Széchenyi 2020
Budapesti Corvinus Egyetem ×

Publikációk

Demography and inflation through time
Apr 29, 2021
Journal of Economic Dynamics and Control

What can commercial property performance reveal about bank valuations?
Jan 11, 2021
Journal of International Money and Finance

We test whether commercial property performance, proxied by real estate investment trust (REIT) prices, can inform us about bank equity prices. Using data from the United States, the euro area and Japan, we show that REIT prices can predict bank equity prices. Furthermore, a “commercial property factor” adds significant explanatory power to both the CAPM and the 3-factor Fama-French model. At the same time, quantile regressions show that this factor becomes particularly prominent during downturns. It accounts for around half of the drop in average bank valuations during the great financial crisis and, again, during the Covid-19 pandemic.

Absztrakt

The claims of international banks held up well during the Covid-19 crisis, although economic output fell by even more than during the Great Financial Crisis (GFC). Both cross-border and local claims were resilient, in advanced and emerging market economies alike. Looking at lending to the real economy, we examine how borrower and lender characteristics relate to the growth of claims on the private non-financial sector during the pandemic. We find that countries with stronger economic activity and smaller financial vulnerabilities borrowed more. Likewise, better capitalised banking systems lent more. The economic stress also led advanced economy borrowers to draw on pre-existing credit lines from foreign banks.

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We investigate how the use of a currency transmits monetary policy changes in the global banking system. We use a newly available rarely accessed dataset on the bilateral cross-border lending flows of 27 BIS-reporting lending banking systems to borrowers in 51 countries, broken down by currency denomination (USD, EUR and JPY). We have three main findings. First, we identify a currency dimension of the international bank lending channel: monetary changes in a currency significantly affect cross-border lending flows in that currency, even when neither the lending banking system nor the target country uses that currency as their own. Second, this transmission works mainly through lending to non-banks. Third, the currency dimension of the bank lending channel works similarly across the three currencies, suggesting that the USD may not be unique in this respect.

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During the Covid-19-induced financial turbulence, central counterparties (CCPs) issued large margin calls, weighing on the liquidity of clearing member banks. In spite of the turbulence, CCPs remained resilient, as intended by the post-crisis reforms of financial market infrastructures.
Higher margins should be expected during heightened turbulence, but the extent of the procyclicality of margining is the consequence of various design choices. Systemic considerations call to examine the nexus between banks and CCPs. Therefore, when thinking about margining, central banks need to assess banks and CCPs jointly rather than in isolation.

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Banks globally entered the Covid-19 crisis with roughly US$ 5 trillion of capital above their Pillar 1 regulatory requirements.
The amount of additional lending will depend on how hard banks’ capital is hit by the crisis, on their willingness to use the buffers and on other policy support. In an adverse stress scenario such as the savings and loan crisis, banks’ usable buffers would decline to US$ 800 billion, which could support US$ 5 trillion of additional loans (6% of total loans outstanding). Yet in a severely adverse scenario, similar to the Great Financial Crisis, the corresponding figures would be only US$ 270 billion and US$ 1 trillion (1.3% of total loans)

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We study the extent to which macroprudential regulatory measures were successful in alleviating the negative shock that the taper tantrum of 2013 imposed on bilateral cross-border lending flows. We use a novel data set combining the BIS stage 1 enhanced banking statistics on bilateral cross-border lending flows with the IBRN’s macroprudential database. Our results suggest that macroprudential measures implemented in borrowers’ host countries prior to the taper tantrum significantly reduced the negative effect of the tantrum on crossborder lending growth. The shock-mitigating effects of hostcountry macroprudential rules are present both in lending to banks and in lending to non-banks, and are stronger for lending flows to borrowers in advanced economies and to the non-bank sector in general. Source (lending) banking system measures do not affect bilateral lending flows, nor do they enhance the effect of host-country macroprudential measures. Our results imply that policymakers may consider applying macroprudential tools to mitigate international shock transmission through cross-border bank lending.

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Exchange rate pass-through: what has changed since the crisis?
Nov 5, 2019
International Journal of Central Banking

We study how exchange rate pass-through to CPI inflation has changed since the global financial crisis. We have three main findings. First, exchange rate pass-through in emerging economies decreased after the financial crisis, while exchange rate pass-through in advanced economies has remained relatively low and stable over time. Second, we show that the declining pass-through in emerging markets is related to declining inflation. Third, we show that it is important to control for non-linearities when estimating exchange rate passthrough. These results hold for both short-run and long-run pass-through and remain robust to extensive changes in the specifications.

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We show that currency networks in cross-border bank lending have a significant impact on the size, distribution, and direction of international monetary policy spillovers. Utilizing a novel dataset, we map the major currency networks in international banking and show that the US dollar dominates at the global level. Next, we provide evidence that during the 2013 Fed taper tantrum, the degree of exposure to US dollar lending had a significant impact on cross-border bank lending growth. Most notably, it had a strong negative impact on cross-border flows to emerging markets.

