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on Financial Development and Growth |
| By: | Luis Rodrigo Arnabal; Santiago Camara; Cecilia Dassatti |
| Abstract: | This paper studies how shocks to global banks' net worth transmit to Emerging Market Economies. Using the identification strategy of Ottonello and Song (2022), which isolates high-frequency surprises to banks' credit supply capacity, we show that positive shocks appreciate local currencies, lower external borrowing costs, increase capital flows to domestic banking sectors, and raise investment, credit, and real activity across EMEs. These effects are highly robust across specifications and samples. Using administrative credit-registry data from Uruguay, we find that better capitalized banks transmit global credit easing more strongly. At the firm level, responses are weaker for more leveraged firms, especially those with foreign-currency debt, short maturities, or collateral not priced to market. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.01132 |
| By: | Vladimir Yeghiazaryan (Central Bank of Armenia); Arthur Grigoryan (Central Bank of Armenia); Ashot Sargsyan (Central Bank of Armenia) |
| Abstract: | In recent years, macroprudential policy has gained importance as a tool to handle cyclical and structural vulnerabilities in the financial system. These vulnerabilities, if left unmonitored, can amplify during periods of financial stress and pose significant risks to economic growth. This paper attempts to quantify these vulnerabilities and the effects of macroprudential policy on them through the use of an empirical growth-at-risk (GaR) framework. Using Bayesian quantile regression, we assess how systemic risks impact GDP growth and explore the potential costs and benefits of macroprudential policy on its growth distribution. Our findings are consistent with earlier studies suggesting that any policy measure introduces a trade-off between mitigating systemic risks and preserving median GDP growth. We contribute to the existing literature by two main ways 1. we estimate the long term sustainable level of systemic risks relative to the resilience of the financial system using estimates of a panel model with 41 countries, 2. we offer improvements to existing macroprudential policy rule frameworks in the current literature to augment the decision-making process. Lastly, we check whether the outputs of some well-known papers in this field hold in a small open economy like Armenia. |
| Keywords: | Systemic risk, Macroprudential policy, Financial stability, Policy stance |
| JEL: | E58 E44 G21 E61 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:ara:wpaper:wp-2025-01 |
| By: | Amat Adarov; M. Ayhan Kose; Dana Vorisek |
| Abstract: | The world faces a pressing challenge to meet key development objectives amid slowing growth and rising macroeconomic and geopolitical risks. With the number of job seekers rising rapidly, infrastructure shortfalls continuing to be large, and climate costs mounting, the case for a significant investment push has never been stronger. Yet the capacity to respond in many emerging market and developing economies (EMDEs) has eroded. Since the global financial crisis, investment growth has slowed to about half its pace in the 2000s, with both public and private investment weakening. Foreign direct investment inflows-a critical source of capital, technology, and managerial know-how-have also fallen sharply and become increasingly concentrated, leaving low-income countries (LICs) with only a marginal share. The risks of further retrenchment are significant, as trade tensions, policy uncertainty, and elevated debt levels continue to weigh on investment. Reigniting momentum will require ambitious domestic reforms to strengthen institutions, rebuild macro-fiscal stability, and deepen trade and investment integration—the foundations of a supportive business climate. At the same time, international cooperation is indispensable. A renewed commitment to a predictable system of cross-border trade and investment flows, combined with scaled-up financial support and sustained technical assistance, is essential to help EMDEs-especially LICs and economies in fragile and conflict situations—bridge financing gaps and implement the domestic reforms needed to restore investment as an engine of growth, jobs, and development. |
| Keywords: | investment, gross fixed capital formation, private investment, public investment, foreign direct investment, structural reforms, economic growth |
| JEL: | E22 F21 F4 F6 O1 O4 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-71 |
| By: | Souleymane Faye; Sarah Godar; Carolina Moura; Gabriel Zucman |
| Abstract: | This paper constructs homogeneous time series of global household offshore wealth covering the 2001–2023 period, during which major international efforts were implemented to curb offshore tax evasion. We find that: (i) global offshore wealth remained broadly stable as a fraction of global GDP since 2001, following a sharp increase in the 1980s and 1990s; (ii) the location of offshore wealth changed markedly, with a decline in the share held in Switzerland and a rise of Asian financial centers, the United Kingdom, and the United States; and (iii) a growing fraction comes from developing countries. |
