nep-ifn New Economics Papers
on International Finance
Issue of 2015‒12‒12
two papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Unconventional monetary policy and the dollar: conventional signs, unconventional magnitudes By Glick, Reuven; Leduc, Sylvain
  2. The influence of risk-taking on bank efficiency: evidence from Colombia By Miguel Sarmiento; Jorge E. Galán

  1. By: Glick, Reuven (Federal Reserve Bank of San Francisco); Leduc, Sylvain (Federal Reserve Bank of San Francisco)
    Abstract: We examine the effects of unconventional monetary policy surprises on the value of the dollar using high-frequency intraday data and contrast them with the effects of conventional policy tools. Identifying monetary policy surprises from changes in interest rate future prices in narrow windows around policy announcements, we find that monetary policy surprises since the Federal Reserve lowered its policy rate to the effective lower bound have had larger effects on the value of the dollar. In particular, we document that the impact on the dollar has been roughly three times that following conventional policy changes prior to the 2007-08 financial crisis.
    JEL: E43 E5 F31
    Date: 2015–11–29
  2. By: Miguel Sarmiento (Banco de la República, Colombia and Tilburg University); Jorge E. Galán (Banco de España)
    Abstract: This paper presents a stochastic frontier model with random inefficiency parameters which captures the influence of risk-taking on bank efficiency and distinguishes the effects among banks with different characteristics. The model is fitted to a 10-year sample of Colombian banks. Cost and profit efficiency are found to be over and underestimated, respectively, when risk measures are omitted or are not accurately modelled. Moreover, the magnitudes at which similar levels of risk affect bank efficiency vary with size and affiliation. In particular, domestic and small Colombian banks benefit more from being highly capitalised, while large and foreign banks benefit from higher exposure to credit and market risk. Holding more liquid assets is found to affect efficiency only at domestic banks. Lastly, we identify some channels that can explain these differences and provide insights for prudential regulation.
    Keywords: bank efficiency, Bayesian inference, heterogeneity, random parameters, risktaking, stochastic frontier models
    JEL: C11 C23 C51 D24 G21 G32
    Date: 2015–12

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