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Bank of England Research

@BoE_Research

Research papers, #bankunderground posts, publications and news from Bank of England researchers. Staff opinion and analysis, not necessarily official BoE views

 London, United Kingdom
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Joined February 2018
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Research papers, Bank Underground posts, publications and news BoE Research

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Latest BU post outlines a model to identify the transmission of QE and QT policies… bankunderground.co.uk/2024/0…
Image from Bank of England Research (@BoE_Research)
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Today’s BU post examines short term interest rate futures and their recent developments…bankunderground.co.uk/2024/0…
Image from Bank of England Research (@BoE_Research)
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ICYMI: "The presence of direct demand-side effects from energy shocks under household heterogeneity adds an important dimension to the policy landscape." bankunderground.co.uk/2024/0…
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2/ See the underlying forthcoming JME paper by Jenny Chan (BoE), Sebastian Diz (Central Bank of Paraguay) + Derrick Kanngiesser (BoE) here: sciencedirect.com/science/ar…
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🧵SWP 1089 by Gabor Pinter (BIS), Emil Siriwardane (Harvard) + Danny Walker (BoE) examines what caused the liability-driven investment (LDI) fund crisis in September 2022… bankofengland.co.uk/working-…
Fire sales of safe assets

Fire sales of safe assets

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.

bankofengland.co.uk
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4/ Finds that operational frictions between LDIs + their well-capitalised pension owners hindered collateral transfers, leading to a fire sale. Pooled LDIs, with the greatest frictions, deleveraged more than non-pooled funds even when controlling for their higher leverage.
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5/ Hedge funds appear to have withheld liquidity provision to the market in an effort to time the bottom of the fire sale. Findings demonstrate how capital can be slow moving internally, due to contracting frictions, + externally, due to strategic arbitrager behaviour.
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🧵 Latest BU post outlines a model to capture the direct adverse effects of energy price shocks on aggregate demand. Shows how the transmission of energy price shocks differs from other supply shocks. bankunderground.co.uk/2024/0…
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2/ Underlying paper by Jenny Chan (BoE), Sebastian Diz (Central Bank of Paraguay) + Derrick Kanngiesser (BoE) is forthcomming in the Journal of Monetary Economics sciencedirect.com/science/ar…
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🧵SWP 1087 by Andrea Alati (BoE), Johannes Fischer (Bundesbank), Maren Froemel (BoE) + Ozgen Ozturk (Oxford Uni) examines how firms adjust their investment in response to sales shocks… bankofengland.co.uk/working-…
Firms’ sales expectations and marginal propensity to invest

Firms’ sales expectations and marginal propensity to invest

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.

bankofengland.co.uk
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3/ A 1pp higher than expected growth rate of sales causes a 0.31pp increase in capital expenditure for UK firms. Firms also increase prices after positive sales surprises, consistent with a demand-driven interpretation of these surprises.
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4/ Firms use unexpected sales realizations to learn about demand. More attentive firms, proxied by their learning gain or pricing strategy, respond significantly stronger to sales surprises. Financial constraints, productivity + uncertainty channels cannot explain the findings.
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ICYMI: "We estimate that LDI selling accounted for half of the decline in gilt prices during this period, with fiscal policy likely accounting for the other half." bankunderground.co.uk/2024/0…
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🧵SWP by 1086 Gabriel Ahlfeldt (LSE), Nikodem Szumil (UCL) + Jagdish Tripathy (BoE) quantifies the impact of house-price growth on mortgage demand in the UK via the “housing-consumption channel”… bankofengland.co.uk/working-…
Housing-consumption channel of mortgage demand

Housing-consumption channel of mortgage demand

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.

bankofengland.co.uk
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5/ Finds robust evidence for the housing-consumption channel: documents an elasticity of mortgage demand to house prices of 0.82, with the specific elasticity attributable to housing-consumption channel of 0.38.
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6/ In the absence of the housing-consumption channel, counterfactual analysis of the general-equilibrium of housing + mortgage markets shows that mortgage + house price growth would have been respectively 50% and 31% lower since the 1990s.
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