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Cross-border banking and monetary policy spillovers: implications for Emerging Europe
Oct 6, 2019
E Berglöf (ed), Monetary policy, economic integration and the “new normal” LSE

The CCP (central counterparty) bank nexus
Oct 6, 2019
P Nagy-Mohacsi and A Belaisch (eds), Financial resilience and systemic risk, LSE

Absztrakt

We study how domestic and global output gaps affect CPI inflation. We use a New-Keynesian Phillips curve framework which controls for non-linear exchange rate movements for a panel of 26 advanced and 22 emerging economies covering the 1994Q1−2017Q4 period. We find that both global and domestic output gaps are significant drivers of inflation both in the pre-crisis (1994–2008) and post-crisis (2008–2017) periods. Furthermore, after the crisis, in advanced economies the effect of the domestic output gap declines, while in emerging economies the effect of the global output gap declines. Our results suggest that emerging and advanced economies have become more similar to each other in terms of output gaps as inflation drivers. The paper demonstrates the usefulness of the New Keynesian Phillips curve in identifying the impact of global and domestic output gaps on inflation.

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Systemically important banks and central counterparties (CCPs) interact in highly concentrated over-the-counter (OTC) derivatives markets. We outline the CCP-bank nexus to think about the endogenous interactions between banks and CCPs in periods of stress. As these interactions could potentially lead to destabilising feedback loops, the risks of banks and CCPs should be considered jointly, rather than in isolation.

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The ABCs of bank PBRs
Mar 11, 2018
BIS Quarterly Review

Price-to-book ratios have been unusually low for many banks since the Great Financial Crisis. Ratios below one, in particular, have been seen as reflecting market concerns about banks’ health and profitability as well as the need for shifts in business models. But what drives these valuations globally? What explains consistently low levels for some banks and jurisdictions? This special feature proposes an empirical valuation methodology based on the intangible value attached to bank assets and liabilities. Our model fits the data well across time and banks, suggesting that measures targeting traditional drivers of profitability, such as the proactive management of non-performing loans, remain essential in enhancing bank valuations.

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The inflation process
Nov 8, 2016
BIS Papers 89

This paper documents three major and favourable inflation dynamics in emerging market economies (EMEs). First, the level of inflation has moderated in EMEs and has been broadly stable since the early 2000s. Second, inflation persistence has declined over the past decade. Third, EME exchange rate pass-through, both short-term and long-term, has also declined after the financial crisis. In addition, the paper shows that the role of global factors on inflation is larger for EMEs that are more open to trade.

Absztrakt

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 cross-border lending to EME borrowers were insignificant.

Absztrakt

Age and inflation
May 1, 2016
IMF Finance and Development

Baby boomers drove down inflation when they joined the workforce and will drive it up as they retire.

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The role of debt securities markets
Nov 1, 2015
BIS Papers 83

Debt securities markets in emerging market economies (EMEs) have grown over the past decade. The growth was particularly strong for domestic debt securities, which have increased from around one third of EME GDP to around one half. Although international debt securities have demonstrated slower growth, bonds still overtook bank loans in international financing flows. This growth was, however, heterogeneous,
reflecting economy-specific factors. While bonds bring economic benefits, especially in funding diversification, the rapid growth in debt securities markets also raises financial stability risks.

Absztrakt

International monetary spillovers
Sep 7, 2015
BIS Quarterly Review

Interest rates have moved closely together internationally in recent years, despite business cycles often being at different stages across countries. We investigate whether international monetary spillovers drove this co-movement, ie whether interest rates in core advanced economies drove interest rates elsewhere. Applying a fixed-effects panel regression to 30 emerging market and smaller open advanced economies over the post-2000 period, we find that (i) US short- and long-term interest rates significantly affect the corresponding rates in other economies and (ii) these price spillovers reflect in part policy spillovers, ie that US policy rates affect policy rates in other countries. These monetary spillovers imply that the interest rate declines seen over the last seven years in the United States have had a considerable impact on interest rates elsewhere.

Absztrakt

Cross-border bank lending to emerging markets slowed sharply during the taper tantrum. The abruptness of this slowdown varied considerably across both lenders and borrowers. We use newly available data to explain the drivers of this cross-sectional variation. Although the initial tapering shock originated from advanced economies, EME-specific factors explain the bulk of the variation in the slowdown across lender-borrower pairs.

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In this paper we investigate how monetary policy in advanced economies affects financial conditions in emerging market economies (EMEs). We find evidence for the working of several international transmission channels. In particular, advanced economy monetary policy, as proxied by US monetary conditions, seems to drive EME policy rates beyond what domestic factors would suggest. Furthermore, US long-term interest rates also affect EME long-term interest rates significantly. Finally, our results suggest that while the impact of US monetary policy has weakened, the co-movement of long-term rates became stronger after the financial crisis in 2008.

