Aerdt Houben - Academia.edu (original) (raw)

Papers by Aerdt Houben

Negative interest rates matter for bank performance. When interest rates turn negative, banks suf... more Negative interest rates matter for bank performance. When interest rates turn negative, banks suffer. This is because retail deposit rates are stuck at zero. Consistent with the deposits channel of monetary policy, banks that are relatively dependent on deposit funding are hurt more, and more persistently, by negative rates. The design of monetary policy can take this into account. Central bank instruments that target the longer-end of the yield curve are less detrimental to bank performance than those that target the shorter-end in times of negative interest rates. Therefore, quantitative easing and yield curve control deserve special consideration when interest rates are negative and further monetary accommodation is required

Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influenc... more Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influencing bank credit and its substitution effects beyond banking have been a key subject of discussion. Our empirical analysis confirms the expected effects of macroprudential policies on bank credit, both for advanced economies and emerging market economies. Yet we also find evidence of substitution effects towards nonbank credit, especially in advanced economies, reducing the policies' effect on total credit. Quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects. Policy implications indicate a need to extend macroprudential policy beyond banking, especially in advanced economies.

Edward Elgar Publishing eBooks, Mar 31, 2008

Macroprudential policies are being implemented around the globe. A key question is whether these ... more Macroprudential policies are being implemented around the globe. A key question is whether these policies prompt substitution toward the non-bank financial sector. This column presents compelling evidence of such ‘waterbed effects’ after macroprudential policy action. Substitution towards non-bank credit is stronger when policy measures applied to banks are binding and are implemented in countries with well-developed financial markets. While systemic risks may nonetheless decline, waterbed effects highlight the importance of developing macroprudential policies beyond banking.

Journal of Banking and Finance, May 1, 2020

Against the background of the great financial crisis, this paper assesses the merits of bank-base... more Against the background of the great financial crisis, this paper assesses the merits of bank-based versus market-based financing by exploring the relationship between financial structure and systemic risk. A fixed effects regression model is estimated over a panel of 22 OECD countries. The results show that bank-based financing generates systemic risk while market-based debt and especially market-based stock financing reduce systemic risk. A threshold regression model estimated over the same panel suggests that banks no longer contribute to systemic risk when there is little bank-based financing. In the case of relatively market-based financial structures, the influence of banks on systemic risk is low. The findings indicate that countries can increase their resilience to systemic risk by reducing the share of bank-based financing and increasing the share of market-based financing.

Journal of Money, Credit and Banking, May 27, 2019

and it is a condition of accessing publications that users recognise and abide by the legal requi... more and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal ? Take down policy If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately and investigate your claim.

ABSTRACT Selecting a monetary policy strategy is an ongoing activity. Changing circumstances, ada... more ABSTRACT Selecting a monetary policy strategy is an ongoing activity. Changing circumstances, adaptations in preferences, and advances in the understanding of how economies work each imply that the strategic orientation of monetary policy needs to be kept under continuous review. At the same time, given the uncertainty inherent in economic relationships and in decisions on prospective developments, as well as the importance of stabilising expectations, constancy in the monetary strategy choice runs at a premium. The adage ‘if it ain’t broke, don’t fix it’ clearly applies to the domain of monetary strategy. In this respect, the evolution of monetary policy strategies in Europe over the past quarter of a century is characterised by a degree of inertia, with changes often prompted by a financial crisis. Indeed, this evolution should be seen against the backdrop of the collapse of the international monetary system of Bretton Woods, which necessitated a fundamental adaptation of European monetary policy frameworks and prompted greater soul-searching in the monetary strategy choice.

Advances in financial innovation, a declining use of cash in some countries and the introduction ... more Advances in financial innovation, a declining use of cash in some countries and the introduction of private digital tokens have spurred central banks to consider issuing digital currencies of their own. Central bank digital currencies(CBDCs) would introduce a new central bank liability that is different from cash and reserves or settlement balances held by commercial banks. This would change the characteristics of central bank money, notably in terms of access and remuneration. Since central banks steer the financial system by calibrating the accessibility and terms of central bank money, this could have major implications for the structure and stability of the financial system.

may be reproduced and/or published in print, by photocopying, on microfilm or in any other way wi... more may be reproduced and/or published in print, by photocopying, on microfilm or in any other way without the written consent of the copyright holder(s); the same applies to whole or partial adaptations. The publisher retains the sole right to collect from third

Palgrave Macmillan UK eBooks, 2014

The recent global financial crisis brought numerous financial institutions to the brink of collap... more The recent global financial crisis brought numerous financial institutions to the brink of collapse and led authorities to take far-reaching measures to safeguard financial stability. The causes of the crisis have been extensively analysed and lessons have been drawn. One lesson stands out: the need to strengthen the supervision of the financial system as a whole, from a macroprudential perspective. As a complement to microprudential supervision, such a perspective considers potential systemic interactions between the individual institution and the broader financial system. This lesson is of particular relevance for the banking sector, as banks are more likely to be considered systemically important than insurers. By nature, banks are highly interconnected through the interbank money market, play a pivotal role in the payment system and are exposed to liquidity risk. Nevertheless, contagion channels also exist between the insurance sector and other parts of the financial system, both in theory and practice.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,... more All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopy, recording or otherwise, without the prior written permission of the Nederlandsche Bank.

