid-1980s. Also, r* is lower in Switzerland than abroad. Potential output growth as well as global factors related to the demand for and supply of safe and liquid assets (i.e., the convenience yield) and to demographics (as reflected in the discount factor) appear to be important drivers of the downward trend in r*. However, generally speaking, r* estimates are subject to sizeable model and statistical uncertainty. Concerning policy implications for Switzerland, we argue that while estimates of r* provide an important piece of information for monetary policy, other factors, such as the exchange rate, are also key determinants of monetary conditions for a small open economy such as Switzerland. |
| Keywords: | Natural rate of interest, Demographics, Productivity growth, Monetary policy |
| JEL: | E52 E43 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbecs:2025-14 |
| By: | Jose Luis Oreiro |
| Abstract: | The current article has two main objectives. The first one is to make a historical reconstruction of the debate between Keynes and Classical economists in the period just after the publication of the General Theory (1937-1939) in order to highlight the differences between Liquidity Preference and Loanable funds theory of interest rate determination. In opposition of what seemed to be a consensus in economic literature (See Oreiro, 2001), both theories had very different implications about the nature of the rate of interest and the role of money in economic process. The second objective is to build a simple Keynesian Stock-Flow consistent model for the funding stage of the process of capital formation, represented by the Finance-Investment-Saving-Funding circuit. This simple model makes clearly that long-term interest rate for corporate bonds is a strict monetary variable, being dependent of liquidity preference of households and the monetary policy conducted by the Central Bank. In such framework, an increase in the households´ s propensity to save will increase, rather then decrease, the long term interest rate over corporate debt since it will decrease corporate profits which are the main source of internal funding for firms´ s investment plans, forcing then to issue more corporate debt in order to get the money required for funding investment, thereby reducing the price of corporate bonds and hence increasing the rate of interest over corporate debt. |
| Keywords: | : John Maynard Keynes, Liquidity Preference, Capital Formation, Finance and Funding. |
| JEL: | E10 E12 E44 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2509 |
| By: | Lukas Altermatt; Hugo van Buggenum; Lukas Voellmy |
| Abstract: | We introduce banks that issue liquid deposits backed by illiquid bonds and capital into an otherwise standard cash-in-advance economy. Liquidity transformation can lead to multiple steady-state equilibria with different interest rates and real outcomes. Whenever multiple equilibria exist, one of them is a 'liquidity trap', in which nominal bond rates equal zero and banks are indifferent between holding bonds or reserves. Whether economic activity is higher in a liquidity trap or in a (coexisting) equilibrium with positive interest rates is ambiguous, but the liquidity trap equilibrium is more likely to go in hand with inefficient overinvestment. While liquidity transformation can lead to macroeconomic instability in the form of multiple equilibria, aggregate consumption is higher than in a cash-only economy, regardless of which equilibrium is selected. |
| Keywords: | Banks, Liquidity, Monetary policy, Zero-lower bound |
| JEL: | E4 E5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbwpa:2025-04 |
| By: | Nicola Cetorelli; Gonzalo Cisternas; Asani Sarkar |
| Abstract: | What is the essence of non-bank financial intermediation? How does it emerge and interact with intermediation performed by banks? To investigate these questions, we develop a model-based survey: we classify existing models into different intermediation functions á la Merton (1995) to show that variations of them admit a common modeling structure; then, we extend or reinterpret the resulting models to connect equilibrium strategies to non-bank activities in practice. Particular emphasis is placed on the coexistence of banks and non-banks: how their competition, or the extent of cooperation through contractual arrangements, varies across intermediation functions. Through this approach we speak to a variety of entities such as traditional banks, open-end funds, special purpose vehicles, private credit entities, and fintech lenders. We also discuss innovation, regulation, and market liquidity as drivers of non-bank activities. |
| Keywords: | Non-banks; banks; financial intermediation |
