1,720,967 research outputs found
How Low Interest Rates Discern the Bubbles Nature: Leveraged vs Unleveraged Bubble
No full textLeveraged asset price bubbles, i.e., boom-bust phases in asset prices accompanied by credit overhangs, are more harmful than unleveraged ones, in terms of financial and macroeconomic stability. If bubbles are not all alike, neither are all bubbles likely? As bubbles are difficult to detect in real-time data, early researches focused on the macroeconomic conditions exacerbating the bubbles' nature. We specifically look at a condition that could become more persistent in the aftermath of COVID-19 pandemic: low risk-free interest rates. In an OLG model, we show that the existence condition for a leveraged bubble is more easily met than that of an unleveraged bubble with low interest rates, and thus leveraged bubbly episodes are relatively more likely to emerge than unleveraged ones. Then, we show that this result holds empirically for post-World War II bubbles in advanced economies
How Low Interest Rates Discern the Bubbles Nature: Leveraged vs Unleveraged Bubble
No full textLeveraged asset price bubbles, i.e., boom-bust phases in asset prices accompanied by credit overhangs, are more harmful than unleveraged ones, in terms of financial and macroeconomic stability. If bubbles are not all alike, neither are all bubbles likely? As bubbles are difficult to detect in real-time data, early researches focused on the macroeconomic conditions exacerbating the bubbles' nature. We specifically look at a condition that could become more persistent in the aftermath of COVID-19 pandemic: low risk-free interest rates. In an OLG model, we show that the existence condition for a leveraged bubble is more easily met than that of an unleveraged bubble with low interest rates, and thus leveraged bubbly episodes are relatively more likely to emerge than unleveraged ones. Then, we show that this result holds empirically for post-World War II bubbles in advanced economies
Supervisory shocks to banks’ credit standards and their macro impact
No full textCredit standards reported in the Bank Lending Surveys (BLS) of the European Central Bank (ECB) summarize banks’ sentiment about credit market tightness, and they strongly comove with credit growth. This paper introduces a new external instrument that captures an exogenous source of variation in credit standards, allowing us to identify a structural shock that negatively affects the credit supply. The instrument accounts for mandatory rotations of external auditors within credit institutions of nine euro-area countries. By estimating local projections, this paper finds that an unexpected supervisory measure at the banking-system level features significant dynamic causal effects at the macroeconomic level, which are also state-dependent
Essays on financial stability, credit dynamics and policy challenges
Full text linkOver the last two decades the intensity of credit standards' tightening during economic contractions has exceeded their easing during expansions among euro area banks. This mechanism is fed by the boom-bust cycle of credit that, as much research has shown, is linked to financial instability with large effects on the real economy. We build a small scale nonlinear quadratic (NLQ) model to study how credit feedback can affect the overall adjustment path of the economy towards some steady state, when the central bank solve a infi nite-horizon decision problem where the policy rate is allowed to also be zero or negative. Then, we estimate local projections for a supervisory shock hitting banks' credit standards and propose a new external instrument to identify its dynamic causal impact on the real and fi nancial sector. We find that the regime dependence reveals important information to policy makers to implement macroprudential measures.This paper identi es credit booms in 11 Euro Area countries by tracking private loans from the banking sector. The events are associated with both fi nancial crises and specfii c macro fluctuations, but the standard identifi cation through threshold methods does not allow to catch credit booms in real time data. Thus, an early warning model is employed to predict the explosive dynamics of credit through several macro- financial indicators. The model catches a large part of the in-sample events and signals correctly both the global fi nancial crisis and the sovereign debt crisis in an out-of-sample setting by issuing signals in real-time data. Moreover, while tranquil booms are driven by global dynamics, crisis-booms are related to the resilience of domestic banking systems to adverse financial shocks. The results suggest an ex-ante policy intervention can avoid dangerous credit booms by focusing on the solvency of the domestic banking system and financial market's overheating
The effects of temperature shocks on energy prices and inflation in the Euro Area
No full textThis paper traces the existence of an energy transmission channel of temperature anomalies to Euro-Area inflation. We show that, on average, warmer temperature shocks elicit a negative energy demand shift, exerting moderate deflationary pressure. By looking into several asymmetries and macroeconomic indicators, we rationalize that evidence as signaling that the “turn-off-heating” effect in Europe outweighs the “turn-on-cooling”. This result becomes clearer when energy market responses are decomposed into gas and electricity components. Weak inflationary effects from non-energy items are at play when the shock hits during warm seasons. A persistent inflationary tendency manifests when food and energy prices rise, an outcome emerging only when negative anomalies – cold spells – hit. These findings shed new light on monitoring price stability due to global warming
Real-time signals anticipating credit booms in Euro Area countries
No full textThis paper identi es credit booms in 11 Euro Area countries by tracking private
loans from the banking sector. The events are associated with both nancial crises and
speci c macro
uctuations, but the standard identi cation through threshold methods
does not allow to catch credit booms in real time data. Thus, an early warning model
is employed to predict the explosive dynamics of credit through several macro- nancial
indicators. The model catches a large part of the in-sample events and signals correctly
both the global nancial crisis and the sovereign debt crisis in an out-of-sample setting
by issuing signals in real-time data. Moreover, while tranquil booms are driven by
global dynamics, crisis-booms are related to the resilience of domestic banking systems
to adverse nancial shocks. The results suggest an ex-ante policy intervention can
avoid dangerous credit booms by focusing on the solvency of the domestic banking
system and fi nancial market's overheating
The misalignment of fiscal multipliers in Italian regions
No full textThis paper estimates fiscal multipliers resulting from shocks to current public expenditure, total public revenues, and public investment in Italian regions by accounting for the structural heterogeneity between Northern and Southern economies. The estimation is carried out by estimating a Bayesian panel vector autoregression, where the structural shocks are identified using sign restrictions suggested by economic theory. The results shed new light on regional fiscal shocks’ magnitude and propagation. Moreover, a misalignment of fiscal multipliers is revealed, possibly policy relevant to local and central authorities.</p
Real-time signals anticipating credit booms in Euro Area countries
No full textThis paper identi es credit booms in 11 Euro Area countries by tracking private
loans from the banking sector. The events are associated with both nancial crises and
speci c macro
uctuations, but the standard identi cation through threshold methods
does not allow to catch credit booms in real time data. Thus, an early warning model
is employed to predict the explosive dynamics of credit through several macro- nancial
indicators. The model catches a large part of the in-sample events and signals correctly
both the global nancial crisis and the sovereign debt crisis in an out-of-sample setting
by issuing signals in real-time data. Moreover, while tranquil booms are driven by
global dynamics, crisis-booms are related to the resilience of domestic banking systems
to adverse nancial shocks. The results suggest an ex-ante policy intervention can
avoid dangerous credit booms by focusing on the solvency of the domestic banking
system and fi nancial market's overheating
Going Beyond Counting First Authors in Author Co-citation Analysis
Full text linkThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
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