http://www.bis.org/list/wpapers/from_01012012/index.rss BIS Working Papers are written by economists from the Bank for International Settlements (BIS) and, occasionally, from central banks or academic institutions. 2012 en http://www.bis.org/publ/work401.htm BIS Working Papers No 401. Corporate bond issuers in emerging economies in Asia have often had a choice between an onshore market and an offshore one. Since 1998, however, many of these issuers have increasingly turned to the onshore market. This paper investigates systematically what factors have influenced this choice between markets for issuers in eight emerging economies - China, Hong Kong SAR, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand. For variables measuring market depth and liquidity, the availability of hedging instruments, and the size of the investor base, we rely on ... Why do firms issue abroad? Lessons from onshore and offshore corporate bond finance in Asian emerging markets 2012-12-18T10:30:00Z Corporate bond issuers in emerging economies in Asia have often had a choice between an onshore market and an offshore one. Since 1998, however, many of these issuers have increasingly turned to the onshore market. This paper investigates systematically what factors have influenced this choice between markets for issuers in eight emerging economies - China, Hong Kong SAR, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand. For variables measuring market depth and liquidity, the availability of hedging instruments, and the size of the investor base, we rely on BIS statistics that have not been used in this literature before. We combine these market-level data with firm-level data in an unbalanced panel for the eight countries covering the period 1995 to 2007. We control for variables representing agency, static trade-off and risk management theories of the capital structure. Our results show that the choice between domestic and foreign markets has changed over time in large part because of the increased depth of the onshore market. The firms that benefit from such market development tend to be the unseasoned issuers rather than the seasoned ones. Why do firms issue abroad? Lessons from onshore and offshore corporate bond finance in Asian emerging markets 2012-12-18T10:30:00Z BIS derivatives emerging markets offshore markets capital structure market depth Asian bond markets bond financing PDF version http://www.bis.org/publ/work401.pdf Paul Mizen Mizen Mr Frank Packer Packer Mr Head of Financial Stability and Markets for Asia & the Pacific Bank for International Settlements Eli M Remolona Remolona Mr Chief Representative for Asia and the Pacific Bank for International Settlements Serafeim Tsoukas Tsoukas Paul Mizen, Frank Packer, Eli M Remolona and Serafeim Tsoukas December 2012 Bank for International Settlements: Working Papers 401 O16 F34 C23 F32 E44 G32 http://www.bis.org/publ/work400.htm BIS Working Papers No 400. This paper examines the relationship between low interests maintained by advanced economy central banks and credit booms in emerging economies. In a model with crossborder banking, low funding rates increase credit supply, but the initial shock is amplified through the "risk-taking channel" of monetary policy where greater risk-taking interacts with dampened measured risks that are driven by currency appreciation to create a feedback loop. In an empirical investigation using VAR analysis, we find that expectations of lower short-term rates dampen measured risks and stimulate cross-border banking sector capital flows. Capital Flows and the Risk-Taking Channel of Monetary Policy 2012-12-18T10:10:00Z This paper examines the relationship between low interests maintained by advanced economy central banks and credit booms in emerging economies. In a model with crossborder banking, low funding rates increase credit supply, but the initial shock is amplified through the "risk-taking channel" of monetary policy where greater risk-taking interacts with dampened measured risks that are driven by currency appreciation to create a feedback loop. In an empirical investigation using VAR analysis, we find that expectations of lower short-term rates dampen measured risks and stimulate cross-border banking sector capital flows. Capital Flows and the Risk-Taking Channel of Monetary Policy 2012-12-18T10:10:00Z BIS capital flows credit booms exchange rate appreciation PDF version http://www.bis.org/publ/work400.pdf Valentina Bruno Bruno Ms Hyun Song Shin Shin Mr Professor of Economics Princeton University Valentina Bruno and Hyun Song Shin December 2012 Bank for International Settlements: Working Papers 400 F34 F33 F32 http://www.bis.org/publ/work399.htm BIS Working Papers No 399. Will the world run out of 'safe assets' and what would be the consequences on global financial stability? We argue that in a world with competing private stores of value, the global economic system tends to favor the riskiest ones. Privately produced stores of value cannot provide sufficient insurance against global shocks. Only public safe assets may, if appropriately supported by monetary policy. We draw some implications for the global financial system. Global safe assets 2012-12-18T09:56:00Z