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Europe > Norway

You are looking at 1 - 10 of 38 items for :

  • Type: Journal Issue x
  • General Financial Markets: General (includes Measurement and Data) x
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Cover IMF Working Papers
Central Bank Exit Strategies Domestic Transmission and International Spillovers
Christopher J. Erceg
,
Marcin Kolasa
,
Jesper Lindé
,
Haroon Mumtaz
, and
Pawel Zabczyk
We study alternative approaches to the withdrawal of prolonged unconventional monetary stimulus (“exit strategies”) by central banks in large, advanced economies. We first show empirically that large-scale asset purchases affect the exchange rate and domestic and foreign term premiums more strongly than conventional short-term policy rate changes when normalizing by the effects on domestic GDP. We then build a two-country New Keynesian model that features segmented bond markets, cognitive discounting and strategic complementarities in price setting that is consistent with these findings. The model implies that quantitative easing (QE) is the only effective way to provide monetary stimulus when policy rates are persistently constrained by the effective lower bound, and that QE is likely to have larger domestic output effects than quantitative tightening (QT). We demonstrate that “exit strategies” by large advanced economies that rely heavily on QT can trigger sizeable inflation-output tradeoffs in foreign recipient economies through the exchange rate and term premium channels. We also show that these tradeoffs are likely to be stronger in emerging market economies, especially those with fixed exchange rates.
Keywords:
Monetary Policy; Quantitative Easing; International Spillovers; asset purchase; central bank exit strategies; inflation surge scenario; Policy conduct; appendix E. term premium; open economy; Central bank policy rate; Inflation; Unconventional monetary policies; Bonds; Exchange rate arrangements; Global
Cover IMF Working Papers
Did Insurers Become Risk-Loving During “Low-for-Long”? The Role of Returns, Ratings, and Regulation
Jeroen Brinkhoff
and
Mr. Juan Sole
European life insurance companies are important bond investors and had traditionally played a stabilizing role in financial markets by pursuing “buy-and-hold” investment strategies. However, since the onset of the ultra-low interest rates era in 2008, observers noted a decline in the credit quality of insurers’ bond portfolios. The commonly-held explanation for this deterioration is that low returns pushed insurers to become more risk-taking. We argue that other factors—such as surging rating downgrades, bond revaluations, and regulatory changes—also played a key role. We estimate that rating changes, revaluations, and search for yield each account for about one-third each of the total deterioration in credit quality. This result has important policy implications as it reestablishes the view that insurers’ investment behavior tends to be passive through the cycle—rather than risk-seeking.
Keywords:
Life Insurance sector; financial stability; credit ratings; bond revaluation; life insurance insurance company; bond portfolio; investment behavior; bond investor; Bonds; Insurance companies; Corporate bonds; Sovereign bonds; Bond ratings; Global
Cover IMF Staff Country Reports
Norway: Financial Sector Assessment Program-Technical Note-Cybersecurity Risk Supervision and Oversight
International Monetary Fund. Monetary and Capital Markets Department
The Norwegian financial system has a long history of incorporating new technology. Norway is at the forefront of digitization and has tight interdependencies within its financial system, making it particularly vulnerable to evolving cyber threats. Norway is increasingly a cashless society, with surveys and data collection suggesting that only 10 percent of point-of-sale and person-to-person transactions in 2019 were made using cash.1 Most payments made in Norway are digital (e.g., 475 card transactions per capita per annum)2 and there is an increase in new market entrants providing a broad range of services. Thus, good cybersecurity is a prerequisite for financial stability in Norway.
Keywords:
ISCR; CR; cybersecurity incident; cybersecurity risk; incident report; NSM cybersecurity principle; FSA plan; incident information; information sharing; risk management; cybersecurity risk supervision; oversight function; Cyber risk; Financial sector; Financial stability assessment; PFM information systems; Securities; Global
Cover IMF Staff Country Reports
Norway: Financial Sector Assessment Program-Technical Note-Systemic Liquidity
International Monetary Fund. Monetary and Capital Markets Department
Norwegian banks and other financial institutions rely heavily on capital markets for liquidity and risk management. Liquidity conditions in the Norwegian financial sector are affected by central bank operations and the lending and funding activities of financial institutions, both domestically and abroad. Nearly 40 percent of the funding of Norwegian banks is obtained from market sources, using commercial paper, covered bonds, and senior unsecured bonds issued both domestically and abroad. Correspondingly, money markets, foreign exchange (FX) swap markets and bond markets are crucial to the credit intermediation process and a dislocation in these markets—the inability of financial institutions to roll over, or obtain new, funding—could have significant consequences for financial stability. Against this background, this note analyzes core funding markets for Norwegian banks and assesses Norges Bank’s capacity to manage systemic liquidity conditions and counteract liquidity shocks in normal times and in times of stress.
Keywords:
ISCR; CR; spot market; commercial paper; cross holdings; FX swap market; liquidity support; government bond; central bank; U.S. dollar; secondary market; mortgage loan; government bond market; market development; Liquidity; Covered bonds; Currency swaps; Sovereign bonds; Collateral; Global
Cover IMF Working Papers
Swing Pricing and Fragility in Open-end Mutual Funds
Dunhong Jin
,
Marcin Kacperczyk
,
Bige Kahraman
, and
Felix Suntheim
How to prevent runs on open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.
