XXVI Meeting of the Central Bank Researchers Network

November 9 - 11, 2021
Digital Event

Summary
Agenda

For third occasion, CEMLA with the support of Financial Network Analytics (FNA) organized the Course on Regtech and Suptech. The Course covered topics of upmost interest for central banks, including the current trends and developments of Suptech and Regtech in 2021, the modelling and applications of Central bank Digital Currencies (CBDCs) implementations, anti-money laundering (AML) new frameworks and technologies, among others. The sessions were both theoretical and practical, giving to the attendants the foundations and the tools to deepen on these topics.

The first day of the meeting began with the opening remarks by Manuel Ramos-Francia, CEMLA’s General Director. He focused on three broad themes: i) the importance given to research at CEMLA; ii) the relevance of awards in society in general and in economic research in particular; and iii) this year’s meeting. Then, six papers on Macroeconomics were presented, each one followed by a discussion. In Natural Disasters, Climate Change, and Sovereign Risk, Enrico Mallucci studies how natural disasters can magnify fiscal vulnerabilities and have the potential of triggering sovereign defaults for a sample of 7 Caribbean countries. In particular, Mallucci analyses the use of natural disaster clauses as financial relief to maintain the economies’ access to international credit markets. On his part, in Securitization in the Mortgage Market under General Equilibrium, Salomón García develops a general equilibrium model to quantify the role of information frictions in the securitization market during the Great Recession and develops a welfare analysis of the policy changes introduced after it. While, in Rational Sentiments and Financial Frictions, Khorrami and Mendo provide an analysis of sunspot equilibria in a dynamic economy with imperfect risk-sharing. The paper Bond Flows at Risk: Global, Local, and Pipe Factors by Ramos-Francia et al. estimates bond flows’ densities and bond-flows-at-risk for five Latin American Economies. They use panel quantile regressions to analyze the effect of global (push), domestic (pull), and pipes factors on the bond flows’ densities. Moreover, in Market Polarization and the Phillips Curve, Andrés et al. study if there is a relationship between the flattening of the Phillips curve in some Advanced Economies over the recent decades and the increase in industrial polarization. Finally, Ait Lahcen et al. explore, both empirically and quantitatively, the possibility of nonlinear and state-dependent effects of the inflation tax on unemployment, output, and welfare in Nonlinear Unemployment Effects of the Inflation Tax.

The second day starred Professor Benjamin Moll’s Keynote Lecture: Heterogeneous-Agent Macro as a Gateway to Behavioral Macro, where he discussed whether incorporating behavioral features into heterogeneous macroeconomic models could change our thinking about macroeconomic fluctuation and policy. He was followed by a Session in Labor Economics. In Responsible Sourcing? Theory and Evidence from Costa Rica, Alfaro-Ureña et al. explore the welfare effects of Responsible Sourcing requirement rollouts in Costa Rica (2009-2017) on firms and workers. While, in Informal Labor Markets in Times of Pandemic: Evidence for Latin America and Policy Options, Leyva and Urrutia document the evolution of labor markets during the COVID-19 pandemic for five Latin American countries, with a focus on informal labor. Finally, Job Ladders and Labor Productivity Dynamics by Albagli et al. analyzes labor productivity dynamics during recessions, focusing on their scarring effect on job ladders and the destruction of high-quality matches. The following session was devoted to three papers on Monetary Policy. In The Risk-Taking Channel of Monetary Policy: A New Approach and Evidence from Peru, Pozo and Rojas explore how financial firms change the allocation of loans across risky markets in response to monetary policy shocks. On the other hand, Supply Shocks and Monetary Policy Responses in Emerging Economies by Ojeda-Joya and Ocampo studies the monetary-policy responses to unexpected and temporary supply shocks for 24 Emerging Economies during the 2004-2019 period to better understand the determinants of procyclical monetary-policy responses. Lastly, in Alternative Monetary-Policy Instruments and Limited Credibility: An Exploration, Javier García-Cicco explores the trade-offs associated with the choice of alternative monetary-policy instruments for a small and open economy, in a context of imperfectly anchored inflation expectations, to understand whether limited credibility can be a determinant in the choice of the instrument to be used.

