Central banks

Climate change policies and technologies: diffusion and interaction with institutions and governance

02/14/2025 European Central Bank Central banks

Climate change is a global-scale structural change, affecting economies across the world, alongside global fragmentation, digitalisation and demographics. This paper analyses the diffusion of climate policies and technologies and the role of institutions and governance in that process. It discusses theory, models and data available to date, and the empirical evidence for the 20 European Union and all 40 countries covered by the OECD’s Environmental Policy Stringency index.

Institutional investors and house prices

02/13/2025 European Central Bank Central banks

Institutional investors, such as investment funds, are playing an increasingly important role in residential real estate markets. This raises the possibility that their actions might drive aggregate market outcomes and may change how and which macrofinancial shocks transmit to house prices. In a Bayesian vector autoregression setting, we show that a demand shock from institutional investors has a positive and persistent effect on aggregate euro area house price growth and mortgage lending volumes.

Mitigating fragility in open-ended investment funds: the role of redemption restrictions

02/13/2025 European Central Bank Central banks

Using supervisory data of alternative investment funds investing in bonds, I exploit the COVID-19 crisis to examine the effectiveness of redemption restrictions from a financial stability perspective. First, I find that redemption restrictions reduced outflows during the March 2020 market turmoil but did not result in higher outflows in the periods following the crisis episode. Second, I find that funds with higher redemption restrictions engaged less in procyclical cash hoarding during the COVID-19 crisis period, even after controlling for the size of their outflows.

FEDS Paper: Heraclius: A Byzantine Fault Tolerant Database System with Potential for Modern Payments Systems

02/12/2025 Federal Reserve Central banks

James Lovejoy, Tarakaram Gollamudi, Jeremy Kassis, Narayanan Pillai, Jeremy Brotherton, and Eric ThompsonModern payments systems are critical infrastructure for the US and global economy, and they all utilize computing systems to facilitate transactions. These computing systems can be vulnerable to failures and an outage of a payment system could cause a serious ripple effect throughout the economy it supports.

FEDS Paper: Research in Commotion: Measuring AI Research and Development through Conference Call Transcripts

02/12/2025 Federal Reserve Central banks

Paul E. SotoThis paper introduces a novel measure of firm-level Artificial Intelligence (AI) Research & Development—the AIR Index—derived from the semantic similarity between earnings conference call transcripts and leading AI research papers. The AIR Index varies widely across industries, with sustained strength in computer and electronic manufacturing, and accelerating growth in computing infrastructure and educational services seen after the introduction of ChatGPT in November 2022.

IFDP Paper: Geopolitics Meets Monetary Policy: Decoding Their Impact on Cross-Border Bank Lending

02/12/2025 Federal Reserve Central banks

Swapan-Kumar Pradhan, Viktors Stebunovs, Előd Takáts, and Judit TemesvaryWe use bilateral cross-border bank claims by nationality to assess the effects of geopolitics on cross-border bank flows. We show that a rise in geopolitical tensions between countries — disagreements in UN voting, broad sanctions, or sentiments captured by geopolitical risk indices — significantly dampens cross-border bank lending.

Monetary policy and the firm-level labor share: a story about capital

02/12/2025 European Central Bank Central banks

We study the heterogeneous pass-through of monetary policy across firms with different labor shares. The goal is to obtain evidence on a labor-intensity transmission channel that should in fact be operating for other kinds of demand shocks as well. Our basic idea is that labor is special: unlike capital, it cannot be pledged against loans as collateral due to property rights.

Distressed assets and fiscal-monetary support: are AMCs a third way?

02/12/2025 European Central Bank Central banks

Following the Global Financial Crisis of 2007-8, Ireland, Slovenia, and Spain set up public Asset Management Companies (AMCs), purchasing delinquent loans equal to 44%, 16%, and 10% of GDP, respectively. Though deemed successful, it’s unclear if this was de facto traditional capital and liquidity support. We show that AMCs have a systematic advantage in reducing pecuniary externalities and costs associated with loan delinquencies.

Housing wealth across countries: the role of expectations, institutions and preferences

02/11/2025 European Central Bank Central banks

Homeownership rates and holdings of housing wealth differ immensely across countries. Using micro data from five economies, we estimate a life-cycle model with illiquid housing in which households face a discrete–continuous choice between renting and owning a house. We use the model to decompose the cross-country differences in the homeownership rate and the value of housing wealth into three groups of explanatory factors: house price expectations, the institutional set-up of the housing market and preferences. We find that all three groups of factors matter, although preferences less so.

Pages

Subscribe to Central banks