IMF Policy Discussion Papers

This paper reviews commercial bank debt restructuring based on the recent experience of Bulgaria.... more This paper reviews commercial bank debt restructuring based on the recent experience of Bulgaria. While the deal is shown to have generated substantial debt relief at a remarkably low cost, several lessons are drawn that may be of broader relevance to countries restructuring bank debt. As, from time to time, it has been suggested that Bulgaria should have held out for more favorable treatment, or that it should now seek further debt reduction, the likely costs of these options are identified. Looking ahead, key policy issues are discussed that will determine growth prospects and debt sustainability over the medium term. It is argued that the deal's success remains to be underpinned in particular by judicious fiscal and debt management policies.

Chapters in SUERF Studies, 2014

Financial Stability Review, 2013

In the financial sector, there is increasing demand for high quality collateral assets that combi... more In the financial sector, there is increasing demand for high quality collateral assets that combine liquidity with low credit risk. This is fuelled by greater risk aversion since the onset of the global financial crisis in 2008 and by regulatory initiatives such as collateral requirements in derivatives markets and liquidity requirements for banks. In turn, increasing collateral use is boosting the share of encumbered assets on banks’ balance sheets. This may have adverse implications for the financial system. Collateral use adds to complexity, opacity and interconnectedness between financial market participants. Asset encumbrance also reduces the scope for bail-in given less residual assets for unsecured creditors. Beyond this, increasing collateral use exacerbates procyclicality stemming from haircuts, margin requirements and collateral eligibility. Taking a European perspective, this article maps out the recent rise in collateral demand and asset encumbrance, investigates the imp...

In recent times, equity and house prices in the Netherlands have soared. By late 1997 the AEX ind... more In recent times, equity and house prices in the Netherlands have soared. By late 1997 the AEX index of the Amsterdam Exchanges hovered around the 900 mark, having started the year at 634, reaching a maximum of 1011 on 7th August. House prices went up some 10% in 1996, a rate of increase that continued in the first half of 1997. This has led many to wonder whether in the early months of 1997 the Netherlands was subject to asset inflation. Asset inflation (or an asset bubble) occurs when the prices of financial assets rise above their underlying or intrinsic value.

The great financial crisis of 2007-2009 again illustrated the enormous costs of financial imbalan... more The great financial crisis of 2007-2009 again illustrated the enormous costs of financial imbalances. Since the crisis, advanced economies have suffered a cumulative output loss of 33% relative to its pre-crisis, an increase in public debt amounting to 21% of GDP and direct fiscal costs totalling around 4% of GDP. These losses demonstrate the need for macroprudential measures that reduce the incidence and impact of systemic crises. This need has been acknowledged by economists and policymakers alike, and much has been written on the theory of macroprudential policy. Now the time has come to put these insights to work. To bring together key players in this new policy arena, DNB organized a high-level seminar on 10 june 2014; the speakers' contributions are bundled in this Occasional Study.

IMF Working Papers, 2016

Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influenc... more Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influencing bank credit and its substitution effects beyond banking have been a key subject of discussion. Our empirical analysis confirms the expected effects of macroprudential policies on bank credit, both for advanced economies and emerging market economies. Yet we also find evidence of substitution effects towards non-bank credit, especially in advanced economies, reducing the policies' effect on total credit. Quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects. Policy implications indicate a need to extend macroprudential policy beyond banking, especially in advanced economies.

Financial Stability Report, 2015

This article presents a synopsis of a workshop on systemic liquidity and macroprudential supervis... more This article presents a synopsis of a workshop on systemic liquidity and macroprudential supervision held at the Oesterreichische Nationalbank on October 28, 2015. We introduce the concept of systemic liquidity and argue that it can be a driving force of systemic risk. Systemic liquidity is shown to be endogenous and cyclical, and to reflect the interaction between banks, other financial intermediaries and financial markets. We then summarize the main conclusions from the individual contributions to the workshop. Finally, we present key questions to be addressed when developing a macroprudential policy to contain systemic liquidity risk.