The last day of the meeting began with the presentation of the Invited Paper Climate Risk and Financial Stability in the Network of Banks and Investment Funds by Martínez-Jaramillo et al., where the authors analyze the interactions between climate policy shocks and market conditions and their effects on financial stability for the Mexican financial system. They extend the financial system stress test framework to describe the impact of transition risk on banks and investment funds via a mechanism of common asset contagion. Then, the first round of Parallel Sessions took place. At the Banking Parallel Session, the following papers were presented: Creditor's Protection and Bank Loans: Market Power and Bankruptcy Reform's Effects by Alencar et al. explores whether the lack of competition in the financial sector may hinder the effects of more effective protection of creditors in the credit market; in Risk-Based Pricing in Competitive Norwegian Banking Markets by Müller et al., the authors analyze the impact of competition on risk-sensitive pricing of credit risk exposures in the Norwegian corporate loan market; while Credit Allocation when Private Banks Distribute Government Loans by Haas Ornelas et al. studies how private banks allocate government-sponsored loans to businesses and explores what the effects of earmarked lending are on spreads in the free market. Further, the Empirical Macroeconomics Parallel Session starred the following papers: Stylized Facts from Prices at Multi-Channel Retailers in Mexico by Solórzano compares the frequency, size, and dispersion of price changes of 8 retailers in Mexico observed on their websites vis á vis the ones observed in their brick and mortar stores; Monetary Policy Communication and Inflation Expectations: New Evidence about Tone and Readability by Ponce et al. investigates the relationship between inflation expectations, the perceived tone of central bank’s monetary policy communications and the mediating effect of their readability and perspicuity; lastly, Environmental Risk Analysis (ERA) in the Strategic Asset Allocation (SAA) of the International Reserves (IRs) Managed by Central Banks (CBs) by de Almeida da Silva Júnior and Torinelli explores how to consider environmental risks in an investment portfolio managed by central banks.

Next, the second round of Parallel Sessions was held. The Finance Parallel Session included the following papers. In Stress-Ridden Finance and Growth Losses: Does Financial Development Break the Link? Ossandon Busch et al. study whether financial development affects the relationship between financial stability and economic growth, namely if it protects countries from the pass-through of financial shocks to real outcomes. In Effects of Sharing Public Positive Credit Information on Personal Loans, Schechtman et al. use a natural experiment caused by a change of regulation in Brazil to investigate the causal effect of reducing informational asymmetries on credit outcomes. Next, Ramírez-Rondán and Terrones explore whether uncertainty can help explain the uncovered interest parity puzzle in their paper Uncertainty and the Uncovered Interest Parity Condition: How Are They Related? Finally, in the last Parallel and Conference Session, three outstanding papers of the Joint Research Program working group were presented. In International Sourcing During Covid-19: How did Chilean Firms Fared? Peña and Prades examine how Chilean firms are responding to the Covid-19 shock and whether it is the extensive margin or the intensive margin of trade that drives the evolution of aggregates in Chile. In addition, Measuring Financial Restrictions of Brazilian Private Firms with Microdata: Did Credit Policies of Banco Central do Brasil During the Covid-19 Pandemic Affect Investment Demand? by Nascimento de Oliveira builds Financial Restriction measures based on microdata related to bank loan contracts of Brazilian private firms and assesses if the credit policies implemented by the Central Bank of Brazil during the Covid-19 pandemic have had any positive effect on mitigating credit constraints for Brazilian companies. Lastly, COVID-19 in Uruguay: A Survey of Policy Responses and their Impact by Bucacos et al. evaluates the impact of the social, economic, and financial policy measures implemented in Uruguay to face the Covid-19 crisis on GDP, inflation, inflation expectations, investment, consumption, and corporate financing.

Tuesday, November 9

Opening Remarks: Manuel Ramos Francia
Director General, CEMLA

Session I. Macroeconomics I

Chair: Santiago García-Verdú, CEMLA / Banco de México

Natural Disasters, Climate Change, and Sovereign Risk
Paper | Presentation

· Enrico Mallucci, Federal Reserve Board

Discussant: Salomón García, Banco de España

Securitization in the Mortgage Market under General Equilibrium
Presentation

· Salomón García Banco de España

Discussant: Fernando Mendo, Banco Central de Chile

Rational Sentiments and Financial Frictions
Paper | Presentation

· Paymon Khorrami, Imperial College Business School
· Fernando Mendo, Banco Central de Chile