| Keywords: | Tax havens, Tax evasion, Wealth, International investment positions |
| JEL: | H26 H87 E21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2150 |
| By: | Michele Bavaro; Piotr Paradowski |
| Abstract: | We examine how underreporting financial assets in surveys bias inequality and wealth tax assessments. Using Luxembourg Wealth Study (LWS) microdata and national accounts (NA), we focus on financial assets, the largest survey-NA gap. We implement non-proportional cross-country statistical matching using Norways’s administrative registers as a donor, preserving demographics and variables within wealth percentile cells. For Austria, Canada, and Italy, the survey to NA ratios rise substantially after correction and financial asset inequality increases, especially at the top; as an anchor, Austria’s ratio changes from 27.3% to 98.8%. Using the Reynolds-Smolesky (RS) index, both flat and progressive tax schedule becomes much more redistributive, with RS (Gini) rising by about 2x-8x across countries (e.g., 0.103-0.853 in Austria under the progressive tax schedule). We map LWS-NA concepts, bound business equity’s effect, and report robustness. These findings indicate that credible assessments of wealth tax progressivity must confront missing financial wealth. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:lis:lwswps:50 |
| By: | Nikolaos Koutounidis; Elena Loutskina; Daniel Murphy (-) |
| Abstract: | We study how household debt portfolios—aggregated at the ZIP code level—respond to local income shocks in the United States. We implement two separate identification strategies: (i) a Bartik-style instrument that shifts local earnings via national industry trends, and (ii) a novel instrument utilizing the timing and location of shale oil and gas well discoveries. Across both designs, positive income shocks are, on average, associated with deleveraging. This average, however, masks a sharp bifurcation in financial behavior. Deleveraging in total credit is driven by financially healthier households—those with higher credit scores, higher incomes, or lower leverage—who restrain the growth of credit-card and auto debt. In contrast, financially vulnerable households often treat the windfall as a gateway to new auto credit while still deleveraging credit-card and typically mortgage debt. Looking at mixed-profile households, we find strong mortgage leveraging among households with high income and high debt or low credit scores. These results show that the same income shock can trigger balance-sheet repair for some households and additional leverage for others—varying by both borrower type and debt category—underscoring substantial underlying heterogeneity and highlighting barriers to broad-based financial stability. |
| Keywords: | consumer credit, household debt, heterogeneity, income shocks, local labor demand |
| JEL: | D14 D15 G51 H31 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:25/1128 |
| By: | Mota, Jose |
| Abstract: | A large body of research has established the importance of international remittances as an insurance mechanism against income shocks in developing countries. However, households have additional self-insurance mechanisms, including precautionary savings, labor supply adjustments, and multiple earners. This paper develops a model with heterogeneous two-member households and endogenous international remittances to study the relationship between remittances from overseas workers and other self-insurance mechanisms. I calibrate the model with data from the Dominican Republic, and then use the model to decompose the relative importance of the self-insurance mechanisms used by non-migrant households and households with overseas workers. I find that the response of household behavior (remittances, labor supply, and savings) differs greatly depending on whether the household is a migrant or non-migrant household and on whether the shock hits the overseas worker (usually male) or the left-behind family member (usually female). Allowing for correlated wage shocks within non-migrant households further highlights the insurance benefits of migration by reducing joint exposure to local shocks and altering the composition of self-insurance mechanisms. |
| Keywords: | Remittances; self-insurance; intra-household risk sharing; labor supply |
| JEL: | D13 D14 F24 J22 |
| Date: | 2025–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126670 |
| By: | Edwards, Ryan Barclay (Australian National University); Stambolie, Estelle |
