Browsing by Subject "financial crisis"

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  • Noth, Felix; Busch, Matias Ossandon (2017)
    BOFIT Discussion Papers 11/2017
    This paper estimates the effect of a foreign funding shock to banks in Brazil after the collapse of Lehman Brothers in September 2008. Our robust results show that bank-specic shocks to Brazilian parent banks negatively affected lending by their individual branches and trigger real economic consequences in Brazilian municipalities: More affected regions face restrictions in aggregated credit and show weaker labor market performance in the aftermath which documents the transmission mechanism of the global financial crisis to local labor markets in emerging countries. The results represent relevant information for regulators concerned with the real effects of cross-border liquidity shocks.
  • Simola, Heli (2021)
    Bank of Finland Bulletin. Blog
    The global economy and global trade flows have been hit hard by the COVID-19 crisis. The trade collapse in the second quarter of 2020 was even more severe than during the trough of the global financial crisis (GFC) in 2009. However, taking into account the substantial fall in the GDP of most countries during the COVID-19 crisis, the relative trade contraction seems milder compared with the GFC. During the GFC, the combined volume of the GDP in OECD countries contracted by about 5%, and the combined volume of imports of goods and services by 17% from peak to trough (Figure 1). The corresponding figures for the COVID-19 crisis were -12% and -20%, respectively. Trade has also recovered rapidly since the trough in the second quarter of 2020. Trade was almost back at pre-crisis level by the end of the year.
  • Liikanen, Erkki (2018)
    Bank of Finland. Bulletin 1/2018
    Recent developments in the euro area and global economy have been favourable. In the euro area, economic growth is strong and broad-based, which is also reflected in decreasing unemployment. The output gap has closed in most euro area countries on the back of economic growth. Inflation remains still subdued, but confidence in inflation converging towards the ECB's objective has strengthened. Despite current favourable developments, the lessons learned from the financial and euro crises must not be forgotten.
  • Bonin, John P.; Louie, Dana (2015)
    BOFIT Discussion Papers 31/2015
    Our objective is to examine empirically the behavior of foreign banks regarding real loan growth during a financial crisis for a set of countries in which these banks dominate the banking sectors due primarily to having taken over large existing former state-owned banks. The eight countries are among the most developed in Emerging Europe, their banking sectors having been modernized by the beginning of the time period.We consider a data period that includes an initial credit boom (2004 – 2007) followed by the global financial crisis (2008 & 2009) and the onset of the Eurozone crisis (2010). Our main innovations with respect to the existing literature on banking during the financial crisis are to include explicit consideration of exchange rate dynamics and to separate foreign banks into two categories, namely, subsidiaries of the Big 6 European MNBs and all other foreign-controlled banks. Our results show that bank lending was impacted adversely by the crisis but that the two types of foreign banks behaved differently. The Big 6 banks remained committed to the region in that their lending behavior was not different from that of domestic banks corroborating the notion that these countries are a “second home market” for these banks. Contrariwise, the other foreign banks were primarily responsible for fueling the credit boom prior to the crisis but then “cut and ran” by decreasing their lending appreciably during the crisis. Our results also indicate different bank behavior in countries with flexible exchange rate regimes from those in the Eurozone. Hence, we conclude that both innovations matter in empirical work on bank behavior during a crisis in the region and may, by extension, be relevant to other small countries in which banking sectors are dominated by foreign financial institutions.
  • Mäkinen, Mikko (2021)
    BOFIT Discussion Papers 8/2021
    Can a major financial crisis trigger changes in a bank’s risk-taking behavior? Using the 2008 Global Financial Crisis as a quasi-natural experiment and a difference-in-differences approach, I examine whether the worst crisis-hit Russian banks – the banks that have strong incentives to behavior-altering changes – can decrease their post-crisis exposure to risk. A shift in risk-taking behavior by these banks indicates the learning hypothesis. The findings are mixed. The evidence concerning credit risk is inconsistent with the learning hypothesis. On the other hand, the evidence concerning solvency risk is consistent with the learning hypothesis and corroborates evidence from the Nordic countries (Berglund and Mäkinen, 2019). As such, bank learning from a financial crisis may not depend on the institutional context and the level of development of national financial market. Several robustness checks with alternative regression specifications are provided.
  • Bank of Finland (2018)
    Bank of Finland. Bulletin 1/2018
    Following the steep contraction caused by the financial crisis, there have been substantial differences in economic performance across the different countries in the euro area. Some countries experienced a double recession from which recovery has been slow. In others, the economy picked up at a steady pace, and in some cases actually rather quickly. The stressed economies in the euro area have also recovered at varying speeds. Healthy economic structures seemed to have facilitated a speedier recovery. At the moment, the four largest euro area economies are growing at a rate above their potential output. Nevertheless, their long-term growth prospects differ from each other.
