http://www.bis.org/cbhub/list/series/sid_58/index.rss Research hub papers by series: Bank for International Settlements Working papers en http://www.bis.org/publ/work384.pdf Bank for International Settlements Working papers by Leonardo Gambacorta, Boris Hofmann and Gert Peersman The Effectiveness of Unconventional Monetary Policy at the Zero Lower Bound: A Cross-Country Analysis 2012-08-27T18:29:00Z This paper assesses the macroeconomic effects of unconventional monetary policies by estimating a panel VAR with monthly data from eight advanced economies over a sample spanning the period since the onset of the global finanancial crisis. It finds that an exogenous increase in central bank balance sheets at the zero lower bound leads to a temporary rise in economic activity and consumer prices. The estimated output effects turn out to be qualitatively similar to the ones found in the literature on the effects of conventional monetary policy, while the impact on the price level is weaker and less persistent. Individual country results suggest that there are no major differences in the macroeconomic effects of unconventional monetary policies across countries, despite the heterogeneity of the measures that were taken. The Effectiveness of Unconventional Monetary Policy at the Zero Lower Bound: A Cross-Country Analysis 2012-08-27T18:29:00Z BIS Abstract http://www.bis.org/publ/work384.htm Full text http://www.bis.org/publ/work384.pdf Leonardo Gambacorta Boris Hofmann Gert Peersman Leonardo Gambacorta, Boris Hofmann and Gert Peersman 2012-08 Bank for International Settlements Working papers C32 E30 E44 E51 E52 http://www.bis.org/publ/work383.pdf Bank for International Settlements Working papers by Michael Brei and Blaise Gadanecz Public recapitalisations and bank risk: evidence from loan spreads and leverage 2012-08-14T16:35:00Z A number of countries' authorities put in place bank rescue packages using public funds in response to the global financial crisis. Were these public recapitalisations followed by a reduction of risk in banks' loan books? To answer this question, in this paper the balance sheets and syndicated loan portfolios of 87 large internationally active banks, approximately half of which were rescued during the crisis, are analysed for the period 2000-10. Evidence is presented that banks that were later rescued took on higher risk in their loan books before the crisis than banks that were not, especially in their home markets. Although the riskiness of loan signings started diminishing across the board in 2009, we do not find consistent evidence that rescued banks reduced their risk relatively more than non rescued banks during the crisis. Public recapitalisations and bank risk: evidence from loan spreads and leverage 2012-08-14T16:35:00Z BIS Abstract http://www.bis.org/publ/work383.htm Full text http://www.bis.org/publ/work383.pdf Blaise Gadanecz Michael Brei Michael Brei and Blaise Gadanecz 2012-07 Bank for International Settlements Working papers E51 G15 G21 G32 http://www.bis.org/publ/work382.pdf Bank for International Settlements Working papers by Robert N McCauley Risk-on/risk-off, capital flows, leverge and safe assets 2012-07-25T12:41:00Z This paper describes the international flow of funds associated with calm and volatile global equity markets. During calm periods, portfolio investment by real money and leveraged investors in advanced countries flows into emerging markets. When central banks in the receiving countries resist exchange rate appreciation and buy dollars against domestic currency, they end up investing in medium-term bonds in reserve currencies. In the process they fund themselves (or "sterilise" the expansion of local bank reserves) by issuing safe assets in domestic currency to domestic investors. Thus, calm periods, marked by leveraged investing in emerging markets, lead to an asymmetric asset swap (risky emerging market assets against safe reserve currency assets) and leveraging up by emerging market central banks. In declining and volatile global equity markets, these flows reverse, and, contrary to some claims, emerging market central banks draw down reserves substantially. In effect emerging market central banks then release safe assets from their reserves, supplying safe havens to global investors. Risk-on/risk-off, capital flows, leverge and safe assets 2012-07-25T12:41:00Z BIS Abstract http://www.bis.org/publ/work382.htm Full text http://www.bis.org/publ/work382.pdf Robert N. McCauley Robert N McCauley 2012-07 Bank for International Settlements Working papers E58 F3 G15 http://www.bis.org/publ/work381.pdf Bank for International Settlements Working papers by Stephen G Cecchetti and Enisse Kharroubi Reassessing the impact of finance on growth 2012-07-17T17:38:59Z