China has been moving to a more market oriented financial system, which has implications for the monetary policy environment. The paper investigates the stability of the money demand function (MDF) in light of progress in financial sector reforms that, for example, have resulted in significant...

Local currency government bonds (OFZ bonds) are an important fixed-income instrument in Russia's financial markets. In this paper, based on granular data, we explore the development of the OFZ bond market with a focus on foreign investors. As this fixed-income market has experienced a...

This paper examines the evolving importance of common global components underlying domestic financial conditions. It develops financial conditions indices (FCIs) that make it possible to compare a large set of advanced and emerging market economies. It finds that a common component, 'global...

This paper investigates financial frictions in US postwar data to understand the interaction between the real business cycle and the credit market. A Bayesian estimation technique is used to estimate a large Vector Auto regression and New Keynesian models demonstrating how financial shocks can...

An asset bubble relaxes collateral constraints and increases borrowing by credit-constrained agents. At the same time, as the bubble deflates when constraints start binding, it amplifies downturns. We show analytically and quantitatively that the macroprudential policy should optimally respond...

Volatility in Italian sovereign spreads has increased since mid-2011. This paper finds that news on the euro area debt crisis and country specific events were important drivers of sovereign spreads. Movements in sovereign spreads affect CDS spreads and bond yields of Italian banks, and are...

We estimate the latent factors that underlie the dynamics of the sovereign bond yield curve inMorocco during 2004-14 based on the Dynamic Nelson-Siegel model. On this basis, weexplore the interaction between macroeconomic variables and the yield curve, which is ofdirect relevance to...

Classic models of fire-sales that emphasize liquidity-constrained natural buyers can-notfully account for the asset fire-sales during the Financial Crisis of 2008. I present a modelto demonstrate that fire-sales may happen even when there is a sizable pool of naturalbuyers and in the absence of...

In distilling a vast literature spanning the rational — irrational divide, this paper offers reflections on why asset bubbles continue to threaten economic stability despite financial markets becoming more informationally-efficient, more complete, and more heavily influenced by sophisticated...

In the aftermath of the global financial crisis, the issue of how best to identify speculative asset bubbles (in real-time) remains in flux. This owes to the difficulty of disentangling irrational investor exuberance from the rational response to lower risk based on price behavior alone. In...