http://www.bis.org/list/wpapers/from_01012013/index.rss BIS Working Papers are written by economists from the Bank for International Settlements (BIS) and, occasionally, from central banks or academic institutions. 2013 en http://www.bis.org/publ/work438.htm Abstract of BIS Working Papers No 438. Standard measures of real economic co-movement between Asia-Pacific economies and those elsewhere had been observed to follow a downward trend, leading some commentators to suggest that the region was decoupling. However, this process .... Asia's decoupling: fact, forecast or fiction? 2013-12-23T09:36:00Z Standard measures of real economic co-movement between Asia-Pacific economies and those elsewhere had been observed to follow a downward trend, leading some commentators to suggest that the region was decoupling. However, this process reversed in response to the International Financial Crisis, and co-movement increased to historically high levels for some economies. We examine co-movement patterns and show that these are very.... Asia's decoupling: fact, forecast or fiction? 2013-12-23T09:36:00Z BIS decoupling business cycle co-movement PDF version http://www.bis.org/publ/work438.pdf Lillie Lam Lam Ms Asset Management Specialist Bank for International Settlements James Yetman Yetman Mr Senior Economist Bank for International Settlements Lillie Lam and James Yetman December 2013 Bank for International Settlements: Working Papers 438 E32 F62 http://www.bis.org/publ/work437.htm Abstract of BIS Working Papers No 437. This paper examines two explanations for the recent spate of complaints about cross-border monetary policy spillovers and calls for international monetary policy coordination, a development that contrasts sharply with the monetary system in the 1980s, 1990s and until recently. The first explanation holds that deviations from rules-based policy at several ... International monetary policy coordination: past, present and future 2013-12-20T09:30:00Z This paper examines two explanations for the recent spate of complaints about cross-border monetary policy spillovers and calls for international monetary policy coordination, a development that contrasts sharply with the monetary system in the 1980s, 1990s and until recently. The first explanation holds that deviations from rules-based policy at several central banks created incentives for other central banks to deviate from such policies. The second explanation either does not see deviations from rules or finds such deviations benign; it characterises recent unusual monetary policies as appropriate, explains the complaints as an adjustment to optimal policies, and downplays concerns about interest rate ... International monetary policy coordination: past, present and future 2013-12-20T09:30:00Z BIS unconventional monetary policy Monetary policy spillovers International policy coordination PDF version http://www.bis.org/publ/work437.pdf John B Taylor Taylor Mr Stanford University John B Taylor December 2013 Bank for International Settlements: Working Papers 437 E5 F3 F4 http://www.bis.org/publ/work436.htm Abstract of BIS Working Papers No 436. I discuss how the unconventional monetary policy measures implemented over the past several years - quantitative and credit easing, and forward guidance - can be analysed in the context of conventional models of asset prices, with particular reference to exchange rates. I then discuss alternative approaches to interpreting the effects of such policies, and ... Global spillovers and domestic monetary policy 2013-12-20T09:29:00Z I discuss how the unconventional monetary policy measures implemented over the past several years - quantitative and credit easing, and forward guidance - can be analysed in the context of conventional models of asset prices, with particular reference to exchange rates. I then discuss alternative approaches to interpreting the effects of such policies, and review the empirical evidence. Finally, I examine the ramifications for thinking about the impact on exchange rates and asset prices of emerging market economies. I conclude that although the implementation of unconventional monetary policy measures may introduce more volatility into global markets, in general it will support global rebalancing by encouraging the revaluation of emerging market currencies. Global spillovers and domestic monetary policy 2013-12-20T09:29:00Z BIS balance sheet capital flows yield curve signaling money supply portfolio balance forward guidance rebalancing PDF version http://www.bis.org/publ/work436.pdf Menzie D Chinn Chinn Mr Menzie D Chinn December 2013 Bank for International Settlements: Working Papers 436 F42 E58 http://www.bis.org/publ/work435.htm Abstract of BIS Working Papers No 435. Following the experience of the global financial crisis, central banks have been asked to undertake unprecedented responsibilities. Governments and the public appear to have high expectations that monetary policy can provide solutions to problems that do not necessarily fit in the realm of traditional monetary policy. This paper examines three broad public policy goals that may overburden monetary policy: full employment, fiscal ... Is monetary policy overburdened? 