This paper investigates how financial development affects aggregate productivity growth. Based on a sample of developed and emerging economies, we first show that the level of financial development is good only up to a point, after which it becomes a drag on growth. Second, focusing on advanced economies, we show that a fast-growing financial sector is detrimental to aggregate productivity growth. Reassessing the impact of finance on growth 2012-07-17T17:38:59Z BIS Abstract http://www.bis.org/publ/work381.htm Full text http://www.bis.org/publ/work381.pdf Stephen Cecchetti Enisse Kharroubi Stephen G Cecchetti and Enisse Kharroubi 2012-07 Bank for International Settlements Working papers D92 E22 E44 O4 http://www.bis.org/publ/work380.pdf Bank for International Settlements Working papers by Mathias Drehmann, Claudio Borio and Kostas Tsatsaronis Characterising the financial cycle: don't lose sight of the medium term! 2012-06-13T17:42:00Z We characterise empirically the financial cycle using two approaches: analysis of turning points and frequency-based filters. We identify the financial cycle with the medium-term component in the joint fluctuations of credit and property prices; equity prices do not fit this picture well. We show that financial cycle peaks are very closely associated with financial crises and that the length and amplitude of the financial cycle have increased markedly since the mid-1980s. We argue that this reflects, in particular, financial liberalisation and changes in monetary policy frameworks. So defined, the financial cycle is much longer than the traditional business cycle. Business cycle recessions are much deeper when they coincide with the contraction phase of the financial cycle. We also draw attention to the "unfinished recession" phenomenon: policy responses that fail to take into account the length of the financial cycle may help contain recessions in the short run but at the expense of larger recessions down the road. Characterising the financial cycle: don't lose sight of the medium term! 2012-06-13T17:42:00Z BIS Abstract http://www.bis.org/publ/work380.htm Full text http://www.bis.org/publ/work380.pdf Kostas Tsatsaronis Claudio Borio Mathias Drehmann Mathias Drehmann, Claudio Borio and Kostas Tsatsaronis 2012-06 Bank for International Settlements Working papers E44 E61 G21 http://www.bis.org/publ/work379.pdf Bank for International Settlements Working papers by Stephen G Cecchetti and Marion Kohler When capital adequacy and interest rate policy are substitutes (and when they are not) 2012-05-07T17:38:59Z Prudential instruments are commonly seen as the tools that can be used to deliver the macroprudential policy goals of reducing the frequency and severity of financial crises. And interest rates are traditionally viewed as the means to deliver the macroeconomic stabilisation goals of low, stable inflation and sustainable, stable growth. But, at the macroeconomic level, these two sets of policy tools have quite a bit in common. We use a simple macroeconomic model to study the extent to which capital adequacy requirements and interest rates might be substitutes in meeting the objective of stabilising the economy. We find that in our model both are substitutes for achieving conventional monetary policy objectives. In addition, we show that, in principle, they can both be used to meet financial stability objectives. This implies a need to coordinate the use of macroprudential and traditional monetary policy tools, a need that has clear implications for the construction of the policy framework designed to deliver the joint objectives of macroeconomic and financial stability. When capital adequacy and interest rate policy are substitutes (and when they are not) 2012-05-07T17:38:59Z BIS Abstract http://www.bis.org/publ/work379.htm Full text http://www.bis.org/publ/work379.pdf Stephen Cecchetti Marion Kohler Stephen G Cecchetti and Marion Kohler 2012-05 Bank for International Settlements Working papers E5 G2 http://www.bis.org/publ/work378.pdf Bank for International Settlements Working papers by Andrew Filardo Ensuring price stability in post-crisis Asia: lessons from the recovery 2012-04-18T12:39:59Z Asian central banks have adopted monetary policy frameworks over the past decade that have, by and large, worked well both to ensure price stability during the pre-crisis period and to navigate the shoals during the recent international financial crisis. Inflation concerns in recent years nonetheless raise the possibility that existing monetary policy frameworks in Asia may be contributing to procyclical inflation swings. Three particular aspects of the policy environment are highlighted. They include the approach of monetary policy to commodity price cycles, to the