Discussant: Enrico Mallucci, Federal Reserve Board
Presentation

Session II. Macroeconomics II

Chair: Nelson R. Ramírez-Rondán, CEMLA

Bond Flows at Risk: Global, Local, and Pipe Factors
Paper | Presentation

· Manuel Ramos-Francia, CEMLA,
· Santiago García-Verdú, Banco de México and CEMLA
· José Manuel Sánchez-Martínez, Banco de México and CEMLA
· Serafín Martínez-Jaramillo, Banco de México and CEMLA

Discussant: Pablo Burriel, Banco de España
Presentation

Market Polarization and the Phillips Curve
Paper | Presentation

· Javier Andrés, Universidad de Valencia
· Óscar Arce, Banco de España
· Pablo Burriel, Banco de España

Discussant: Garth Baughman, Federal Reserve Board
Presentation

Nonlinear Unemployment Effects of the Inflation Tax
Paper | Presentation

· Mohammed Ait Lahcen, Qatar University and University of Basel
· Garth Baughman, Federal Reserve Board
· Stanislav Rabinovich, University of North Carolina at Chapel Hill
· Hugo van Buggenum, Tilburg University

Discussant: Benjamín Tello Bravo, CEMLA
Presentation

Wednesday, November 10

Keynote Lecture: Heterogeneous-Agent Macro as a Gateway to Behavioral Macro
Presentation
Professor Benjamin Moll
London School of Economics

Session III. Labor Economics

Chair: Carola Müller, CEMLA

Responsible Sourcing? Theory and Evidence from Costa Rica
Paper | Presentation

· Alonso Alfaro-Ureña, Banco Central de Costa Rica and Universidad de Costa Rica
· Benjamin Faber, University of California Berkeley
· Cecile Gaubert, University of California Berkeley
· Isabela Manelici, London School of Economics
· José P. Vásquez, London School of Economics

Discussant: Carlos Urrutia, CIE-ITAM
Presentation

Informal Labor Markets in Times of Pandemic: Evidence for Latin America and Policy Options
Paper | Presentation

· Gustavo Leyva, Banco de México
· Carlos Urrutia, CIE-ITAM

Discussant: Matías Tapia, Banco Central de Chile
Presentation

Job Ladders and Labor Productivity Dynamics
Presentation

· Elías Albagli, Banco Central de Chile
· Benjamín García, Banco Central de Chile
· Sebastián Guarda, Banco Central de Chile
· Alberto Naudon, Banco Central de Chile
· Matías Tapia, Banco Central de Chile

Discussant: Alonso Alfaro-Ureña, Banco Central de Costa Rica and Universidad de Costa Rica
Presentation

Session IV. Monetary Policy

Chair: Benjamín Tello Bravo, CEMLA

The Risk-Taking Channel of Monetary Policy: A New Approach and Evidence
Paper | Presentation

· Youel Rojas, Banco Central de Reserva del Perú
· Jorge Pozo, Banco Central de Reserva del Perú

Discussant: Javier García-Cicco, Banco Central de la República de Argentina and Universidad del CEMA
Presentation

Supply Shocks and Monetary Policy Responses in Emerging Economies
Paper | Presentation

· José Antonio Ocampo, Columbia University
· Jair Ojeda-Joya, Banco de la República (Colombia)

Discussant: Youel Rojas, Banco Central de Reserva del Perú
Presentation

Alternative Monetary-Policy Instruments and Limited Credibility: An Exploration
Paper | Presentation

· Javier García-Cicco, BCRA and Universidad del CEMA

Discussant: Jair Ojeda-Joya, Banco de la República (Colombia)
Presentation

Thursday, November 11

Invited Paper: Climate Risk and Financial Stability in the Network of Banks and Investment Funds
Presentation

· Alan Roncoroni, University of Zurich
· Stefano Battiston, University of Zurich and University of Venice
· Luis Onésimo Leonardo Escobar Farfán, Banco de México and CEMLA
· Serafín Martínez Jaramillo, Banco de México

Parallel Session V-A. Banking

Chair: Benjamín Tello Bravo, CEMLA

Creditor's Protection and Bank Loans: Market Power and Bankruptcy Reform's Effects
Paper | Presentation

· Leonardo S. de Alencar, Banco Central do Brasil
· Rodrigo Augusto Silva de Andrade, Banco Central do Brasil
· Klenio de Souza Barbosa, SKEMA Business School-University of Côte d'Azur