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Many emerging markets have intervened in FX markets during and after the global financial crisis to dampen movements in exchange rates and smooth volatile capital flows. Firstly, we show that the joint dynamics of capital flows, FX changes and asset returns in emerging markets are largely consistent with portfolio rebalancing of international investors. This suggests that large and volatile capital flows are here to stay and policy makers will have to devise effective frameworks to deal with them. Secondly, we analyse the differences between FX interveners and non-interveners. We show that intervening economies, on average, have exhibited dynamics that are less destabilising. In particular since 2009, non-intervening economies tend to experience additional capital inflows in response to an exchange rate appreciation –
and these capital inflows then create additional appreciation pressures on the exchange rate (ie a momentum effect). In contrast, intervening economies have been able to break the destabilising feedback loop of this momentum effect.

Absztrakt

Cross-border bank lending to emerging markets dropped sharply in the second half of 2011 as the euro area crisis intensified. Stefan Avdjiev (BIS), Zsolt Kuti (Magyar Nemzeti Bank) and Előd Takáts (BIS) use the BIS international banking statistics to identify the key drivers of this decline. Their results suggest that the latest contraction in cross-border bank lending was largely linked to the deteriorating health of euro area banks.

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In this paper we analyse how fiscal policy has affected monetary policy in the emerging market economies (EMEs). We find that most EMEs have pursued countercyclical fiscal and monetary policy over the past decade, with little evidence of fiscal dominance, in contrast to earlier periods. Our results also suggest that stronger fiscal positions are weakly associated with lower equilibrium real interest rates, and smaller deficits with lower inflation. Overall, improvements in fiscal policy in EMEs appear to have increased the effectiveness of monetary policy.

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Aging and house prices
Sep 16, 2012
Journal of Housing Economics

The paper investigates how aging will affect house prices. It uses for the first time a house price dataset covering 22 advanced economies. The analysis finds that demography did and will affect real house prices significantly. The results suggest that a major shift is taking place. In the past 40 years, on average demography increased advanced economy real house prices by around 30 basis points per annum, while in the next 40 years aging will decrease them on average by around 80 basis points per annum compared to neutral demographics. The shift from demographic tailwinds to headwinds might also be relevant when thinking about financial asset prices.

Absztrakt

Countercyclical policies in emerging markets
Jun 2, 2012
BIS Quarterly Review

Emerging market economies (EMEs) have historically faced challenges in implementing countercyclical policies. However, the policy environment has changed. This paper finds evidence that EMEs were able to conduct countercyclical monetary and fiscal policies over the past decade. Indeed, the EMEs that have leaned more heavily against the business cycle have generally used both monetary and fiscal tools to do so.

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Globalisation has allowed emerging market economies to capitalise on their comparative advantage and reap rewards in terms of rapid economic development and rising living standards. Capital movements became more responsive to changes in saving and investment patterns globally. International banks have facilitated these capital flows, and in many countries have also transferred valuable banking technology and expertise.

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The global financial crisis shook the foundations of international banking and finance and put the international banking system under intense stress. Many financial markets became dysfunctional, and many international banks went bankrupt. Although the crisis originated in advanced economies, it quickly moved to emerging market economies (EMEs), particularly in the aftermath of the collapse of Lehman Brothers. Cross-border bank lending proved to be one of the major financial channels through which stresses in the international financial system were transmitted to individual EMEs. This paper examines cross-border bank lending during the crisis. It also aims to understand the role played by international banks and hopes to provide lessons for thinking about economic policy.

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Cross-border bank lending dropped sharply during the financial crisis. This feature uses a panel regression framework to analyse the key drivers of cross-border bank lending to 21 emerging market economies between 1995 and 2009. The analysis suggests that both demand and supply factors contributed to the fall, but the impact of supply was stronger. The two factors seem to have had more balanced effects before the crisis.

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The article shows how excessive reporting, called “crying wolf”, can dilute the information value of reports and how more reports can mean less information. Excessive reporting is investigated by undertaking the first formal analysis of money laundering enforcement. Banks monitor transactions and report suspicious activity to government agencies, which use these reports to identify investigation targets. Banks face fines should they fail to report money laundering. However, excessive fines force banks to report transactions which are less suspicious. The empirical evidence is shown to be consistent with the model’s predictions. The model is used to suggest implementable corrective policy measures, such as decreasing fines and introducing reporting fees.

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Promotions, Dismissals, and Employee Selection: Theory and Evidence
Aug 2009
Journal of Law, Economics, and Organization

Firms offer highly complex contracts to their employees. These contracts contain a mix of incentives, such as fixed wages, bonus payments, promotion options, and dismissals or threats of dismissal. In this article, we show that firms having a production process that is sensitive to employee quality may find it optimal to combine cost-efficient incentives such as bonuses and promotions with dismissals. Based on this result, we derive a hierarchy of incentives. Furthermore, we demonstrate the close link between the optimal contract and the employee sorting and selection and use this to analyse the information conveyed in employment matches.

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The authors first present the general principles of money laundering. They go on to illustrate an institutional and empirical framework that is useful in evaluating the causes and effects of money laundering phenomena in the banking and financial markets. They also analyse the design of the national and international policies aimed at combating them.

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GEN.:2021.11.27. - 14:27:28