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Flexible asset purchases and repo market functioning

01/15/2025 European Central Bank Central banks

Flexibility has progressively become a distinctive feature of the implementation of the Eurosystem’s asset purchases. In its many manifestations, flexibility has also been used by asset managers in the daily selection of sovereign bonds to limit the impact of asset purchases on repo market specialness. This study shows that, since the inception of the Public Sector Purchase Programme, flexible purchases of bonds greatly mitigated the Eurosystem’s footprint on the repo market.

Flexible asset purchases and repo market functioning

01/15/2025 European Central Bank Central banks

Strengthening risk monitoring and policy for non-bank leverage

01/15/2025 European Central Bank Central banks

Leverage in the non-bank financial intermediation (NBFI) sector can be a source of systemic risk and amplify stress in the wider financial system. Policymakers are currently considering ways to address NBFI leverage risks, with the focus on containing the build-up of such risks ex ante. To achieve this, authorities need a broad toolkit that allows them first to identify leverage risks and then to address them. Taking advantage of recent improvements in data availability, this edition of the Macroprudential Bulletin explores novel approaches to identifying risks and designing policies.

We study aging family business incumbents who refuse to let go − here’s why the 2024 race felt familiar

01/14/2025 The Conversation News & Comments

Succession planning is one of the biggest challenges family businesses face, with aging leaders often reluctant to let go of their power.

FEDS Paper: Spatially Mapping Banks' Commercial & Industrial Loan Exposures: Including an Application to Climate-Related Risks

01/13/2025 Federal Reserve Central banks

Benjamin N. Dennis, Gurubala Kotta, and Caroline Conley NorrisThe correlation of the spatial distribution of banking exposures with changes in spatial patterns of economic activity (e.g., internal migration, changes in agglomeration patterns, climate change, etc.) may have financial stability implications. We therefore study the spatial distribution of large U.S. banks' commercial and industrial (C&I) lending portfolios.

FEDS Paper: Impact of the Volcker Rule on the Trading Revenue of Largest U.S. Trading Firms During the COVID-19 Crisis Period

01/13/2025 Federal Reserve Central banks

Zach Modig, Hulusi Inanoglu, and David LynchUsing a novel data collection, we examine the impact of the Volcker Rule on trading revenue of the 21 largest U.S. trading firms during the 100 day stress period centered on the COVID-19 financial crisis.

The Origins of the Modern Era of the Federal Reserve

01/13/2025 Ineteconomics Analysis

Fifty years ago the actions of the Federal Reserve mattered. Today, so far as the aggregate measures of the American domestic economy go, they do not.
Books discussed in this essay:
Sarah Binder and Mark Spindel, The Myth of Independence: How Congress Governs the Federal Reserve. Princeton: Princeton University Press, 2017.

Time-varying risk aversion and inflation-consumption correlation in an equilibrium term structure model

01/13/2025 European Central Bank Central banks

Inflation risk premiums tend to be positive in an economy mainly hit by supply shocks, and negative if demand shocks dominate. Risk premiums also fluctuate with risk aversion. We shed light on this nexus in a linear-quadratic equilibrium microfinance model featuring time variation in inflation-consumption correlation and risk aversion. We obtain analytical solutions for real and nominal yield curves and for risk premiums. While changes in the inflation-consumption correlation drive nominal yields, changes in risk aversion drive real yields and act as amplifier on nominal yields.

Women in senior management: The more the better

01/12/2025 The Conversation News & Comments

While the appointment of just one woman to a board of directors has a positive impact, the benefits become clear and reverberate throughout the company when there are at least three women on the board. (Shutterstock)Ten years after the securities regulations came into force, which established a disclosure regime regarding the number and percentage of women sitting on a board of directors, or holding an executive position, where do we stand?

Why gradual and predictable? Bank lending during the sharpest quantitative tightening ever

01/09/2025 European Central Bank Central banks

Exploiting the recalibration of ECB’s outstanding central bank funding in 2022, we show that a sharp reabsorption of bank liquidity induces a tightening impact on credit supply, as intended when centralbanks reduce their balance sheets. The tightening originates from the sudden relative convenience for banks accustomed to large liquidity holdings to more rapidly adapt to the new environment. Moreover, we show that the associated reduction in credit supply has real economic effects.

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