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Europe > Latvia, Republic of

You are looking at 1 - 10 of 16 items for :

  • Type: Journal Issue x
  • Financial sector policy and analysis x
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Cover IMF Working Papers
Shocked: Electricity Price Volatility Spillovers in Europe
Serhan Cevik
and
Yueshu Zhao
European electricity markets are in the midst of unprecedented changes—caused by Russia’s invasion of Ukraine and the rise of renewable sources of energy. Using high-frequency data, this paper investigates volatility spillovers across 24 countries in the European Union (EU) during the period 2014–2024 to provide a better understanding of the transmission of risks in an international context. We develop both a static and a dynamic assessment of spillover effects and directional decomposition between individual countries. Our main findings show that about 73 percent of the forecast error variation is explained by cross-variance shares, which means only 27 percent can be attributed to shocks within each country. In other words, cross-border volatility spillovers dominate the behavior in national electricity markets in Europe—and this effect has grown over time. We also implement an augmented gravity model of bilateral volatility spillovers across power markets in the EU. Altogether, these results provide important insights to policymakers and regulators with regards to greater integration of electricity markets and infrastructure improvements that would also help with the transition to low-carbon sources of power generation and strengthen energy security in Europe.
Keywords:
Electricity prices; Volatility; Spillovers; Gravity model; Renewable energy; Electricity market reform; Europe; volatility spillover; spillover effect; markets in the EU; electricity market; Electricity; Gravity models
Cover IMF Working Papers
Micro-Assessment of Macroprudential Borrower-Based Measures in Lithuania
Mantas Dirma
and
Jaunius Karmelavičius
Despite having introduced borrower-based measures (BBM), Lithuania's housing and mortgage markets were booming during the low-interest-rate period, casting doubt on the macroprudential toolkit's ability to contain excessive mortgage growth. This paper assesses the adequacy of BBMs’ parametrization in Lithuania. We do so by building a novel lifetime expected credit loss framework that is founded on actual loan-level default and household income data. We show that the BBM package effectively contains mortgage credit risk and that housing loans are more resilient to stress than in the preregulatory era. Our BBM limit calibration exercise reveals that (1) in the low-rate environment, income-based measures could have been tighter; and (2) borrowers taking out secondary mortgages rightly are and should be required to pledge a higher down payment.
Keywords:
macroprudential policy; borrower-based measures; LTV; mortgage credit risk; lifetime expected loss; probability of default.; calibration exercise; BBM package; modeling mortgage risk; Lithuania's housing market; Mortgages; Loans; Credit risk; Housing prices; Macroprudential policy instruments; Europe; Baltics; Global
Cover IMF Staff Country Reports
Nordic-Baltic Regional Report: Technical Assistance Report-Nordic-Baltic Technical Assistance Project Financial Flows Analysis, AML/CFT Supervision, and Financial Stability
International Monetary Fund. Legal Dept.
This paper presents a regional report on Nordic-Baltic technical assistance project: financial flows analysis, Anti-Money Laundering and combating the Financing of Terrorism (AML/CFT) Supervision, and Financial Stability. The purpose of the project is to conduct an analysis of cross-border ML threats and vulnerabilities in the Nordic-Baltic region—encompassing Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, and Sweden (the Nordic-Baltic Constituency or NBC)—and issue a final report containing recommendations for mitigating the potential risks. The financial flows analysis presented in this report is based on the IMF staff’s analysis of cross-border payments data. Six out of the eight Nordic-Baltic countries have seen an increase in aggregate flows since 2013. Monitoring cross-border financial flows provides countries with a deeper understanding of their external ML threat environment and evolving cross-border related risks they are facing. Leveraging broader analysis of ML/TF cross-border risk, the Nordic-Baltic countries should develop their own understanding of higher-risk countries reflecting country-specific ML/TF threats.
Keywords:
TF risk assessment; colleges participation; TF risk; EU Anti-Money Laundering Authority; supervisory cooperation; information Sharin; Anti-money laundering and combating the financing of terrorism (AML/CFT); Virtual currencies; Correspondent banking; Internal controls; Financial sector stability; Baltics; Global
Cover IMF Staff Country Reports
Euro Area Policies: Financial Sector Assessment Program-Technical Note-Bank Resolution and Crisis Management
International Monetary Fund. Monetary and Capital Markets Department
The euro area (EA) bank resolution and crisis management arrangements have been strengthened considerably over recent years, but work remains to complete and unify the regime. The adoption of the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR), and the establishment of the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM) provide a foundation to deal with problem banks. The authorities remain committed to completing the banking union through the establishment of a backstop for the Single Resolution Fund (SRF) and a European deposit insurance scheme (EDIS) and other measures, many of which are in line with recommendations in this report.
Keywords:
ISCR; CR; member state; resolution authorities; insolvency regime; bail-in regime; central bank; senior debt; SRB decision-making authority; resolution plan; liquidation regime; SRB staff; SRB advance resolution preparation; public funds; SRB resolution scheme; SRB chair; SRB board member; Bank resolution framework; Bank resolution; Crisis management; Financial sector stability; Crisis resolution; Global
Cover Staff Discussion Notes
A Strategy for Resolving Europe's Problem Loans
Mr. Shekhar Aiyar
,
Mr. Wolfgang Bergthaler
,
Jose M Garrido
,
Ms. Anna Ilyina
,
Andreas Jobst
,
Mr. Kenneth H Kang
,
Dmitriy Kovtun
,
Ms. Yan Liu
,
Mr. Dermot Monaghan
, and
Ms. Marina Moretti
Europe’s banking system is weighed down by high levels of non-performing loans (NPLs), which are holding down credit growth and economic activity. This discussion note uses a new survey of European country authorities and banks to examine the structural obstacles that discourage banks from addressing their problem loans. A three pillared strategy is advocated to remedy the situation, comprising: (i) tightened supervisory policies, (ii) insolvency reforms, and (iii) the development of distressed debt markets.
