Central banks

To ensure that means of payments are readily interchangeable at face value – i.e. fungible – for retail payments, three elements are required: (1) settlement finality; (2) interoperability; and (3) seamless convertibility of the means of payment into the “ultimate” or quasi-ultimate means of payment.

Using a granular database of variable rate euro area loans and analysing their defaults between 2014 and 2019, we show that the effect of interest rate changes on mortgage defaults is highly non-linear. First, we find that the risk associated with higher contemporaneous interest rates is concentrated among borrowers who got the loan at ultra-low interest rates, their default probability being 2.6 times higher than our sample average.

Announcing a large fiscal stimulus may signal the government’s pessimism about the severity of a recession to the private sector, impairing the stabilizing effects of the policy. Using a theoretical model, we show that these signaling effects occur when the stimulus exceeds expectations and are more noticeable during periods of high economic uncertainty. Analysis of a new dataset of daily stock prices and fiscal news in Japan supports these predictions.

This paper examines how structural change in labor markets affects household credit outcomes. Using a Shift-Share instrumental variable approach, we find that occupational shifts negatively influence mortgage holding for households facing fa-vorable job market conditions, such as stable employment and income growth. Our results, robust to alternative specifications, suggest that when both individual and economy-wide career prospects are favorable, the opportunity costs of settling down grow accordingly.