The acceleration in the formation of global imbalances in the period preceding the last financial crisis prompted a revival of the debate on whether exchange rate regimes affect the flexibility of the current account (ie its degree of mean reversion), as originally proposed by Friedman (1953). I...

This paper investigates the potential implications for sterling of the US current account returning to balance. The analysis is conducted using a three-country model comprising the United Kingdom, the United States and a block that is meant to represent the rest of the world. The main conclusion...

This paper sheds lights on the open economy dimension of the Fed information effect, by evaluating its international spillovers on exchange rates, capital flows, and global economic activity. We provide empirical evidence that in response to unexpected increases in the Federal Funds rate...

In this paper we investigate the price, volatility and micro-level effects of central bank swap lines during the 2020 pandemic. These policies lowered the ceiling on covered interest rate parity violations and reduced volatility following settlement of swap line auctions. We then combine...

Can macroprudential foreign exchange (FX) regulations on banks reduce the financial and macroeconomic vulnerabilities created by borrowing in foreign currency? To evaluate the effectiveness and unintended consequences of macroprudential FX regulations, we develop a parsimonious model of bank and...

We characterise the probability distribution of capital flows for a panel of emerging market economies conditional on information contained in financial asset prices, with a focus on ‘tail' events. Our framework, based on the quantile regression methodology, allows for a separate role of push...

Motivated by the traditional business cycle approach of Burns and Mitchell (1946), we explore cyclical similarities in financial conditions over time in order to improve our understanding of financial cycles. Looking back at 120 years of data, we find that financial cycles exhibit behaviour...

A number of OECD countries experienced an environment of low interest rates and a rapid increase in housing market activity during the last decade. Previous work suggests three potential explanations for these events: expansionary monetary policy, capital inflows due to a global savings glut and...

We examine the extent to which uncertainty with regard to macroeconomic policies in advanced countries spills over to emerging market economies (EMEs) via gross portfolio bond and equity flows. We find that the impact of fluctuations in policy uncertainty on portfolio equity flows differs...

This paper forms the United Kingdom's contribution to the International Banking Research Network's project examining the cross-border spillovers of prudential policy actions, where each participant in the network uses proprietary bank-level data available to central banks. We examine whether...