Institutional research & analysis
INSTITUTIONAL
Climate change is an important source of macroeconomic risk with direct implications for monetary policy and financial stability. Physical risks, including more frequent and severe weather events, disrupt production and damage infrastructure, generating supply and demand side pressures that affect output and inflation.
This paper introduces a framework for performing Bayesian inference using quantum computation. It presents a proof-of-concept quantum algorithm that performs posterior sampling. We provide an accessible introduction to quantum computation for economists and a practical demonstration of quantum-based posterior sampling for Bayesian estimation.
We present empirical evidence from the United States demonstrating that labour market flows provide valuable insights into subsequent wage and price inflation.
Open finance is transforming the financial system, with rapid adoption in several jurisdictions in the years since its introduction. By enabling the sharing and use of customer-permissioned data, open finance can foster innovation, competition and financial inclusion. Early evidence highlights a role for open finance in breaking through data silos, reducing information asymmetries and driving venture capital investment.
Using data on four USD-pegged stablecoins and 27 fiat currencies, this paper documents spillovers from stablecoin-based foreign exchange (FX) to traditional FXmarkets. We document a gap between the cost of acquiring dollars via stablecoins and via the spot FX market (parity deviations). To establish a causal link between stablecoin flows and FX markets, we use a granular instrumental variable that exploits idiosyncratic shocks to stablecoin net inflows in other currencies.
Conventional indicators of fiscal sustainability, such as the interest rate-growth differential that focus on long-term drivers do not always incorporate fluctuating financial conditions and risk. This paper proposes an analytical framework in which sovereign borrowing costs depend on the balance-sheet capacity of financial intermediaries, where financial amplification can generate an endogenously tighter debt limit even in the absence of fiscal fatigue or explicit default risk. Fiscal space ...
Data plays a critical role in the transformation of the financial sector through artificial intelligence (AI). While challenges in data management are not new, they pose significant barriers to the wider adoption of advanced AI systems, such as generative AI (gen AI). Key concerns include data privacy, quality and security, which are further intensified by third-party dependencies and market concentration among major service providers. Effectively managing data-related risks is essential to e...
Recent episodes of market turmoil, eg the Archegos Capital collapse in 2021 or the United Kingdom's liability-driven fund stress in September 2022, showed that rapid increases in margin and collateral requirements, while essential for managing counterparty risk, can amplify liquidity needs across the financial system, especially if market participants are unprepared.
The banking turmoil that started in March 2023 was the most significant period of banking stress since the Great Financial Crisis that began in 2007. Credit Suisse, a Swiss global systemically important bank, along with three regional banks in the United States, with total assets exceeding USD 1 trillion, were either shut down, put into receivership or rescued. These failures triggered a crisis of confidence in banks' resilience and led to wide-scale public support measures.
A third-party service provider (TPSP) is an entity or individual that performs services, activities, functions, processes or tasks directly for a bank. Banks enter into formal arrangements with TPSPs for various reasons, including enabling access to specialised expertise, reducing costs and improving scalability, efficiency and operational resilience.
In 2021, the International Association of Insurance Supervisors (IAIS) published a statement that explained the importance of diversity, equity and inclusion (DEI) considerations in insurance supervision. Its Application Paper on supervising diversity, equity and inclusion: the governance, risk management and culture perspective elaborates on the significance of DEI in the supervision of risk management and corporate culture of insurers, in accordance with the IAIS Insurance Core Principles (...
This paper examines asymmetries in the effects of geopolitical events on international bank credit, contrasting adverse events, such as the 2022 invasion of Ukraine, with positive events like the fall of the Berlin Wall in 1989.