uneven global recovery and to the new financial stability mandates. Ensuring price stability in post-crisis Asia: lessons from the recovery 2012-04-18T12:39:59Z BIS Abstract http://www.bis.org/publ/work378.htm Full text http://www.bis.org/publ/work378.pdf Andrew Filardo Andrew Filardo 2012-04 Bank for International Settlements Working papers E3 E5 E6 F4 http://www.bis.org/publ/work377.pdf Bank for International Settlements Working papers by Stefan Avdjiev, Robert N McCauley and Patrick McGuire Rapid credit growth and international credit: Challenges for Asia 2012-04-12T17:38:59Z Very low interest rates in major currencies have raised concerns over international credit flows to robustly growing economies in Asia. This paper examines three components of international credit and highlights several of the policy challenges that arise in constraining such credit. Our empirical findings suggest that international credit enables domestic credit booms in emerging markets. Furthermore, we demonstrate that higher levels of international credit on the eve of a crisis are associated with larger subsequent contractions in overall credit and real output. In Asia today, international credit generally is small in relation to overall credit - as was not the case before the Asian crisis. So even though dollar credit is growing very rapidly in some Asian economies, its contribution to overall credit growth has been modest outside the more dollarised economies of Asia. Rapid credit growth and international credit: Challenges for Asia 2012-04-12T17:38:59Z BIS Abstract http://www.bis.org/publ/work377.htm Full text http://www.bis.org/publ/work377.pdf Stefan Avdjiev Robert N. McCauley Patrick McGuire Stefan Avdjiev, Robert N McCauley and Patrick McGuire 2012-04 Bank for International Settlements Working papers E32 F34 F43 http://www.bis.org/publ/work376.pdf Bank for International Settlements Working papers by Eugenio Cerutti, Stijn Claessens and Patrick McGuire Systemic risk in global banking: what can available data tell us and what more data are needed? 2012-04-11T12:41:00Z The recent financial crisis has shown how interconnected the financial world has become. Shocks in one location or asset class can have a sizable impact on the stability of institutions and markets around the world. But systemic risk analysis is severely hampered by the lack of consistent data that capture the international dimensions of finance. While currently available data can be used more effectively, supervisors and other agencies need more and better data to construct even rudimentary measures of risks in the international financial system. Similarly, market participants need better information on aggregate positions and linkages to appropriately monitor and price risks. Ongoing initiatives that will help close data gaps include the G20 Data Gaps Initiative, which recommends the collection of consistent banklevel data for joint analyses and enhancements to existing sets of aggregate statistics, and enhancements to the BIS international banking statistics. Systemic risk in global banking: what can available data tell us and what more data are needed? 2012-04-11T12:41:00Z BIS Abstract http://www.bis.org/publ/work376.htm Full text http://www.bis.org/publ/work376.pdf Eugenio Cerutti Stijn Claessens Patrick McGuire Eugenio Cerutti, Stijn Claessens and Patrick McGuire 2012-04 Bank for International Settlements Working papers F21 F34 G15 G18 Y1 http://www.bis.org/publ/work375.pdf Bank for International Settlements Working papers by Frank Packer and Haibin Zhu Loan loss provisioning practices of Asian banks 2012-04-05T17:38:59Z In the wake of the Asian financial crisis, many regimes in Asia adopted stricter provisioning requirements, as well as discretionary measures, with the objective of increasing provisioning in good times in response to rising levels of risk. Based on a final sample of 240 banks in 12 Asian economies, the evidence is that countercyclical loan loss provisioning has dominated throughout emerging Asia, most strikingly so in the case of India. Thus, loan loss provisioning did not simply become more conservative at all points in time subsequent to the Asian financial crisis, but actively leaned in a fashion that ameliorated swings in earnings and the macroeconomy. Loan loss provisioning practices of Asian banks 2012-04-05T17:38:59Z BIS Abstract http://www.bis.org/publ/work375.htm Full text http://www.bis.org/publ/work375.pdf Haibin Zhu Frank Packer Frank Packer and Haibin Zhu 2012-04 Bank for International Settlements Working papers G21 G28 http://www.bis.org/publ/work374.pdf Bank for International Settlements Working papers by Economic Variables by Charlotte Christiansen, Maik Schmeling and Andreas Schrimpf A Comprehensive Look at