  • Łyziak, Tomasz; Paloviita, Maritta (2017)
    Bank of Finland Research Discussion Papers 13/2017
    Available also in Economic Modelling 72 ; June ; 2018
    This paper studies the formation of inflation expectations in the euro area. We first analyse the forecast accuracy of ECB inflation projections relative to private sector forecasts. Then, using the ECB Survey of Professional Forecasters (ECB SPF), we estimate a general model integrating two theoretical concepts: the hybrid model of expectations, including rational and static expectations, and the sticky-information (epidemiological) model. When modelling inflation expectations we consider – except for backward-looking factors – the rational expectations assumption and the effects of ECB communication. More specifically, we examine whether ECB inflation projections are still important in expectations’ formation once the impact of forward-lookingness of economic agents has been taken into account. We also derive implicit (perceived) inflation targets and assess their consistency with the official ECB inflation target. Our analysis indicates that the recent turbulent times have contributed to changes in expectations’ formation in the euro area, as the importance of backward-looking mechanisms has decreased, while the importance of the perceived inflation target has increased. We also find that the perceived inflation target has remained broadly consistent with the official ECB inflation target in the medium-term. However, the downward trend of the perceived target suggests some risks of de-anchoring of inflation expectations. The importance of ECB inflation projections for medium-term private sector inflation expectations has increased over time, but the magnitude of this effect is rather small. However, SPF inflation forecasts remain consistent with ECB communication, being either close to ECB projections or between ECB projections and the inflation target.
  • Anttila, Juho (2016)
    Bank of Finland. Bulletin 4/2016
    Deep recessions have typically led to a permanent step down to a lower growth trajectory. However, since the financial crisis of 2008, the growth rate itself has also been exceptionally slow, due to weak growth in total factor productivity. In addition to the recession itself, the slow pace of recovery does, in fact, constitute a significant part of the overall costs of the crisis.
  • Gulan, Adam (2018)
    Bank of Finland Research Discussion Papers 22/2018
    Since the Global Financial Crisis, academic economists and policymakers have had to deal with uncomfortable questions about the quality of their models and the state of macroeconomics as a profession. This note offers a summary of this discussion, focusing on the Dynamic Stochastic General Equilibrium (DSGE) framework and its underpinnings. This class of models reflects both theoretical advances and perennial modeling challenges. While DSGE modeling developed in times of scarce micro data and limited computational resources, it has much room for improvement given progress along these dimensions and advances in other branches of economics. Key tasks on the to-do-list for model improvement include the modeling on the financial sector, departures from the representative agent and rationality, as well as clarification of the empirical relevance of the Lucas critique. The framework is likely to remain a major research and policy tool, although its limitations call for greater robustness, validation and open recognition of uncertainty in drawing real-life quantitative conclusions.
  • Bank of Finland (2010)
    Editorial+Financial accelerator and investment in a small open economy in a currency union+Dynamic stochastic general equilibrium model for China
  • Bank of Finland (2008)
    Editorial+Improving the quantitative performance of the standard labour market matching model: introducing heterogeneity among new and existing matches+Overlapping claims and the possibility of financial contagion: exploring the Finnish interbank markets+The economic impact of corruption
  • Bank of Finland (2009)
    Editorial+Financial factors and aggregate fluctuations+Monetary policy rules in emerging economies
  • Bank of Finland (2010)
    Editorial: Bank capital and business cycle fluctuations+Great depressions: How important are financial frictions?+Economic crisis and exchange rate fluctuations
  • Battaglia, Francesca; Buchanan, Bonnie G.; Fiordelisi, Franco; Ricci, Ornella (2018)
    Bank of Finland Research Discussion Papers 26/2018
    The 2008 global financial crisis highlights the importance of securitization and crash risk. Yet there is a dearth of papers exploring the link between securitization and crash risk. We analyze 7,096 securitization deals made by large European listed banks between 2000 and 2017. Our paper provides evidence that bank risk declines in the year of the securitization and increases in the following year. We also show that this effect is driven by low-risk securitization deals. We use a dynamic panel data approach to establish a causal relationship and control the robustness of our results by using different tail risk measures (such as crash risk, value at risk, and expected shortfall). We also show that the risk reduction effect is weaker in crisis periods relative to normal times. Our findings have policy implications as regulators attempt to revive European securitization markets.
  • Pönkä, Harri; Sariola, Mikko (2021)
    Bank of Finland. Bulletin 6/2020
    In the Bank of Finland’s December 2020 forecast, the crisis caused by COVID-19 is not expected to be as deep as the global financial crisis and recovery is expected to be faster. Although both recessions have had a broad-ranging impact, in the recession caused by the COVID-19 pandemic it is mainly service industries that have suffered. According to the forecast, the current crisis will result in temporarily slower economic growth in the next few years, but in the medium term the economy will see a return to the growth rates that preceded the crisis.