| Abstract: | Using high-frequency financial diaries data from Fijians working in Australia as part of the Pacific Australia Labour Mobility scheme, we examine whether migrants send more money home when they earn more. Regardless of whether PALM migrants earn more or less in Australia over their stay, they tend to send the same regular amounts home to support their families. Exploiting variation within individual migrants over time, we estimate an income elasticity of remittances of around 0.3. These contemporaneous responses are driven by negative shocks, suggesting an immediate pass-through to families back home, where remittances are the main source of income. |
| Date: | 2025–12–02 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:5nhq6_v1 |
| By: | Ngunza Maniata, Kevin; Waminuku Manzambi, Tresor |
| Abstract: | The rapid rise of financial technologies (fintechs) in Africa has significantly expanded access to financial services, especially through mobile money. While this growth has improved financial inclusion and household resilience, its impact on structural transformation remains limited. This paper examines whether and how fintechs can serve as a driver of productive modernization, drawing on a literature review, case studies (Kenya, Nigeria, Francophone Africa), and a stylized analytical framework. Findings show that digital finance enhances transaction efficiency and access to basic services, but generates lasting macroeconomic effects only when integrated with industrial policy, productive financing, human-capital development, and stronger links between firms and modern value chains. |
| Keywords: | Fintech; Financial inclusion; Structural transformation; Africa; Economic development; Digital economy |
| JEL: | E26 G21 L26 O14 O16 O33 |
| Date: | 2025–12–10 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127303 |
| By: | Lay, Sok Heng; Sam, Vichet |
| Abstract: | Dollarization poses significant challenges to monetary policy effectiveness and heightens economic vulnerability to external shocks, prompting calls for de-dollarization and greater promotion of local currency use. This paper investigates the role of digital payment in fostering the use of Cambodia’s local currency, the Khmer riel (KHR), in an economy that has remained heavily dollarized since the 1990s. First, we develop a simple theoretical model to explain how digital payment has the potential to promote the use of KHR. Second, using unique survey data collected in 2023 from workers in Cambodia’s garment, footwear, and textile sectors, we apply two advanced econometric approaches to address endogeneity in digital payment adoption: i/-A linear regression model with endogenous treatment effects estimated via maximum likelihood, and ii/-An endogenous treatment-effects model allowing for heterogenous impacts of digital payment based on households’ characteristics. These models enable comparison between observed outcomes and counterfactual scenarios—that is, what individuals’ KHR usage would have been had they use or do not use digital payment. Empirical results indicate that digital payment significantly increases KHR usage, raising total expenditure in KHR by 4.52 percent to 10.41 percent relative to the case without digital payment. However, the analysis also reveals important demographic disparities: younger, urban, and more educated individuals show stronger preferences for the US dollar. Hence, while digital payment supports broader use of the local currency, their long-term effectiveness relies on complementary measures such as promoting KHR-denominated pricing, salary payments, and expanding KHR-linked digital services. Therefore, the study emphasizes the necessity of coordinated efforts among relevant stakeholders to ensure sustained progress in the promotion of local currency. |
| Keywords: | Digital payment, Dollarization, Local Currency, Endogenous treatment effects |
| JEL: | D12 E42 O33 |
| Date: | 2025–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126747 |
| By: | Cam Donohoe; Youming Liu |
| Abstract: | As economies across the world continue to digitize, debates around the design and efficiency of national infrastructures for electronic payments have gained added relevance. Central to these debates is the question of how many electronic funds transfer (EFT) systems can viably coexist within a jurisdiction while achieving scale economies to ensure that average cost is minimized, a threshold that largely depends on the shape of the cost function. In this paper, we conduct a cross-country meta-analysis using data from 13 social cost studies across 9 jurisdictions between 2001 and 2016. We quantitatively estimate a cost function relating the total transaction volume to the per-transaction cost and interpret its parameters in terms of fixed and variable costs. We find a rapidly decreasing, convex cost curve that plateaus quickly at around one billion annual transactions. Additionally, we estimate the marginal cost of an EFT to be approximately $0.55 per transaction, expressed in 2025 Canadian dollars, and the total fixed cost to be approximately $83 million per year. |
