Sam Christie and Aniruddha Rajan Sudden contractions in credit supply can trigger and amplify recessions – a reality made painfully clear by the 2008 global financial crisis (GFC). However, quantifying these real economic effects is challenging. In this post, we demonstrate a novel way to do so using Granular Instrumental Variables (GIV), focusing on the … Continue reading GIV us some credit: estimating the macroeconomic effects of credit supply shocks
Financial Stability
Danny Walker, Dong Lou, Gabor Pinter and Semih Üslü Government bond yields tend to drift higher in the days before monetary policy or data news in the UK. Over the past two decades this tendency – which we label ‘pre-news drift’ – has pushed up on yields by 2 percentage points in total over that … Continue reading Why do government bond yields drift when news is on its way?
Misa Tanaka Today the Bank published the 2025–28 ‘Bank of England Agenda for Research’ setting out the key areas for new research over the coming years and a set of priority topics for 2025. Misa Tanaka works in the Bank’s Research Hub and is the Bank’s Head of Research. If you want to get in … Continue reading Launch of the 2025–28 Bank of England Agenda for Research
Before Bank Underground goes off on its Christmas holidays, it’s time for the Annual Bank Underground Christmas Quiz! We hope you enjoy testing your knowledge on our festive themed questions on economics, finance and all things central banking… If you want to get in touch, please email us at bankunderground@bankofengland.co.uk or leave a comment below. Comments will only … Continue reading The Bank Underground Christmas Quiz 2024
Nicolò Bandera and Jacob Stevens How should the central bank conduct asset purchases to restore market functioning without causing higher inflation? The Bank of England was faced with this question during the 2022 gilt crisis, when it undertook gilt purchases on financial stability grounds while inflation was above 10%. These financial stability asset purchases could … Continue reading Stable gilts and stable prices: assessing the Bank of England’s response to the LDI crisis
Jenny Clark and Theresa Löber The UK’s climate continues to change, getting wetter and warmer, with extremes becoming ever more pronounced. Even if we limit global warming to 1.5°C above pre-industrial levels, experts warn that we’ll see the number and severity of extreme weather events increase further. Without adaptation, we will see more property, infrastructure … Continue reading Adaptation is to mitigation what Robin is to Batman
Bowen Xiao Zero-day options have exploded in popularity in recent years, accounting for approximately half of S&P 500’s total options volume, a ten-fold increase from just 5% in 2016. Their flexibility, low premia and underlying leverage appeal to all market participants ranging from conservative investors hedging against intraday market volatility to aggressive traders speculating for … Continue reading Zero-day options and financial market vulnerability
Rebecca Mari and Matteo Ficarra. Floods are the most costly natural disaster in Europe. In the UK, they account for around GBP1.4 billion in annual losses. Yet, evidence on the macroeconomic implications is inconclusive. GDP often shows a puzzling delayed response, and prices can be pushed in opposite directions. Using a novel county level data … Continue reading Weathering the storm: the economic impact of floods and the role of adaptation
Boromeus Wanengkirtyo, Francesca Diluiso, Rebecca Mari, Jenny Chan, Ambrogio Cesa-Bianchi and Alex Haberis. Climate change is becoming increasingly important for monetary policy as the world transitions into greener economies and climate change’s physical impacts become more prominent. This is complementary, but distinct to, examining how climate change affects financial stability risks (Carney (2015)). This series … Continue reading Climate and monetary policy series
James Waddell and Meghna Shrestha An increasing number of households in the UK are opting for longer-term mortgages, with the share of borrowers taking out new mortgages with terms 30 years or longer tripling since 2005. But who are these households, why have they done so, and what could this imply for financial stability? This … Continue reading 30+ year mortgages – are these the new norm? What does this mean for financial stability?