BIS Working Papers
 | 
No 894
 | 
22 October 2020

by 
Taneli Mäkinen,
Fan Li,
Andrea Mercatanti and
Andrea Silvestrini

PDF full text (352kb)
 | 
33 pages

Summary
Focus
Central banks in several advanced economies continue to rely on asset purchase programs to pursue their objectives. The costs and benefits of such policies, however, remain imperfectly understood. We try to shed light on these issues by studying the price effects of the corporate sector purchase programme (CSPP) of the European Central Bank, which involved a sizable transfer

BIS Working Papers
 | 
No 893
 | 
22 October 2020

by 
Claudio Borio,
Juan Contreras and
Fabrizio Zampolli

PDF full text (1,002kb)
 | 
27 pages

Summary
Focus
We propose a method to compute the probability distribution of the potential fiscal cost of a banking crisis – a key input in assessing the adequacy of a country’s fiscal buffers. Using a sample of banking crises in advanced and emerging market economies, we approximate the cost with the post-crisis increase in government debt. We then examine which pre-crisis economic developments help

IFC Bulletin
 | 
No 52
 | 
20 October 2020

PDF full text (46,291kb)
 | 
968 pages

Proceedings of the IFC Conference on external statistics, co-organised with the Bank of Portugal (BoP) and the European Central Bank (ECB), Lisbon, Portugal, 17-18 February 2020.

Conference overview

Central banks and external statistics: evolution or revolution?

Authors: 
Paula Menezes,
Fausto Pastoris,
Carmen Picon-Aguilar,
Martin Schmitz,
Nuno Silva and
Bruno Tissot

pdf

BIS Working Papers
 | 
No 892
 | 
14 October 2020

by 
Eugenio Cerutti,
Catherine Koch and
Swapan-Kumar Pradhan

PDF full text (672kb)
 | 
46 pages

Summary
Focus
This paper studies the global footprint of Chinese banks, and compares it with that of other major bank nationalities. Chinese banks account for 24% of all cross-border lending to borrowers in emerging market and developing economies (EMDEs), more than double that of Japanese banks, the closest competitor. Further, almost half of all EMDE borrowers rely on Chinese banks as their most

BIS Bulletin
 | 
No 31
 | 
13 October 2020

by 
Ryan Niladri Banerjee,
Enisse Kharroubi and
Ulf Lewrick

PDF full text (653kb)
 | 
9 pages

Key takeaways
The expected wave of business failures in the Covid-19 recession has yet to materialise, due in part to policy support, but also reflecting the inherent lag between declines in GDP and insolvencies.
Bankruptcies weigh heavily on labour markets. Unemployment typically increases three times more if a fall in GDP is accompanied by a similar-sized increase in bankruptcies.
Concentration of

FSI Briefs
 | 
No 11
 | 
12 October 2020

by 
Patrizia Baudino

PDF full text (531kb)
 | 
9 pages

Highlights
In response to the Covid-19 pandemic, a number of authorities that regularly conduct stress tests on individual banks adjusted their approach. They performed ad hoc exercises to assess the vulnerability of banking sectors as a whole. These exercises are different from regular ones in terms of key features such as objectives, design and methodologies, and communication.
In the short term, such stress tests can support the assessment of the pandemic’s

BIS Bulletin
 | 
No 30
 | 
12 October 2020

by 
Ryan Niladri Banerjee,
Giulio Cornelli and
Egon Zakrajšek

PDF full text (689kb)
 | 
9 pages

Key takeaways
Economic growth and forward-looking indicators of default risk inferred from equity markets, two variables that together predict business bankruptcies in advanced economies, show bankruptcies rising significantly by the end of 2021.
Projections of real GDP growth embedded in the consensus forecast account for the bulk of this projected increase. Unlike in previous downturns, the stock

BIS Working Papers
 | 
No 891
 | 
09 October 2020

by 
Basil Guggenheim and
Andreas Schrimpf

PDF full text (1,308kb)
 | 
27 pages

Summary
Focus
This note looks at different ways of constructing term rates from overnight rates. When LIBOR goes out of use, as planned for the end of 2021, financial contracts will need to use LIBOR’s alternative rates. For the US market, this is the Secured Overnight Financing Rate (SOFR), a measure of the cost of borrowing cash overnight collateralised by Treasury securities. However, unlike LIBOR, which is a term rate,

Joint report by The Bank of Canada, European Central Bank, Bank of Japan, Sveriges Riksbank, Swiss National Bank, Bank of England, Board of Governors of the Federal Reserve and Bank for International Settlements.

