Research Newsletter 4/2007

Editorial

Recent financial market turbulence has once again given rise to intensive discussions and exchange of opinions on various aspects of financial market behaviour. This has covered, in particular, the optimality of existing regulatory frameworks to provide the appropriate incentives for financial market participants to behave prudentially and to monitor their risk exposures in ways that do not compromise the stability of the financial system. 
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Revisiting the bank lending channel of the transmission mechanism of monetary policy

Much of the recent macroeconomic research on monetary policy relies on New Keynesian business cycle models where there is little or no role for banks or similar specialised financial institutions in the transmission mechanism for monetary policy. As the saying goes, banks are not 'special' for the transmission of monetary policy. 
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Stress testing financial systems: risky GDP paths in a DSGE model

The very idea of systemic risk taking is at the same time extremely interesting and disturbing. It is interesting, because it refers to the possibility where individuals interact in a financial environment that induces them to coordinate in undertaking insolvency risk. Such coordination in risk taking could be the outcome of financial liberalization, for example.
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Inflation targeting, exchange rate and money supply in Russia 

In recent years, the Russian central bank has been up against a difficult task. Export revenue growth and capital inflows have added to the build-up of liquidity in the Russian economy. This has been reflected in a pick-up in inflationary pressures, although, for example, labour productivity has also simultaneously improved and the velocity of circulation of money has declined in response to economic policy gaining a higher degree of credibility. 
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