CNB Research News

 
Quarterly Summary – 1/2022
 
Published jointly by the Economic Research Division and the Financial Research Division
 
 

— Our Latest Research

 
March 2022 – CNB WP 3/2022
 
Cooling the Mortgage Loan Market: The Effect of Recommended Borrower-Based Limits on New Mortgage Lending
by Martin Hodula, Milan Szabo, Lukáš Pfeifer and Martin Melecký

This paper studies the effects of regulatory recommendations concerning maximum (i) loan-to-value (LTV), (ii) debt-to-income (DTI) and (iii) debt service-to-income ratios (DSTI) on new loans secured by residential property. It uses loan-level regulatory survey data on about 82,000 newly granted residential mortgage loans in the Czech Republic from 2016 to 2019 to estimate the average effects of the Czech National Bank’s regulatory recommendations and their heterogeneous effects depending on borrower, loan, bank and regional characteristics.

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March 2022 – CNB WP 2/2022
 
Application of Quantum Computers in Foreign Exchange Reserves Management
by Martin Veselý

The main purpose of this article is to evaluate possible applications of quantum computers in foreign exchange reserves management. The capabilities of quantum computers are demonstrated by means of risk measurement using the quantum Monte Carlo method and portfolio optimisation using a linear equations system solver (the Harrow-Hassidim-Lloyd algorithm) and quadratic unconstrained binary optimisation (the quantum approximate optimisation algorithm).

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March 2022 – CNB RPN 4/2021
 
Macroprudential Policy in Central Banks: Integrated or Separate? Survey Among Academics and Central Bankers
by Simona Malovaná, Martin Hodula, Zuzana Gric and Josef Bajzík

The authors surveyed experts from academia, central banks and other regulatory institutions on the preferred institutional setup of macroprudential policy and the underlying interactions stemming from the conduct of monetary and macroprudential policy. They find substantial support for the integration setup, under which macroprudential policy is entrusted to the central bank and not to a separate institution.

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February 2022 – CNB WP 10/2021
 
Does Sentiment Affect Stock Returns? A Meta-analysis Across Survey-based Measures
by Zuzana Gric, Josef Bajzík and Ondřej Badura

This paper analyses the literature on the relationship between sentiment and future stock returns, a topic which reacts to the history of systemic events causing asset bubbles in financial markets. The meta-analysis of 1,311 point estimates from 30 primary studies suggests that the true effect of an improvement in sentiment is significant and negative.

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February 2022 – CNB WP 9/2021
 
Non-linear Effects of Market Concentration on the Underwriting Profitability of the Non-life Insurance Sector in Europe
by Jan Janků and Ondřej Badura

This paper analyzes the relationship between market concentration and the underwriting profitability of the non-life insurance sector. The authors find that an increasing level of concentration over time leads, on average, to an increase in underwriting profitability (as proxied by the loss ratio). At high levels of concentration, however, this effect reverses, with rising concentration reducing underwriting profitability.

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January 2022 – CNB WP 8/2021
 
A Tale of Different Capital Ratios: How to Correctly Assess the Impact of Capital Regulation on Lending
by Simona Malovaná, Martin Hodula, Josef Bajzík and Zuzana Gric

This paper employs meta-analysis to quantify the effect of changes in bank capital and capital regulation on lending. The authors collect more than 1,600 estimates on the relationship between bank capital and lending. After accounting for potential publication bias, the effect of a 1 percentage point (pp) change to the capital (regulatory) ratio on annual credit growth is set at around 0.3 pp, while the effect of changes to capital requirements is about -0.7 pp.

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— Hot Topics at Home and Abroad

 

— Global Economic Outlook

 
March 2022 – CNB GEO 3/2022
 
Developments in the European Natural Gas Market
by Jan Hošek

This article explains the reasons for the very rapid growth in energy prices since the second half of last year and analyses the global situation. It also shows that a wide range of factors affect the price of natural gas, and that the interplay of these factors caused prices in Europe and Asia to reach historical highs at the end of 2021 and later.

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February 2022 – CNB GEO 2/2022
 
Container Shipping in the Time of Covid
by Milan Frydrych

This article focuses on the workings of container shipping and on the issues that this important worldwide logistics sector is facing. Currently, the sector is overloaded and is contributing to delaying the global recovery after the pandemic and simultaneously strengthening the inflation pressures. The article suggests that the stress in container shipping will fade away only gradually this year and the next.

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January 2022 – CNB GEO 1/2022
 
The Risks Associated with European Export-Oriented Economies' Twin Deficits
by Luboš Komárek and Petr Polák

This article focuses on the twin deficit phenomenon, namely the link between the public budget balance and the current account balance. Twin deficits can have very negative impacts on the economy, especially export oriented ones, so it is important to better understand the risks associated with current developments.

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All Issues of Global Economic Outlook
 
 

— Thematic Articles on Financial Stability

 
October 2021 – CNB FS 2/2021
 
The CNB's Approach to Setting the Capital Buffer for Other Systemically Important Institutions: Past and Present
by Lukáš Pfeifer

This article presents the CNB’s approach to setting the capital buffer for mitigating risks associated with institutions’ systemic importance in the CRD IV regulatory environment and describes the changes to that approach caused by the transposition of CRD V into Czech law. It also explains the reasons for the different approaches applied in the EU Member States before the transposition of CRD V and summarises the legislative measures taken to harmonise those approaches.

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All Thematic Articles on Financial Stability
 
 

— Central Bank Monitoring

 
March 2021 – CBM I/2022
 
Current QE Tapering in Central Banks
by Vojtěch Molnár

In response to the outbreak of the coronavirus pandemic, many central banks launched or extended asset purchase programmes (quantitative easing, QE) in order to mitigate its economic impacts. However, most central banks are currently facing a surge in inflation and are gradually tightening monetary policy and scaling back quantitative easing. This article discusses the ongoing tapering of quantitative easing and, in some cases, the start of the balance sheet reduction process in central banks that have been pursuing QE.

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All Issues of Central Bank Monitoring
 
 
 
March 2022 – CNBLOG
 
Will Quantum Computers One Day Manage International Reserves? (Part 2)
by Martin Veselý

This blog article discusses the potential future use of quantum computers in international reserves management by central banks. The article describes quantum algorithms that can be used for risk measurement and portfolio optimisation, as well as their experimental implementation on the quantum computer IBM QuantumTM.

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January 2022 – CNBLOG
 
Anticipated Events versus Surprise Shocks in Structural Forecasting Models: Czech National Bank's Practical Perspective
by Karel Musil, Stanislav Tvrz and Jan Vlček

This blog article discusses modelling anticipated future events and surprise shocks from the CNB's practical perspective. Monetary policy is forward-looking, so it is crucial for central banks to choose a suitable approach to future information in their forecasting processes. The preferred choice should be to use expected events. For this purpose, the CNB uses the limited information (LIRE) concept, which has worked well in practice.

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