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International Settlement
The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

Bank of International Settlement

An explanation of negative swap spreads: demand for duration from underfunded pension plans

by Sven Klingler and Suresh Sundaresan Focus This paper examines the reasons for the persistent negative 30-year swap spread. Because of the credit risk implicit in Libor, swap rates should exceed the (theoretical) risk-free rate and rise when bank credit risk increases. Further, Treasuries (against which swap spreads are computed) are "safe haven" assets whose yields fall during a crisis, so that they...

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Are credit rating agencies discredited? Measuring market price effects from agency sovereign debt announcements

by Mahir Binici, Michael M Hutchison and Evan Weicheng Miao Summary Focus This paper looks at whether the information value of credit rating agency announcements relating to sovereign bonds has diminished since the Global Financial Crisis (GFC) of 2007-09. In particular, taking into account the prior credit status of the bonds, we measure how the response of credit default swap spreads (CDS)...

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Cross-border retail payments

There is room to improve the infrastructure for payments made by individuals, firms and government agencies that cross borders, according to a report by the Committee on Payments and Market Infrastructures (CPMI), the global standard setter for payment, clearing and settlement services. Innovations such as mobile or e-banking have made cross-border payments more convenient but the key to making these payments faster and cheaper is better choice...

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The negative interest rate policy and the yield curve

by Dora Xia and Jing Cynthia Wu Summary Focus The European Central Bank (ECB) has cut interest rates four times under zero since 2014. This paper extracts the market expectations embedded in the euro area's yield curve to study the impact of the ECB's negative rate policy on that yield curve. Contribution Negative policy rates are a relatively new tool for central banks and it is important to...

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Cross-stock market spillovers through variance risk premiums and equity flows

by Masazumi Hattori, Ilhyock Shim and Yoshihiko Sugihara Summary Focus We first calculate the "variance risk premiums" (VRPs) that investors require for taking on stock market volatility risk in major advanced economies (AEs) and emerging market economies (EMEs) over 2007-15. We test whether the US and eurozone AEs' risk premiums affect those of other economies. We also examine the US...

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Mapping shadow banking in China: structure and dynamics

by Torsten Ehlers, Steven Kong and Feng Zhu Summary Focus We study the structure of the shadow banking system in China, focusing on the main activities and linkages with the formal banking sector. With the help of our newly developed shadow banking map, we analyse how shadow banking activities in China have evolved and how their dynamics have changed. Contribution Existing research tends to...

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The perils of approximating fixed-horizon inflation forecasts with fixed-event forecasts

by James Yetman Summary Focus Inflation forecasts are either "fixed event" (eg forecasts made each month for inflation in 2017) or "fixed horizon" (eg forecasts made each month for inflation over the coming 12 months). Fixed-event forecasts are preferable for some purposes, and fixed-horizon forecasts for others. However, fixed-event forecasts are generally more readily available than fixed-horizon ones. A common...

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Deflation expectations

by Ryan Niladri Banerjee and Aaron Mehrotra Summary Focus We study how inflation expectations behave during periods of deflation. We analyse, in particular, whether inflation expectations become less well anchored. If expectations are less well anchored, they tend to be less stable and forecasters disagree to a greater extent about future inflation. Contribution After the Great Financial Crisis of...

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Money and trust: lessons from the 1620s for money in the digital age

by Isabel Schnabel and Hyun Song Shin Summary Focus We look to history for lessons on the nature of money and the role of central banks in building trust in the use of money in society. The issue of trust has again come to the fore in debates on the durability of cryptocurrencies such as Bitcoin, and how far private money can supplant central bank money as a medium of exchange. Contribution Our study...

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Are banks opaque? Evidence from insider trading

by Fabrizio Spargoli and Christian Upper Summary Focus We contribute to a long literature on whether banks are more opaque than other firms. By opaque we mean that outsiders, such as investors or depositors, are less able to assess the soundness of a bank than that of another type of firm. An answer to this question has important implications for regulation. For instance, bank opacity could undermine...

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