Will the world run out of 'safe assets' and what would be the consequences on global financial stability? We argue that in a world with competing private stores of value, the global economic system tends to favor the riskiest ones. Privately produced stores of value cannot provide sufficient insurance against global shocks. Only public safe assets may, if appropriately supported by monetary policy. We draw some implications for the global financial system. Global safe assets 2012-12-18T09:56:00Z BIS euro dollar safe assets liquidity trap government debt crisis PDF version http://www.bis.org/publ/work399.pdf Pierre-Olivier Gourinchas Gourinchas Mr University of California, Berkeley Olivier Jeanne Jeanne Mr Johns Hopkins University Pierre-Olivier Gourinchas and Olivier Jeanne December 2012 Bank for International Settlements: Working Papers 399 G01 G15 F30 F02 http://www.bis.org/publ/work398.htm BIS Working Papers No 398. What can history can tell us about the relationship between the banking system, financial crises, the global economy, and economic performance? Evidence shows that in the advanced economies we live in a world that is more financialized than ever before as measured by importance of credit in the economy. I term this long-run evolution "The Great Leveraging" and present a ten-point examination of its main contours and implications. The great leveraging 2012-12-18T09:49:00Z What can history can tell us about the relationship between the banking system, financial crises, the global economy, and economic performance? Evidence shows that in the advanced economies we live in a world that is more financialized than ever before as measured by importance of credit in the economy. I term this long-run evolution "The Great Leveraging" and present a ten-point examination of its main contours and implications. The great leveraging 2012-12-18T09:49:00Z BIS fiscal policy banking credit recessions crises Global Imbalances financial development booms great recession PDF version http://www.bis.org/publ/work398.pdf Alan M. Taylor Taylor Mr Alan M. Taylor December 2012 Bank for International Settlements: Working Papers 398 N10 E30 E60 E50 N20 http://www.bis.org/publ/work397.htm BIS Working Papers No 397. The global financial crisis provides an important testing ground for the financial globalisation model. We ask three questions. First, did financial globalisation materially contribute to the origination of the global financial crisis? Second, once the crisis occurred, how did financial globalisation affect the incidence and propagation of the crisis across different countries? Third, how has financial globalisation affected the management of the crisis at national and international levels? Financial Globalisation and the Crisis 2012-12-18T09:30:00Z The global financial crisis provides an important testing ground for the financial globalisation model. We ask three questions. First, did financial globalisation materially contribute to the origination of the global financial crisis? Second, once the crisis occurred, how did financial globalisation affect the incidence and propagation of the crisis across different countries? Third, how has financial globalisation affected the management of the crisis at national and international levels? Financial Globalisation and the Crisis 2012-12-18T09:30:00Z BIS global financial crises financial globalization PDF version http://www.bis.org/publ/work397.pdf Philip R. Lane Lane Mr Philip R. Lane December 2012 Bank for International Settlements: Working Papers 397 E60 F30 http://www.bis.org/publ/work396.htm BIS Working Papers No 396. Is systematic monetary policy a driver of the forward premium puzzle, i.e. the tendency of high interest-rate currencies to appreciate, thus strongly violating Uncovered Interest Parity (UIP)? We address this question by studying a battery of monetary policy rules in a small open economy that is subject to stationary but persistent domestic and foreign shocks. Each rule leads to model-implied UIP violations, which we derive analytically and then calibrate numerically. Our key finding is that only a forward-looking rule based on CPI inflation can account for frequently observed strong UIP violations. Systematic monetary policy and the forward premium puzzle 2012-12-12T15:30:00Z Is systematic monetary policy a driver of the forward premium puzzle, i.e. the tendency of high interest-rate currencies to appreciate, thus strongly violating Uncovered Interest Parity (UIP)? We address this question by studying a battery of monetary policy rules in a small open economy that is subject to stationary but persistent domestic and foreign shocks. Each rule leads to model-implied UIP violations, which we derive analytically and then calibrate numerically. Our key finding is that only a forward-looking rule based on CPI inflation can account for frequently observed strong UIP violations. Systematic monetary policy and the forward premium puzzle 2012-12-12T15:30:00Z BIS monetary policy rules exchange rate dynamics uncovered interest parity inflation-targeting PDF version http://www.bis.org/publ/work396.pdf Demosthenes N. Tambakis Tambakis University of Cambridge Nikola Tarashev Tarashev