2013-12-20T09:28:00Z Following the experience of the global financial crisis, central banks have been asked to undertake unprecedented responsibilities. Governments and the public appear to have high expectations that monetary policy can provide solutions to problems that do not necessarily fit in the realm of traditional monetary policy. This paper examines three broad public policy goals that may overburden monetary policy: full employment, fiscal sustainability and financial stability. While central banks have a crucial position in public policy, the appropriate policy mix also involves other institutions, and overreliance on monetary policy to achieve these goals is bound to disappoint. Central bank policies that ... Is monetary policy overburdened? 2013-12-20T09:28:00Z BIS Monetary Policy Financial Stability central bank independence global financial crisis real-time output gap fiscal dominance PDF version http://www.bis.org/publ/work435.pdf Athanasios Orphanides Orphanides Mr Governor Central Bank of Cyprus Athanasios Orphanides December 2013 Bank for International Settlements: Working Papers 435 E50 E58 E52 http://www.bis.org/publ/work434.htm Abstract of BIS Working Papers No 434. This paper investigates the effect of cyclical macroeconomic policy and financial sector characteristics on growth. Using cross-country, cross-industry OECD data, it yields two main findings. First, countercyclical fiscal and monetary policies foster growth disproportionately in more credit/liquidity-constrained industries. Second, while higher bank capital ... Cyclical macroeconomic policy, financial regulation and economic growth 2013-12-20T09:27:00Z This paper investigates the effect of cyclical macroeconomic policy and financial sector characteristics on growth. Using cross-country, cross-industry OECD data, it yields two main findings. First, countercyclical fiscal and monetary policies foster growth disproportionately in more credit/liquidity-constrained industries. Second, while higher bank capital ratios may contribute to reducing the benefit of a countercyclical monetary policy, countercyclical credit enhances growth disproportionately in more credit/liquidity-constrained industries and this complements the growth effects of countercyclical monetary policy. Raising regulatory requirements for bank capital can therefore help achieve financial stability and preserve economic growth if complemented with more countercyclical macroeconomic and regulatory policy. Cyclical macroeconomic policy, financial regulation and economic growth 2013-12-20T09:27:00Z BIS Monetary Policy Fiscal Policy financial regulation growth financial constraints PDF version http://www.bis.org/publ/work434.pdf Philippe Aghion Aghion Mr Enisse Kharroubi Kharroubi Mr Economist Bank for International Settlements Philippe Aghion and Enisse Kharroubi December 2013 Bank for International Settlements: Working Papers 434 E32 O43 E62 G28 E52 E44 http://www.bis.org/publ/work433.htm Abstract of BIS Working Papers No 433. Using data from 57 countries spanning more than three decades, this paper investigates the effectiveness of nine non-interest rate policy tools, including macroprudential measures, in stabilising house prices and housing credit. In conventional panel regressions, housing credit growth is significantly affected by changes in the maximum debt-service-to-income (DSTI) ratio, the maximum loan-to-value ratio, limits on exposure to the housing sector and housing-related taxes. Can non-interest rate policies stabilise housing markets? Evidence from a panel of 57 economies 2013-11-15T11:05:00Z Using data from 57 countries spanning more than three decades, this paper investigates the effectiveness of nine non-interest rate policy tools, including macroprudential measures, in stabilising house prices and housing credit. In conventional panel regressions, housing credit growth is significantly affected by changes in the maximum debt-service-to-income (DSTI) ratio, the maximum loan-to-value ratio, limits on exposure to the housing sector and housing-related taxes. But only the DSTI ratio limit has a significant effect on housing credit growth when we use mean group and panel event study methods. Among the policies considered, a change in housing-related taxes is the only policy tool with a discernible impact on house price appreciation. Can non-interest rate policies stabilise housing markets? Evidence from a panel of 57 economies 2013-11-15T11:05:00Z BIS Financial Stability house prices macroprudential policy housing credit PDF version http://www.bis.org/publ/work433.pdf Kenneth N Kuttner Kuttner Mr Principal Economist Bank for International Settlements Ilhyock Shim Shim Mr Senior Economist Bank for International Settlements Kenneth N Kuttner and Ilhyock Shim November 2013 Bank for International Settlements: Working Papers 433 G21 G28 http://www.bis.org/publ/work432.htm Abstract of BIS Working Papers No 432. In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the liquidity coverage ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to survive a 30-day period of market stress. As monetary policy typically involves targeting