Financial Volatility Prediction by Economic Variables 2012-03-06T17:40:00Z We investigate if asset return volatility is predictable by macroeconomic and financial variables and shed light on the economic drivers of financial volatility. Our approach is distinct due to its comprehensiveness: First, we employ a data-rich forecast methodology to handle a large set of potential predictors in a Bayesian Model Averaging approach, and, second, we take a look at multiple asset classes (equities, foreign exchange, bonds, and commodities) over long time spans. We find that proxies for credit risk and funding (il)liquidity consistently show up as common predictors of volatility across asset classes. Variables capturing time-varying risk premia also perform well as predictors of volatility. While forecasts by macro-finance augmented models also achieve forecasting gains out-of-sample relative to autoregressive benchmarks, the performance varies across asset classes and over time. A Comprehensive Look at Financial Volatility Prediction by Economic Variables 2012-03-06T17:40:00Z BIS Abstract http://www.bis.org/publ/work374.htm Full text http://www.bis.org/publ/work374.pdf Maik Schmeling Charlotte Christiansen Andreas Schrimpf Economic Variables by Charlotte Christiansen, Maik Schmeling and Andreas Schrimpf 2012-03 Bank for International Settlements Working papers C53 G12 G15 G17 http://www.bis.org/publ/work373.pdf Bank for International Settlements Working papers by Daniel Heller and Nicholas Vause Collateral requirements for mandatory central clearing of over-the-counter derivatives 2012-03-06T12:41:00Z By the end of 2012, all standardised over-the-counter (OTC) derivatives must be cleared with central counterparties (CCPs). In this paper, we estimate the amount of collateral that CCPs should demand to clear safely all interest rate swap and credit default swap positions of the major derivatives dealers. Our estimates are based on potential losses on a set of hypothetical dealer portfolios that replicate several aspects of the way that derivatives positions are distributed within and across dealer portfolios in practice. Our results suggest that major dealers already have sufficient unencumbered assets to meet initial margin requirements, but that some of them may need to increase their cash holdings to meet variation margin calls. We also find that default funds worth only a small fraction of dealers' equity appear sufficient to protect CCPs against almost all possible losses that could arise from the default of one or more dealers, especially if initial margin requirements take into account the tail risks and time variation in risk of cleared portfolios. Finally, we find that concentrating clearing of OTC derivatives in a single CCP could economise on collateral requirements without undermining the robustness of central clearing. Collateral requirements for mandatory central clearing of over-the-counter derivatives 2012-03-06T12:41:00Z BIS Abstract http://www.bis.org/publ/work373.htm Full text http://www.bis.org/publ/work373.pdf Daniel Heller Nicholas Vause Daniel Heller and Nicholas Vause 2012-03 Bank for International Settlements Working papers G24 G28 http://www.bis.org/publ/work372.pdf Bank for International Settlements Working papers by Paul Castillo and Carlos Montoro Inflation Dynamics in the Presence of Informal Labour Markets 2012-02-21T17:38:59Z In this paper we analyse the effects of informal labour markets on the dynamics of inflation and on the transmission of aggregate demand and supply shocks. In doing so, we incorporate the informal sector in a modified New Keynesian model with labour market frictions as in the Diamond-Mortensen-Pissarides model. Our main results show that the informal economy generates a "buffer" effect that diminishes the pressure of demand shocks on inflation. This finding is consistent with the empirical literature on the effects of informal labour markets in business cycle fluctuations. This result implies that, in economies with large informal labour markets, changes in interest rates are more effective in stimulating real output and there is less impact on inflation. Furthermore, the model produces cyclical flows from informal to formal employment, consistent with the data. Inflation Dynamics in the Presence of Informal Labour Markets 2012-02-21T17:38:59Z BIS Abstract http://www.bis.org/publ/work372.htm Full text http://www.bis.org/publ/work372.pdf Carlos Montoro Paul Castillo Paul Castillo and Carlos Montoro 2012-02 Bank for International Settlements Working papers E32 E50 J64 O17 http://www.bis.org/publ/work371.pdf Bank for International Settlements Working papers by Makoto Nirei, Theodoros Stamatiou and Vladyslav Sushko Stochastic Herding in Financial Markets