System Of Central Banks Research Articles

Labour Market Adjustment in Europe During the Crisis: Microeconomic Evidence from the Wage Dynamics Network Survey

Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wage-setting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms’ adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey.

Labour Market Adjustment in Europe During the Crisis: Microeconomic Evidence from the Wage Dynamics Network Survey

Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wage-setting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms’ adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey.

The Analytical Credit Dataset. A Magnifying Glass for Analysing Credit in the Euro Area

In May 2016 the Governing Council adopted the AnaCredit Regulation (ECB/2016/13) providing the legal basis for the European System of Central Banks (ESCB) to collect granular information on loans from banks to corporates and other legal persons based on a core set of harmonised concepts and definitions. Starting with reference data from September 2018, credit institutions in the euro area, and possibly elsewhere in the EU, will report to the ECB via the national central banks (NCBs) individual credit exposures falling within the reporting scope. The reporting framework is the outcome of in-depth discussions within the ESCB involving several rounds of consultations with users, the industry and other stakeholders. As set out in the Regulation, AnaCredit will, already in Stage 1, significantly enhance the value for analysis on credit and credit risk in the euro area by providing detailed, timely and harmonised information on individual exposures to legal entities as counterparts. The new data will be useful for several key tasks of the ESCB for a better analysis of credit distribution to the economy, e.g. for monetary policy analysis and operation (risk and collateral management), financial stability, economic research and statistics. The scope of the project might be further expanded in future stages to cover additional lenders, borrowers and instruments. The purpose of this paper is to reflect and illustrate the methodological work and process leading to the definition of the AnaCredit requirements that were eventually included in the Regulation.

The Aggregate Effects of Government Income Transfer Shocks - EU Evidence

This paper estimates the aggregate effect of government income transfer shocks for a sample of EU countries. The new measure of transfer shocks builds on a dataset by public finance experts of the European System of Central Banks (ESCB). The identification strategy consists of a narrative analysis of the old-age pension-related policy actions reported in the ESCB dataset. Increases in old-age pensions are found to have a positive impact on aggregate expenditure components and employment consistent with a multiplier effect of between 0 and 1.

Historia de la creación de la banca central latinoamericana -El pretérito es la base de un presente prominente-

El dinero desempeña tres funciones principales: la primera es servir como medio de cambio, cuando lo utilizamos para comprar bienes y servicios. El trueque es muy ineficiente porque exige una coincidencia de necesidades y deseos entre oferentes y demandantes.La segunda función es la de servir como unidad de cuenta, es decir permite realizar fácilmente comparaciones de valor entre bienes, a través de los precios. La tercera función es como depósito de valor. No obstante, el dinero no es la única forma de “tener” riqueza (depósito de valor). Sin embargo el dinero en efectivo tiene la ventaja de que es difícil de “seguirle la pista” ya que es anónimo, pero la inflación hace que se pierda la riqueza.El dinero tiene un valor nominal superior al valor intrínseco de su contenido en metal o papel. Es por esta razón que el factor confianza (del latín fiducia) es la base para que funcione eficientemente un sistema monetario moderno. Esa necesaria confianza fue perdiéndose cuando la banca privada, que era la que emitía los valores fiduciarios (monedas y billetes), lo hacía sin tener ningún respaldo físico (de oro o plata) y en consecuencia le correspondió al Estado asumir la responsabilidad de restablecer esa confianza y credibilidad en el dinero. Por esto es necesaria la existencia y funcionamiento de la banca central.En esta investigación se relata la historia de la creación de la banca central Latinoamericana, para lo cual iniciaremos con una breve introducción para referirnos a la aparición, alrededor de 5.000 años atrás, de los primeros bancos. Describiremos lo ocurrido en Inglaterra y España con relación a la creación de los bancos centrales en esas naciones, por la influencia que tuvieron esos países en América Latina. Luego haremos un breve recuento de lo ocurrido entre los siglos XVII y XX, periodo en el cual aparece en el mundo la banca central. Finalmente abordaremos sobre la creación de los bancos centrales en Argentina, Colombia, Ecuador, Panamá y Perú. Terminaremos el ensayo con algunas conclusiones.