Keywords:
WP; swing pricing; pricing rule; fund investor; adjustment factor; liquidity mismatch; fund runs; fragility; strategic complementarity; pricing mechanism; Liquidity risk; Flow of funds; Mutual funds; Corporate bonds; Price structures; Global
Cover IMF Working Papers
Public Sector Balance Sheet Strength and the Macro Economy
Mr. Seyed Reza Yousefi
This paper introduces concepts of public sector balance sheet (PSBS) strength, taking into account different aspects of what governments own in addition to what they owe. It develops measures of PSBS strength and investigates their macroeconomic implications. Empirical estimations show that in their pricing of sovereign bonds, financial markets account for government assets and net worth in addition to their liabilities. Furthermore, economies with stronger public sector balance sheets experience shallower recessions and recover faster in the aftermath of economic downturns. This faster return to growth can be explained by the greater space for countercyclical fiscal policy in countries with stronger balance sheets.
Keywords:
WP; balance sheet; debt; balance sheet strength; Public sector balance sheet; Fiscal policy; Net financial worth; Net worth; balance sheet indicator; balance sheet measure; government balance sheets; balance sheet strength measure; balance sheet variable; balance sheet data; Financial statements; Bond yields; Yield curve; Sovereign bonds
Cover IMF Working Papers
Covered Interest Parity Deviations: Macrofinancial Determinants
Mr. Eugenio M Cerutti
,
Mr. Maurice Obstfeld
, and
Haonan Zhou
For about three decades until the Global Financial Crisis (GFC), Covered Interest Parity (CIP) appeared to hold quite closely—even as a broad macroeconomic relationship applying to daily or weekly data. Not only have CIP deviations significantly increased since the GFC, but potential macrofinancial drivers of the variation in CIP deviations have also become significant. The variation in CIP deviations seems to be associated with multiple factors, not only regulatory changes. Most of these do not display a uniform importance across currency pairs and time, and some are associated with possible temporary considerations (such as asynchronous monetary policy cycles).
Keywords:
WP; U.S. dollar; cross-currency basis; cross-currency dollar basis; basis calculation; Covered Interest Parity; Interest Rate Differentials; Forward FX Market; dollar strength; investment option; time-series regression; dollar appreciation; Interest rate parity; Currencies; Global financial crisis of 2008-2009; Interbank rates; Money markets; Global
Cover IMF Staff Country Reports
Finland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper examines Finland’s sectoral balance sheets and how they have evolved since the global financial crisis; the analysis reveals that financial vulnerabilities have risen in most sectors. Indebtedness has increased for nonfinancial corporations (NFCs), households, and the government, increasing their financial fragility and vulnerability to shocks. Also, cross-border financial exposures have risen on both sides of Finland’s balance sheet. Specifically, banks’ balance sheets have grown considerably, largely owing to a rise in foreign liabilities. NFCs and the government have also relied in part on foreign investors to finance their debt increases.
Keywords:
ISCR; CR; firm; private sector; firm productivity; product market; firm TFP; accounts payable; productivity gain; company size; Productivity; Financial statements; Commodity markets; Total factor productivity; Stocks; Global
Cover Policy Papers
Poverty Reduction and Growth Trust - 2016 Borrowing Agreements with Danmarks Nationalbank, the Norwegian Ministry of Finance Representing the Kingdom of Norway, and the Sveriges Riksbank
International Monetary Fund
The Fund, as Trustee of the Poverty Reduction and Growth Trust (PRGT or Trust),entered into an amendment of the 2010 borrowing agreement with Danmarks Nationalbank, and new borrowing agreements with the Norwegian Ministry of Finance representing the Kingdom of Norway and the Sveriges Riksbank (hereafter Denmark, Norway, and Sweden, respectively), by which the counterparties will provide new resources to the Loan Accounts of the PRGT in the total amount of SDR 1.1 billion (see attachments). The augmentation under the amendment and the two new agreements are the first three loan contributions to be concluded in the context of the current Board-endorsed effort to raise SDR 11 billion in new PRGT loan resources. These amendment and new agreements became effective on November 17, 2016.
Keywords:
PP; trustee; amount; business day; bond equivalent yield; interest rate calculation; agreements result; SDR rate; loan resource; equivalent amount; Loans; Currencies; Bond yields; Poverty reduction and development; Treasury bills and bonds
Cover IMF Working Papers
Negative Interest Rate Policy (NIRP): Implications for Monetary Transmission and Bank Profitability in the Euro Area
Andreas Jobst
and
Ms. Huidan Huidan Lin
More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.
Keywords:
WP; rate; deposit; Policy rate; bank; deposit rate; negative rates; NIRP; unconventional monetary policy; monetary transmission; money market rate; negative rate; bank lending survey; sight deposit rate; rate cut; solvency constraint; rate setting; tiered deposit rate; marginal policy rate; central bank deposit rate; interest margin; Deposit rates; Central bank policy rate; Bank soundness; Negative interest rates; Money markets; rateminus deposit rate