Negative interest rates matter for bank performance. When interest rates turn negative, banks suf... more Negative interest rates matter for bank performance. When interest rates turn negative, banks suffer. This is because retail deposit rates are stuck at zero. Consistent with the deposits channel of monetary policy, banks that are relatively dependent on deposit funding are hurt more, and more persistently, by negative rates. The design of monetary policy can take this into account. Central bank instruments that target the longer-end of the yield curve are less detrimental to bank performance than those that target the shorter-end in times of negative interest rates. Therefore, quantitative easing and yield curve control deserve special consideration when interest rates are negative and further monetary accommodation is required

Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influenc... more Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influencing bank credit and its substitution effects beyond banking have been a key subject of discussion. Our empirical analysis confirms the expected effects of macroprudential policies on bank credit, both for advanced economies and emerging market economies. Yet we also find evidence of substitution effects towards nonbank credit, especially in advanced economies, reducing the policies' effect on total credit. Quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects. Policy implications indicate a need to extend macroprudential policy beyond banking, especially in advanced economies.

Edward Elgar Publishing eBooks, Mar 31, 2008

Macroprudential policies are being implemented around the globe. A key question is whether these ... more Macroprudential policies are being implemented around the globe. A key question is whether these policies prompt substitution toward the non-bank financial sector. This column presents compelling evidence of such ‘waterbed effects’ after macroprudential policy action. Substitution towards non-bank credit is stronger when policy measures applied to banks are binding and are implemented in countries with well-developed financial markets. While systemic risks may nonetheless decline, waterbed effects highlight the importance of developing macroprudential policies beyond banking.

Journal of Banking and Finance, May 1, 2020

Against the background of the great financial crisis, this paper assesses the merits of bank-base... more Against the background of the great financial crisis, this paper assesses the merits of bank-based versus market-based financing by exploring the relationship between financial structure and systemic risk. A fixed effects regression model is estimated over a panel of 22 OECD countries. The results show that bank-based financing generates systemic risk while market-based debt and especially market-based stock financing reduce systemic risk. A threshold regression model estimated over the same panel suggests that banks no longer contribute to systemic risk when there is little bank-based financing. In the case of relatively market-based financial structures, the influence of banks on systemic risk is low. The findings indicate that countries can increase their resilience to systemic risk by reducing the share of bank-based financing and increasing the share of market-based financing.

Journal of Money, Credit and Banking, May 27, 2019

and it is a condition of accessing publications that users recognise and abide by the legal requi... more and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal ? Take down policy If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately and investigate your claim.

ABSTRACT Selecting a monetary policy strategy is an ongoing activity. Changing circumstances, ada... more ABSTRACT Selecting a monetary policy strategy is an ongoing activity. Changing circumstances, adaptations in preferences, and advances in the understanding of how economies work each imply that the strategic orientation of monetary policy needs to be kept under continuous review. At the same time, given the uncertainty inherent in economic relationships and in decisions on prospective developments, as well as the importance of stabilising expectations, constancy in the monetary strategy choice runs at a premium. The adage ‘if it ain’t broke, don’t fix it’ clearly applies to the domain of monetary strategy. In this respect, the evolution of monetary policy strategies in Europe over the past quarter of a century is characterised by a degree of inertia, with changes often prompted by a financial crisis. Indeed, this evolution should be seen against the backdrop of the collapse of the international monetary system of Bretton Woods, which necessitated a fundamental adaptation of European monetary policy frameworks and prompted greater soul-searching in the monetary strategy choice.

Advances in financial innovation, a declining use of cash in some countries and the introduction ... more Advances in financial innovation, a declining use of cash in some countries and the introduction of private digital tokens have spurred central banks to consider issuing digital currencies of their own. Central bank digital currencies(CBDCs) would introduce a new central bank liability that is different from cash and reserves or settlement balances held by commercial banks. This would change the characteristics of central bank money, notably in terms of access and remuneration. Since central banks steer the financial system by calibrating the accessibility and terms of central bank money, this could have major implications for the structure and stability of the financial system.

may be reproduced and/or published in print, by photocopying, on microfilm or in any other way wi... more may be reproduced and/or published in print, by photocopying, on microfilm or in any other way without the written consent of the copyright holder(s); the same applies to whole or partial adaptations. The publisher retains the sole right to collect from third

Palgrave Macmillan UK eBooks, 2014

The recent global financial crisis brought numerous financial institutions to the brink of collap... more The recent global financial crisis brought numerous financial institutions to the brink of collapse and led authorities to take far-reaching measures to safeguard financial stability. The causes of the crisis have been extensively analysed and lessons have been drawn. One lesson stands out: the need to strengthen the supervision of the financial system as a whole, from a macroprudential perspective. As a complement to microprudential supervision, such a perspective considers potential systemic interactions between the individual institution and the broader financial system. This lesson is of particular relevance for the banking sector, as banks are more likely to be considered systemically important than insurers. By nature, banks are highly interconnected through the interbank money market, play a pivotal role in the payment system and are exposed to liquidity risk. Nevertheless, contagion channels also exist between the insurance sector and other parts of the financial system, both in theory and practice.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,... more All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopy, recording or otherwise, without the prior written permission of the Nederlandsche Bank.