| Keywords: | Payment Clearing and Settlement Systems, Financial Institutions, Financial System Regulation and Policies |
| JEL: | E42 E58 H54 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocadp:25-17 |
| By: | Adib Rahman (University of Hawaii); Liang Wang (University of Hawaii) |
| Abstract: | We investigate the effects of central bank digital currency (CBDC) issuance in an economy where individuals can evade taxes by using cash. Our tractable model features agent heterogeneity with unobservable idiosyncratic shocks and voluntary exchange, where CBDC and cash compete as payment methods. CBDC's transparency enables governments to collect a labor tax that proves non-distortionary in our quasi-linear environment. Agents with higher marginal utility voluntarily pay fixed fees to access interest-bearing CBDC when their debt constraints bind, allowing the implementation of optimal policy with strictly positive inflation and nominal interest rates. We demonstrate how CBDC enables redistribution between agent types that is not possible in cash-only economies. We conjecture that an optimal CBDC policy involves higher nominal interest rates and lower inflation compared to cash regimes. By reducing tax evasion incentives, the introduction of CBDC can increase both output and aggregate welfare. |
| Keywords: | Cash, CBDC, Labor Tax, Tax Evasion, Monetary Policy |
| JEL: | E42 E58 H21 H26 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:hai:wpaper:202505 |
| By: | Qingqing Cao; Hans Degryse; Sotirios Kokas; Raoul Minetti |
| Abstract: | The firm sector continuously engages in the reallocation of physical capital. We study the implications for credit market outcomes of banks' engagement in borrowing firms' capital reallocation. We develop a model in which banks' experience with the reallocation opportunities of physical capital raises their ability to recover liquidation values after firm defaults and asset reallocations, diluting banks' incentives to monitor borrowers. To test the model, we then construct an empirical measure of banks' engagement in capital reallocation using US loan-level data matched with firm-level data on capital asset transactions. We find that, unlike lending relationships and experience with co-lenders, capital allocation engagement dilutes banks' monitoring incentives, calling for larger involvement in loan syndication. |
| Keywords: | banks; experience; capital allocation; sector specialization; monitoring |
| JEL: | G21 D8 |
| Date: | 2025–12–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:102233 |
| By: | Axelson, Ulf; Makarov, Igor |
| Abstract: | Entrepreneurs typically seek financing in decentralized markets, where they approach investors sequentially. We develop a model of sequential capital markets with privately informed investors. The sequential market creates a dynamic adverse selection externality that leads to overinvestment and excessive rents to intermediaries, even as the number of competing investors becomes arbitrary large. The resulting rents lead to excessive entry of investors and insufficient entry of entrepreneurs. Moving to a centralized market structure or reducing transparency restores competitiveness but may harm efficiency. The model also explains how even a small skill advantage for an investor can lead to preferential deal flow and outsized returns. |
| Keywords: | credit markets; directed search; dynamic adverse selection |
| JEL: | F3 G3 |
| Date: | 2026–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130383 |
| By: | Quinn, William; Turner, John D.; Walker, Clive B. |
| Abstract: | Speculation has long been thought to have significant economic effects, but it is difficult to measure, making it challenging to examine these effects empirically. In this paper we measure speculation in the UK since 1785 by using business and financial reporting in The Times newspaper. Our monthly speculation index reveals four distinct epochs of speculation in the UK. Epochs of high speculation coincide with higher stock market returns and higher economic growth, while low speculation periods coincide with high levels of government debt and financial repression. We find that low interest rates foment the development of higher speculation, and that eras of higher speculation are often followed by greater banking instability. |
| Keywords: | speculation, commodity markets, stock market, financial repression, monetary conditions, banking stability |
| JEL: | E44 E50 G10 N13 N14 N23 N24 Q02 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qucehw:333934 |
| By: | Rajashri Chakrabarti; Daniel Garcia; Donald P. Morgan; Lee Seltzer |
| Abstract: | Many states have capped consumer loan interest rates to protect households from high-cost lenders. Using triple-difference and event study analysis, we investigate how these usury limits affect the availability and allocation of credit across households. Consistent with standard price theory, we find that credit to the riskiest borrowers contracts under usury limits without improving delinquencies. More surprisingly, credit to lower risk borrowers expands under usury limits. This reallocation suggests that usury limits have unintended effects that are not entirely explained by standard theory. |
