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Current Research

The Causes and Consequences of International Dollar Positions

by Agustín Bénétrix

By the end of 2014, banks and bond investors extended 8 trillion of US dollar credit to non-bank borrowers outside the United States. However, the offshore credit denominated in other main international currencies such as the euro and yen reached $2.5 and $0.6 trillion, respectively (BIS 2015). The central role of US dollar as currency of denomination for international credit motivates this research. Building on previous work on international currency exposures, our goal is to study the cross-country distribution of short and long dollar positions, its determinants and implications.

An Aging Dynamo:
Demographic Change and the Decline of Entrepreneurship in the United States

by Joseph Kopecky

The rate of new business startups has fallen dramatically over the last thirty-five years, a trend that accelerated after the year 2000. The timing of this decline coincides with the start of a steady increase in both the life expectancy and average age of the workforce. I document that an individual's propensity to select into entrepreneurship follows a hump "shape" as they age. To account for both individual behavior and aggregate trends, I construct a life cycle model of entrepreneurial choice. I find that demographic channels can account for a large portion of the recent decline in startup activity, predicting further decline as the population continues to age. This presents a new challenge that policy makers around the world may face, as they see steadily increasing shares of their workforce near retirement, and relatively few individuals well positioned to take on entrepreneurial risk.

Did Bank Lending Stifle Innovation in Europe During the Great Recession?

by Davide Romelli

Using the 2008-09 Global financial crisis and the 2012 Euro area sovereign debt crisis as natural experiments, we investigate the effects of contractions in credit supply on R&D spending in a large sample of European rms. Our identification strategy exploits differences in financial constraints across rms, as well as the cross-industry variation in dependence on external finance, to identify a causal effect of bank credit supply on firm investment in innovation. We show that rms that are more likely financially constrained, in industries more dependent on external finance, have a disproportionally lower growth rate of R&D spending, as well as lower R&D intensity and share of R&D investment in total investment during periods of tight credit supply. These results are robust to different proxies of financial constraints, model specifications and fixed-effects identification strategies.

New Goods and International Risk Sharing

by Paul Scanlon

Because consumption growth rates are weakly correlated across countries, standard one-good models indicate that the degree of international risk sharing is low. This project develops a model which identifies another form of risk sharing: the exchange of new goods. In the model, consumers have a love of variety, and the composition of consumption also determines welfare. As a result, the exchange of new goods now constitutes a form of risk sharing; to determine the degree of international risk sharing, comparing consumption growths is not enough.

Economic Development with Integrated Labour Markets

by Michael Wycherley

The integration of the Irish and UK labour markets meant that Irish wages were determined largely by UK wages rather than economic conditions within Ireland. This meant that Ireland found it difficult to follow the standard development strategy of progressing up the value chain from low wage and low skill activities. This project investigates Ireland's alternative strategy of importing productivity via FDI, the implications of relying on outside sources for productivity growth, and the degree to which this strategy is necessary or possible for other European countries.

Recent Publications

"Banking supervision and external auditors: Theory and empirics" Journal of Financial Stability, Volume 46, p. 100722, 2020. (By Davide Romelli, with Donato Masciandaro and Oana Peia)

"Central Bank Reforms and Institutions", ifo DICE Report, ifo Institute, I/2019, Vol. 17, 30–35,2019. (By Davide Romelli with Oana Peia)

"Financial deglobalisation in banking?",Journal of International Money and Finance, forthcoming. (By Agustin Benetrix with Rober McCauley, Patrick McGuire and Goetz von Peter)

“Currency, Credit and Crisis: Central Banking in Ireland and Europe”,Studies in Macroeconomic History, Cambridge University Press, forthcoming.(by Patrick Honohan)

“Managing Macrofinancial Crises: The Role of the Central Bank”, in David Mayes, Pierre L. Siklos and Jan-Egbert Sturm, eds., The Oxford Handbook of the Economics of Central Banking, Oxford University Press, forthcoming. (By Patrick Honohan, with Domenico Lombardi and Samantha St. Amand)

