Bank of England Research

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Latest BU post outlines a model to identify the transmission of QE and QT policies… bankunderground.co.uk/2024/08/09/cen…

Today’s BU post examines short term interest rate futures and their recent developments…bankunderground.co.uk/2024/08/07/car…

2/ See the underlying forthcoming JME paper by Jenny Chan (BoE), Sebastian Diz (Central Bank of Paraguay) + Derrick Kanngiesser (BoE) here: sciencedirect.com/science/articl…

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/2024/08/02/mon…

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.

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.

🧵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-paper/…

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/articl…

🧵 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/2024/08/02/mon…

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.

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.

🧵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-paper/…

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/2024/07/26/wha…

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.

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.

🧵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-paper/…