BIS Triennial Survey of Foreign Exchange and Over-The-Counter Interest Rate Derivatives Markets in April 2025 – UK Data
Results of our latest survey of turnover in the markets for foreign exchange and over-the-counter interest rate derivatives.
Financial institutions
Foreign demand for safety and macroeconomic instability
Using novel data on sectoral safe asset positions in 21 advanced economies since 1980, we document the central role of the foreign sector in the market for safety and its macroeconomic implications. We show that safe asset holdings have expanded significantly relative to GDP, driven by rising net holdings of the foreign sector and accommodated by increased issuance from the financial and public sectors. Furthermore, fluctuations in safe assets are almost exclusively driven by the foreign and financial sectors, with close links between the two.
Battle of the ages: distributional and aggregate effects of monetary policy in a model with age demographics
We develop a model in which agents face unemployment risk, but also age and eventually retire. We study the impact of different retirement schemes on life-cycle consumption and the monetary transmission mechanism. Agents save because of a fall in income upon retirement, changes along the life-cycle wage profile, and unemployment risk. Changes in retirement policies affect the distribution of available assets (bonds) among the middle aged and the young, which in turn can have a strong impact on the ability of the young to insure themselves against unemployment risk.
Battle of the ages: distributional and aggregate effects of monetary policy in a model with age demographics
We develop a model in which agents face unemployment risk, but also age and eventually retire. We study the impact of different retirement schemes on life-cycle consumption and the monetary transmission mechanism. Agents save because of a fall in income upon retirement, changes along the life-cycle wage profile, and unemployment risk. Changes in retirement policies affect the distribution of available assets (bonds) among the middle aged and the young, which in turn can have a strong impact on the ability of the young to insure themselves against unemployment risk.
Foreign demand for safety and macroeconomic instability
Using novel data on sectoral safe asset positions in 21 advanced economies since 1980, we document the central role of the foreign sector in the market for safety and its macroeconomic implications. We show that safe asset holdings have expanded significantly relative to GDP, driven by rising net holdings of the foreign sector and accommodated by increased issuance from the financial and public sectors. Furthermore, fluctuations in safe assets are almost exclusively driven by the foreign and financial sectors, with close links between the two.
FEDS Paper: Can LLMs Improve Sanctions Screening in the Financial System? Evidence from a Fuzzy Matching Assessment
Jeffrey S. Allen and Max S. S. HatfieldWe examined the performance of four families of large language models (LLMs) and a variety of common fuzzy matching algorithms in assessing the similarity of names and addresses in a sanctions screening context. On average, across a range of realistic matching thresholds, the LLMs in our study reduced sanctions screening false positives by 92 percent and increased detection rates by 11 percent relative to the best-performing fuzzy matching baseline.
FEDS Paper: Parallel Trends Forest: Data-Driven Control Sample Selection in Difference-in-Differences
Yesol Huh and Matthew Vanderpool KlingThis paper introduces parallel trends forest, a novel approach to constructing optimal control samples when using difference-in-differences (DiD) in a relatively long panel data with little randomization in treatment assignment. Our method uses machine learning techniques to construct an optimal control sample that best meet the parallel trends assumption. We demonstrate that our approach outperforms existing methods, particularly with noisy, granular data.
The Great Moderation at 40: learning from the cross section
This study examines the drivers of inflation levels, inflation variability, and growth variability collectively representing long-term central bank performance across 37 advanced economies in the Great Moderation era. A key finding is that central bank performance is consistently linked to the overall quality of institutions, while central bank-specific factors such as independence, exchange rate regimes, or inflation targeting show no significant impact. The analysis is extended to the 2022 inflation resurgence, using pre-2022 country characteristics.
Business cycles with pricing cascades
Business cycles with pronounced inflation can have sectoral origins and often feature a growing share of price-adjusting firms. Rationalizing such phenomena requires enhancing our modeling toolkit. We do that by building a non-linear equilibrium multi-sector framework featuring a general input-output network and optimal decisions on the timing and size of price adjustments. The interaction of our ingredients creates equilibrium cascades: large movements in aggregates trigger price adjustment decisions on the extensive margin.
Business cycles with pricing cascades
Business cycles with pronounced inflation can have sectoral origins and often feature a growing share of price-adjusting firms. Rationalizing such phenomena requires enhancing our modeling toolkit. We do that by building a non-linear equilibrium multi-sector framework featuring a general input-output network and optimal decisions on the timing and size of price adjustments. The interaction of our ingredients creates equilibrium cascades: large movements in aggregates trigger price adjustment decisions on the extensive margin.
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