Mr Senior Economist Bank for International Settlements Demosthenes N. Tambakis and Nikola Tarashev December 2012 Bank for International Settlements: Working Papers 396 F33 E58 E52 http://www.bis.org/publ/work395.htm BIS Working Papers No 395. It is high time we rediscovered the role of the financial cycle in macroeconomics. In the environment that has prevailed for at least three decades now, it is not possible to understand business fluctuations and the corresponding analytical and policy challenges without understanding the financial cycle. This calls for a rethink of modelling strategies and for significant adjustments to macroeconomic policies. This essay highlights the stylised empirical features of the financial cycle, conjectures as to what it may take to model it satisfactorily, and considers its policy implications. In the discussion of policy, the essay pays special attention to the bust phase, which is less well explored and raises much more controversial issues. The financial cycle and macroeconomics: What have we learnt? 2012-12-10T02:00:00Z It is high time we rediscovered the role of the financial cycle in macroeconomics. In the environment that has prevailed for at least three decades now, it is not possible to understand business fluctuations and the corresponding analytical and policy challenges without understanding the financial cycle. This calls for a rethink of modelling strategies and for significant adjustments to macroeconomic policies. This essay highlights the stylised empirical features of the financial cycle, conjectures as to what it may take to model it satisfactorily, and considers its policy implications. In the discussion of policy, the essay pays special attention to the bust phase, which is less well explored and raises much more controversial issues. The financial cycle and macroeconomics: What have we learnt? 2012-12-10T02:00:00Z BIS financial crises business cycle financial cycle monetary economy balance sheet recessions medium term balance sheet repair PDF version http://www.bis.org/publ/work395.pdf Claudio Borio Borio Mr Deputy Head of Monetary and Economic Department and Director of Research and Statistics Bank for International Settlements Claudio Borio December 2012 Bank for International Settlements: Working Papers 395 G20 E30 G10 E50 H50 G28 E44 H30 http://www.bis.org/publ/work394.htm BIS Working Papers No 394. This paper presents a large panel study on the macroeconomic consequences of natural catastrophes and analyses the extent to which risk transfer to insurance markets facilitates economic recovery. Our main results are that major natural catastrophes have large and significant negative effects on economic activity, both on impact and over the longer run. However, it is mainly the uninsured losses that drive the subsequent macroeconomic cost, whereas sufficiently insured events are inconsequential in terms of foregone output. This result helps to disentangle conflicting findings in the literature, and puts the focus on risk transfer mechanisms to help mitigate the macroeconomic costs of natural catastrophes. Unmitigated disasters? New evidence on the macroeconomic cost of natural catastrophes 2012-12-07T08:35:00Z This paper presents a large panel study on the macroeconomic consequences of natural catastrophes and analyses the extent to which risk transfer to insurance markets facilitates economic recovery. Our main results are that major natural catastrophes have large and significant negative effects on economic activity, both on impact and over the longer run. However, it is mainly the uninsured losses that drive the subsequent macroeconomic cost, whereas sufficiently insured events are inconsequential in terms of foregone output. This result helps to disentangle conflicting findings in the literature, and puts the focus on risk transfer mechanisms to help mitigate the macroeconomic costs of natural catastrophes. Unmitigated disasters? New evidence on the macroeconomic cost of natural catastrophes 2012-12-07T08:35:00Z BIS recovery insurance development Natural catastrophes disasters economic growth risk transfer reinsurance PDF version http://www.bis.org/publ/work394.pdf Goetz von Peter von Peter Mr Senior Economist Bank for International Settlements Sebastian von Dahlen von Dahlen Mr Principal Administrator Bank for International Settlements Sweta C Saxena Saxena Mrs Economist Goetz von Peter, Sebastian von Dahlen and Sweta C Saxena December 2012 Bank for International Settlements: Working Papers 394 G22 Q54 O11 http://www.bis.org/publ/work393.htm BIS Working Papers No 393. The increase in the TARGET2 balance for the Bundesbank has led to a debate in Germany about the appropriate interpretation and policy response, if any. In this paper we review the evidence for the current account financing interpretation, and find it wanting in explaining the data in 2012. BIS international banking data, by contrast, point to the importance of TARGET2 balances as a symptom of a reduction by core European banks of credit previously extended to borrowers in peripheral Europe. These same data suggest that banks headquartered outside the euro area, particularly UK banks, boosted TARGET2 balances by