🧵SWP 1019 by Gabor Pintér combines several sources of transaction level data to sketch out a narrative of September 2022 gilt market crisis and documents a number of key stylised facts about how it played out…
bankofengland.co.uk/working-paper/… 2/ Looking at trade flows of LDI-exposed actors, finds cumulative outflows were over £36bn. In linkers (which make up only ≈ ¼ of market) there were more sales, but these v similar across maturities. In conventional gilts- smaller selling volume + only in 10yr+ maturities.

🧵 SWP 993 by Phil Bunn (BoE), Lena Anayi (BoE), @I_Am_NickBloom, @MizenPaul, @GregoryThwaites + Ivan Yotzov (BoE) uses firm-level data from the Decision Maker Panel (@DMP_BoE) to study recent UK inflation dynamics. b-o-e.uk/3T4A0n1 2/ Based on survey responses, authors estimate a “firm-level Philips curve” by regressing own price inflation on firm-level measures of demand/supply side factors + expected inflation.

🧵SWP 925 by Federico di Pace (BoE) + Christoph Görtz (Uni of Birmingham) solves a puzzle on the co-movement of consumption + investment in response to monetary policy shocks...
bankofengland.co.uk/working-paper/… 2/ Barsky, House + Kimball (2007) NK model has “co-movement puzzle” i.e. can’t match observed co-movement between investment + consumption after monetary shock. Models lacking co-movement tend to exhibit near-neutrality of money. Paper finds resolution using financial frictions…

[THREAD] SWP 921 by Sevim Kösem (BoE) builds a general equilibrium model to understand the interplay between income inequality, mortgage debt, defaults and house prices under different interest rate environments.
bankofengland.co.uk/working-paper/… 2/ Model features borrower income heterogeneity + has key feature that lenders offer a “menu” of mortgage contracts with different interest rates, LTIs, LTVs + default risks. Borrowers select contract type endogenously, giving rise to novel *borrower composition channel*

[THREAD] SWP 884 by Michael Kumhof (BoE), Phurichai Rungcharoenkitkul (BIS) + Andrej Sokol (ECB) argues that viewing banks as money creators rather than intermediaries of loanable funds challenges some important canonical results in international macro…
bankofengland.co.uk/working-paper/… 2/ Authors build 2-country 2-currency DSGE model. Key distinction: x-border *payment* flows (capital acct mirror image of physical resource flows of the current acct) vs x-border *financial* flows (pair of matching + inseparable gross capital in/out flows inside capital acct).

SWP 845 by Paul Schmelzing reconstructs "global" real interest rate series, across a variety of assets and covering 78% of advanced economy GDP since the 14th century, by drawing on archival, printed primary, and secondary sources.
bankofengland.co.uk/working-paper/… 2/ The new series aims to revisit long-run nominal and real capital return trends which are at the core of multiple current debates. Existing classics - such as Homer and Sylla's History of Interest Rates - ignored archival and even many secondary sources.

[THREAD] SWP 837 by David Miles (BoE/@Imperial) + Victoria Monro (BoE) argues that the rise in UK house prices seen over the past three decades can be accounted for by substantial declines in real interest rates over the period.
bankofengland.co.uk/working-paper/… 2/ Paper uses a “User Cost of Housing” Model, where the price of a house is equal to present discounted value of the housing services a house produces. Monthly cost of buying should equal the rental price after allowing for maintenance costs, taxes etc.

[THREAD] On Saturday, the BoE celebrated its 325th birthday. To commemorate this, we've delved into the back catalogue of BU posts, Staff Working Papers + other research resources to construct a timeline of the BoE's life and its place in the broader history of central banking... *1694: The Bank of England is founded*

The first Governor Sir John Houblon is elected along with a Deputy Governor and 24 directors: bankofengland.co.uk/archive/direct…

[THREAD] SWP 761 by Zoltan Jakab + Michael Kumhof argues the standard economic model of banks as intermediaries of loanable funds is wrong. It misrepresents what banks do + doesn’t fit stylised facts about balance sheets + propagation of financial shocks.

bankofengland.co.uk/working-paper/… 2/ Most economic models assume banks are “intermediaries of loanable funds”(ILF): i.e. savers turn up at branches with funds to deposit, which a bank then lends on to borrowers. In this view banks don’t create credit, they just channel existing funds from savers to borrowers.

[THREAD] SWP 751 by Michalis Vasios (BoE), @GinoCenedese (@FulcrumAsset), Angelo Ranaldo (@HSGStGallen) looks at how recent reforms to OTC derivatives have affected how interest rate swaps are priced, uses transaction level trade repository data.
bankofengland.co.uk/-/media/boe/fi… 2/ Paper looks at USD denominated fixed-to-floating IRS contracts between 2014-16. Trades more likely to be centrally cleared when they have larger notional value, longer maturity and involve dealers, banks or hedge funds.

[THREAD] SWP 724 by Ben Dyson, Jack Meaning, James Barker and Emily Clayton explores how a central bank digital currency (CBDC) might affect the monetary transmission mechanism (MTM).
bankofengland.co.uk/working-paper/… 2/ If a CBDC is just a payment instrument that doesn’t pay interest, then it only really competes with cash. If it also pays interest, then it starts to compete with bank deposits. Then it starts to have implications for price and volume of bank funding. And therefore the MTM.