EconPapers    
Economics at your fingertips  
 

Risk endogeneity at the lender/investor-of-last-resort

Diego Caballero, Andre Lucas (), Bernd Schwaab and Xin Zhang

No 766, BIS Working Papers from Bank for International Settlements

Abstract: We address to what extent a central bank can de-risk its balance sheet by unconventional monetary policy operations. To that end, we propose a novel risk measurement framework to empirically study the time variation in central bank portfolio credit risks associated with such operations. The framework accommodates a large number of bank and sovereign counterparties, joint tail dependence, skewness, and time-varying dependence parameters. In an application to selected items from the consolidated Eurosystem's weekly balance sheet between 2009 and 2015, we find that unconventional monetary policy operations generated beneficial risk spillovers across monetary policy operations, causing overall risk to be non-linear in exposures. Some policy operations reduced rather than increased overall risk.

Keywords: credit risk; risk measurement; central bank; lender-of-last-resort; unconventional monetary policy (search for similar items in EconPapers)
JEL-codes: G21 C33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba
Date: 2019-01
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.bis.org/publ/work766.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/work766.htm (text/html)

Related works:
Working Paper: Risk endogeneity at the lender/investor-of-last-resort (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:766

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Christian Beslmeisl ().

 
Page updated 2019-04-19
Handle: RePEc:bis:biswps:766