Money laundering and Greek banking payment and settlement systems

Purpose – The purpose of this paper is to identify, categorize and describe the Greek banking payment and settlement systems and the way to SEPA. Also, the purpose is to describe authorities that supervise money laundering through Greek payment systems and identify major categories of suspicious transaction reports and amounts of criminal assets per each category. Design/methodology/approach – The Bank of Greece, central bank of Greece, has explicit tasks in the field of payment and settlement systems. In Greece, there are three payment and settlement systems: large-value payment system (TARGET2), retail payment systems and securities settlement systems. Findings – TARGET2 is based on a technically centralized platform (single shared platform – SSP), which is provided by the central banks of Germany, France and Italy, and it replaces the decentralized structure of the original TARGET system. Migration on TARGET2 took place in Greece on May 19, 2008. Ongoing cooperation between the European System of Central Banks and the banking community through extensive consultations facilitated the smooth migration to TARGET2. Retail payment systems consist of DIAS credit transfers, direct debits, check, ATM transactions and card payments. During the year 2013, DIAS cleared 144.13 million payment transactions with a total value of €184.1 billion. Most of the transactions were credit transfers SEPA compliant. Securities settlement systems operate on the delivery versus payment principle, whereby sales of securities and respective payments are affected simultaneously, as well as the principle of dual notice. Migration of Greek data systems toward SEPA through a regulatory framework will promote the use of common European standards and business practices for a fully automated and efficient processing of payment instruments. Bank of Greece and Greek Anti-Money Laundering and Counter Terrorist Financing Authority are responsible authorities to supervise illegal activity through bank payment systems. Data show that Greek bank payment systems were used during 2012 for tax evasion and for offences that result in imprisonment for over six months. Practical implications – Above findings are useful for information technology management, legislative and compliance authorities, investors and person that operate transactions with Greek banking payment and settlement systems. Originality/value – To the best of the author’s knowledge, it is the first study about Greek banking payment systems.

Banking on Modernism: Dr H.C. (Nugget) Coombs and the Institutional Architecture of the Reserve Bank of Australia

Australia’s central banking systems were established in 1911 as part of the functions of the Commonwealth Bank of Australia. The Bank’s central banking role and powers gradually evolved over the next four decades and in 1959 the central banking functions of the Commonwealth Bank were separated from its commercial activities with the Reserve Bank Act.On 14 January 1960, the Reserve Bank of Australia (RBA) opened for business with Dr H.C. (Nugget) Coombs as its first Governor. The establishment of the RBA as a separate entity marked a new phase in the institutional setting of the banking sector in Australia and was consolidated by the construction of eight purpose-built offices to accommodate its operations in every Australian state and territory. Through its architecture, interior design, furniture, artworks and graphic identity, the new RBA offices sought to demonstrate the changing role and functions of Australia’s new central bank, engaging with modernism, both locally and internationally.The new buildings reflected Coombs’ ideal of design as an expression of functional elegance and national character as well as his conviction that contemporary design could better reflect the changing institutional character of the banking sector and its relationship to the community it served. The new offices also reflected a post-war cultural shift within the banking industry internationally, away from the traditional architectural emphasis on strength and solidity to a focus on trust, openness and transparency. This paper will examine the vision, role and influence of Coombs in the conception of the Reserve Bank during his governorship between 1960 and 1968, focussing on the way his ideals and values were translated through its new institutional architecture in relation to both the international and local architectural context.

