PAPERS & NOTES
OUR PAPERS & NOTES
We also conduct research that is published as research papers and notes. These often appear in peer-reviewed journals in economics, finance and investments. Find below some of our research.
PUBLISHED PAPERS
"A shadow rate without a lower bound constraint"
Author(s): Rafael B. De Rezende & Annukka Ristiniemi (ECB, external)
Journal of Banking and Finance, January 2023
PAPER OPEN ACCESS. CLICK HERE TO DOWNLOAD
We propose a shadow rate without a lower bound constraint that measures the overall stance of monetary policy in any policy environment, prior and during the lower-bound period, as well as in the current “New Normal” environment, where unconventional monetary policies have become more standard. Using daily yield curve data we estimate shadow rates for the US, Sweden, the euro area and the UK, and document that they fall (rise) as monetary policy becomes more expansionary (contractionary), following announcements of policy rate cuts (hikes), forward guidance, and balance sheet expansions (contractions). In addition, we show two applications for our shadow rate. First, we decompose shadow rate responses to monetary policy announcements into conventional and unconventional monetary policy surprises, and assess the pass-through of each type of policy to exchange rates. We find that exchange rates respond more to conventional than to unconventional monetary policy. Lastly, counterfactual experiments in two DSGE models suggest that inflation in the US and in Sweden would have been on average about 0.8 and 0.33 percentage points lower, respectively, had unconventional monetary policy not been used.
"An event-driven bank stress indicator: the case of US regional banks"
(unpublished - to appear)
Author(s): Rafael B. De Rezende
April 2023
SUBSCRIBE TO GAIN ACCESS
Financial markets have been shaken by the surge of a banking crisis in early 2023. The failure of Silicon Valley Bank has raised concerns about the health of various financial institutions in a period of rapid monetary contraction and high interest rates. I discuss the stress level of sixty US regional banks, by proposing a new “bank stress indicator”, based on an event study framework. The indicator suggests at least six banks with high levels of stress. The launching of the new Bank Term Funding Program by the Fed has helped to lower the risk of new failures as it is designed to feed liquidity shortages that can be derived from withdrawals of uninsured deposits. I also analyze their financial health. Some of these banks have been highly profitable, and had built solid balance sheet positions over the past years.
"Effects of cost of mortgage on house prices: the role of the maturity structure of mortgage contracts" (unpublished - to appear)
Author(s): Rafael B. De Rezende
April 2023
SUBSCRIBE TO GAIN ACCESS
This paper examines how the maturity structure of mortgage contracts influences the effects of cost of mortgage on house prices. Theoretical results show that the cost of mortgage becomes more sensitive to changes in mortgage rates the larger the share of variable interest rate mortgage contracts and the lower the mortgage rate. House prices, in turn, become more sensitive to changes in mortgage rates the larger the effects of the cost of mortgage on house prices, the higher the loan-to-value ratio, and the larger the share of variable interest rate mortgage contracts in the economy. I present empirical results that support my arguments. Local projections estimated for the US, UK, Sweden, and Canada, and estimated interest rate sensitivities of cost of mortgage and house prices are also in line with theory. I also discuss implications of my results for how monetary policy affects house prices.