BIS Other
 | 
09 October 2020

PDF full text (3,095kb)
 | 
26 pages

Watch the video (00:05:45)  
Executive paper

Listen to the podcast (00:14:38) 

Central banks have been providing trusted money to the

BIS Working Papers
 | 
No 890
 | 
01 October 2020

by 
Michael Kumhof,
Phurichai Rungcharoenkitkul and
Andrej Sokol

PDF full text (1,059kb)
 | 
68 pages

Summary
Focus
Gross capital flows play a central role in today’s policy debates. Yet current theory largely relies on net flow models of saving and current accounts. This limits the scope of policy advice.
Contribution
We extend the standard open economy macroeconomic model to include credit creation, thus allowing us to study gross capital flows. The model clarifies that it is shifts in

BIS Working Papers
 | 
No 889
 | 
30 September 2020

by 
Pierre-Richard Agénor,
Timothy Jackson and
Luiz Awazu Pereira da Silva

PDF full text (937kb)
 | 
57 pages

Summary
Focus
Managed floats remain the norm in middle-income countries – even among those that have adopted inflation targeting as their monetary policy framework. Moreover, the decision to intervene appears to be increasingly driven by the goal of limiting exchange rate volatility, rather than concerns about competitiveness, the degree of exchange rate pass-through or the need to build

CPMI Papers
 | 
No 195
 | 
29 September 2020

PDF full text (526kb)
 | 
59 pages

This report follows the publication of Payment aspects of financial inclusion (PAFI) in 2016 and Payment aspects of financial inclusion in the fintech era in April 2020. The 2016 report outlined seven guiding principles for public and private sector stakeholders and recommended key actions for countries seeking to implement these principles, while the April 2020 report provided additional guidance on recent fintech developments that have relevant implications for PAFI’s underlying objectives.

BIS Working Papers
 | 
No 888
 | 
23 September 2020

by 
Frank Packer and
Mark M Spiegel

PDF full text (742kb)
 | 
37 pages

Summary
Focus
We look at periods where all initial public offerings (IPOs) were suspended in China in order to assess the effect of IPOs on stock markets and individual listed firms.    
Contribution
Initial public offering (IPO) activity was suspended across the board three times in China between 2008 and 2015. This allows us to examine the effects of delays in IPOs that are unaffected by individual firm and industry

BIS Working Papers
 | 
No 887
 | 
22 September 2020

by 
Giulio Cornelli,
Jon Frost,
Leonardo Gambacorta,
Raghavendra Rau,
Robert Wardrop and
Tania Ziegler

PDF full text (2,257kb)
 | 
35 pages

Summary
Focus
Credit markets around the world are undergoing a deep transformation. While banks, credit unions and other traditional lenders remain the chief source of finance in most economies, with capital markets playing an important role in some cases, new intermediaries have recently emerged. In particular, digital lending models such

BIS Working Papers
 | 
No 886
 | 
18 September 2020

by 
Yavuz Arslan,
Bulent Guler and
Temel Taskin

PDF full text (952kb)
 | 
40 pages

Summary
Focus
Very often, different vendors sell the same goods at very different prices. If poorer households are willing to search more and pay lower prices than wealthier ones, consumption inequality should be lower than expenditure inequality. We explore the importance of this distinction.
Contribution
Most previous studies on consumption inequality implicitly assumed that consumption and expenditure are

BIS Working Papers
 | 
No 885
 | 
18 September 2020

by 
Yavuz Arslan,
Bulent Guler and
Burhan Kuruscu

PDF full text (3,091kb)
 | 
78 pages

Summary
Focus
The housing market in the US (and in many other countries) experienced a boom-bust cycle during the last two decades. Real house prices increased by more than 30 percent between 1995 and 2006, and then dropped by a similar amount until 2011. The financial sector and the rest of the economy also experienced a boom-bust cycle. This paper studies the role of credit supply in driving these dynamics.

This Quarterly Review looks at the financial market’s recovery from March’s acute stress, noting that the upturn has been uneven and corporate balance sheets remain fragile. It also analyses how lower interest rates affect stock prices and explores why equity investors have been negative towards banks even though they entered the pandemic well positioned to absorb losses thanks to post-2008 regulatory reforms.

BIS Quarterly Review
 | 
14 September 2020

PDF full text (1,360kb)
 | 
119 pages

Media briefing

[unable to retrieve full-text content]

BIS Working Papers
 | 
No 884
 | 
08 September 2020

by 
Fernando Pérez-Cervantes

PDF full text (473kb)
 | 
44 pages

Paper produced as part of the BIS Consultative Council for the Americas Research Network project "Exchange rates: key drivers and effects on inflation and trade"
Summary
Focus
I use a simple model to study the econometric implications of allowing multi-product retailers to choose their markups on a price dynamics identification equation. To test the implications, I use a novel set of micro data which includes 23 million observations of

BIS Working Papers
 | 
No 883
 | 
04 September 2020

by 
Ryan Niladri Banerjee,
Juan Contreras,
Aaron Mehrotra and
Fabrizio Zampolli

PDF full text (5,665kb)
 | 
40 pages

Focus
Discussion of inflation risks, especially whether risks to future inflation are balanced or tilted to the upside or downside, often take centre stage in central bank policy meetings and communication. Policymakers often consider not only the most likely future path of inflation but also the full range of possible outcomes around that path. However, there is limited