| JEL: | G21 G23 G18 |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:99720 |
| By: | Itamar Drechsler; Hyeyoon Jung; Weiyu Peng; Dominik Supera; Guanyu Zhou |
| Abstract: | Credit card interest rates, the marginal cost of consumption for nearly half of households, currently average 23 percent, far exceeding the rates on any other major type of loan or bond. Why are these rates so high? To understand this, and the economics of credit card banking more generally, we analyze regulatory account-level data on 330 million monthly accounts, representing 90 percent of the US credit card market. Default rates are relatively high at around 5 percent, but explain only a fraction of cards’ rates. Non-interest expenses and rewards payments are more than offset by interchange and non-interest income. Operating expenses, such as marketing, are very large, and are used to generate pricing power. Deducting them, we find that credit card lending still earns a 6.8 percent return on assets (ROA), more than four times the banking sector’s ROA. Using the cross section of accounts by FICO score, we estimate that credit card rates price in a 5.3 percent default risk premium, which we show is comparable to the one in high-yield bonds. Adjusting for this, we estimate that card lending still earns a 1.17 percent to 1.44 percent “alpha” relative to the overall banking sector. |
| Keywords: | credit cards; banking; asset pricing; household finance |
| JEL: | G12 G21 G51 |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:99669 |
| By: | Evrard, Johanne; Parisi, Laura; Rouveyrol, Clément; van Overbeek, Fons; Arampatzi, Alexia-Styliani; Christie, Rebecca |
| Abstract: | The European Union requires a single market for capital. Well-developed and integrated capital markets support economic growth and resilience across the region, offering benefits for businesses, households, and financial stability. This paper examines the importance of CMU in achieving five strategic objectives: supporting innovation and productivity, financing the twin transition, shoring up pension savings, strengthening alternatives to bank financing, and fostering convergence and inclusion. It highlights the progress made over the past decade, the challenges encountered, and the renewed impetus behind the CMU initiative. The paper proposes concrete steps to move forward, building on long-standing priorities supported by the ECB and the current policy debate on CMU. First, it suggests facilitating access to capital markets, via the creation of a new standard for a European savings and investment product. Second, it emphasises the importance of expanding capital markets across-borders which would be facilitated by improvements towards a more integrated supervisory ecosystem, an integrated trading and post-trading landscape leveraging on the potential benefits of digitalisation, and a more active securitisation market that does not compromise on financial stability. Third, the paper highlights the need to channel capital towards innovative and competitive firms by increasing opportunities for equity and venture capital financing. These actions should be complemented by longer-term initiatives, including continuing to address barriers stemming from the lack of harmonisation in insolvency, corporate and taxation regimes, designing a safe asset for Europe, completing the Banking Union, and promoting financial literacy and inclusion. JEL Classification: E61, F36, G18, G24, G51, O16 |
| Keywords: | capital markets union, convergence, financial integration, innovation financing, savings |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025369 |
| By: | Tobias König |
| Abstract: | I examine how financial constraints shape the transmission of aggregate external equity financing shocks to firms' equity issuance, outstanding debt, and investment. I construct a novel instrument for aggregate equity financing shocks from firm-level data using the Granular Instrumental Variable (GIV) strategy. I find that financially unconstrained firms--characterized by high cash holdings and dividend-paying status--increase equity issuance by 1.8–2.0 percentage points, substitute equity for debt, and boost investment when capital market conditions improve. Highly leveraged firms, in contrast, refuse both to issue new equity and to reduce outstanding debt, consistent with the leverage ratchet effect. The debt overhang of highly leveraged firms results in 1.9 percentage points lower investment rates compared to the average firm. These results emphasize the crucial role of financial constraints in external equity financing and highlight the broader macroeconomic implications of debt overhang. |
| Keywords: | Capital Markets, External Equity Financing, Granular Instrumental Variable, Financial Constraints |
