Suomen Pankin Julkaisuarkisto
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Puheet ja esitelmät : Välimäki, Tuomas 2020
No full textVuosittainen pdf-kooste suomenpankki.fi-sivustolla julkaistuista johtokunnan puheista edellisvuodelta
Instant payments as a new normal : Case study of liquidity impacts for the Finnish market
No full textThe amount of central bank money, or liquidity, needed to settle payments, depends on the way the settlement is organized. It is largest when payments are settled individually on gross basis and smallest with settlement in one big netting cycle. Retail payments are increasingly processed in instant payment schemes and systems. We evaluate how the result of this transition affects the liquidity needs of the Finnish banks. For the analysis we generate artificial transaction level data, which mimics the Finnish retail payment flows processed in the STEP2 system. This allows us to estimate the difference between the liquidity needs for the settlement in a cycle based model and in a full instant payment mode. We also present a regression model for the bank level additional liquidity needs. A full migration to instant payments is expected to cause only a small aggregate increase in the liquidity needs. However, the variations between banks or between days can be significant and emphasize the need of liquidity bufers
Bank of Finland's long-run forecast framework with human capital
No full textPopulation ageing constitutes a central challenge to Finland. Understanding the Finnish economy’s likely future trajectory and the key sources of growth is important for the design of policies to counteract these adverse long-term trends. For this purpose, we develop a novel long-run forecast framework based on enodogenous growth theory with human and fixed capital. A central result is a pronounced projected decrease in human capital, substantially weighing on the long-run GDP outlook for Finland. To revert these trends substantial policy efforts are needed. Unless the decline in human capital can be prevented by increasing fertility, skilled immigration, education or employment, even reaching a growth rate of one per cent after the 2040s would require significant measures to increase new fixed capital investments with new technology
The real impact of ratings-based capital rules on the finance-growth nexus
No full textWe investigate whether ratings-based capital regulation has affected the finance-growth nexus via a foreign credit channel. Using quarterly data on short to medium term real GDP growth and cross-border bank lending flows from G-10 countries to 67 recipient countries, we find that since the implementation of Basel 2 capital rules, risk weight reductions mapped to sovereign credit rating upgrades have stimulated short-term economic growth in investment grade recipients but hampered growth in non-investment grade recipients. The impact of these rating upgrades is strongest in the first year and then reverses from the third year and onwards. On the other hand, there is a consistent and lasting negative impact of risk weight increases due to rating downgrades across all recipient countries. The adverse effects of ratings-based capital regulation on foreign bank credit supply and economic growth are compounded in countries with more corruption and less competitive banking sectors and are attenuated with greater political stability
Have Too-Big-To-Fail Expectations Diminished? Evidence from the European Overnight Interbank Market
No full textUsing the Eurosystem’s proprietary interbank loan data from June 2008–June 2020, we show that larger European banks have had a lower cost of overnight borrowing than smaller banks. The size premium remains significant after controlling for a large set of other factors but has decreased over time, especially in countries that were stricken by the Sovereign Debt Crisis. A difference-in-differences analysis suggests that the decline in the size premium is related to the actual bail-in events, not to the implementation dates of the Bank Recovery and Resolution Directive as such. This finding is robust to controlling for the effect of the ECB’s long-term refinancing operations. Overall, the results suggest that the regulatory move towards bail-in rather than bailout policies to deal with financially distressed banks has reduced the too-big-to-fail expectations concerning large banks.Published in BoF DP 29/2015 http://urn.fi/URN:NBN:fi:bof-20151215148
Nowcasting Finnish GDP growth using financial variables : a MIDAS approach
No full textWe analyse the performance of financial market variables in nowcasting Finnish quarterly GDP growth. In particular, we assess if prediction accuracy is affected by the sampling frequency of the financial variables. Therefore, we apply MIDAS models that allow us to nowcast quarterly GDP growth using monthly or daily data without temporal aggregation in a parsimonious way. We find that financial market data nowcasts Finnish GDP growth relatively well: nowcasting performance is similar to industrial production, but financial market data is available much earlier. Our results suggest that the sampling frequency of financial market variables is not crucial: nowcasting accuracy of daily, monthly and quarterly data is similar
Monetary policy transmission with two exchange rates and a single currency : The Chinese experience
No full textIn emerging market economies, transmission of monetary policy through the foreign exchange market is complicated by the coexistence of financial restrictions and arbitrages. Using China as an example, we show that the coexistence of exchange rate interventions, capital controls and an on-shore-offshore exchange rate differential makes the long run equilibrium in the currency market nonlinear. Disturbances to this nonlinear long run equilibrium could offset the impact of monetary policy actions on domestic price stability. Omitting such nonlinearity leads to biased inference on the effectiveness of monetary policy
Win-Win? Assessing the global impact of the Chinese economy
No full textWe study the global impact of the Chinese economy based on a novel indirect approach where the spillover effect is quantified from a forecast error model under relatively favorable identifying conditions. Findings from the real-time World Economic Outlook data over the period 2004 ̶ 2015 indicate that an increase in economic growth in China had a negative impact on most other economies one to two years ahead. The estimations furthermore uncover evidence at the global level that spillover propagated by influencing prices, including global commodity prices, which tend to increase in reaction to accelerating economic growth in China
Quid pro quo? Political ties and sovereign borrowing
No full textDo stronger political ties with a global superpower improve sovereign borrowing conditions? We use data on voting at the United Nations General Assembly along with foreign aid flows to construct an index of political ties and find evidence that suggests stronger political ties with the US is associated with both better sovereign credit ratings and lower yields on sovereign bonds especially among lower income countries. We use official heads-of-state visits to the White House and coalition forces troop contributions as additional measures of the strength of political ties to further reinforce our findings
Can large trade shocks cause crises? The case of the Finnish-Soviet trade collapse
No full textWe study the macroeconomic consequences of a major trade disruption using the example of the Finnish–Soviet trade collapse in 1991. This is a rare case of a well–identified large trade shock in a developed economy. We find that the shock significantly affected Finnish output. Even so, the trade collapse was insufficient to generate an all–out crisis, and accounts for only a part of the Finnish Great Depression (1990–1993). We show that shocks originating domestically played a major role throughout the depression.Published in BoF DP 9/2019 http://urn.fi/URN:NBN:fi:bof-20190605121