FSI Insights
 | 
No 28
 | 
03 September 2020

by 
Rodrigo Coelho,
Jonathan Fishman,
Amer Hassan and
Rastko Vrbaski

PDF full text (363kb)
 | 
25 pages

Under the auspice of the Financial Stability Board’s four point action plan, several international organisations have taken measures to address the decline in correspondent banking relationships, including further examining the dimensions of the decline and implications for financial inclusion and financial stability; clarifying regulatory expectations; supporting domestic capacity-building in

BIS Working Papers
 | 
No 882
 | 
02 September 2020

by 
Ryan Niladri Banerjee and
Boris Hofmann

PDF full text (1,096kb)
 | 
31 pages

Focus
We analyse zombie firms, defined as unprofitable firms with low stock market valuation. Our analysis takes a longer-run international perspective using firm-level data on listed non-financial companies covering 14 advanced economies and spanning three decades.
Contribution
Documenting the rise of zombie companies over the past three decades, we explore their anatomy and life cycle. Their anatomy is analysed in

BIS Working Papers
 | 
No 881
 | 
01 September 2020

by 
Leonardo Gambacorta,
Yiping Huang,
Zhenhua Li,
Han Qiu and
Shu Chen

PDF full text (4,575kb)
 | 
45 pages

Summary
Focus
Collateral is used in debt contracts to mitigate the difficulties ("agency problems") that arise when the lender’s knowledge of the borrower is incomplete ("asymmetric information"). Banks usually require borrowers to pledge tangible assets, such as real estate, to help offset such problems in credit assessment, or to reduce moral hazard and enforcement problems.

FSI Insights
 | 
No 27
 | 
27 August 2020

by 
Johannes Ehrentraud,
Denise Garcia Ocampo and
Camila Quevedo Vega

PDF full text (1,493kb)
 | 
39 pages

A host of new technology-enabled business models for deposit-taking, credit intermediation and capital raising have emerged in recent years.
In particular, the proliferation of digital banking and financing via web-based platforms (fintech balance sheet lending and crowdfunding) raises the question of where the regulatory perimeter should be drawn. Financial authorities now face the task of deciding

BIS Working Papers
 | 
No 880
 | 
24 August 2020

by 
Raphael Auer,
Giulio Cornelli and
Jon Frost

PDF full text (6,017kb)
 | 
44 pages

Summary
Focus
Central bank digital currencies (CBDCs) are in the limelight. But the reasons for issuing them vary between countries, as do the policy approaches and technical designs. This paper looks at the economic and institutional motives behind current CBDC projects and asks how they might shape the design of such currencies.
Contribution
We draw up a database of research and development work, technical

BIS Working Papers
 | 
No 879
 | 
24 August 2020

by 
Julián Caballero

PDF full text (821kb)
 | 
63 pages

Summary
Focus
When a country’s exchange rate falls, the effect on corporate balance sheets may become significant. A firm that borrows in foreign currency is vulnerable to unexpected exchange rate movements if its currency exposures are not fully hedged operationally (eg the firm exports) or financially (eg with financial derivatives). A depreciation can weaken the firm’s balance sheet and thus hinder investment. This paper studies such balance sheet

BIS Bulletin
 | 
No 29
 | 
14 August 2020

by 
Tirupam Goel and
José María Serena Garralda

PDF full text (683kb)
 | 
9 pages

Key takeaways
Borrowing by non-financial firms in global debt markets surged following the Covid-19 shock. Bond issuance boomed, while syndicated loan originations trailed.
Led by easier access to bond markets, large firms significantly increased their borrowing. The rest of the firms faced bottlenecks due to their reliance on a strained syndicated loan market and hurdles in switching to bond markets.
Large firms, which had

Download PDF

BIS Working Papers
 | 
No 878
 | 
12 August 2020

by 
Mathias Drehmann and
James Yetman

PDF full text (599kb)
 | 
35 pages

Summary
Focus
Early warning indicators for financial crises are important inputs for central bankers to guide macroprudential policies. One such indicator -the deviation of the credit-to-GDP ratio from a long-run trend, in short the credit-to-GDP gap – is very useful in this regard. Basel III therefore suggests that policymakers use it as part of their countercyclical capital buffer frameworks. However, several authors have

BIS Working Papers
 | 
No 877
 | 
11 August 2020

by 
Laura D’Amato,
Máximo Sangiácomo and
Martin Tobal

PDF full text (704kb)
 | 
37 pages

Summary
Focus
Foreign financing provides external finance and better financing conditions to exporters in the developing world. Through this channel, it increases their export survival rates and could therefore foster economic development.
Contribution
Export survival rates are smaller in developing countries than in advanced economies, and this explains a large part of the long-term export growth