IMF Policy Discussion Papers

This paper reviews commercial bank debt restructuring based on the recent experience of Bulgaria.... more This paper reviews commercial bank debt restructuring based on the recent experience of Bulgaria. While the deal is shown to have generated substantial debt relief at a remarkably low cost, several lessons are drawn that may be of broader relevance to countries restructuring bank debt. As, from time to time, it has been suggested that Bulgaria should have held out for more favorable treatment, or that it should now seek further debt reduction, the likely costs of these options are identified. Looking ahead, key policy issues are discussed that will determine growth prospects and debt sustainability over the medium term. It is argued that the deal's success remains to be underpinned in particular by judicious fiscal and debt management policies.

Chapters in SUERF Studies, 2014

Financial Stability Review, 2013

In the financial sector, there is increasing demand for high quality collateral assets that combi... more In the financial sector, there is increasing demand for high quality collateral assets that combine liquidity with low credit risk. This is fuelled by greater risk aversion since the onset of the global financial crisis in 2008 and by regulatory initiatives such as collateral requirements in derivatives markets and liquidity requirements for banks. In turn, increasing collateral use is boosting the share of encumbered assets on banks’ balance sheets. This may have adverse implications for the financial system. Collateral use adds to complexity, opacity and interconnectedness between financial market participants. Asset encumbrance also reduces the scope for bail-in given less residual assets for unsecured creditors. Beyond this, increasing collateral use exacerbates procyclicality stemming from haircuts, margin requirements and collateral eligibility. Taking a European perspective, this article maps out the recent rise in collateral demand and asset encumbrance, investigates the imp...

In recent times, equity and house prices in the Netherlands have soared. By late 1997 the AEX ind... more In recent times, equity and house prices in the Netherlands have soared. By late 1997 the AEX index of the Amsterdam Exchanges hovered around the 900 mark, having started the year at 634, reaching a maximum of 1011 on 7th August. House prices went up some 10% in 1996, a rate of increase that continued in the first half of 1997. This has led many to wonder whether in the early months of 1997 the Netherlands was subject to asset inflation. Asset inflation (or an asset bubble) occurs when the prices of financial assets rise above their underlying or intrinsic value.

The great financial crisis of 2007-2009 again illustrated the enormous costs of financial imbalan... more The great financial crisis of 2007-2009 again illustrated the enormous costs of financial imbalances. Since the crisis, advanced economies have suffered a cumulative output loss of 33% relative to its pre-crisis, an increase in public debt amounting to 21% of GDP and direct fiscal costs totalling around 4% of GDP. These losses demonstrate the need for macroprudential measures that reduce the incidence and impact of systemic crises. This need has been acknowledged by economists and policymakers alike, and much has been written on the theory of macroprudential policy. Now the time has come to put these insights to work. To bring together key players in this new policy arena, DNB organized a high-level seminar on 10 june 2014; the speakers' contributions are bundled in this Occasional Study.

IMF Working Papers, 2016

Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influenc... more Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influencing bank credit and its substitution effects beyond banking have been a key subject of discussion. Our empirical analysis confirms the expected effects of macroprudential policies on bank credit, both for advanced economies and emerging market economies. Yet we also find evidence of substitution effects towards non-bank credit, especially in advanced economies, reducing the policies' effect on total credit. Quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects. Policy implications indicate a need to extend macroprudential policy beyond banking, especially in advanced economies.

Financial Stability Report, 2015

This article presents a synopsis of a workshop on systemic liquidity and macroprudential supervis... more This article presents a synopsis of a workshop on systemic liquidity and macroprudential supervision held at the Oesterreichische Nationalbank on October 28, 2015. We introduce the concept of systemic liquidity and argue that it can be a driving force of systemic risk. Systemic liquidity is shown to be endogenous and cyclical, and to reflect the interaction between banks, other financial intermediaries and financial markets. We then summarize the main conclusions from the individual contributions to the workshop. Finally, we present key questions to be addressed when developing a macroprudential policy to contain systemic liquidity risk.