| JEL: | E22 E44 G30 G32 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_675 |
| By: | Botsari, Antonia; Gvetadze, Salome; Lang, Frank |
| Abstract: | This working paper provides an updated overview of the key markets the EIF focuses on, highlighting the challenges and opportunities in SME financing during these uncertain times. It reviews the overall market environment, explores developments in SME equity, guarantees, securitisation, and inclusive finance markets, and discusses how these areas are shaping the support available to SMEs. The paper reflects the EIF's commitment to addressing financing gaps and fostering sustainable growth across Europe. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eifwps:313620 |
| By: | Mario Cassetti |
| Abstract: | This study uses Kalecki's profit equation to examine the changing composition of expenditures that drove profit realisation in the US economy over the last few decades (1961-2019). A clear result is that profits in the Consumer Age (1979-2008) were driven less by investment and 'external markets', - i.e. net ex- ports and government deficits - than by a general collapse in savings. Thereafter, public deficits have aided profits. Still, the support of capitalists' consumption, although reduced, has remained. The study argues that the decline in the rela- tive bargaining power of production workers in the labour market, together with financial innovations, is the root cause of the Consumer Age. Empirical support is sought for the hypothesis that income inequality resulting from wage stagnation has increased upper- and middle-class consumption, and household indebtedness, and thus, profits. These events suggest a debate about how the distribution-spending link, fairly stable in Kaleckian/Keynesian models, can be profoundly altered be- cause of institutional and cultural change, and more generally, a debate about how long an economy driven by consumerism and inequality can last. |
| Keywords: | Kalecki's profit determinants, Income distribution, Consumerism |
| JEL: | E11 E12 E21 E25 E65 O51 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2510 |
| By: | Steven Kelly; Jonathan D. Rose |
| Abstract: | This article critically reviews the 2023 banking crisis with the benefit of two years of hindsight. We highlight seven facts that depart from the standard account of the crisis that has developed. We describe the crisis as a reaction to bank business models that focused on providing banking services to certain economic sectors, crypto-asset firms and venture capital, that had come under economic pressure during the preceding year. We argue this view of the crisis provides a more precise explanation of which banks were affected compared to an explanation focused solely on banks’ balance sheet metrics. We also argue that this view of the crisis has different policy implications, more focused on surveilling bank business models and institutional depositors. |
| Keywords: | Banking crisis; Business models; Uninsured deposits; unrealized losses |
| JEL: | G01 G21 G28 H12 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedhwp:99678 |
| By: | Beverly Hirtle; Matthew Plosser |
| Abstract: | Conventional measures of bank solvency fail to account for the unique liquidity risks posed by deposits. Using public regulatory data, we develop a novel measure, economic capital, that jointly quantifies the impact of credit, liquidity, and market risk on bank solvency. We validate that economic capital is a more timely and accurate indicator of bank health than standard solvency measures. Using our framework, we examine the evolution of banking sector risk exposures over several decades. Despite significant reforms in the aftermath of the Global Financial Crisis, economic capital suggests that liquidity and market risks have grown and remain elevated. |
| Keywords: | bank capital; solvency; liquidity; financial stability |
| JEL: | G21 G17 G01 |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:99679 |
| By: | Matteo Iacoviello (Federal Reserve Board of Governors and CEPR); Ricardo Nunes (University of Surrey); Andrea Prestipino (Federal Reserve Board of Governors) |
| Abstract: | We study optimal credit market policy in a stochastic, quantitative, general equilibrium, infinite-horizon economy with collateral constraints tied to housing prices. Collateral constraints yield a competitive equilibrium that is Pareto inefficient. Taxing housing in good states and subsidizing it in recessions leads to a Pareto-improving allocation for borrowers and savers. Quantitatively, the welfare gains afforded by the optimal tax are significant. The optimal tax reduces the covariance of collateral prices with consumption, and, by doing so, it increases asset prices on average, thus providing welfare gains both in steady state and around it. We also show that the welfare gains stem from mopping up after the crash rather than a pure ex-ante macroprudential aspect, aligning with prior research that emphasizes the importance of ex-post measures compared to preventative policies alone. |
