BIS Quarterly Review, September 2016
The BIS Quarterly Review for September 2016: Dissonant markets?
Remarks by Mr Claudio Borio, Head of the Monetary and Economic Department, and Mr Hyun Song Shin, Economic Adviser & Head of Research, at the media briefing on 16 September 2016.
International banking and financial market developments
Statistical initiatives
Special features
Covered interest parity verges on a physical law in international finance. And yet it has been systematically violated since the Great Financial Crisis. Especially puzzling have been the violations since 2014, even once banks had strengthened their balance sheets and regained easy access to funding. We offer a framework to think about these violations, stressing the ...
More...Since the Great Financial Crisis, emerging market economies have been more active in FX markets. As rising dollar debt and increased exposure to global financing flows have affected the demand and supply of foreign currency, financial stability has become an increasingly important motive for interventions. Adjustments in intervention tactics and instruments are consistent with a greater importance of financial stability considerations. Timely interventions can be effective in improving FX market liquidity, and there are credibility gains from holding foreign reserve buffers in countries with ...
More...Firms in emerging market economies markedly increased their issuance of bonds in offshore markets after the Great Financial Crisis. By contrast, increases in offshore bond issuance by firms in advanced economies were more muted. An empirical analysis suggests that the less developed state of financial markets in emerging economies may have encouraged firms there to step up their offshore bond issuance as external financing costs fell. Firms appear to use the proceeds of offshore bonds to boost their holdings of short-term assets. This may ...
More...There is growing evidence that the currency distribution of cross-border credit affects international monetary policy spillovers. While the existing literature has concentrated primarily on the US dollar, this article focuses on the euro. We find that the ECB's quantitative easing of January 2015 had a larger positive impact on cross-border bank credit in lender-borrower pairs with a higher share of euro-denominated bank claims. The effect was especially pronounced for lending to advanced economies outside the euro area. By contrast, the estimated effects on crossborder lending to ...
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