Evidence from Institutional Investor Equity Portfolios 2012-02-17T17:42:00Z We estimate a structural model of herding behavior in which feedback arises due to mutual concerns of traders over the unobservable "true" level of market liquidity. In a herding regime, random shocks are exacerbated by endogenous feedback, producing a dampened power-law in the uctuation of largest sales. The key to the uctuation is that each trader responds not only to private information, but also to the aggregate behavior of others. Applying the model to the data on portfolios of institutional investors (fund managers), we nd that the empirical distribution is consistent with model predictions. A stock's realized illiquidity propagates herding and raises the probability of observing a sell-off. The distribution function itself has desirable properties for evaluating "tail risk". Stochastic Herding in Financial Markets Evidence from Institutional Investor Equity Portfolios 2012-02-17T17:42:00Z BIS Abstract http://www.bis.org/publ/work371.htm Full text http://www.bis.org/publ/work371.pdf Makoto Nirei Theodoros Stamatiou Vladyslav Sushko Makoto Nirei, Theodoros Stamatiou and Vladyslav Sushko 2012-02 Bank for International Settlements Working papers C16 D80 G14 G20 http://www.bis.org/publ/work370.pdf Bank for International Settlements Working papers by Carlos Montoro and Liliana Rojas-Suarez Credit at times of stress: Latin American lessons from the global financial crisis 2012-02-07T12:39:00Z The financial systems in emerging market economies (EMEs) during the 2008-09 global financial crisis performed much better than in previous crisis episodes, albeit with significant differences across regions. For example, real credit growth in Asia and Latin America was less affected than in Central and Eastern Europe. This paper identifies the factors at both the country and the bank levels that contributed to the behaviour of real credit growth in Latin America during the global financial crisis. The resilience of real credit during the crisis was highly related to policies, measures and reforms implemented in the pre-crisis period. Credit at times of stress: Latin American lessons from the global financial crisis 2012-02-07T12:39:00Z BIS Abstract http://www.bis.org/publ/work370.htm Full text http://www.bis.org/publ/work370.pdf Carlos Montoro Liliana Rojas-Suarez Carlos Montoro and Liliana Rojas-Suarez 2012-02 Bank for International Settlements Working papers http://www.bis.org/publ/work369.pdf Bank for International Settlements Working papers by Claudio Borio, Mathias Drehmann and Kostas Tsatsaronis Stress-testing macro stress testing: does it live up to expectations? 2012-01-18T12:39:00Z We critically review the state of the art in macro stress testing, assessing its strengths and weaknesses. We argue that, given current technology, macro stress tests are ill-suited as early warning devices, ie as tools for identifying vulnerabilities during seemingly tranquil times and for triggering remedial action. By contrast, as long as properly designed, stress tests can be quite effective as crisis management and resolution tools. We also see additional side benefits, stemming largely from the way such tests can discipline thinking about financial stability. We suggest possible ways to improve their performance. Stress-testing macro stress testing: does it live up to expectations? 2012-01-18T12:39:00Z BIS Abstract http://www.bis.org/publ/work369.htm Full text http://www.bis.org/publ/work369.pdf Kostas Tsatsaronis Claudio Borio Mathias Drehmann Claudio Borio, Mathias Drehmann and Kostas Tsatsaronis 2012-01 Bank for International Settlements Working papers http://www.bis.org/publ/work368.pdf Bank for International Settlements Working papers by Srichander Ramaswamy The sustainability of pension schemes 2012-01-03T12:41:59Z Poor financial market returns and low long-term real interest rates in recent years have created challenges for the sponsors of defined benefit pension schemes. At the same time, lower payroll tax revenues in a period of high unemployment, and rising fiscal deficits in many advanced economies as economic activity has fallen, are also testing the sustainability of pay-as-you-go public pension schemes. Amendments to pension accounting rules that require corporations to regularly report the valuation differences between their defined benefit pension assets and plan liabilities on their balance sheet have made investors more aware of the pension risk exposure for the sponsors of such schemes. This paper sheds light on what effects these developments are having on the design of occupational pension schemes, and also provides some estimates for the post-employment benefits that could be delivered by these schemes under different sets of assumptions. The paper concludes by providing some policy perspectives. The sustainability of pension schemes 2012-01-03T12:41:59Z BIS Abstract http://www.bis.org/publ/work368.htm Full text http://www.bis.org/publ/work368.pdf Srichander Ramaswamy Srichander Ramaswamy 2012-01 Bank for International Settlements Working papers http://www.bis.org/publ/work367.pdf Bank for International Settlements Working papers by Philip Turner Is the long-term interest rate a policy victim, a policy variable or a policy lodestar? 