G2 - Financial Institutions and Services

• Uncertain Costs and Vertical Differentiation in an Insurance Duopoly

  Staff Working Paper 2014-14 Radoslav Raykov

  Classical oligopoly models predict that firms differentiate vertically as a way of softening price competition, but some metrics suggest very little quality differentiation in the U.S. auto insurance market.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Market structure and pricing JEL Code(s): D, D4, D43, D8, D81, G, G2, G22, L, L2, L22

• Do Sunspots Matter? Evidence from an Experimental Study of Bank Runs

  Staff Working Paper 2014-12 Jasmina Arifovic, Janet Hua Jiang

  A "sunspot" is a variable that has no direct impact on the economy’s fundamental condition, such as preferences, endowments or technologies, but may nonetheless affect economic outcomes through the expectations channel as a coordination device. This paper investigates how people react to sunspots in the context of a bank-run game in a controlled laboratory environment.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial stability JEL Code(s): C, C9, C91, C92, D, D8, D80, E, E5, E58, G, G2, G20

• Rollover Risk and the Maturity Transformation Function of Banks

  Staff Working Paper 2014-8 Teodora Paligorova, João Santos

  This paper shows that banks that rely heavily on short-term funding engage less in maturity transformation in an attempt to decrease their exposure to rollover risk. These banks shorten both the maturity of their portfolio of loans as well as the maturity of newly issued loans. We find that the loan yield curve becomes steeper with banks’ increasing use of short-term funding.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial stability JEL Code(s): G, G2, G21

• Banks’ Financial Distress, Lending Supply and Consumption Expenditure

  Staff Working Paper 2014-7 H. Evren Damar, Reint Gropp, Adi Mordel

  The paper employs a unique identification strategy that links survey data on household consumption expenditure to bank-level data in order to estimate the effects of bank financial distress on consumer credit and consumption expenditures.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Domestic demand and components, Financial institutions JEL Code(s): E, E2, E21, E4, E44, G, G0, G01, G2, G21

• Search-for-Yield in Canadian Fixed-Income Mutual Funds and Monetary Policy

  Staff Working Paper 2014-3 Sermin Gungor, Jesus Sierra

  This paper investigates the effects of monetary policy on the risk-taking behavior of fixed-income mutual funds in Canada. We consider different measures of the stance of monetary policy and investigate active variation in mutual funds’ risk exposure in response to monetary policy.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Monetary policy transmission JEL Code(s): E, E5, E52, G, G2, G23

• Household Risk Management and Actual Mortgage Choice in the Euro Area

  Staff Working Paper 2014-1 Michael Ehrmann, Michael Ziegelmeyer

  Mortgages constitute the largest part of household debt. An essential choice when taking out a mortgage is between fixed-interest-rate mortgages (FRMs) and adjustable-interest-rate mortgages (ARMs). However, so far, no comprehensive cross‐country study has analyzed what determines household demand for mortgage types, a task that this paper takes up using new data for the euro area.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Monetary policy transmission JEL Code(s): D, D1, D12, E, E4, E43, E5, E52, G, G2, G21