hedging redenomination risk. As such, TARGET2 balances reflect not only concern regarding actual credit exposures but also potential currency exposures. Interpreting TARGET2 balances 2012-12-04T09:14:00Z The increase in the TARGET2 balance for the Bundesbank has led to a debate in Germany about the appropriate interpretation and policy response, if any. In this paper we review the evidence for the current account financing interpretation, and find it wanting in explaining the data in 2012. BIS international banking data, by contrast, point to the importance of TARGET2 balances as a symptom of a reduction by core European banks of credit previously extended to borrowers in peripheral Europe. These same data suggest that banks headquartered outside the euro area, particularly UK banks, boosted TARGET2 balances by hedging redenomination risk. As such, TARGET2 balances reflect not only concern regarding actual credit exposures but also potential currency exposures. Interpreting TARGET2 balances 2012-12-04T09:14:00Z BIS Monetary Policy financial crises payment systems banks' international lending PDF version http://www.bis.org/publ/work393.pdf Stephen G Cecchetti Cecchetti Mr Economic Adviser, Head of Monetary and Economic Department Bank for International Settlements Robert N McCauley McCauley Mr Senior Advisor Bank for International Settlements Patrick McGuire McGuire Mr Senior Economist Bank for International Settlements Stephen G Cecchetti, Robert N McCauley and Patrick McGuire December 2012 Bank for International Settlements: Working Papers 393 E42 F36 F34 F32 E58 E52 E44 http://www.bis.org/publ/work392.htm BIS Working Papers No 392. We present findings on the secondary market liquidity of government and covered bonds in Denmark before, during and after the 2008 financial crisis. The analysis focuses on wholesale trading in the two markets and is based on a complete transaction level dataset covering November 2007 until end 2011. Overall, our findings suggest that Danish benchmark covered bonds by and large are as liquid as ... Liquidity in Government versus Covered Bond Markets 2012-11-23T12:06:00Z We present findings on the secondary market liquidity of government and covered bonds in Denmark before, during and after the 2008 financial crisis. The analysis focuses on wholesale trading in the two markets and is based on a complete transaction level dataset covering November 2007 until end 2011. Overall, our findings suggest that Danish benchmark covered bonds by and large are as liquid as Danish government bonds - including in periods of market stress. Before the financial crisis of 2008, government bonds were slightly more liquid than covered bonds. During the crisis, trading continued in both markets but the government bond market experienced a brief but pronounced decline in market liquidity while liquidity in the covered bond market was more robust - partly reflective of a number of events as well as policy measures introduced in the autumn of 2008. After the crisis, liquidity in the government bond market quickly rebounded and government bonds again became slightly more liquid than covered bonds. Liquidity in Government versus Covered Bond Markets 2012-11-23T12:06:00Z BIS Price Impact Covered Bonds Bond Market Liquidity Government Bonds PDF version http://www.bis.org/publ/work392.pdf Jens Dick-Nielsen Dick-Nielsen Mr Jacob Gyntelberg Gyntelberg Mr Senior Economist Bank for International Settlements Thomas Sangill Sangill Mr Jens Dick-Nielsen, Jacob Gyntelberg and Thomas Sangill November 2012 Bank for International Settlements: Working Papers 392 G12 G21 E43 http://www.bis.org/publ/work391.htm BIS Working Papers No 391. Over the past three years, cross-border inflows into emerging market (EM) local currency bonds have surged. The returns on these bonds have moved more closely with those on international assets regarded as "safe", particularly following the euro area debt crisis. This paper first demonstrates that ... Emerging market local currency bonds: diversification and stability 2012-11-15T09:58:00Z Over the past three years, cross-border inflows into emerging market (EM) local currency bonds have surged. The returns on these bonds have moved more closely with those on international assets regarded as "safe", particularly following the euro area debt crisis. This paper first demonstrates that domestic factors have tended to dictate the dynamics of the EM local currency government yield. The importance of local drivers has probably increased the potential diversification benefit, creating strong appetite for the asset class. Second, the paper confirms that EM local currency government yields have behaved more like safe haven yields since 2008: they have dropped, rather than increased, in response to worsening global risk sentiment. Yet EM local currency government yields could be susceptible to adverse external shocks: the yield dynamics have been affected by unsustainably low US Treasury yields. Moreover, the international role of EM local currency bonds depends crucially on the behaviour of exchange rates. Nevertheless, the further development of local currency bond markets should help strengthen the stability of the