Financial innovations and systemic risk – a financial stability policy perspective

2020 ◽  
pp. 60-76
Author(s):  
Adam Głogowski
Keyword(s):  
Systemic Risk ◽  
Financial Stability ◽  
Policy Perspective ◽  
Financial Innovations

Macroprudential Policy Instruments of Central Banks

2012 ◽  
pp. 32-47
Author(s):  
S. Andryushin ◽  
V. Kuznetsova
Keyword(s):  
Systemic Risk ◽  
Financial Stability ◽  
Financial System ◽  
Policy Instruments ◽  
Central Banks ◽  
Macroprudential Policy ◽  
Policy Studies ◽  
The Future ◽  
Financial Cycles

The paper analyzes central banks macroprudencial policy and its instruments. The issues of their classification, option, design and adjustment are connected with financial stability of overall financial system and its specific institutions. The macroprudencial instruments effectiveness is evaluated from the two points: how they mitigate temporal and intersectoral systemic risk development (market, credit, and operational). The future macroprudentional policy studies directions are noted to identify the instruments, which can be used to limit the financial systemdevelopment procyclicality, mitigate the credit and financial cycles volatility.

scholarly journals Fiscal-Monetary-Financial Stability Interactions in a Data-Rich Environment

2018 ◽  
Vol 18 (3) ◽  
pp. 195-224 ◽  
Author(s):  
Martin Hodula ◽  
Lukáš Pfeifer
Keyword(s):  
Monetary Policy ◽  
Systemic Risk ◽  
Financial Stability ◽  
House Prices ◽  
Empirical Support ◽  
Financial Sector ◽  
Economic Policies ◽  
Real Economy ◽  
Monetary Policies ◽  
Fiscal And Monetary Policy

Abstract In this paper, we shed some light on the mutual interplay of economic policy and the financial stability objective. We contribute to the intense discussion regarding the influence of fiscal and monetary policy measures on the real economy and the financial sector. We apply a factor-augmented vector autoregression model to Czech macroeconomic data and model the policy interactions in a data-rich environment. Our findings can be summarized in three main points: First, loose economic policies (especially monetary policy) may translate into a more stable financial sector, albeit only in the short term. In the medium term, an expansion-focused mix of monetary and fiscal policy may contribute to systemic risk accumulation, by substantially increasing credit dynamics and house prices. Second, we find that fiscal and monetary policy impact the financial sector in differential magnitudes and time horizons. And third, we confirm that systemic risk materialization might cause significant output losses and deterioration of public finances, trigger deflationary pressures, and increase the debt service ratio. Overall, our findings provide some empirical support for countercyclical fiscal and monetary policies.

Systemic risk, SIFIs and financial stability

2011 ◽  
Vol 6 (2) ◽  
pp. 197-213 ◽  
Author(s):  
R. M. Lastra
Keyword(s):  
Systemic Risk ◽  
Financial Stability

scholarly journals Economic Insecurity as Systemic Risk

2015 ◽  
Vol 62 (s1) ◽  
pp. 29-36
Author(s):  
Ion Pârţachi ◽  
Eugeniu Gârlă
Keyword(s):  
Systemic Risk ◽  
Economic Activity ◽  
Financial Stability ◽  
Banking Sector ◽  
Activity Index ◽  
Analytical Description ◽  
Economic Security ◽  
Economic Insecurity ◽  
Corporate Sector ◽  
New Approach

Abstract Difficulties related to the problem of evaluating the economic security / insecurity, including the threshold of economic security / insecurity, namely the impossibility of giving an analytical description of a criterion entirely made up of a set of indicators describing the degree of economic security / insecurity, makes more and more researchers, including the authors, to seek indirect ways of finding solutions, for example considering systemic risk., as a measure of evaluation. Thus, starting from a new approach, and given the specific components of systemic risk to financial stability: the banking sector, corporate sector, public sector, volume of credits, economic activity index the threshold vector of economic security / insecurity can be developed. The study shows that systemic risk can be used to measure the threshold of economic security /insecurity.

scholarly journals The Time-Spatial Dimension of Eurozone Banking Systemic Risk

Risks ◽  
2019 ◽  
Vol 7 (3) ◽  
pp. 75 ◽  
Author(s):  
Matteo Foglia ◽  
Eliana Angelini
Keyword(s):  
Spatial Econometrics ◽  
Systemic Risk ◽  
Spatial Dependence ◽  
Financial Stability ◽  
Risk Measure ◽  
Spatial Dimension ◽  
Time Dimension ◽  
Cross Sectional ◽  
Time Space ◽  
Contagion Risk

