CNB Research News

The Effect of Monetary Policy on House Prices – How Strong is the Transmission?

This paper analyses the effect of monetary policy on house prices by examining the broad empirical literature on the topic. The authors show that an increase in the short-term interest rate by one percentage point causes a median decrease in house prices of 0.7 per cent for the one-year horizon. After controlling for publication bias and data and method choices, the authors find that the mean true effect is even stronger than that reported in the literature and stronger than the effect of monetary policy on consumer prices.

Composite Survey Sentiment as a Predictor of Future Market Returns: Evidence for German Equity Indices

This paper shows that sentiment which captures the beliefs of the general public is responsible for temporary overreactions of the aggregate German stock market and also of its narrower segments as embodied in four important equity indices from the DAX family. In addition, the author finds that this sentiment measure even outperforms the consumer confidence index in terms of out-of-sample return predictability.

A Top-down Stress-testing Framework for the Nonfinancial Corporate Sector

This paper introduces a framework for top-down stress-testing of the nonfinancial corporate sector. It describes the macroeconomic simulation and propagation of economic shocks between individual industries in the underlying aggregate scenario and default rate estimation based on industry-specific performance variables obtained from this simulation. The results are demonstrated on two different scenarios

Estimating Commercial Property Price Misalignment in the CEE Countries

This paper estimates the misalignment of commercial property prices in the CEE countries, differentiating between office and industrial property. To this end, the authors propose a semi-structural model which imitates the functioning of various segments of the commercial real estate market.

The Power of Sentiment: Irrational Beliefs of Households and Consumer Loan Dynamics

This paper examines whether household sentiment can explain fluctuations in newly issued consumer loans. The authors construct a novel measure of household sentiment using detailed data from the harmonised consumer surveys conducted in European countries and show that shocks to this new measure of sentiment do have a measurable impact on growth of consumer loans.

Researching the Research: A Central Banking Edition

This paper employs two unique data sets describing research in central banks in Europe and the United States to offer a novel insight into central banks’ research activities. The authors identify significant heterogeneity among central banks from different regions, but also identify several important stylised facts.

How Accurate Are Oil Price Forecasts?

This article assesses the accuracy of the three oil price forecasts we comment on most often in GEO: 1) the forecast derived from the market curve based on Brent crude oil futures, 2) the US Energy Information Administration’s model-based forecast and 3) the predictions obtained from the regular Consensus Forecasts surveys.

After the BITs: The Uncertain Future of International Investment Governance

This article examines international investment and investor protections. The 1990s saw a massive increase in bilateral investment treaties (BITs), but their number is currently declining. This is due in part to the historical experience of substantial investor compensation, but also to an emerging policy shift towards levelling the playing field for domestic and foreign investors.

A Network of National AMCs – Part of the Solution to the Legacy of the Financial Crisis and the Coronavirus Crisis?

This article looks at the risk posed by the coronavirus crisis to the financial sector and describes current work in the area of non-performing loans (NPLs) and their possible resolution. One solution is to set up asset management companies (AMCs). The article also notes that historically, public finances have usually had to be deployed to help resolve debt problems, because market mechanisms alone have seldom been sufficient. 

Usability of Capital Buffers under a Binding Leverage Ratio Requirement

A binding leverage ratio requirement may in certain extreme situations limit the usability of capital buffers to absorb losses. This article estimates that this usability would hypothetically have been limited by almost 1.7 pp of the capital ratio in the Czech banking sector at the end of the first half of 2020.

Reserve Requirements

Reserve requirements used to be a standard central bank instrument. Recent decades, however, have seen a decline in their importance, especially in developed countries; the prescribed level of reserves has been reduced, and in some cases the requirement has been abolished completely. This article discusses the potential functions of reserve requirements and describes the practices of selected central banks.