Keywords:
SDN; book value; unsecured debt; expected return; profit sharing; NPL ratio; NPL resolution; bank capitalization; area bank; real GDP; bank profitability; capital buffer; Nonperforming loans; Distressed assets; Loans; Solvency; Debt restructuring; Europe; Global
Cover IMF Research Bulletin
IMF Research Bulletin, March 2014
International Monetary Fund
The Research Summaries in the March 2014 Research Bulletin focus on efficiency of health expenditure (Francesco Grigoli and Javier Kapsoli) and employment growth in European Union countries (Bas B. Bakker and Li Zeng). The Q&A article looks at “Seven Questions on Financial Interconnectedness” (Co-Pierre Georg and Camelia Minoiu). The Research Bulletin also includes a listing of IMF Working Papers, Staff Discussion Notes, and Recommended Readings from the IMF Bookstore. Information on the IMF Economic Review—the research journal of the IMF—is also provided.
Keywords:
IRB; IMF research bulletin; bulletin; research; IMF bookstore; research journal; Thomson Reuters journal citation; IMF research; journal of the International Monetary Fund; Employment; Health care spending; Financial contagion; Expenditure efficiency; Global; Asia and Pacific; Western Hemisphere; Middle East and Central Asia; Europe; Africa
Cover IMF Working Papers
Sovereign CDS Spreads in Europe: The Role of Global Risk Aversion, Economic Fundamentals, Liquidity, and Spillovers
Mr. Frigyes F Heinz
and
Ms. Yan M Sun
By analysing data from January 2007 to December 2012 in a panel GLS error correction framework we find that European countries’ sovereign CDS spreads are largely driven by global investor sentiment, macroeconomic fundamentals and liquidity conditions in the CDS market. But the relative importance of these factors changes over time. While during the 2008/09 crisis weak economic fundamentals (such as high current account decifit, worsening underlying fiscal balances, credit boom), a drop in liquidity and a spike in risk aversion contributed to high spreads in Central and Eastern and South-Eastern European (CESEE) countries, a marked improvement in fundamentals (e.g. reduction in fiscal deficit, narrowing of current balances, gradual economic recovery) explains the region’s resilience to financial market spillovers during the euro area crisis. Our generalised variance decomposition analyisis does not suggest strong direct spillovers from the euro area periphery. The significant drop in the CDS spreads between July 2012 and December 2012 was mainly driven by a decline in risk aversion as suggested by the model’s out of sample forecasts.
Keywords:
WP; CDS spread; financial market; area crisis; real GDP; CESEE countries; financial spillovers; CDS spreads; CESEE country; sovereign CDS; area CDS; norm decomposition; periphery country; CDS bid; CDS market liquidity condition; Credit default swap; Government debt management; Spillovers; Liquidity; Current account balance; Global; Baltics
Cover IMF Staff Country Reports
Spain: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper analyzes household savings ratio in Spain. The household savings ratio has fallen to its lowest historical rate in 2012, as households cut back savings to support consumption in response to negative income shocks. Household savings fell across all households, but the declines were likely more material among lower income and highly indebted groups. Declining household income and savings slowed deleveraging and put household balance sheets under pressure. Looking ahead, households may need to restrain consumption further to free resources for repaying debt. Household savings rates will likely stay below historical levels for some time then slowly increase.
Keywords:
ISCR; CR; insolvency; saving; Spain; household saving; AIReF; insolvency regime; financial market spillover; AIReF staffing; AIReF president; Solvency; Disposable income; Pension spending; Fiscal law; Personal income; Global; Europe; North America; Africa
Cover IMF Working Papers
Dealing with Private Debt Distress in the Wake of the European Financial Crisis A Review of the Economics and Legal Toolbox
Ms. Yan Liu
and
Mr. Christoph B. Rosenberg
The private non-financial sector in Europe is facing increased challenges in meeting its debt servicing obligation. In response, governments are revisiting legal tools and—in some cases—institutional arrangements to deal with over-indebtedness. For households, where the problem in some countries is large but no established best practice exists, reforms have generally sought to allow debtors a fresh start while minimizing moral hazard and preserving bank solvency and credit discipline. For the corporate sector, efforts have focused on facilitating debt restruturing (including through out of court mechanisms). Direct government intervention has been rare.
Keywords:
WP; country; government; procedure; court; track court approval procedure; private sector debt; household insolvency; corporate insolvency; government intervention; insolvency proceeding; a number of country; IMF country desk; court insolvency regime; government support scheme; Solvency; Debt restructuring; Private debt; Europe; Baltics
Cover IMF Working Papers
Credit Growth and Bank Soundness: Fast and Furious?
Ms. Deniz O Igan
and
Marcelo Pinheiro
We examine the risks to bank soundness associated with credit booms in a large set of countries. Using bank-level data in 90 countries between 1995 and 2005, we analyze the relationship between credit growth and bank soundness taking into account the potential two-way causality. We find that, while sounder banks tend to grow faster at moderate-growth periods, credit growth becomes less dependent on soundness during booms. These findings shed some light on why credit booms are often associated with financial crises.
Keywords:
WP; credit growth; bank; credit boom; bank soundness; distance to default; sounder bank; bank stability equation; data set; bank level; accumulation of risk; growth episode; bank ownership; bank supervisor; Credit; Credit booms; Bank credit; Loans; Global