1,720,987 research outputs found
Macroprudential Policy: a Blessing or a Curse?
Full text linkAfter the destructive impact of the global financial crisis of 2008, many believe that pre-crisis financial market regulation did not take the “big picture” of the system sufficiently into account and, subsequently, financial supervision mainly “missed the forest for the trees”. As a result, the need for macroprudential aspects of regulation emerged, which has recently become the focal point of many policy debates. This has also led to intense discussion on the contours of monetary policy after the post-crisis “new normal”. Here, I review recent progress in empirical and theoretical research on the effectiveness of macroprudential tools, as well as the current state of the debate, in order to extract common policy conclusions. The work highlights that, despite the achievements in the literature, the current experience and knowledge of how macroprudential instruments work, their calibration, and the mechanisms through which they interact with each other and with monetary policy are rather limited and conflicting. Moreover, I critically survey and note the current challenges faced by macroprudential regulation in creating stable, yet efficient financial systems. At the same time, I emphasize the importance of accepting that many risks may remain, requiring that we proceed prudently and develop better plans for future crises
Dollarization and its determining factors
No full textThe dynamics of dollarization and its main influencing factors are investigated. The direction and substance of relations between the dollarization process and its influencing are analyzed. An econometric model reflecting the mutual relations between direction and the factors determining the latter is made. As a result of the econometric analysis, the dollarization hysteresis process is investigated in RA
Armenian diaspora foreign direct investment factor analysis in the Republic of Armenia
No full textThe dynamics of diaspora FDI in RA and its main influencing factors are investigated. The direction and substance of relations between diaspora FDI and its influencing factors are analysed. An econometric model reflecting mutual relations between diaspora FDI and determining factors are constructed
THE ALTERNATIVE APPROACH TO MODELING OF DOLLARIZATION IN THE REPUBLIC OF ARMENIA FROM THE VIEWPOINT OF CURRENCY SUBSTITUTION
Full text linkThe currency substitution aspect of dollarization in the Republic of Armenia is investigated. The direction and substance of relations between currency substitution in the Republic of Armenia and influencing factors are analyzed. An econometric model reflecting mutual relationship between currency substitution and its determining factors has been created. The latter overpasses the borders of classic approaches for the estimation and modeling of dollarization and is based on the “Money-in-Utility-Function” approach
Bank-sovereign ties against interbank market integration: the case of the Italian segment
Full text linkThis paper investigates interbank market fragmentation that results from the bank–sovereign risk nexus. We focus on the Italian market fragmentation before and within the European sovereign debt crisis. By using Italian bank and GIPSI country CDS spread changes, we suggest a new measure of sovereign/bank spillovers, based on partial correlations. Then, we examine the relationship between the sovereign-to-banks contagion risk variable and interbank market fragmentation in rates using the e-MID market data. We find that the bank–sovereign nexus is a significant source of fragmentation during the most acute phase of the sovereign debt crisis. Our findings suggest that even if the home country/bank ties impact interbank market integration seriously, the risk from other distressed countries is not negligible
Realising Central Banks’ Climate Ambitions Through Financial Stability Mandates
No full textAbstract This paper discusses how financial stability governance has evolved and how central banks and financial regulators are coping with the threats posed by climate uncertainty, providing an overview of G20 countries’ green central banking experiences in the past 20 years. The analysis shows that most central banks realise their climate ambitions through financial stability mandates, leaving the monetary stability mandate unaffected. Considering the debate on market neutrality, the concerns on the risk of overstretching the central banks’ mandate, violation of Tinbergen’s principle and threats posed to central banks’ independence, the provided evidence reveals a mismatch between the observed policy practice and its theoretical underpinnings. Drawing on these findings, we argue that effective green central banking governance should be based on a synthesis between monetary and macroprudential policymaking
Taking up the climate change challenge: a new perspective on central banking
Full text linkThe awareness about climate-related financial risks is gaining momentum both in the policy and academic debates. The role of countries’ institutional dimension and central bank governance structures in the adoption of green prudential regulation is, however, overlooked in the current discussion. The paper fills this gap by proposing an analysis of the state-of-the-art, challenges and perspectives, of “green” central banking. The study complements existing research that usually points to an “extended” monetary policy mandate, including, for example, sustainability objectives or green growth, as the primary motivation for a central bank to engage in “green” financial policymaking. According to our research, the decision to implement green regulations is not exclusively related to the mandate per se, but on the central bank’s independence and on how the interaction between the monetary and prudential policy is structured. Moreover, the higher exposure to climate-related adverse events also plays a crucial role in the adoption of green prudential regulations. To avoid potential conflicts between monetary policy and green prudential regulation caused by existing intertwined transmission mechanisms, on the one hand, our analysis emphasizes the importance of having a central bank that hosts the green prudential regulation under its governance roof. On the other hand, when the “green” governance models studied in the paper are in place, the Tinbergen principle is safeguarded
Do monetary policy mandates and financial stability governance structures matter for the adoption of climate-related financial policies?
No full textThe proposed analysis investigates whether the type of central banks’ monetary policy mandates and their financial stability governance arrangements influence the adoption of climate-related financial policies. The empirical findings confirm a statistically significant relationship between a broader monetary policy mandate and the adoption of climate-related financial policies. However, the hypothesis – informed by existing literature – that a more integrated financial stability governance model would imply a higher adoption of climate-related financial policies is not confirmed. Focusing on G20 countries in 2000–2018, the study reveals that a more complex financial stability governance based on less integrated arrangements is more successful for climate-related financial policy adoption. Other factors, such as the presence of a democratic regime, the independence of the central bank, and being a member of the Sustainable Banking Network, have a positive and (statistically) significant effect across all specifications. Moreover, the materialization of climate-related physical risks such as, e.g., floods, heatwaves, droughts, and storms, and transition risks proxied by – among others – CO2 emissions per capita, climate mitigation policies, and financial readiness to implement climate adaptation plans are also essential. The results are robust after considering a different dependent variable and several alternative model specifications
Real Estate and the Great Crisis: Lessons for Macro-Prudential Policy
Full text linkFrom a broad macro-financial structure perspective, credit conditions have gaven rise to house price booms and busts in several advanced economies (e.g., Ireland, Spain, and the U.S.), and, more specifically in the U.S., an underpricing of risk made possible by regulatory arbitrage and shadow financing fueled the credit and twin real estate bubbles of the mid-2000s. Across countries and over time, bubbles have been particularly acute in real estate markets reflecting not only the relatively inelastic supply of land and thin trading of real estate, but also the amplification of shocks via backward-looking price expectations and the funding of consumption off of distorted and elevated prices. Macro-prudential lessons from the Great Crisis highlight the need to prevent the build-up of excess real estate financing and limit the amplification and correlation of real estate risks. Progress has been made through imposing new tougher restrictions on the choice sets of lenders and of borrowers, with particulars varying across advanced economies. Nonetheless, regulatory reform of banking is ongoing, significant challenges remain especially in dealing with correlated risks associated with securitization
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