Research Brief
This publication by the Bundesbank Research Centre provides regular news about recent studies and discussion papers by Bundesbank research economists.
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Banks with low profitability increasingly taking risks in the low interest rate environment Research Brief | 42nd edition – October 2021
Banks grant long-term loans funded by short-term customer deposits. This maturity transformation earns banks money because long-term interest rates are generally higher than short-term interest rates. At the same time, this exposes banks to the risk that interest rates will rise, forcing them to pay more for deposits in the short term already, whereas they only receive the higher interest on new loans. In the low interest rate environment which has prevailed over the past few years, the premium on assuming interest rate risk has trended downward. At the same time, banks with poor profitability have stepped up their maturity transformation and thus also this risk. This is potentially a sign of a search for yield.
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Short sellers anticipate governments’ fiscal space during the COVID-19 pandemic Research Brief | 41st edition – August 2021
The outbreak of the COVID-19 pandemic had an unprecedented impact on the global economy, forcing governments to take rapid fiscal action. However, generous government support programmes depend on the government having a good credit rating. How do financial market players take fiscal constraints into account in their investment decisions? A new study looks into this question by analysing developments in short positions in the first few months of the COVID-19 pandemic in Europe.
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Dynamics in the crude oil market dictated by the manufacturing sector Research Brief | 40th edition – May 2021
It is often said that industry in oil-importing countries is especially hard hit when oil prices climb. However, a new study reveals that the manufacturing sector actually often does well during episodes of elevated oil prices. This is because, from a global perspective, that particular sector is a driving force behind oil price movements. The manufacturing sector’s healthy performance thus bolsters the economy of oil-importing countries in times of rising oil prices. Conversely, industry often exerts negative effects when oil prices fall.
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Monetary policy played a pivotal role in the Great Depression Research Brief | 39th edition – March 2021
The root causes of the Great Depression from 1929 to 1933 have been researched extensively. In this context, economic historians view central bank policy as having played a pivotal role, something which empirical modelling often fails to confirm. A new study likewise examines this influence empirically, but more explicitly takes into account the functioning of the international monetary system at the time – the international gold standard.
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How institutional investment funds’ reach for yield intensifies asset price volatility Research Brief | 38th edition – January 2021
Institutional funds manage the majority of the assets under management of all German investment funds. This research brief documents that institutional funds act in a strongly procyclical manner: they actively invest in higher-yielding, longer-duration and lower-rated assets as yield spreads compress. We show that this intensifies asset price volatility and highlight reasons behind this procyclical investment behaviour.