the interest rate on loans of one of these assets - central bank reserves - it is important to understand how this regulation may impact the efficacy of central banks' current operational frameworks. Liquidity regulation and the implementation of monetary policy 2013-10-10T13:50:00Z In addition to revamping existing rules for bank capital, Basel III introduces a new global framework for liquidity regulation. One part of this framework is the liquidity coverage ratio (LCR), which requires banks to hold sufficient high-quality liquid assets to survive a 30-day period of market stress. As monetary policy typically involves targeting the interest rate on loans of one of these assets - central bank reserves - it is important to understand how this regulation may impact the efficacy of central banks' current operational frameworks. We introduce term funding and an LCR requirement into an otherwise standard model of monetary policy implementation. Our model shows that if banks face the possibility of an LCR shortfall, then the usual link between open market operations and the overnight interest rate changes and the short end of the yield curve becomes steeper. Our results suggest that central banks may want to adjust their operational frameworks as the new regulation is implemented. Liquidity regulation and the implementation of monetary policy 2013-10-10T13:50:00Z BIS Monetary Policy liquidity regulation Basel III LCR corridor system reserves PDF version http://www.bis.org/publ/work432.pdf Morten Bech Bech Mr Principal Economist Bank for International Settlements Todd Keister Keister Mr Professor of Economics Morten Bech and Todd Keister October 2013 Bank for International Settlements: Working Papers 432 E58 G28 E52 E43 http://www.bis.org/publ/work431.htm Abstract of BIS Working Papers No 431. We review extant work on the transmission of monetary policy, both conventional and unconventional, of the major advanced economies to East Asia through monetary policy reactions, integrated bond markets and induced currency appreciation. We present new results on the growth of foreign currency credit, especially US dollar credit, as a transmission mechanism. Restrained growth of dollar credit in Korea contrasts with very rapid growth on the Chinese mainland and in Hong Kong SAR. Transmitting global liquidity to East Asia: policy rates, bond yields, currencies and dollar credit 2013-10-04T07:00:00Z We review extant work on the transmission of monetary policy, both conventional and unconventional, of the major advanced economies to East Asia through monetary policy reactions, integrated bond markets and induced currency appreciation. We present new results on the growth of foreign currency credit, especially US dollar credit, as a transmission mechanism. Restrained growth of dollar credit in Korea contrasts with very rapid growth on the Chinese mainland and in Hong Kong SAR. Transmitting global liquidity to East Asia: policy rates, bond yields, currencies and dollar credit 2013-10-04T07:00:00Z BIS Monetary Policy capital controls exchange rates bond markets macroprudential policy global liquidity Taylor rule foreign currency debt dollarisation PDF version http://www.bis.org/publ/work431.pdf Dong He He Mr Executive Director, Research Department Hong Kong Monetary Authority Robert N McCauley McCauley Mr Senior Adviser Bank for International Settlements Dong He and Robert N McCauley October 2013 Bank for International Settlements: Working Papers 431 F42 G21 G28 E52 F30 E43 http://www.bis.org/publ/work430.htm Abstract of BIS Working Papers No 430. Asymmetric effects of Central Bank foreign exchange (forex) intervention have not been extensively studied in the literature, even though in practice Central Bank's motives for purchasing and for selling foreign currency may differ. This paper studies asymmetric effects of Central Bank interventions under the premise that policy authorities view depreciations and appreciations as having asymmetric implications. Using undisclosed intraday data for Peru from 2009 to 2011, this paper shows that Central Bank interventions in the foreign exchange market have a signifcant and asymmetric ... Asymmetric effects of FOREX intervention using intraday data: evidence from Peru 2013-09-17T14:54:00Z Asymmetric effects of Central Bank foreign exchange (forex) intervention have not been extensively studied in the literature, even though in practice Central Bank's motives for purchasing and for selling foreign currency may differ. This paper studies asymmetric effects of Central Bank interventions under the premise that policy authorities view depreciations and appreciations as having asymmetric implications. Using undisclosed intraday data for Peru from 2009 to 2011, this paper shows that Central Bank interventions in the foreign exchange market have a signifcant and asymmetric effect on interbank exchange rates. Specifically, central bank intervention is more effective in reducing the interbank exchange rate than in raising it. Asymmetric effects of FOREX intervention using intraday data: evidence from Peru 2013-09-17T14:54:00Z BIS exchange rate intervention foreign exchange market PDF version