international monetary and financial system. Emerging market local currency bonds: diversification and stability 2012-11-15T09:58:00Z BIS currency mismatches emerging market local currency bond safe asset diversification benefit panel VAR PDF version http://www.bis.org/publ/work391.pdf Ken Miyajima Miyajima Mr Senior Economist Bank for International Settlements Madhusudan Mohanty Mohanty Mr Head of Macroeconomic Monitoring Bank for International Settlements Tracy Chan Chan Ms Research Analyst Bank for International Settlements Ken Miyajima, Madhusudan Mohanty and Tracy Chan November 2012 Bank for International Settlements: Working Papers 391 G12 F36 E43 http://www.bis.org/publ/work390.htm BIS Working Papers No 390. We examine the liquidity effects of the euro area sovereign debt crisis, including its effects on euro area banks as a group, on intra-euro area financial flows, on the supply of and demand for collateral, and on international liquidity. The lending capacity of the euro area banking system has been much weakened, despite the remarkable growth of ... The liquidity consequences of the euro area sovereign debt crisis 2012-10-08T16:00:00Z We examine the liquidity effects of the euro area sovereign debt crisis, including its effects on euro area banks as a group, on intra-euro area financial flows, on the supply of and demand for collateral, and on international liquidity. The lending capacity of the euro area banking system has been much weakened, despite the remarkable growth of the operations of the Eurosystem, including its greatly increased lending, its intermediation between national central banks in surplus and deficit countries and its collateral policy. The euro crisis has also created international liquidity stresses. We find that central bank swap lines have only had limited effectiveness in alleviating the stresses, probably owing to some stigma being attached to their use. The liquidity consequences of the euro area sovereign debt crisis 2012-10-08T16:00:00Z BIS liquidity financial crisis central bank swap lines foreign exchange swaps PDF version http://www.bis.org/publ/work390.pdf William A Allen Allen Mr Richhild Moessner Moessner Senior Economist Bank for International Settlements William A Allen and Richhild Moessner October 2012 Bank for International Settlements: Working Papers 390 G01 F31 E58 http://www.bis.org/publ/work389.htm BIS Working Papers No 389 Currency intervention and the global portfolio balance effect: Japanese lessons 2012-10-02T08:27:00Z This paper shows that the Japanese foreign exchange interventions in 2003/04 seem to have lowered long-term interest rates in a wide range of countries, including Japan. It seems that this decline was triggered by the investment of the intervention proceeds in US bonds and that a global portfolio balance effect spread the resulting decline in US yields to other bond markets, thus easing global monetary conditions. Currency intervention and the global portfolio balance effect: Japanese lessons 2012-10-02T08:27:00Z BIS Japan intervention portfolio rebalancing PDF version http://www.bis.org/publ/work389.pdf Petra Gerlach-Kristen Gerlach-Kristen Mrs Economic and Social Research Institute, Dublin Robert N McCauley McCauley Mr Senior Advisor Bank for International Settlements Kazuo Ueda Ueda Mr University of Tokyo Petra Gerlach-Kristen, Robert N McCauley and Kazuo Ueda October 2012 Bank for International Settlements: Working Papers 389 E5 G12 O24 http://www.bis.org/publ/work388.htm BIS Working Papers No 388 Monetary policy in a downturn: Are financial crises special? 2012-09-27T07:23:00Z Accommodative monetary policy during the financial crisis was instrumental in preventing a deeper recession. Views differ, however, on how long such measures should be kept in place. At the heart of this debate is the notion that a protracted period of policy accommodation could create distortions... Monetary policy in a downturn: Are financial crises special? 2012-09-27T07:23:00Z BIS Monetary Policy financial crises recessions deleveraging PDF version http://www.bis.org/publ/work388.pdf Morten Bech Bech Mr Senior Economist Bank for International Settlements Leonardo Gambacorta Gambacorta Dr Principal Economist Bank for International Settlements Enisse Kharroubi Kharroubi Mr Economist Bank for International Settlements Morten Bech, Leonardo Gambacorta and Enisse Kharroubi September 2012 Bank for International Settlements: Working Papers 388 E6 N10 E3 F3 H6 E2 F4 http://www.bis.org/publ/work387.htm BIS Working Papers No 387 Does US GDP stall? 2012-09-18T07:51:00Z Low positive GDP growth has been interpreted as evidence that the economy may be "stalling", implying that low growth is a strong predictor of future recessions. We examine the empirical evidence for stalling based on kernel density estimates, probit estimates and Markov switching models. Does US GDP stall? 2012-09-18T07:51:00Z BIS business cycles stall speed Markov switching PDF version http://www.bis.org/publ/work387.pdf Wai-Yip Alex Ho Ho Mr James Yetman Yetman Mr Senior Economist Bank for International Settlements Wai-Yip Alex Ho and James Yetman September 2012 Bank for International Settlements: Working Papers 387 E32 E37 C22