Labour Market Modelling in the Light of the Financial Crisis

This paper revisits the empirical relationship between unemployment and output, and its evolution following the financial crisis of 2008, with the aim of drawing potential consequences for labour market modelling strategies in place within the European System of Central Banks (ESCB). First, the negative correlation between output and unemployment (Okun’s law) at cyclical frequencies is found to be a robust feature of macro data across time, countries and identification schemes. Focusing on the euro area, the financial distress seems to have altered the dynamics of output and unemployment mainly at lower frequencies, interpreted as trend developments by the statistical filters used in the analysis. Looking at the implications for modelling strategies, we propose an extension of the standard labour search and matching model in which financial frictions impinge directly on the labour market rather than on the capital market, opening the way to protracted and lagged response of employment after a “financial” crisis. In terms of policy implications, the importance of the interplay between financial and labour market frictions in trend developments should be read as strong support for an ambitious structural reform agenda in Europe, so as to make our labour (and goods) markets more flexible and resilient. JEL Classification: E10, E32, J64

Central Bank Behaviour Concerning the Level of Bitcoin Regulation as a Policy Variable

Bitcoin gains more and more attention in the general public and is already the most popular virtual currency. At the same time, the acceptance of Bitcoin as a speculative asset and also as a payment vehicle increases. This is an indication that we might now be entering an era of parallel currency systems. Therefore, one could state that the Bitcoin network and the central banking system could become two rival systems with respect to issuing payment vehicles and providing cross-border payment systems. Our aim is to analyse the central bank incentives for establishing a network model that includes hacking. With our model we are able to explain why central banks have no incentive to advance Bitcoin regulation at the current stage of development, as this would reduce the critical mass of Bitcoin users. Finally, in combination with a central bank loss function, we are able to calculate an optimal level of central regulation.

The Selected Aspects of Application of Monetary Policy in the Economic and Monetary Union Pre-And-Post 2008

Abstract Purpose of the article is to present in two parts the selected aspects of application of monetary policy in the euro area pre and post 2008 as well as insitutional adaptations brought by the EU legislator. Methodology/methods In order to better explain these points, the article relies partially on a comparison with the framework and application of the monetary policy by the Federal Reserve as well as on a historic method when outlining the influence of definition of financial stability from the ECB/Eurosystem towards other prominent central banks. Scientific aim The article presents selected aspects of the monetary policy in the part of the EU where single currency was introduced in order to outline state of the art governance structure as well as a certain institutional creativity in application of powers conferred upon the central banks by the Treaty on the Functioning of the European Union and Protocol on the Statute of the European System of Central Banks and of the European Central Bank. The goal is to prove (i) the hypothesis of robustness of the framework and (ii) present the limits that can only be pushed further by the legislative power. The conclusions confirm on the one hand that the framework of monetary policy based on strong institutional safeguards such as legislative power and independence is very resilient and can prove efficient and creative enough to stabilise an innovative monetary system, however, on the other hand, validate the hypothesis that certain adaptations can only be performed on the basis of a legislative adaptations.

Comparative Analysis of Financial Stability Policy of The National Bank of Serbia and The European Central Bank

Abstract The Republic of Serbia has successfully completed the first part in the European Union integration process, being granted candidate status for membership in the European Union (EU). The stage of accession negotiations is in progress, and it includes the full harmonization with the EU acquis, whereby the analytical review of legislation, the so-called screening is being carried out in 35 chapters. The global financial crisis that affected our country in 2008 has required a timely reaction of the National Bank of Serbia (NBS) in order to preserve the financial system stability, especially the banking sector as its most important segment. As the financial services sector adjusts within chapter 9, the aim of this paper is to assess the level of compliance of national legislation with the EU legislation regarding banking sector. Along with the regulatory initiatives in the field of preserving financial stability in the EU countries, the NBS has paid great attention to the harmonization of its financial stability policy with the financial stability policy of the European System of Central Banks (ESCB).