| Keywords: | usury limit; household debt |
| JEL: | G28 G50 G51 |
| Date: | 2025–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102207 |
| By: | Cormier, Ben; Naqvi, Natalya |
| Abstract: | Inclusion in bond indexes improves Emerging Market (EM) government access to capital. Under what conditions do EMs enter indexes and gain the market access benefits? We find borrower features affect index inclusion differently in domestic currency versus foreign currency bond contexts. In the higher-risk domestic currency bond context, indexes are designed to include only a small low-risk subset of bonds, leading borrower political, institutional, and policy characteristics to significantly affect inclusion probability. In the lower-risk foreign currency bond context, indexes are designed to depict more of the market, so these same borrower features do not significantly affect inclusion probability. The study shows why EM entry into indexes and the corresponding access to capital varies across domestic currency and foreign currency bond markets, providing a nuanced picture of how contemporary sovereign debt markets operate. We provide historical index inclusion data for future research. |
| JEL: | J1 |
| Date: | 2025–12–04 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130491 |
| By: | Carlos Giraldo (Fondo Latinoamericano de Reservas - FLAR); Iader Giraldo-Salazar (Fondo Latinoamericano de Reservas - FLAR); Jose E. Gomez-Gonzalez (Department of Finance, Information Systems, and Economics, City University of New York – Lehman College); Jorge M Uribe (Universitat Oberta de Catalunya) |
| Abstract: | This study explores how banks’ capital ratios respond to government debt-to-GDP shocks and how this response varies with regulatory quality. Using local projections for a large panel of advanced and non-advanced economies, we document that on average, increases in public debt are followed by declines in banks’ capital-to-assets ratios. However, this aggregate trend conceals important heterogeneity. When regulatory quality is introduced as a conditioning variable, capital adjustment becomes state dependent. Banks operating in weaker regulatory environments incorporate fiscal pressure more slowly and may raise capital ratios in the medium term, whereas those in stronger systems record losses earlier and experience an immediate decline in capital, followed by a recovery in advanced economies as conditions stabilize. These results show that institutional quality shapes the transmission of fiscal shocks to bank balance sheets and that simple capital measures capture this adjustment more reliably than risk-weighted ratios. The findings highlight the need to account for fiscal conditions in macroprudential assessments and underscore the importance of supervisory capacity for maintaining bank resilience when public debt increases. |
| Keywords: | bank capital; sovereign risk; public debt; regulatory quality; macroprudential policy; local projections |
| JEL: | G21 G28 E32 E44 H63 |
| Date: | 2025–12–17 |
| URL: | https://d.repec.org/n?u=RePEc:col:000566:021931 |
| By: | Bruno Delalibera (Universitat de Barcelona); Angélica Brum (Sao Paulo School of Economics - FGV); Luciene Pereiera (Sao Paulo School of Economics - FGV) |
| Abstract: | Over the past three decades, many countries have adopted fiscal rules. This paper studies their impact on economic growth using an overlapping generations model with endogenous growth, where the government imposes both a debt rule and a budget balance rule. The model shows that fiscal rules are not neutral: their design and interaction, through an endogenously adjusting tax rate, directly shape savings, capital accumulation, and longterm growth. The model identifies conditions under which a balanced growth path exists and highlights the possibility of multiple steady states. When fiscal rules are too loose or initial debt is too high, the economy may converge to an unstable path. Tightening fiscal rules improves long-run welfare but can reduce current utility due to higher taxes. Empirically, we estimate a growth equation and address endogeneity using an instrumental variable strategy based on the geographical diffusion of fiscal rules. The results indicate that the adoption of fiscal rules boosts growth in developing and lowincome countries. In Europe, only welldesigned rules are associated with higher growth. Across specifications, debt rules consistently outperform budget balance rules, especially in less developed economies. |
| Keywords: | Fiscal Rules, Fiscal Policy, Economic growth, OLG Model, Instrumental Variables |
| JEL: | O47 E61 E62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:487web |
| By: | Florian Leon (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne) |