In this paper, we measure the systemic risk with a novel methodology, based on a “spatial-temporal” approach. We propose a new bank systemic risk measure to consider the two components of systemic risk: cross-sectional and time dimension. The aim is to highlight the “time-space dynamics” of contagion, i.e., if the CDS spread of bank i depends on the CDS spread of other banks. To do this, we use an advanced spatial econometrics design with a time-varying spatial dependence that can be interpreted as an index of the degree of cross-sectional spillovers. The findings highlight that the Eurozone banks have strong spatial dependence in the evolution of CDS spread, namely the contagion effect is present and persistent. Moreover, we analyse the role of the European Central Bank in managing contagion risk. We find that monetary policy has been effective in reducing systemic risk. However, the results show that systemic risk does not imply a policy intervention, highlighting how financial stability policy is not yet an objective.

MACRO- AND MICROPRUDENTIAL POLICIES: SWEET AND LOWDOWN IN A CREDIT NETWORK AGENT-BASED MODEL

2019 ◽  
pp. 1-20
Author(s):  
Ermanno Catullo ◽  
Federico Giri ◽  
Mauro Gallegati
Keyword(s):  
Systemic Risk ◽  
Financial Stability ◽  
Agent Based Model ◽  
Agent Based ◽  
Macroprudential Policies ◽  
The Stability ◽  
The Individual ◽  
The Cost ◽  
Individual Choices ◽  
Credit Network

The paper presents an agent-based model reproducing a stylized credit network that evolves endogenously through the individual choices of firms and banks. We introduce in this framework a financial stability authority in order to test the effects of different prudential policy measures designed to improve the resilience of the economic system. Simulations show that a combination of micro- and macroprudential policies reduces systemic risk but at the cost of increasing banks’ capital volatility. Moreover, the agent-based methodology allows us to implement an alternative meso regulatory framework that takes into consideration the connections between firms and banks. This policy targets only the more connected banks, increasing their capital requirement in order to reduce the diffusion of local shocks. Our results support the idea that the mesoprudential policy is able to reduce systemic risk without affecting the stability of banks’ capital structure.

scholarly journals Bank Networks and Systemic Risk: Evidence from the National Banking Acts

2019 ◽  
Vol 109 (9) ◽  
pp. 3125-3161 ◽  
Author(s):  
Haelim Anderson ◽  
Mark Paddrik ◽  
Jessie Jiaxu Wang
Keyword(s):  
Network Model ◽  
Network Structure ◽  
Systemic Risk ◽  
Financial Stability ◽  
Balance Sheets ◽  
Unique Data ◽  
Financial Center ◽  
Bank Balance Sheets ◽  
The City ◽  
Systemically Important Banks

The National Banking Acts (NBAs) of 1863–1864 established rules governing the amounts and locations of interbank deposits, thereby reshaping the bank networks. Using unique data on bank balance sheets and detailed interbank deposits in 1862 and 1867 in Pennsylvania, we study how the NBAs changed the network structure and quantify the effect on financial stability in an interbank network model. We find that the NBAs induced a concentration of interbank deposits at both the city and bank levels, creating systemically important banks. Although the concentration facilitated diversification, contagion would have become more likely when financial center banks faced large shocks. (JEL E44, G01, G21, G28, L14, N21)

Systemic risk, governance and global financial stability

2014 ◽  
Vol 45 ◽  
pp. 175-181 ◽  
Author(s):  
Luci Ellis ◽  
Andy Haldane ◽  
Fariborz Moshirian
Keyword(s):  
Systemic Risk ◽  
Financial Stability ◽  
Risk Governance

scholarly journals Financial Stability Indicators – The Case of Croatia

2016 ◽  
Vol 5 (1) ◽  
pp. 113-140 ◽  
Author(s):  
Mirna Dumičić
Keyword(s):  
Principal Component Analysis ◽  
Systemic Risk ◽  
Financial Stability ◽  
Principal Component ◽  
Small Open Economies ◽  
Macroprudential Policy ◽  
Policy Makers ◽  
The Public ◽  
Systemic Risks ◽  
Accumulation Index

Abstract This paper considers financial stability through the processes of accumulation and materialisation of systemic risks. To this end, the method of principal component analysis on the example of Croatia has been used to construct two composite indicators – a systemic risk accumulation index and an index reflecting the consequences of systemic risk materialisation. In the construction of the indices, the features and risks specific to small open economies were considered. Such an approach to systemic risk analysis facilitates the monitoring and understanding of the degree of financial stability and communication of macroprudential policy makers with the public.

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