2011-12-28T17:18:59Z Few financial variables are more fundamental than the "risk free" real long-term interest rate because it prices the terms of exchange over time. During the past 15 years, it has dropped from a range of 4 to 5% to a range of 0 to 2%. By late 2011, cyclical factors had driven it close to zero. This paper explores why. Possible persistent factors are: the investment of the large savings generated by developing Asia in highly-rated bonds; accounting and valuation rules for institutional investment; and financial sector regulation. The consequences could be far-reaching: cheaper leverage; less pressure to correct fiscal deficits; larger interest rate exposures in the financial industry; and a more cyclical bond market. During the financial crisis, central banks in the advanced countries have made the long-term interest rate a policy variable as Keynes had always advocated. This policy focus will draw more attention to the macroeconomic and financial consequences of government debt management policies. Coordination between central bank balance sheet policies and government debt management is essential. With government debt very high for years to come, bond market volatility could confront central banks with unenviable choices. Is the long-term interest rate a policy victim, a policy variable or a policy lodestar? 2011-12-28T17:18:59Z BIS Abstract http://www.bis.org/publ/work367.htm Full text http://www.bis.org/publ/work367.pdf Philip Turner Philip Turner 2011-12 Bank for International Settlements Working papers http://www.bis.org/publ/work366.pdf Bank for International Settlements Working papers by Lukas Menkhoff, Lucio Sarno, Maik Schmeling and Andreas Schrimpf Currency Momentum Strategies 2011-12-13T12:41:00Z We provide a broad empirical investigation of momentum strategies in the foreign exchange market. We find a signiffcant cross-sectional spread in excess returns of up to 10% p.a. between past winner and loser currencies. This spread in excess returns is not explained by traditional risk factors, it is partially explained by transaction costs and shows behavior consistent with investor under- and over-reaction. Moreover, crosssectional currency momentum has very different properties from the widely studied carry trade and is not highly correlated with returns of benchmark technical trading rules. However, there seem to be very effective limits to arbitrage which prevent momentum returns from being easily exploitable in currency markets. Currency Momentum Strategies 2011-12-13T12:41:00Z BIS Abstract http://www.bis.org/publ/work366.htm Full text http://www.bis.org/publ/work366.pdf Lukas Menkhoff Maik Schmeling Lucio Sarno Andreas Schrimpf Lukas Menkhoff, Lucio Sarno, Maik Schmeling and Andreas Schrimpf 2011-12 Bank for International Settlements Working papers http://www.bis.org/publ/work365.pdf Bank for International Settlements Working papers by Luis Felipe Céspedes and Andrés Velasco Was This Time Different?: Fiscal Policy in Commodity Republics 2011-12-09T17:44:59Z According to standard economic theory, fiscal policy should be countercyclical. In the neoclassical smoothing model of Barro (1979), a government should optimally run surpluses in good times and deficits in bad times. That is the same a government should do, though for different reasons, in the standard Keynesian or neo-Keynesian framework. Was This Time Different?: Fiscal Policy in Commodity Republics 2011-12-09T17:44:59Z BIS Abstract http://www.bis.org/publ/work365.htm Full text http://www.bis.org/publ/work365.pdf Luis Felipe Céspedes Andrés Velasco Luis Felipe Céspedes and Andrés Velasco 2011-12 Bank for International Settlements Working papers http://www.bis.org/publ/work364.pdf Bank for International Settlements Working papers by Eric M. Leeper and Todd B. Walker Perceptions and misperceptions of fiscal inflation 2011-12-09T17:44:59Z The Great Recession and worldwide financial crisis have exploded fiscal imbalances and brought fiscal policy and inflation to the forefront of policy concerns. Those concerns will only grow as aging populations increase demands on government expenditures in coming decades. It is widely perceived that fiscal policy is inflationary if and only if it leads the