| Abstract: | Access to finance remains a major obstacle for small and medium-sized enterprises (SMEs) in Africa, limiting their growth and job creation. To address this, programs have been implemented to encourage banks to increase their credit supply to SMEs. However, evaluations of the impact of these programs are scarce. Our study examines this issue, utilizing a novel database that compiles programs financed by development finance institutions in Africa. The results reveal an unexpected effect: supported banks experienced an 8% reduction in their lending activity. |
| Abstract: | L'accès au financement reste un obstacle majeur pour les petites et moyennes entreprises (PME) en Afrique, limitant leur croissance et la création d'emplois. Pour remédier à cela, des programmes ont été mis en place pour inciter les banques à augmenter leur offre de crédit aux PME. Cependant, les évaluations de l'impact de ces programmes sont rares. Notre étude examine cette question en se basant sur les programmes proposés par les institutions financières de développement, révélant un effet inattendu : une réduction de 8 % de l'activité de prêt des banques soutenues. |
| Keywords: | Banks, Africa, Private Sector Support, Development Finance Institutions, Blended Finance, Banques, Afrique, Soutien au secteur privé, Institutions financières de développement, Financement mixte |
| Date: | 2025–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05385198 |
| By: | Haibo Wang; Lutfu Sua; Burak Dolar |
| Abstract: | This paper examines the relationship between trade and financial openness, as well as the operational efficiency and growth of Turkish banks, from 2010 to 2023. Utilizing CAMELG-DEA and dynamic panel data analysis, the study finds that increased trade openness significantly enhances banking efficiency, primarily due to heightened demand for banking services related to international trade. Financial openness further boosts growth by facilitating capital flows, expanding banks' credit portfolios, and increasing fee income from cross-border transactions. However, poverty levels have a negative impact on bank performance, reducing financial intermediation and innovation opportunities. The results underscore the crucial role of trade and financial openness in fostering banking sector growth in developing economies. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.05148 |
| By: | Tao Liu (Central University of Finance and Economics); Dong Lu (Renmin University of China); Liang Wang (University of Hawaii) |
| Abstract: | There have been two competing views on the structure of the international monetary system: one sees it as a unipolar system with a dominant currency, such as the U.S. dollar, while the other argues that a multipolar system has been the rule, not the exception. We propose a unified theoretical framework to reconcile these two views. In a micro-founded monetary model, we examine the interactions of two essential roles played by international currencies, the medium of exchange and the store of value, and highlight the importance of abundant safe asset supplies. When the two roles reinforce each other, a unipolar equilibrium exists. However, when one currency is unable to serve as sufficient safe assets for international trade transactions, the two roles work against each other, and agents have the incentive to diversify their portfolio, giving rise to a multipolar system. The effects of monetary policy, fiscal policy, and their combinations crucially depend on the total supply of safe assets and the relative importance of the two functions of international currencies. The structure of the international monetary system could be influenced by various policies such as monetary policy, fiscal policy, and financial sanctions. A calibrated model shows that, all else equal, USD could lose its dominance if the US fiscal capacity deteriorates by 34\% or the US economy size shrinks by 32%. |
| Keywords: | International Currency, Money, Multipolar, Safe Assets, Unipolar |
| JEL: | E42 E52 F33 F40 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:hai:wpaper:202504 |
| By: | Hall, Viv; Huang, Angela |
| Abstract: | Deterministic simulations with the Reserve Bank of New Zealand’s core FPS model show how New Zealand’s broad macroeconomic environment might have evolved over the 1990s, if a US nominal yield curve and US TWI exchange rate movements under a common currency arrangement had been experienced. Relatively looser monetary conditions would have prevailed, and led to modest short-run output gains, greater excess demand pressures, noticeably higher CPI inflation rates over the whole of the 1990s, and less favourable trade balance outcomes, especially for the late 1990s. These macroeconomic outcomes are overall less favourable than those obtained from simulating the equivalent Australian monetary conditions. |
| Keywords: | Institutional and Behavioral Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:motuwp:293013 |
