Central banks

The causal effect of inflation on financial stability, evidence from history

09/12/2025 European Central Bank Central banks

In contrast to the conventional Fisherian view that inflation reduces real debt positions, we show that significant increases in inflation are strongly associated with financial crises. In the spirit of Jordà et al. (2020), countries with free and fixed ex-change rates can be compared to difference out the confounding reaction of monetary policy. Across a dataset of 18 advanced economies over 151 years, we show that the impact of inflation extends beyond its indirect effect via monetary policy.

Buffer usability in a complex world: Interactions between macroprudential regulation and the resolution framework

09/12/2025 European Central Bank Central banks

This paper explores the interplay between the risk- and leverage-based prudential and the resolution frameworks within the EU banking system. The prudential framework is designed to enhance the resilience of both individual banks and the banking sector as a whole. It does so by imposing minimum capital requirements and capital buffers that can absorb losses during periods of financial stress.

FEDS Paper: Pricing Tail Risks: Bank Equity Returns During the 2023 Bank Stress

09/05/2025 Federal Reserve Central banks

Matthew P. Seay and Shawn M. KimbleDid bank equity prices reflect growing sector imbalances before the 2023 failure of Silicon Valley Bank? We find that banks with higher reliance on uninsured deposits, or with higher marked-to-market leverage, had lower equity returns prior to SVB's collapse. Although markets priced uninsured deposits and high leverage individually, their interaction was not reflected in market prices prior to SVB’s failure.

IFDP Paper: De-Dollarization? Diversification? Exploring Central Bank Gold Purchases and the Dollar’s Role in International Reserves

09/05/2025 Federal Reserve Central banks

Colin WeissI examine how governments have managed their holdings of gold and dollar reserves in recent decades, a period when gold’s share of aggregate international reserves rose and the dollar’s share fell. Using data on central banks’ reserve currency composition and official sector purchases of U.S. assets, I argue that gold reserve accumulation is generally not associated with de-dollarization of international reserves at the country level, except in a few prominent cases.

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