http://www.bis.org/publ/work430.pdf Erick Lahura Lahura Mr Head, Capital Markets Analysis and Financial Regulation Central Reserve Bank of Peru Marco Vega Vega Mr Deputy Manager, Research Division Central Reserve Bank of Peru Erick Lahura and Marco Vega September 2013 Bank for International Settlements: Working Papers 430 G14 G15 F31 http://www.bis.org/publ/work429.htm Abstract of BIS Working Papers No 429. In recent years the Bank of Mexico has made a series of rules-based interventions in the peso/dollar foreign exchange market. We assess the effectiveness of two specific interventions that occurred in periods of great stress for the Mexican economy. The aims of these two interventions were ... On central bank interventions in the Mexican peso/dollar foreign exchange market 2013-09-17T14:53:00Z In recent years the Bank of Mexico has made a series of rules-based interventions in the peso/dollar foreign exchange market. We assess the effectiveness of two specific interventions that occurred in periods of great stress for the Mexican economy. The aims of these two interventions were, respectively, to provide liquidity and to promote orderly conditions in the foreign exchange market. For our analysis, we follow the framework implemented by Dominguez (2003) and Dominguez (2006), an event-style microstructure approach. We use the bid-ask spreads as a measure of liquidity and of orderly conditions. In general, our results show no indication of an effect in the opposite direction from the one intended for the first intervention and are fairly conclusive regarding a significant reduction on the bid-ask spread for the second intervention. On central bank interventions in the Mexican peso/dollar foreign exchange market 2013-09-17T14:53:00Z BIS microstructure foreign exchange rate central bank interventions PDF version http://www.bis.org/publ/work429.pdf Santiago García-Verdú García-Verdú Mr Adviser to the Board Bank of Mexico Miguel Zerecero Zerecero Mr Economist Bank of Mexico Santiago García-Verdú and Miguel Zerecero September 2013 Bank for International Settlements: Working Papers 429 E5 F31 http://www.bis.org/publ/work428.htm Abstract of BIS Working Papers No 428 The adoption of a managed regime assumes that interventions are relatively successful. However, while some authors consider that foreign exchange interventions are not effective, arguing that domestic and foreign assets are close substitutes, others advocate their use and maintain that their effects can even last for months. There is also a lack of consensus ... The impact of pre-announced day-to-day interventions on the Colombian exchange rate 2013-09-17T14:52:00Z The adoption of a managed regime assumes that interventions are relatively successful. However, while some authors consider that foreign exchange interventions are not effective, arguing that domestic and foreign assets are close substitutes, others advocate their use and maintain that their effects can even last for months. There is also a lack of consensus on the related question of how to intervene. Are dirty interventions more powerful than pre-announced constant ones? This paper compares the effects of day-to-day interventions with discretionary interventions by combining a Tobit-GARCH reaction function with an asymmetric power PGARCH(1,1) impact function. Our results show that the impact of pre-announced and transparent US$ 20 million daily interventions, adopted by Colombia in 2008-2012, has been much larger than the impact of dirty interventions adopted in 2004-2007.We find that the impact of a change in daily interventions (from US$20 million to US$ 40 million) raises the exchange rate by approximately Col $2, implying that actual interventions of US$ 1000 million increase the exchange rate in one day by 5.50%. We also find a positive impact of capital controls. The impact of pre-announced day-to-day interventions on the Colombian exchange rate 2013-09-17T14:52:00Z BIS capital controls Tobit-GARCH Central bank intervention foreign exchange intervention mechanisms reaction function dirty interventions PDF version http://www.bis.org/publ/work428.pdf Juan José Echavarría Echavarría Mr Bank of the Republic, Colombia Luis Fernando Melo Melo Mr Bank of the Republic, Colombia Santiago Téllez Téllez Mr Bank of the Republic, Colombia Mauricio Villamizar Villamizar Mr Bank of the Republic, Colombia Juan José Echavarría, Luis Fernando Melo, Santiago Téllez and Mauricio Villamizar September 2013 Bank for International Settlements: Working Papers 428 E58 F31 E52 http://www.bis.org/publ/work427.htm Abstract of BIS Working Papers No 427 In this paper we explore the role that exchange rate interventions may play in determining inflation expectations in Chile. To that end, we consider a set of nine deciles of inflation expectations coming from the survey of professional forecasters carried out by the Central Bank of Chile. We consider two episodes of preannounced central bank interventions during the sample period 2007-2012. Interventions and inflation expectations in an inflation targeting economy 2013-09-17T14:51:00Z In this paper we explore the role that exchange rate interventions may play in determining