| By: | Tatul Hayruni (Central Bank of Armenia); Mane Pirumyan (Central Bank of Armenia); Aleksandr Shirkhanyan (Central Bank of Armenia) |
| Abstract: | This paper examines depositor behavior during two episodes of system-wide withdrawal pressure in Armenia, a small, open, and highly dollarized economy. Using depositor-level administrative data covering 60–73 percent of the national deposit portfolio, we study early withdrawals during the 2014 exchange-rate and financial-market shock and the 2020 geopolitical shock, both characterized by sizable outflows despite the absence of bank-specific solvency stress. This environment allows us to analyze how contract characteristics, currency denomination, and depositor–bank relationships shape withdrawal decisions under uncertainty. We exploit Armenia’s dual-currency deposit insurance regime to assess how currency-specific coverage interacts with exchange-rate risk, and we use legally defined insider classifications to identify individuals with formal ties to bank governance. We find that deposit insurance has a clear stabilizing effect, though insured depositors still adjust behavior modestly as balances approach the coverage limit. Insiders, despite lacking insurance and plausibly possessing superior information, do not withdraw more aggressively than the broader public. Prior crisis experience reduces the likelihood of withdrawal in subsequent shocks, and dual-currency depositors disproportionately redeem AMD deposits, consistent with depreciation-driven precautionary motives. These results underscore how currency composition, contract design, and relational ties shape withdrawal pressures under macro-financial stress. |
| Keywords: | Depositor Behavior, Deposit Insurance, Early Withdrawals, Financial Shock, Geopolitical Shock |
| JEL: | D81 G01 G21 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ara:wpaper:wp-2025-06 |
| By: | Duarte, João B.; Pires, Mariana N. |
| Abstract: | We study how financial integration shapes the transmission of monetary policy to consumer prices and output in the euro area. Using local projections, we document that the effect of financial integration is continuous: greater integration systematically strengthens the pass-through of monetary policy. When integration falls to low levels—around the first quartile of its historical distribution— transmission to both prices and output becomes statistically and economically insignificant. The amplification pattern is pervasive across member states and more pronounced in peripheral economies. These results show that financial integration is a key determinant of monetary policy effectiveness within the euro area. JEL Classification: E44, E52, F36, F45 |
| Keywords: | financial integration, local projections, monetary policy, monetary union |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253165 |
| By: | Kliem, Martin; Metiu, Norbert |
| Abstract: | Financial cycles refer to fluctuations in credit and house prices that extend beyond typical business cycles. Despite its significance for both monetary and macropru- dential policy, the question of how monetary policy shapes financial cycles remains largely unanswered. We extract innovations from a vector autoregression that account for most of the cyclical co-movement between credit and house price growth at medium frequencies. Our findings indicate that systematic monetary policy plays a crucial role in propagating this innovation and can significantly dampen financial cycles, particularly when counteracting house price movements. These stabilizing effects could have substantially mitigated the U.S. financial cycle during the 2000s. |
| Keywords: | Financial cycle, monetary policy, policy counterfactual |
| JEL: | C32 E32 E52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:333896 |
| By: | Tevdovski, Dragan; Hadzi-Velkova, Biljana |
| Abstract: | This paper examines the interest rate pass-through in an economy with structurally high banking sector liquidity, using North Macedonia as a case study. Persistent surplus liquidity limits commercial banks’ reliance on central bank and interbank funding, potentially weakening the transmission of monetary policy. Employing a dynamic autoregressive distributed lag and error-correction (ARDL/ECM) framework augmented with a liquidity variable, we estimate the two stages of the transmission process - from the policy rate to the interbank rate, and from the interbank to lending rates. The results show that high liquidity dampens both the strength and speed of pass-through by reducing interbank rate responsiveness and moderating lending rate adjustments. These findings suggest that in banking systems with structural liquidity surpluses, conventional interest rate policy may be insufficient, underscoring the need for complementary instruments to enhance monetary transmission effectiveness. |
| Keywords: | interest rate, lending, liquidity, monetary policy, banking sector. |
| JEL: | E43 E52 G21 O11 |
| Date: | 2025–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126691 |