central bank to print new currency to monetize deficits. Monetization can be inflationary. But it is a misperception that this is the only channel for fiscal inflations. Nominal bonds, the predominant form of government debt in advanced economies, derive their value from expected future nominal primary surpluses and money creation; changes in the price level can align the market value of debt to its expected real backing. This introduces a fresh channel, not requiring monetization, through which fiscal deficits directly affect inflation. The paper begins by pointing out similarities and differences between the Weimar Republic after World War I and the United States today. It describes various ways in which fiscal policy can directly affect inflation and explains why these fiscal effects are difficult to detect in time series data. Perceptions and misperceptions of fiscal inflation 2011-12-09T17:44:59Z BIS Abstract http://www.bis.org/publ/work364.htm Full text http://www.bis.org/publ/work364.pdf Todd B. Walker Eric M. Leeper Eric M. Leeper and Todd B. Walker 2011-12 Bank for International Settlements Working papers http://www.bis.org/publ/work362.pdf Bank for International Settlements Working papers by Roberto Perotti The "Austerity myth": Gain Without Pain? 2011-12-09T17:44:59Z As governments around the world contemplate slashing budget deficits, the "expansionary fiscal consolidation hypothesis" is back in vogue. I argue that, as a statement about the short run, it should be taken with caution. The "Austerity myth": Gain Without Pain? 2011-12-09T17:44:59Z BIS Abstract http://www.bis.org/publ/work362.htm Full text http://www.bis.org/publ/work362.pdf Roberto Perotti Roberto Perotti 2011-12 Bank for International Settlements Working papers http://www.bis.org/publ/work361.pdf Bank for International Settlements Working papers by Alan J Auerbach Long-term fiscal sustainability in major economies 2011-12-09T17:44:59Z As the world economy slowly recovers from the very deep and widespread recession of recent years, many countries confront very serious fiscal imbalances. How much time they have to deal with these imbalances is a central question, the salience of which can only have been increased by the ongoing fiscal crisis and bailout in Greece and the immediate fiscal adjustments being discussed or already undertaken in several other countries. Long-term fiscal sustainability in major economies 2011-12-09T17:44:59Z BIS Abstract http://www.bis.org/publ/work361.htm Full text http://www.bis.org/publ/work361.pdf Alan J Auerbach Alan J Auerbach 2011-12 Bank for International Settlements Working papers http://www.bis.org/publ/work363.pdf Bank for International Settlements Working papers by Carmen M. Reinhart and M. Belen Sbrancia The Liquidation of Government Debt 2011-12-09T17:44:59Z Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts. A subtle type of debt restructuring takes the form of "financial repression." Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks. In the heavily regulated financial markets of the Bretton Woods system, several restrictions facilitated a sharp and rapid reduction in public debt/GDP ratios from the late 1940s to the 1970s. Low nominal interest rates help reduce debt servicing costs while a high incidence of negative real interest rates liquidates or erodes the real value of government debt. Thus, financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation. Inflation need not take market participants entirely by surprise and, in effect, it need not be very high (by historic standards). For the advanced economies in our sample, real interest rates were negative roughly ½ of the time during 1945-1980. For the United States and the United Kingdom our estimates of the annual liquidation of debt via negative real interest rates amounted on average from 2 to 3 percent of GDP a year. We describe some of the regulatory measures and policy actions that characterized the heyday of the financial repression era. The Liquidation of Government Debt 2011-12-09T17:44:59Z BIS Abstract http://www.bis.org/publ/work363.htm Full text http://www.bis.org/publ/work363.pdf Carmen M. Reinhart M. Belen Sbrancia Carmen M. Reinhart and M. Belen Sbrancia 2011-12 Bank for International Settlements Working papers http://www.bis.org/publ/work360.pdf Bank for International Settlements Working papers by Guonan Ma, Yan Xiandong and Liu Xi China's evolving reserve requirements 2011-11-14T17:42:00Z *** Warning - contains HTML *** China's evolving reserve requirements 2011-11-14T17:42:00Z BIS Abstract http://www.bis.org/publ/work360.htm Full text http://www.bis.org/publ/work360.pdf Yan Xiandong Liu Xi Guonan Ma Guonan Ma, Yan Xiandong and Liu Xi 2011-11 Bank for International Settlements Working papers