| JEL: | E32 E44 G18 H23 R21 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:sur:surrec:0225 |
| By: | Castells-Jauregui, Madalen |
| Abstract: | This paper analyzes the private production of safe assets and its implications forfinancial stability. Financial intermediaries (FIs) originate loans, exert hidden effort toimprove loan quality, and create safe assets by issuing debt backed by the safe paymentsfrom (i) their own loans and (ii) a diversified pool of loans from all intermediaries. Ishow that the interaction between effort and diversification decisions determines theaggregate level of safe assets produced by FIs. In the context of incomplete markets, Iidentify a free-rider problem: individual FIs fail to internalize how their effort influencesthe ability to generate safe assets through diversification, since the latter depends onthe collective effort of all FIs. This market failure generates a novel inefficiency, thatworsens as the scarcity of safe assets increases. The public provision of safe assetshelps mitigate this inefficiency by reducing their scarcity, but it cannot fully resolve it.Moreover, the impact on the total private supply of safe assets is ambiguous: public safeassets reduce incentives for diversification (crowding-out effect), which in turn increasesFIs’ incentives to exert effort (the crowding-in effect). JEL Classification: G20, G28 |
| Keywords: | financial intermediaries, moral hazard, regulation, safe assets, securitization |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253044 |
| By: | Aliaksandr Zaretski (University of Surrey) |
| Abstract: | I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two dimensions. First, by internalizing the impact of banks’ portfolio decisions on the prices of assets and liabilities that affect the enforcement constraints. Second, by redistributing future net worth from new entrants to surviving banks, which increases the current forward-looking value of all banks, relaxing their enforcement constraints and decreasing the probability of banking crises. The latter can be accomplished with systemic preemptive bailouts that are time consistent and unambiguously welfare improving. Unregulated banks can be both overleveraged and underleveraged depending on the state of the economy, thus macroprudential policy requires both taxes and subsidies, while minimum bank capital requirements are generally ineffective. |
| JEL: | E44 E60 G21 G28 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:sur:surrec:0325 |
| By: | Kentaro Asai (Kyoto University); Bruce Grundy (Australian National University); Ryuichiro Izumi (Department of Economics, Wesleyan University) |
| Abstract: | Should banks be transparent during a bail-in? Banks suffering losses may bail-in creditors to optimally allocate resources between early and late withdrawers. However, if losses are private information, then bail-ins may signal asset quality. In the absence of signaling, banks can sell assets at a pooled price, effectively insuring creditors against asset risks. However, when bail-ins signal quality, banks may delay bail-ins and sell assets at higher prices, but this incentive to delay can trigger inefficient bank runs. To prevent such runs, banks should choose to be either fully transparent or entirely opaque, ensuring asset quality is not private information. |
| Keywords: | Bank Runs, Swing Pricing, Bail-ins, Signaling, Asymmetric Information, Opacity |
| JEL: | E44 G21 G23 G28 D82 D84 D86 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:wes:weswpa:2025-003 |
| By: | João Tovar Jalles; André Teixeira |
| Abstract: | This paper explores the impact of fiscal consolidations on banking behavior, focusing on efficiency and stability. Using a panel dataset covering 194 countries from 1989 to 2020 and employing local projection methods, we find that fiscal consolidations improve bank stability at the expense of efficiency. The decline in efficiency is attributed to reduced operational income, while stability gains stem from improved asset quality and bolstered capital adequacy. The effects are heterogeneous: consolidations have a more substantial negative impact on efficiency in advanced economies, while stability improvements are more pronounced in emerging markets. The size and composition of fiscal adjustments also matter: tax-based consolidations favor stability more than expenditure-based ones. Robustness checks with alternative definitions of fiscal consolidations and non-linear models confirm these findings. The findings emphasize the importance of tailoring fiscal consolidations to country-specific factors to balance stability and efficiency in the banking sector. |
