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Date Headline Description #
22-Oct-2024 Bank geographic diversification and funding stability Banks are getting larger, while the number of physical bank branches is rapidly declining. These trends have raised important questions. Do larger banks imply greater risks to financial stability? And will the demise of bank branches, which are crucial for collecting soft information about borrowers, impair small business lending and hurt local economies? Request summary
18-Oct-2024 The road to net zero: a fund flow investigation Using US-domiciled energy equity mutual funds and exchange traded funds from 2006 to 2022, we focus our analysis on the shifting patterns and pace of flows of green and brown funds in response to climate-related news shocks. Request summary
17-Oct-2024 Stablecoins, money market funds and monetary policy Stablecoins are crypto tokens that exist on distributed ledgers (ie "on-chain") and are designed to maintain a stable value, typically pegged one to one with the US dollar. Issuers back these tokens mostly with fiat-denominated, short-term assets such as Treasuries, high-quality commercial papers, repurchase agreements and bank deposits. This structure, where money-like liabilities are supported by assets that can become illiquid, exposes stablecoin issuers to the risk of liquidity runs. In this way, the balance sheet structure of stablecoins closely mirrors that of money market funds (MMFs). Request summary
15-Oct-2024 Bank specialisation and corporate innovation Theoretical models offer conflicting predictions on how lenders' sectoral specialisation affects firms' innovation activities. On one hand, banks specialising in particular sectors may develop unique expertise, enabling them to better assess and support the opaque and risky investments essential for innovation. On the other hand, innovation can create spillovers where one firm's technological advancements negatively impact the value of other firms' existing assets. Specialised banks, which are more exposed to these potential spillovers, may be more inclined to impede innovation, especially in sectors where the risk of such spillovers is high. Despite these theories, empirical research on the link between bank specialisation and corporate innovation is limited. Request summary
14-Oct-2024 Global inflation, inflation expectations and central banks in emerging markets In 2021 and 2022, inflation saw a synchronised increase in both advanced economies (AEs) and emerging market economies (EMEs). The inflation surge, which was initially thought to be transitory, was later diagnosed as persistent, and short-term inflation expectations across AEs and EMEs saw significant upward revisions. In this context, we address two crucial questions: How has the sensitivity of inflation expectations to global inflation changed in EMEs recently? And how can EME central banks reduce the impact of global inflation on inflation expectations? Request summary
8-Oct-2024 Trade credit and exchange rate risk pass through We model the transmission of exchange rate risk via firm balance sheets along the supply chain. We document stylised facts in the data linking foreign currency debt to trade credit lending (ie accounts receivable). We develop a stylised model where firms with access to foreign currency debt sell to firms downstream on credit. We analyse the implications of exchange rate risk and the consequences of its realisation. We validate theoretical predictions in a cross-country data set of firms in 19 emerging market economies. Request summary
1-Oct-2024 CB-LMs: language models for central banking Economists are increasingly applying natural language processing (NLP) techniques to analyse monetary policy communications. While these studies offer valuable insights, they often rely on language models trained on collections of general texts. This limitation may hinder the models' ability to fully capture the nuances unique to central banking and monetary economics. Recent literature suggests that retraining language models on domain-specific data can enhance performance in specialised NLP analyses. Request summary
26-Sep-2024 The impact of financial crises on industrial growth: lessons from the last 40 years Financial crises have a large impact on economic growth, and recoveries from such episodes can take years. However, assessing the causal effect of financial crises on GDP growth is difficult. This is because of reverse causality – the possibility that shocks to current or expected growth were a cause of the crisis. Request summary
23-Sep-2024 Chinese banks and their EMDE borrowers: have their relationships changed in times of geoeconomic fragmentation? Although Chinese banks stand out as the top cross-border lender to most emerging market and developing economies (EMDEs), their global expansion has recently slowed. We use their outstanding amounts and market shares in up to 85 EMDEs over the 2017 to 2022 period to explore the role of bilateral economic ties, borrower risk variables and foreign policies. For bilateral economic ties, we study trade, foreign direct investment (FDI) and portfolio flows between China and its borrower countries. We use debt burden measures and perceived corruption as borrower risk variables. With respect to foreign policies, we analyse both China-specific policies such as the Belt and Road Initiative and borrower-specific policies, some of which reflect geoeconomic fragmentation trends. Request summary