Archive for July 9th, 2020

Central banks in parliaments: a text analysis of the parliamentary hearings of the Bank of England, the European Central Bank and the Federal Reserve

July 9, 2020

Nicolò Fraccaroli, Alessandro Giovannini and Jean-François Jamet in this ECB WP:

As the role of central banks expanded, demand for public scrutiny of their actions increased. This paper investigates whether parliamentary hearings, the main tool to hold central banks accountable, are fit for this purpose. Using text analysis, it detects the topics and sentiments in parliamentary hearings of the Bank of England, the European Central Bank and the Federal Reserve from 1999 to 2019.

It shows that, while central bank objectives play the most relevant role in determining the topic, unemployment is negatively associated with the focus of hearings on price stability. Sentiments are more negative when uncertainty is higher and when inflation is more distant from the central bank’s inflation aim.

These findings suggest that parliamentarians use hearings to scrutinise the performance of central banks in line with their objectives and economic developments, but also that uncertainty is associated with a higher perceived risk of under-performance of central banks.

It will be interesting to go through some of these hearings..

Plague, prorogation and the suspension of the courts in fifteenth-century England

July 9, 2020

Fascinating post by  Dr Simon Payling on History of Parliament Blog:

On Wednesday 6 June 1464, at the beginning of Trinity term, a small piece of theatre was played out in Westminster Hall. Three justices of the court of common pleas ordered everyone present to hear the King’s command. The seal of a royal writ, dated ten days earlier, was then broken and the writ read aloud: the King, absent in the north campaigning against the Lancastrians, had heard of the plague raging in London and Westminster and decided to suspend the court for the whole of Trinity term. This sensible precaution reminds us that, although no visitation of the plague to these shores approached the devastating mortality of the Black Death of 1349, plague remained a recurring and unwelcome visitor into the fifteenth century and beyond. Indeed, over that century, at least ten law terms were lost, in whole or part, to such court suspensions, most notably the successive terms of Easter and Trinity term 1479 when the visitation of the plague to London was particularly severe.


New Testament’s Matthew effect and modern finance: on the nexus between wealth inequality, financial development and financial technology

July 9, 2020

Jon Frost, Leonardo Gambacorta and Romina Gambacorta of BIS in this paper:

In the social sciences, the idea of the well endowed receiving further privilege, eg the rich getting richer, is often called the “Matthew effect” (New Testament Book of Matthew, 25:29). In economics, this effect is relevant particularly for wealth inequality. The effect could be amplified by financial development and technological advances that give investors access to better financial services or to assets with higher returns.

This paper analyses the role of financial development and financial technology in driving inequality in (returns to) wealth. Using micro data from the Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy for the period 1991-2016, we find evidence of the “Matthew effect” – a capacity of wealthy households to achieve higher returns than other households. With an instrumental variable approach, we find that financial development (number of bank branches) and financial technology (use of remote banking) both have a positive association with households’ financial wealth and financial returns. While households of all wealth deciles benefit from the effects of financial development and financial technology, these benefits are larger when moving towards the top of the wealth distribution. Still, the economic significance of this gap fell in the last part of the sample period, as remote banking became more widespread.


Reserve Bank of NZ begins to build teams for money and payment futurists

July 9, 2020

I had written on how RBNZ is looking to recruit money futurists.

The central bank has moved further and appointed chiefs of these new departments:

Two appointments to senior leadership roles in the Reserve Bank’s Money Group show the Bank’s commitment to developing and preparing for the future of physical and electronic payments, Assistant Governor Christian Hawkesby says.

Ian Woolford has been appointed the Reserve Bank’s Head of Money and Cash, and Steve Gordon will head a new Payment Services Department.

Mr Hawkesby says both new roles stem from growth and developments within the Reserve Bank’s Banking Department.

“Two major strategic projects – the Payment Systems Replacement, and the Future of Cash – have resulted in new responsibilities and considerable advancements in thinking and future direction for physical and electronic payments,” he says.

“Te Pūtea Matua, the Reserve Bank of New Zealand, is the steward of the cash system and operates New Zealand’s payment settlement system. Dedicated oversight and leadership of these critical areas is needed so New Zealand can be at the leading edge of work on the future of cash – physical and digital.”

Mr Hawkesby says both leaders have proven track records for delivering large complex changes, and will bring strong thought leadership and stakeholder experience to the new roles.


The ‘Money Group’ within the Reserve Bank comprises the departments that connect the full cycle of monetary policy, from policy formulation to implementation across the Reserve Bank’s balance sheet. These include the Money and Cash Department, Economics Department, the Financial Markets Department, Payment Services Department.

Keep watching what RBNZ does in this space. I will not be surprised if they innovate and pioneer this field too.

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