| Keywords: | fiscal consolidations, bank efficiency, financial stability, tax-based adjustments, panel data, local projections. |
| JEL: | C23 G21 H3 E62 F34 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03702025 |
| By: | Peter Claeys; Bettina Bökemeier; Benjamin Owusu; Juan Equiza Goñi; Michael Stierle; Andreea Stoian |
| Abstract: | Concerns about fiscal sustainability and worsening balance sheet conditions of major banks triggered a doom loop between banks and sovereigns during the 2010-2013 sovereign debt crisis. Despite closer financial integration and additional institutional safeguards, the home bias, i.e. domestic bank holdings of domestic sovereign debt, is still high in most EU countries. We examine the effects of home bias on fiscal sustainability. In this paper, fiscal sustainability is understood in a broad sense of a government's ability to manage its finances in a way that ensures the long-term viability of its economic and social programmes, without compromising the stability of its financial system. We first extend two IMF databases on sovereign debt holdings to all EU Member States. We then apply panel smooth transition regression models on a fiscal rule. We find that a high home bias does not reduce the reaction of governments to public debt, but only if the financial system is sufficiently developed. A developed banking system allows sovereigns to raise more public debt at acceptable conditions to support economic stabilisation. An increased presence of foreign banks has a benign effect on sustainability by reducing governments’ debt bias, but state-owned banks reduce it. We further test fiscal responses to public debt shocks with an interacted panel Vector Auto Regression model. Even though governments respond to public debt under a high home bias, they react only slowly and delay fiscal consolidations. Developing financial markets further through the completion of the Banking and Capital Markets Unions in the EU could help countries in the trade-off between economic stabilisation and debt sustainability, while bringing in more foreign banks might enforce stronger fiscal discipline. |
| JEL: | E43 G21 H62 H63 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:218 |
| By: | Janine Aron; John Muellbauer |
| Abstract: | Aggregate consumption typically exceeds 60 per cent of GDP and should be pivotal in central bank policy models. Most use semi-structural macro-models, yet consumption is usually inadequately specified. We use a systems approach to estimate new equations for South African consumption, house prices, mortgage and non-mortgage debt, and income forecasting. A credit-augmented consumption function approach introduces a greater role for uncertainty and a key role for credit conditions, and varies the spendability of different wealth components. |
| Keywords: | Consumption, House prices, Credit, Household Debt, Monetary policy, Households balance sheets |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-8 |
| By: | Jung, Alexander; Romelli, Davide; Farvaque, Etienne |
| Abstract: | This paper investigates the impact of reforms altering legal central bank independence (CBI) on monetary policy discipline and credibility, two key mechanisms shaping price stability. Using a sample of 155 countries over more than 50 years (1972–2023), we show that reforms improving CBI strengthen monetary discipline and the credibility of central banks. Larger reforms enhance monetary discipline with a lag, achieving their full effect after ten years. Central bank reforms have a greater impact on monetary discipline in countries that have not reversed earlier reforms. CBI reforms have the strongest impact in democratic countries, countries with flexible exchange rates, and those without a monetary policy strategy. The effects of CBI on monetary discipline and credibility are amplified when public debt-to-GDP ratios are high. These findings underscore the crucial role of CBI as a key factor influencing price stability and highlight the risks associated with weakening institutional autonomy. |
| Keywords: | independence, institutional reforms, local projections, monetary policy, money growth |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253049 |
