We construct, on the basis of an original methodology and database, composite indices to measure domestic financial development in 26 emerging economies, using mature economies as a benchmark. Twenty-two variables are used and grouped according to three broad dimensions: (i) institutions and...

As the current financial crisis has shown, macroeconomic imbalances such as persistent current account and trade deficits, can seriously undermine a country’s resilience to economic shocks. Maintaining and enhancing external competitiveness has thus become of increasing concern, particularly...

The design of the euro area Quantitative Easing (QE) programme raises the question of whether insuficient liquidity in the bond markets will reduce the impact of the programme and lead to market volatility. While estimates suggests that scarcity of around €102 billion may arise over the life...

Even before their deployment in major economies, one of the concerns that has been voiced about central bank digital currency (CBDC) is that it might be too successful and lead to bank disintermediation, which could intensify further in the case of a banking crisis. Some also argue that CBDC...

One of the important consequences to be drawn from the course of the financial crisis up to now is the insight that more attention must be paid in the future to the factors of liquidity, liquidity management and liquidity protection. That holds true for the protection of the stability of an...

This paper provides an overview of supply and demand factors influencing the availability of euro-denominated debt instruments that qualify as high-quality liquid assets (HQLA) in the euro area. The paper estimates the supply of HQLA issued by the public and private sectors as well as the...

The cost of equity for banks equates to the compensation that market participants demand for investing in and holding banks' equity, and has important implications for the transmission of monetary policy and for financial stability. Notwithstanding its importance, the cost of equity is...

Accounting standard setters are considering the wider use of fair value accounting. This paper focuses on the financial stability implications of a move in the banking sector from the current accounting framework to full fair value accounting. A simulation exercise is performed on how various...

In this paper, we present a set of specific measures to quantify the state and evolution of financial integration in the euro area. Five key markets are considered, namely the money, corporate bond, government bond, credit and equity markets. Building upon the law of one price, we developed two...

This paper offers a new framework for the assessment of financial market liquidity and identifies two types: search liquidity and systemic liquidity. Search liquidity, i.e. liquidity in “normal” times, is driven by search costs required for a trader to find a willing buyer for an asset...