“Peaks and Troughs: Economics and Political Economy of Central Bank Independence Cycles”, in David Mayes, Pierre L. Siklos and Jan-Egbert Sturm, eds.,The Oxford Handbook of the Economics of Central Banking, Oxford University Press, forthcoming. (By Davide Romelli, with Donato Masciandaro)

“New Goods and Asset Prices”, Journal of Financial Economics, forthcoming. (By Paul Scanlon)

“Could Performance-linked Lending Have Helped in the Euro Crisis? Could It Still?” in Robert Shiller, Jonathan D. Ostry and James Benford, eds., Sovereign GDP-linked Bonds: Rationale and Design, A ebook, CEPR Press, 2018 (By Patrick Honohan)

“The Management and Prevention of Banking Crises: Lessons from Recent Experience”, in Thorsten Beck and Ross Levine, eds., Handbook of Finance and Development (Edward Elgar). 2018, pp. 312-337. (By Patrick Honohan)

"Can appreciation be expansionary? Evidence from the euro area", Economic Policy, volume 33.94, 2018. (By Philip R. Lane, with Livio Stracca)

"The external wealth of nations revisited: international financial integration in the aftermath of the global financial crisis", IMF Economic Review, volume 66.1, 2018. (By Philip R. Lane, with Gian Maria Milesi-Ferretti)

"Central Bankers as Supervisors: Do Crises Matter?”, European Journal of Political Economy, volume 52, 2018. (By Davide Romelli, with Donato Masciandaro).

“Current account and real exchange rate changes: The impact of trade openness” European Economic Review, volume 105, 2018. (By Davide Romelli, with Cristina Terra and Enrico Vasconcelos)

>“Restoring an Effective Fiscal Stabilization Capacity for Euro Area Countries”, in Agnès Bénassy-Quéré and Francesco Giavazzi, eds., Europe’s Political Spring: Fixing the Eurozone and Beyond, A ebook, CEPR Press, 2017. (By Patrick Honohan)

“Restoring Trust in the Arrangements for Euro Area Intergovernmental Debt”, in Thorsten Beck and Geoffrey Underhill, eds., Quo Vadis? Identity, Policy and the Future of the European Union, A ebook, CEPR Press, 2017. (By Patrick Honohan)

“Management and Resolution of Banking Crises: Lessons from Recent European Experience”, PIIE Policy Brief 17-1, 2017. (By Patrick Honohan)

"Appointments to Central Bank Boards: Does Gender Matter?", Economics Letters, volume 155, 2017. (By Davide Romelli, with Patricia Charlety and Estefania Santacreu-Vasut)

"Debt and austerity: Post-crisis lessons from Ireland, Journal of Financial Stability, volume 24, 2016. (By Patrick Honohan)

“Are Wider Central Bank Mandates Sustainable?”, in Doris Ritzberger-Grünwald, ed., Central Banking in Times of Change, Austrian National Bank, 2016. (By Patrick Honohan)

“What Else Can Central Banks Do?”, Geneva Reports on the World Economy, Geneva: International Center for Monetary and Banking Studies and London: Centre for Economic Policy Research, 2016. (By Patrick Honohan, with Laurence Ball, Joseph Gagnon and Signe Krogstrup)

"The Sovereign-Bank Diabolic Loop and ESBies", American Economic Review (P&P), volume 24, 2016. (By Philip R. Lane, with Markus K. Brunnermeier, Luis Garicano, Marco Pagano, Ricardo Reis, Tano Santos, David Thesmar, Stijn Van Nieuwerburgh, and Dimitri Vayanos)

“International Currency Exposures, Valuation Effects and the Global Financial Crisis”, Journal of International Economics, volume 96, 2015. (By Agustín Bénétrix and Philip R. Lane, with Jay C. Shambaugh)

“Ups and Downs. Central Bank Independence from the Great Inflation to the Great Recession: Theory, Institutions and Empirics”, Financial History Review, volume 22, 2015. (By Davide Romelli, with Donato Masciandaro)