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Date Headline Description #
18-Dec-2024 Fiscal stimulus plans and households' expectations We examine how large fiscal stimulus plans influence households' expectations, particularly regarding inflation. We focus on three significant US fiscal stimulus packages that differ in size and scope, providing a diverse context for analysis: the CARES Act of 2020, the Tax Cuts and Jobs Act (TCJA) of 2017, and the American Rescue Plan (ARP) of 2021. We aim to understand how households react to fiscal policy announcements and whether their financial literacy plays a role in shaping these reactions. Request summary
16-Dec-2024 The macroeconomics of green transitions We analyse the macroeconomic implications of a green energy transition. Major economies increasingly recognise the need to shift from fossil fuels to renewable energy sources to reduce carbon emissions and address the risks of climate change. We examine the effects of this transition on energy prices, inflation and the broader economy. A particular focus is on the role of economic policy – especially monetary policy – in shaping the transition process. Request summary
13-Dec-2024 Savings-and-credit contracts We examine a novel financial contract design called the savings-and-credit contract (SCC), which uses mandatory savings periods and default penalties as a screening mechanism in credit markets. Unlike traditional spot loan contracts where borrowers make an immediate down payment, SCCs require borrowers to demonstrate their creditworthiness through regular savings payments over a specified period before receiving credit. We specifically analyse both theoretical and empirical aspects of this contract design, using Brazil's consórcio system as a real-world application of the SCC concept. Request summary
11-Dec-2024 Aggregate debt servicing and the limit on private credit The data contain the long-run historical debt service ratios for the private non-financial sector developed in the paper. Request summary
10-Dec-2024 Targeted Taylor rules: some evidence and theory We refine the monetary policy rules used to summarise central banks' reaction functions to allow for a different (targeted) reaction to demand- versus supply-driven inflation. We estimate this novel type of rule for the United States and discuss its business cycle properties through the lens of a textbook monetary model. Request summary
6-Dec-2024 Fire sales of safe assets We examine the significant price pressures in the UK gilt market during a period of extreme volatility from September to October 2022. We investigate the impact of forced sales by liability-driven investment funds (LDIs) on gilt prices, the reasons behind the inability of LDIs to recapitalise quickly and the scarcity of liquidity providers during this period. The findings provide insights into the mechanics of fire sales, the process of arbitrage and the limits of market efficiency. Request summary
5-Dec-2024 Bond supply, yield drifts and liquidity provision before macroeconomic announcements Two of the most important drivers of nominal interest rates are the arrival of macroeconomic news and changes in the supply of government bonds. These two factors have become more and more intertwined as bond issuances have increasingly occurred near scheduled macroeconomic announcements. Yet, how the interaction between these two forces affects investor behaviour, bond market liquidity and ultimately interest rates is not well understood. We fill this gap in the literature. Request summary
4-Dec-2024 Monetary policy in the news: communication pass-through and inflation expectations In recent decades, central banks have placed increasing emphasis on communication with the public as a critical tool to explain monetary policy decisions and help anchor inflation expectations. While a large body of research has shown that central bank communication is effective in influencing financial markets, much less is known about central banks' ability to reach the broader public. Survey evidence shows that households acquire information about monetary policy mostly from traditional media. Hence, for central banks to effectively influence the public, it is critical that the media cover their communication accurately. Request summary
2-Dec-2024 Whither inflation targeting as a global monetary standard? From its tentative beginnings, inflation targeting has spread to become the de facto global monetary standard. Historically, only the Gold Standard has had a longer lifespan. What have been the framework's successes and failures? What adjustments could make it fit for purpose in the longer term? Request summary
22-Nov-2024 Through stormy seas: how fragile is liquidity across asset classes and time? We analyse the evolution and resilience of market liquidity across key asset classes – stocks, foreign exchange (FX) and government bonds – in major developed markets (United States, Europe and Japan) over the past 25 years. We do not focus simply on the first moment (mean) but include the higher moments (standard deviation, skewness and kurtosis) of the bid-ask spread. By looking at the distribution, we gain insights into the complex dynamics and resilience of liquidity in these markets. We also explore the potential drivers behind observed changes in the distribution of liquidity and their implications for traders and markets. Request summary
21-Nov-2024 Retail fast payment systems as a catalyst for digital finance The rise of digital technologies is challenging the dominance of traditional financial institutions, such as banks. Payments have been the most deeply impacted, and a number of initiatives aim to further increase their speed and convenience. Retail fast payment systems (FPS) offer one prominent example. The impact of FPS extends beyond offering faster and more convenient payment options for individuals and businesses. FPS have spurred the rising use of finance apps, which in turn provide individuals and small businesses alternative ways to borrow, to invest and to buy insurance. We assess the pace of adoption of digital finance apps and how FPS have influenced adoption, both across countries and over time. Request summary
19-Nov-2024 Decentralised dealers? Examining liquidity provision in decentralised exchanges We explore the role of sophisticated and unsophisticated participants in providing liquidity on decentralised exchanges (DEXs), focusing on Uniswap V3, one of the largest DEX platforms. By analysing large data sets of transactions, we identify different strategies used by sophisticated (institutional) and unsophisticated (retail) participants. We categorise participants based on their behaviour and position sizes and assess their profitability, liquidity provision strategies and responses to market changes. Request summary
15-Nov-2024 How does fiscal policy affect the transmission of monetary policy into cross-border bank lending? Cross-country evidence Governments have recently implemented large-scale fiscal operations. These fiscal policies interact with monetary policy in affecting credit supply and thereby the economy. Yet studying this interaction is difficult because monetary and fiscal policies work through similar channels and often address similar objectives. Request summary