infonet-economy

Inflation expectations are a key variable in conducting monetary policy. However, these expectations are generally unobservable and only certain proxy variables exist, such as surveys on inflation expectations. This article offers guidance on the appropriate quantification of household inflation expectations in the Swiss Consumer Survey, where answers are qualitative in nature. We…

Making use of a structural model that allows for optimal liquidity management, we study the role that repos play in a bank's financing structure. In our model the bank's assets consist of illiquid loans and liquid reserves and are financed by a combination of repos, long--term debt, deposits and equity. Repos are a cheap source of funding, but they are subject to an…

Banks are important providers of external finance to firms. In order to solve asymmetric information problems, firms and banks often engage in bank-firm relationships. Relationship banking occurs when a bank and a borrower enter multiple mutual interactions and both parties invest in obtaining some counterparty specific information, binding bank and firm, to a certain degree, to each…

We study capital requirements when the bank's econometric model only approximately describes the dynamics of portfolio returns—which is virtually always the case in practice. We derive a simple formula for capital requirements based on a first-order Taylor expansion of the Value at Risk around a ‘model confidence’ parameter. This formula allows to reflect the bank's…

We apply a new and innovative approach to communicating risks associated with financial products that should support investors in making better investment decisions. In our experiments, participants are able to gain "simulated experience" by random sampling of a previously described return distribution. We find that simulated experience considerably improves participants’…

This paper discusses how income inequality developed during the current crisis in euro area countries, as well as the role played by each income source. Based on an extended definition of income – including additional components which do not appear in the standard Eurostat definitions – we complement the information provided by the Gini index and quantile ratios by computing an…

Les marchés financiers et les grandes banques ont atteint une taille, une complexité et un degré d’opacité particulièrement inquiétants, qui leur permet d’accroître encore plus leur pouvoir. Au niveau international, les dirigeants élus, qu’ils soient de gauche ou de droite, n’appliquent le plus souvent qu’une seule et même politique économique, celle qui répond aux intérêts de l’…