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Oil prices, a temporary rebound? 5/5/2017
The rebound in oil prices has stalled. Yet world growth seems to have accelerated. Causes rely to the supply side.
How vulnerable are housing markets to a rise in interest rates? 4/20/2017
With interest rates still close to historical lows and increasing signs of a pickup in global inflation, a key question for global financial stability is how vulnerable residential real estate markets are to a rise in interest rates. In assessing vulnerability, a natural place to start is to look at valuation ratios. This note examines the ratio of residential house prices to household disposable incomes over a 40-year period for a set of 21 countries. The analysis suggests that valuation ratios for residential real estate are currently high in a number of countries but interestingly this is not the case for the largest economies in the sample, namely the United States, Japan and Germany. The sample contains 47 booms in residential house prices. The median boom lasts 5.5 years and is associated with an increase in the ratio of house prices to household disposable incomes of 45%. Countries currently in a housing boom include Canada, Australia, New Zealand and Luxembourg. The sample contains 36 housing busts. The median bust lasts 6 years and is associated with a decrease in the price-to-income ratio of 34.4%.  Countries currently in a housing downturn include Japan, Italy and Spain. In addition to valuation ratios, high leverage may pose a source of risk. However it turns out that household indebtedness has fallen significantly in most advanced economies over the last five years. Finally there are important variations in financing patterns across countries and over time. Within the euro zone the share of fixed-rate mortgages in new financing has increased significantly in a number of countries over recent years. These contracts lock in borrowing costs although higher long-term mortgage rates may still weigh on housing valuations and thus create negative wealth effects for all homeowners.  Borrowers with adjustable-rate contracts are in principle more exposed to a rise in borrowing costs. However short-term interest rates are not currently expected to move up significantly in the near term in the euro zone.
Monetary Policy: What are the objectives? 4/12/2017
The ECB’s primary objective, the Fed’s dual mandate and the multiples goals of the PBoC: from one central bank to the other, the objectives can differ greatly.
Monetary Policy: What decisions? 4/12/2017
As for objectives, the available instruments can differ from one central bank to the other, and more crucially from one point in the cycle to the other.
Monetary Policy: What effectiveness? 4/12/2017
The effectiveness of monetary policy is quite consensual. As effective as they can be, monetary policymakers are neither almighty nor infallible
Improvements across the board… or just about 4/7/2017
Economic outlook improves in several developed countries.
G-SIBs: Higher cumulated CET1 requirements in the euro area for 2017 4/5/2017
Banks’ 2016 annual reports revealed that cumulated Common Equity Tier 1 (CET1) requirements for global systemically important banks (G-SIBs) for 2017 are on average higher in the euro area than in the US. On average, the 8 euro-area G-SIBs are required to meet, on a consolidated basis, a phased-in CET1 ratio of at least 8.3% (excluding the Pillar 2 Guidance, P2G, which is not public) against 7% for the 8 US G-SIBs. The aggregate CET1 demand includes the minimum Pillar 1 requirement (4.5%), the capital conservation buffer (1.25%), the G-SIB buffer (0.75% in average in the euro area against 1.25% in the US) and, for euro area banks only, the Pillar 2 Requirement (P2R, 1.8%) set by the ECB as the outcome of the 2016 Supervisory Review and Evaluation Process (SREP). The overall CET1 requirement for 2017 for all banks which are under direct supervision of the ECB (SSM) stands à 8.3% excluding the P2G and 10.4% including the P2G.  
Uncertainty, markets and the economy 3/8/2017
Historically, high levels of economic policy uncertainty have weighed on the risk appetite of investors. However, this relationship seems to have broken down as of late due to improved growth outlook.
The economic impact of Basel III: applying the BIS analysis to the eurozone 2/27/2017
In November 2016 the Bank for International Settlements (BIS) published an updated economic impact study of Basel III and the ongoing reforms, suggesting the existence of some room for manoeuvre in the creation of additional capital buffers. We demonstrate in this analysis that this room no longer exists in the eurozone, where the dominant role played by banks in financing increases the economic cost of new regulatory requirements and reduces the optimal bank solvency ratio, above which the economic cost exceeds the estimated benefit of tighter regulation.

ABOUT US Three teams of economists (OECD countries research, emerging economies and country risk, banking economics) make up BNP Paribas Economic Research Department.
This website presents their analyses.
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