Discussant: Carola Müller, CEMLA
Presentation

Risk-Based Pricing in Competitive Norwegian Banking Markets

· Carola Müller, CEMLA
· Henrik Andersen, Norges Bank
· Ragnar Juelsrud, Norges Bank

Discussant: Jose Renato Haas Ornelas, Banco Central do Brasil

Credit Allocation when Private Banks Distribute Government Loans
Paper | Presentation

· Jose Renato Haas Ornelas, Banco Central do Brasil
· Alvaro Pedraza, World Bank
· Claudia Ruiz-Ortega, World Bank
· Thiago Christiano Silva, Banco Central do Brasil and Universidade Católica de Brasília

Discussant: Leonardo S. de Alencar, Banco Central do Brasil
Presentation

Parallel Session V-B. Empirical Macroeconomics

Chair: Nelson R. Ramírez-Rondán, CEMLA

Stylized Facts from Prices at Multi-Channel Retailers in Mexico
Paper | Presentation

· Diego Solórzano, Banco de México

Discussant: Jorge Ponce, Banco Central del Uruguay

Monetary Policy Communication and Inflation Expectations: New Evidence about Tone and Readability
Paper | Presentation

· Gianni Carotta, Banco Central del Uruguay
· Miguel Mello, Banco Central del Uruguay
· Jorge Ponce, Banco Central del Uruguay

Discussant: Viviane Helena Torinelli, Universidade Federal da Bahia PhD Candidate and Banco Central do Brasil PhD Fellow
Presentation

Environmental Risk Analysis (ERA) in the Strategic Asset Allocation (SAA) of the International Reserves (IRs) Managed by Central Banks (CBs)
Paper | Presentation

· Viviane Helena Torinelli, Universidade Federal da Bahia PhD Candidate and Banco Central do Brasil PhD Fellow
· Antônio Francisco de Almeida da Silva Júnior, Universidade Federal da Bahia (UFBA)

Discussant: Diego Solórzano, Banco de México
Presentation

Parallel Session VI-A. Finance

Chair: Matias Ossandon Busch, CEMLA

Stress-Ridden Finance and Growth Losses: Does Financial Development Break the Link?
Paper | Presentation

· Matias Ossandon Busch, CEMLA and Halle Institute for Economic Research
· José Manuel Sánchez-Martínez, CEMLA and Banco de México
· Anahí Rodríguez-Martínez, CEMLA
· Ricardo Montañez-Enríquez, CEMLA
· Serafín Martínez-Jaramillo, CEMLA and Banco de México
· Manuel Ramos-Francia, CEMLA

Discussant: Ricardo Schechtman, Banco Central do Brasil

Effects of Sharing Public Positive Credit Information on Personal Loans
Paper

· Marco Bonomo, Insper - Research Institute
· Claudia Bruschi, Insper - Research Institute
· Ricardo Schechtman, Banco Central do Brasil

Discussant: Nelson R. Ramírez-Rondán, CEMLA
Presentation

Uncertainty and the Uncovered Interest Parity Condition: How Are They Related?
Paper | Presentation

· Nelson R. Ramírez-Rondán, CEMLA
· Marco E. Terrones, Universidad del Pacífico

Discussant: Matias Ossandon Busch, CEMLA
Presentation

Parallel Session VI-B. 2021 Joint Research Program

Chair: David Argente, Pennsylvania State University

International Sourcing During Covid-19: How did Chilean Firms Fared?
Paper | Presentation

· Jennifer Peña, Banco Central de Chile
· Elvira Prades, Banco de España

Discussant: Elizabeth Bucacos, Banco Central del Uruguay
Presentation

Measuring Financial Restrictions of Brazilian Private Firms with Microdata: Did Credit Policies of Banco Central do Brasil During the Covid-19 Pandemic Affect Investment Demand?
Paper | Presentation

· Fernando Nascimento De Oliveira, Banco Central do Brasil

Discussant: Jennifer Peña, Banco Central de Chile
Presentation

COVID-19 in Uruguay: A Survey of Policy Responses and their Impact
Paper

· Elizabeth Bucacos, Banco Central del Uruguay
· Patricia Carballo, Banco Central del Uruguay
· Miguel Mello, Banco Central del Uruguay
· Jorge Ponce, Banco Central del Uruguay

Discussant: David Argente, Pennsylvania State University
Presentation