| By: | Aldasoro, Iñaki; Barbon, Andrea; Barthélemy, Jean; Benedetti, Marco; Da Silva, Pedro Bento Pereira; Born, Alexandra; Brandi, Marco; Brousse, Claire; Butruille, Béranger; Martinez, José Manuel Carbó; Di Casola, Paola; Ceparano, Vittorio; Cornelli, Giulio; Coste, Charles-Enguerrand; De Sclavis, Francesco; Deflorio, Anita; Delić, Eldin; Della Gatta, Daniela; López, Miguel Díaz; Dubravica, Yvan; Favorito, Marco; Ferrari Minesso, Massimo; Fessler, Pirmin; Galano, Giuseppe; Gambacorta, Leonardo; Garratt, Rodney; Gati, Zakaria; Gehem, Anton; Giammusso, Sara; Habib, Maurizio Michael; Haslhofer, Bernhard; Hodbod, Alexander; Jahanshahloo, Hossein; Kalfa, Mikaël; Kasimati, Agapi; Kerner, Isabel; Kochanska, Urszula; Koutrouli, Eleni; Lambert, Claudia; Manousopoulos, Polychronis; Marchetti, Sabina; Marchi, Edoardo; Marini, Andrea; Musso, Guillermo Andres Marquez; Blazquez, María Cristina Molero; Muci, Antonio; Naeem, Mahvish; Nardelli, Matteo; Naudts, Ellen; Neugebauer, Katja; Nguyen, Benoît; Painelli, Laura; Paula, Georg; Pellicani, Antonella; Perrella, Antonio; Piqueras, José Carlos; Räsänen, Tatu; Raunig, Burkhard; Reghezza, Alessio; Rubera, Eugenio; Saggese, Pietro; Segalla, Esther; Sigmund, Michael; Soemer, Nicolas; Zitan, Salim Talout; Tercero-Lucas, David; Teulery, Thomas; Theal, John; Tresso, Laura; van der Vaart, Sjoerd; Weber, Beat; Zamora-Pérez, Alejandro; Zangerl, Felix |
| Abstract: | This paper provides an overview of recent analytical work conducted, under their own aegis, by experts from various European authorities and institutions in the field of crypto-asset monitoring. Currently, risks stemming from crypto-assets and the potential implications for central banking domains are limited and/or manageable, including as regards the existing regulatory and oversight frameworks. Nevertheless, the importance of monitoring developments in crypto-assets, raising awareness of the potential risks and fostering preparedness cannot be overstated. In light of this, this paper sets out the background to the establishment of the Crypto-Asset Monitoring Expert Group (CAMEG) in late 2023 to bring together experts from the Eurosystem’s central banks and from the European Systemic Risk Board (ESRB). It also provides abstracts of various papers and other analytical works presented at the inaugural CAMEG conference held on 24 and 25 October 2024. The conference aimed to take stock of analytical work and data issues in this area, while fostering European collaboration and monitoring in the field of crypto-assets. Finally, this paper outlines the prospective way forward for the CAMEG, focusing on gaining greater insight into data in this area and deepening analytical work on interlinkages, crypto-asset adoption and the latest trends. JEL Classification: E42, G21, G23, O33 |
| Keywords: | crypto-asset data, crypto-asset risks, crypto-assets, monitoring |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025368 |
| By: | Valentina Saltane; Anam Amin; Subika Farazi |
| Keywords: | Finance and Financial Sector Development-Financial Regulation & Supervision Finance and Financial Sector Development-Capital Markets and Capital Flows |
| Date: | 2023–08 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wboper:40148 |
| By: | Cappiello, Lorenzo; Ferrucci, Gianluigi; Maddaloni, Angela; Veggente, Veronica |
| Abstract: | Do sovereign credit ratings take into account physical and transition climate risks? This paper empirically addresses this question using a panel dataset that includes a large sample of countries over two decades. The analysis reveals that higher temperature anomalies and more frequent natural disasters—key indicators of physical risk—are associated with lower credit ratings. In contrast, transition risk factors do not appear to be systematically integrated into credit ratings throughout the entire sample period. However, following the Paris Agreement, countries with greater exposure to natural disasters received comparatively lower ratings, suggesting that credit rating agencies are increasingly recognizing the significance of physical risk for sovereign balance sheets. Additionally, more ambitious CO2 emission reduction targets and actual reductions in CO2 emission intensities are associated with higher ratings post-Paris Agreement, indicating that credit rating agencies are beginning to pay more attention to transition risk. At the same time, countries with high levels of debt and those heavily reliant on fossil fuel revenues tend to receive lower ratings after the Paris Agreement. Conversely, sovereigns that stand to gain from the green transition—through revenues from transition-critical materials—are assigned higher sovereign ratings after 2015. JEL Classification: G15, G24, F3, F64, H64 |
| Keywords: | climate change, credit ratings, physical risk, sovereign bonds, transition risk |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253042 |