우리나라의 금융감독체계 및 중앙은행제도 개편방안에 관한 연구 : 글로벌 금융위기 이후 영국의 금융개혁 내용 및 우리나라에의 시사점을 중심으로

우리나라의 금융감독체계 및 중앙은행제도 개편방안에 관한 연구 : 글로벌 금융위기 이후 영국의 금융개혁 내용 및 우리나라에의 시사점을 중심으로

The Twelve Federal Reserve Banks: Governance and Accountability in the 21st Century

Chronicling the politics that led to the creation of the twelve Reserve Banks and the pursuant legal and political consequences, this paper argues that the Federal Reserve’s quasi-private Reserve Banks are, at best, opaque and unaccountable, and, at worst, unconstitutional. Following the Panic of 1907, one of the most destructive in the nation’s history, Republicans and Democrats offered competing proposals to overhaul the nation’s monetary system. Republicans wanted a single central bank, whereas Democrats wanted multiple independent reserve banks across the country that could tailor policy to local conditions. In both plans, private bankers would determine central bank leadership. As a compromise, President Woodrow Wilson proposed the creation of 8–12 reserve banks run by appointees of private bankers, but supervised by a single central board of Presidential appointees. Wilson’s vision formed the basis of the Federal Reserve Act of 1913, the Fed’s founding statute. The Wilsonian structure resulted in turf battles between the private Reserve Banks and the public Board in Washington, which led to policy uncertainty that contributed to the Great Depression. In response to this uncertainty, Congress, at the insistence of President Roosevelt, revoked Wilson's vision and centralized authority in the Board of Governors in Washington. But while the Depression-era legislation removed the 12 quasi-private Reserve Banks' autonomy, it did not eliminate them. This structure, which persists today, presents problems for both constitutional law and public policy. The President and Congress play no role in choosing who leads the Reserve Banks, and the President must rely on an indirect process if he wants to remove Reserve Bank presidents, a feature which violates constitutional principles of separation of powers. In addition, because Reserve Bank presidents have close ties to the banks they regulate, they are less likely to police bad behavior. One possible solution is to give the Fed’s Board of Governors the power to appoint and remove Reserve Bank Presidents at will. This structural change would make our nation’s central banking system more answerable to the democratic process and, in turn, improve the Fed’s policymaking.

Comparing Different Early Warning Systems: Results from a Horse Race Competition Among Members of the Macro-Prudential Research Network

Over the recent decades researchers in academia and central banks have developed early warning systems (EWS) designed to warn policy makers of potential future economic and financial crises. These EWS are based on diverse approaches and empirical models. In this paper we compare the performance of nine distinct models for predicting banking crises resulting from the work of the Macroprudential Research Network (MaRs) initiated by the European System of Central Banks. In order to ensure comparability, all models use the same database of crises created by MaRs and comparable sets of potential early warning indicators. We evaluate the models’ relative usefulness by comparing the ratios of false alarms and missed crises and discuss implications for pratical use and future research. We find that multivariate models, in their many appearances, have great potential added value over simple signalling models. One of the main policy recommendations coming from this exercise is that policy makers can benefit from taking a broad methodological approach when they develop models to set macro-prudential instruments.

Is the Eurozone Not a Monetary Union, But an Extraordinary Exchange Rate Union?

The Target imbalances within the Eurozone can be interpreted as a sign of a missing balance of payments adjustment mechanism for the member countries. As the Eurozone lacks a fiscal union, in economic theory it is more an exchange rate union or a system of fixed exchange rates than a monetary union. In the latter, there would not be any national balances of payments, but only one for the whole Eurozone. This paper will show why the Target System is a crucial indicator for the Eurozone not being a monetary union, but an exchange rate union and why countries holding Target liabilities against the European System of Central Banks can be compared to a reserve currency country, e.g. like the US during the Bretton-Woods-System.

Why Price Stability?

The European System of Central Banks (ESCB) is contractually obliged to ensure price stability. That is a vital prerequisite for the applicability of the nominalistic principle in a monetary economy according to which money debt consists merely of a certain quantity of accounting units like a number of dollars or euros. The conceptual pair of the nominalistic principle and price stability is seen as plausible focal principle (Schelling) of transaction cost minimizing actors of a paper money economy. On the other hand, an inflationary target of x% as suggested by Bernanke et al. contradicts not only the nominalistic principle that actually underlies the German legal system but, on its own, is also implausible as focal principle.