inflation expectations in Chile. To that end, we consider a set of nine deciles of inflation expectations coming from the survey of professional forecasters carried out by the Central Bank of Chile. We consider two episodes of preannounced central bank interventions during the sample period 2007-2012. Interventions and inflation expectations in an inflation targeting economy 2013-09-17T14:51:00Z BIS Inflation targeting exchange rates inflation expectations interventions PDF version http://www.bis.org/publ/work427.pdf Pablo Pincheira Pincheira Mr Central Bank of Chile Pablo Pincheira September 2013 Bank for International Settlements: Working Papers 427 E31 F31 E58 E52 http://www.bis.org/publ/work426.htm Abstract of BIS Working Papers No 426 This study presents indirect evidence of the effectiveness of sterilized interventions in Brazil based on the complete records of daily customer order flow data reported by Brazilian dealers, as well as foreign exchange intervention data over a time span of 10 years (2002-2011). We find that the effect of USD sales by end-users on the BRL/USD was much stronger on days in which the BCB did not intervene in the spot foreign exchange market. Order flow and the real: indirect evidence of the effectiveness of sterilized interventions 2013-09-17T14:50:00Z This study presents indirect evidence of the effectiveness of sterilized interventions in Brazil based on the complete records of daily customer order flow data reported by Brazilian dealers, as well as foreign exchange intervention data over a time span of 10 years (2002-2011). We find that the effect of USD sales by end-users on the BRL/USD was much stronger on days in which the BCB did not intervene in the spot foreign exchange market. Order flow and the real: indirect evidence of the effectiveness of sterilized interventions 2013-09-17T14:50:00Z BIS exchange rate intervention order flow PDF version http://www.bis.org/publ/work426.pdf Emanuel Kohlscheen Kohlscheen Mr Senior Economist Bank for International Settlements Emanuel Kohlscheen September 2013 Bank for International Settlements: Working Papers 426 E58 F31 E52 http://www.bis.org/publ/work425.htm Abstract of BIS Working Papers No 425 We evaluate the response of perceived tail risks in financial markets to the implementation of unconventional monetary policy by the U.S. Federal Reserve. Using information from out-of-money equity index options, we find that perceived risks decline significantly in response to both policy announcements and actual asset purchases. The announcement effects ... The response of tail risk perceptions to unconventional monetary policy 2013-09-05T13:01:00Z We evaluate the response of perceived tail risks in financial markets to the implementation of unconventional monetary policy by the U.S. Federal Reserve. Using information from out-of-money equity index options, we find that perceived risks decline significantly in response to both policy announcements and actual asset purchases. The announcement effects .... The response of tail risk perceptions to unconventional monetary policy 2013-09-05T13:01:00Z BIS event study unconventional monetary policy tail risk Bayesian time-varying parameter VARs PDF version http://www.bis.org/publ/work425.pdf Masazumi Hattori Hattori Mr Bank of Japan Andreas Schrimpf Schrimpf Mr Economist Bank for International Settlements Vladyslav Sushko Sushko Mr Economist Bank for International Settlements Masazumi Hattori, Andreas Schrimpf and Vladyslav Sushko September 2013 Bank for International Settlements: Working Papers 425 E32 G20 G12 E52 E44 http://www.bis.org/publ/work424.htm Abstract of BIS Working Papers No 424 We analyse global and euro area imbalances by focusing on China and Germany as large surplus and creditor countries. In the 2000s, domestic reforms in both countries expanded the effective labour force, restrained wages, shifted income towards profits and increased corporate saving. As a result, both economies' current account surpluses widened before the global financial crisis, and that of Germany has proven more persistent as domestic investment has remained subdued. Global and euro imbalances: China and Germany 2013-09-05T13:00:00Z We analyse global and euro area imbalances by focusing on China and Germany as large surplus and creditor countries. In the 2000s, domestic reforms in both countries expanded the effective labour force, restrained wages, shifted income towards profits and increased corporate saving. As a result, both economies' current account surpluses widened before the global financial crisis, and that of Germany has proven more persistent as domestic investment has remained subdued. Global and euro imbalances: China and Germany 2013-09-05T13:00:00Z BIS current account Global Imbalances saving and investment distribution of income capital account world banker international assets and liabilities PDF version http://www.bis.org/publ/work424.pdf Guonan Ma Ma Mr Senior Economist Bank for International Settlements Robert N McCauley McCauley Mr Senior Adviser Bank for International Settlements Guonan Ma and Robert N McCauley September 2013 Bank for International Settlements: Working Papers 424 F15 F32