Money Market Pressure and the Determinants of Banking Crises

This article develops an index of money market pressure to identify banking crises. We define banking crises as periods in which there is excessive demand for liquidity in the money market. We begin with the theoretical foundation of this new method. With the newly defined crisis episodes, we examine the determinants of banking crises using data complied from 47 countries. We find that slowdown of real GDP, lower real interest rates, extremely high inflation, large fiscal deficits, and over-valued exchange rates tend to precede banking crises. The effects of monetary base growth on the probability of banking crises are negligible.     

How Does Household Portfolio Diversification Vary with Financial Literacy and Financial Advice?

Household investment mistakes are an important concern for researchers and policymakers alike. Portfolio underdiversification ranks among those mistakes that are potentially most costly. However, its roots and empirical importance are poorly understood. I estimate quantitatively meaningful diversification statistics and investigate their relationship with key variables. Nearly all households that score high on financial literacy or rely on professionals or private contacts for advice achieve reasonable investment outcomes. Compared to these groups, households with below‐median financial literacy that trust their own decision‐making capabilities lose an expected 50 bps on average. All group differences stem from the top of the loss distribution.     

Does Interbank Borrowing Reduce Bank Risk?

In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks that allows us to explore the impact of interbank lending when exposures are long term and interbank borrowers are small banks. The results of the empirical analysis generally confirm the hypothesis that long-term interbank exposures result in lower risk of the borrowing banks.     

The father role: father-child interaction in work on the farm

This study examines the relationship between the perceived success of farm men in the father role and (i) frequency of work with their children and (ii) perceived conflicts over work. Data were collected by mail survey from 124 men employed in farm work. This study concludes that fathers who think themselves successful in the father role are likely to have less conflict with their children about work. The age, education and income of the father do not contribute significantly to father-child conflict about work.     

THE TRANSITION TO EUROPEAN MONETARY UNION AND THE EUROPEAN MONETARY INSTITUTE

The European Monetary Institute (EMI) will prepare a framework for European Monetary Union (EMU) monetary policy during the transition to the EMU. This involves a trade-off between deepening financial market integration and harmonizing central bank instruments, a choice between centralized and decentralized monetary strategies with significant welfare implications, and a trade-off between expected welfare and certainty of policy outcomes. As a result of being dominated by national central bankers and of the conflict between the core and the periphery of the European Community (EC), the EMI is biased toward an inefficient solution. Enlargement of the EC by the European Free Trade Area (EFTA) group would raise the probability of a more efficient, two-track EMU, which initially would involve only the core group.     

M‐PRESS‐CreditRisk: Microprudential and Macroprudential Capital Requirements for Credit Risk under Systemic Stress

M‐PRESS‐CreditRisk is a novel stress testing approach that can help authorities gauge banks' capital adequacy related to credit risk. For the first time, it combines the assessment of microprudential capital requirements under Pillars 1 and 2 and macroprudential buffers in a unified, coherent framework. Its core element is an advanced credit portfolio model—SystemicCreditRisk—built upon a rich, nonlinear dependence structure for correlated bank portfolios. The model is applied to a sample of 12 systemically important German banking groups and delivers measures for systemic credit risk and the banks' contributions to it in both baseline and stress scenarios.