We show that excess returns to the carry trade can be interpreted as compensation for foreign exchange dealers' capital risk. Given that the top market makers in foreign exchange are at the heart of the market's information aggregation process we also suggest that it is their marginal value of...

This paper examines the investment behavior in debt securities across financial institutions with a particular focus on how they respond to price changes. For identification, we use security-level data from the German Microdatabase Securities Holdings Statistics. Our results suggest that banks...

We study the synchronization of credit booms and busts among 12 major European economies and the United States between 1972-2011. We propose a regression-based procedure to test whether boom-bust phases of credit cycles coincide across countries and to cluster countries with positively...

Foreign exchange rates and capital movements are expected to be closely related to each other as international capital markets become more and more integrated. To account for this fact we construct an index of real effective exchange rates as a weighted average of cross-country asset price...

This paper examines how the exposure of German parent banks to the disruptions on sale and repurchase markets (repo markets) during the financial crisis has affected their provision of funds to their foreign branches and subsidiaries via bank-internal capital markets. The collapse of the...

This paper investigates the dynamic linkages in terms of the first and second moments between stock and bond returns, within a wide range of advanced economies, over the different phases of the recent financial crisis. The adopted empirical framework is a bivariate volatility model, where...

We analyze the impact of market liquidity on bank lending in the euro area for different segments over the period 2003 to 2016. Our results on the aggregate level show that market liquidity is positively related to loan volumes and negatively related to credit spreads. Particularly during the...

The effectiveness of a central bank’s monetary policymaking is determined by the merit of its policy actions and their perceived credibility. Since the 1990s central banks have placed more emphasis on clear communications and transparency as additional levers to help achieve their goals. In...

Using confidential daily data, we analyse how the intervention episode of the Bank of Israel (BOI) from 2013 to 2019 has affected the foreign value of the Israeli new shekel (ILS) and the expectations about its future value. We find that interventions amounting to US dollar (USD) 1 billion are...

This paper analyzes how newly introduced transparency requirements for short positions affect investors' behavior and security prices. Employing a unique data set, which contains both public positions above and confidential positions below the regulatory disclosure threshold, we offer several...