Why Price Stability? An Answer from the Perspective of New Institutional Economics

The European System of Central Banks (ESCB) is contractually obliged to ensure price stability. That is a vital prerequisite for the applicability of the nominalistic principle in a monetary economy according to which money debt consists merely of a certain quantity of accounting units like a number of dollars or euros. The conceptual pair of the nominalistic principle and price stability is seen as plausible focal principle (Schelling) of transaction cost minimizing actors of a paper money economy. On the other hand, an inflationary target of x% as suggested by Bernanke et al. contradicts not only the nominalistic principle that actually underlies the German legal system but, on its own, is also implausible as focal principle.

中国农村资金互助组织发展的现状及对策

本文在对4个省、自治区和直辖市包括7家正规和7家非正规的农村资金互助组织进行调研访谈的基础上，从治理机制与风险控制、基本业务规则、经营状况和社会认可度几个方面描述了我国农村资金互助组织发展的现状，认为农村资金互助组织具有志愿服务、社区基础、无需抵押和资金封闭运行等优势，但也存在内部治理不完善、缺乏外部监管、名称被滥用、不能接入央行系统等问题，最后，本文提出了完善法律法规、明确监管主体、借助行业协会力量进行监管的对策建议。 On the basis of field interview and questionnaire investigation on 14 sample rural mutual cooper-ative organizations in 4 provinces, autonomous regions and municipalities in China, among which 7 are formal approved by China Banking Regulatory Commission and the other 7 are informal. This paper describes the status quo from perspectives of governance and internal control, business rules, operation results and social cognition, proposes the advantages of these organizations such as volunteer service, community basis, no need of mortgage and closed funds operation, and points out the problems of these organizations such as incomplete internal governance, lack of external supervision, name abuse and no connection with central bank system. Finally, the paper makes some suggestions such as improving law and regulations, clarifying regulatory body and drawing support from mutual cooperative association.

Enhancing the Toolbox of Fixed Income Active Portfolio Management

Abstract Many central banks adopt an active investment style for reserve management. This paper discusses various possible enhancements to active management tools and processes to generate extra returns in an increasingly challenging environment. The proposed framework is based on an affine model, which includes macroeconomic and market sentiment indicators among the explanatory variables. Using estimates of expected excess returns drawn from the model, an operational indicator produces input highlighting the portfolio's exposure to duration risk. This indicator is incorporated within a broader framework, in which a scorecard considers a range of qualitative elements, including consensus figures on macroeconomic data, monetary policy and interest rates. These elements are then combined with the model output to produce a comprehensive indication with respect to portfolio deviation from the benchmark. It should be noted that the approach presented in this paper is experimental; it has not yet been used in an active portfolio. Finally, consideration is given to the governance of the central bank investment process in order to assess how the proposed enhancements could strengthen the decision-making process. The analysis suggests that the scorecard with model-based input may address some weaknesses inherent in tactical decision- making. The views expressed herein are solely our own and do not necessarily reflect those of the Bank of Italy or the European System of Central Banks.

Financial Stability Challenges in EU Candidate and Potential Candidate Countries

This paper reviews financial stability challenges in countries preparing for EU membership, i.e. Albania, Bosnia and Herzegovina, Kosovo*, Iceland, the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey. The paper has been prepared by an expert group of staff from the European System of Central Banks (ESCB) in which experts from EU candidate and potential candidate country central banks also participated. The paper finds that near-term challenges to financial stability primarily relate to credit risks from the generally weak economic dynamics in combination with already high non-performing loan burdens in many banking systems, especially in the Western Balkans. In the medium-term, challenges to financial stability stem from indirect market risks to banks related to foreign currency lending as well as lingering exposures to funding risks, with Western Balkan economies again appearing as relatively more vulnerable. Looking further ahead, the paper highlights that the magnitude of the challenge to reach a JEL Classification: F31, F34, F36, F41, G21, G28