Uusimmat julkaisut

  • Tuuli, Saara (2019)
    Bank of Finland Research Discussion Papers 4/2019
    This paper investigates the impact of the model-based approach to bank capital regulation (i.e. the Internal Ratings Based Approach; IRBA) on firms' access to finance. A difference-in-differences methodology is used given that the IRBA, introduced as part of Basel II, was adopted by different banks in different times. The results suggest that firms indirectly affected by the new regulation via their main bank adopting the IRBA faced a 6-7 percentage point higher probability of facing a deterioration in their access to finance. When the sample is adjusted for the demand for credit, this estimate increases to 12-13 percentage points. The impact is found to come via increases in the cost of credit and to a smaller extent, reductions in the volume or size of loans. Around three-quarters of the effect is attributed to the sensitivity of the IRBA capital requirements to economic conditions, with adopting banks also found to specialize in low-risk lending.
  • Saka, Orkun (2019)
    Bank of Finland Research Discussion Papers 3/2019
    European banks have been criticized for holding excessive domestic government debt during economic downturns, which may have intensified the diabolic loop between sovereign and bank credit risks. By using a novel bank-level dataset covering the entire timeline of the Eurozone crisis, I first re-confirm that the crisis led to the reallocation of sovereign debt from foreign to domestic banks. This reallocation was only visible for banks as opposed to other domestic private agents and it cannot be explained by the banks' risk-shifting tendency. In contrast to the recent literature focusing only on sovereign debt, I show that banks' private sector exposures were (at least) equally affected by a rise in home bias. Finally, consistent with these patterns, I propose a new debt reallocation channel based on informational frictions and show that informationally closer foreign banks increase their relative exposures when sovereign risk rises. The effect of informational closeness is economically meaningful and robust to the use of different information measures and controls for alternative channels of sovereign debt reallocation.
  • Bircan, Çağatay; Saka, Orkun (2019)
    BOFIT Discussion Papers 1/2019
    We use data on the universe of credit in Turkey to document a strong political lending cycle. State-owned banks systematically adjust their lending around local elections compared with private banks in the same province. There is considerable tactical redistribution: state-owned banks increase credit in politically competitive provinces which have an incumbent mayor aligned with the ruling party, but reduce it in similar provinces with an incumbent mayor from the opposition parties. This effect only exists in corporate lending as opposed to consumer loans, suggesting that tactical redistribution targets job creation to increase electoral success. Political lending influences real outcomes as credit-constrained opposition areas suffer drops in employment and firm sales. There is substantial misallocation of financial resources as credit constraints most affect provinces and industries with high initial efficiency.
  • D'Acunto, Francesco; Hoang, Daniel; Paloviita, Maritta; Weber, Michael (2019)
    Bank of Finland Research Discussion Papers 2/2019
    We use administrative and survey-based micro data to study the relationship between cognitive abilities (IQ), the formation of economic expectations, and the choices of a representative male population. Men above the median IQ (high-IQ men) display 50% lower forecast errors for inflation than other men. The inflation expectations and perceptions of high-IQ men, but not others, are positively correlated over time. High-IQ men are also less likely to round and to forecast implausible values. In terms of choice, only high-IQ men increase their propensity to consume when expecting higher inflation as the consumer Euler equation prescribes. High-IQ men are also forward-looking - they are more likely to save for retirement conditional on saving. Education levels, income, socio-economic status, and employment status, although important, do not explain the variation in expectations and choice by IQ. Our results have implications for heterogeneous-beliefs models of household consumption, saving, and investment.
  • Gallegati, Marco; Giri, Federico; Fratianni, Michele (2019)
    Bank of Finland Research Discussion Papers 1/2019
    How long is the long run in the relationship between money growth and inflation? How important are high inflation episodes for the unit slope finding in the quantity theory of money? To answer these questions we study the relationship between excess money growth and inflation over time and across frequencies using annual data from 1871 to 2013 for several developed countries. Wavelet-based exploratory analysis shows the existence of a close stable relationship between excess money growth and inflation only over longer time horizons, i.e. periods greater than 16 and 24 years, with money growth mostly leading. When we investigate the sensitivity of the unit slope finding to inflation episodes using a scale-based panel data approach we find that low-frequency regression coefficients estimated over variable-length subsamples before and after WWII are largely affected by high inflation episodes. Taken together the results that inflationary upsurges affect regression coefficients but not the closeness of the long-run relationship call for a qualification of the Quantity Theory of Money and suggests that policymakers should not lose interest on monetary developments.