Working Papers
Working Papers
Floods and Financial Stability: Scenario-based evidence from below the sea level
Floods and Financial Stability: Scenario-based evidence from below the sea level
Joint with D.J. Jansen and K. van Ginkel
Joint with D.J. Jansen and K. van Ginkel
We study whether floods can affect financial stability through a credit risk channel. Our focus is onthe Netherlands, a country situated partly below sea level, where insurance policies exclude property damages caused by some types of floods. Using geocoded data for close to EUR 650 billion in real estate exposures, we consider possible implications of such floods for bank capital. For a set of 38 adverse scenarios, we estimate that flood-related property damages lead to capital declines that mostly range between 30 and 50 basis points. We highlight how starting-point loan-to-value ratios are one important driver of capital impacts. Our estimates focus on property damages as the main transmission channel and are also subject to a number of assumptions. If climate change continues, more frequent floods or flood-related macrofinancial disruptions may have stronger implications for financial stability than our estimates so far indicate.
We study whether floods can affect financial stability through a credit risk channel. Our focus is onthe Netherlands, a country situated partly below sea level, where insurance policies exclude property damages caused by some types of floods. Using geocoded data for close to EUR 650 billion in real estate exposures, we consider possible implications of such floods for bank capital. For a set of 38 adverse scenarios, we estimate that flood-related property damages lead to capital declines that mostly range between 30 and 50 basis points. We highlight how starting-point loan-to-value ratios are one important driver of capital impacts. Our estimates focus on property damages as the main transmission channel and are also subject to a number of assumptions. If climate change continues, more frequent floods or flood-related macrofinancial disruptions may have stronger implications for financial stability than our estimates so far indicate.
Bunching at the LTV limit
Bunching at the LTV limit
This paper quantifies the impact of a tightening of the macro-prudential Loan-to-Value (LTV) limit on the distribution of household leverage, as expressed by the LTV ratio. Using a non-parametric approach, I disentangle shifts in the LTV distributions induced by the tightening from those due to housing market developments. The findings show that, while still not imposing any down-payment constraint, a progressive tightening of the LTV limit from 106% to 100% increased the number of constrained borrowers of nearly 50%,thus containing systemic risk by curbing household leverage throughout a housing boom.
This paper quantifies the impact of a tightening of the macro-prudential Loan-to-Value (LTV) limit on the distribution of household leverage, as expressed by the LTV ratio. Using a non-parametric approach, I disentangle shifts in the LTV distributions induced by the tightening from those due to housing market developments. The findings show that, while still not imposing any down-payment constraint, a progressive tightening of the LTV limit from 106% to 100% increased the number of constrained borrowers of nearly 50%,thus containing systemic risk by curbing household leverage throughout a housing boom.
Shocks to Occupational Pension Funds and Household Saving
Shocks to Occupational Pension Funds and Household Saving
Joint with M.Mastrogiacomo and I.Simonetti
Joint with M.Mastrogiacomo and I.Simonetti
This paper studies household saving response to shocks to the capital position of the pension fund sector. Using household survey data linked to supervisory data of Dutch occupational pension funds, we provide evidence of the increase in savings driven by the deterioration of the financial position of pension funds, over a period characterized by three major financial crises that substantially hit their capital position. The identification strategy exploits the high cross-sectional and time variation in pension funds’ funding ratios, which are exogenous shocks to the pension wealth of pension fund members as these result from asset allocations and price corrections over which members have no direct control. Results show that changes in funding ratios – by affecting the expected pension benefit of the members of the pension fund - result into opposite changes in household savings with displacement effects up to 40%, and that households increase saving in the event of a severe funding deficit of their pension fund. Lastly, we show that the effect is driven by older and more risk-averse individuals and by members of pension funds with lower historical rates of return on their investment portfolio.
This paper studies household saving response to shocks to the capital position of the pension fund sector. Using household survey data linked to supervisory data of Dutch occupational pension funds, we provide evidence of the increase in savings driven by the deterioration of the financial position of pension funds, over a period characterized by three major financial crises that substantially hit their capital position. The identification strategy exploits the high cross-sectional and time variation in pension funds’ funding ratios, which are exogenous shocks to the pension wealth of pension fund members as these result from asset allocations and price corrections over which members have no direct control. Results show that changes in funding ratios – by affecting the expected pension benefit of the members of the pension fund - result into opposite changes in household savings with displacement effects up to 40%, and that households increase saving in the event of a severe funding deficit of their pension fund. Lastly, we show that the effect is driven by older and more risk-averse individuals and by members of pension funds with lower historical rates of return on their investment portfolio.
DNB Working Paper n. 775. New version coming soon.
Being in Good Hands: Deposit Insurance and Peers Financial Sophistication
Being in Good Hands: Deposit Insurance and Peers Financial Sophistication
Joint with M.Mastrogiacomo and G.Pasini
Joint with M.Mastrogiacomo and G.Pasini
We study the effect on savings of the Deposit Guarantee Scheme (DGS) reform in the Netherlands, that resulted in an insurance extension to all deposit accounts. Using survey data containing information on the amount held in each deposit account, we empirically investigate how bank accounts allocations of the Dutch households changed as a response to the reform. Using a quasi natural experiment based on the insurance limit change, we find increasing savings above the insurance limit after the reform, and insurance limit increases as a policy tool to increase confidence in the banking sectors in times of risk and uncertainty. Using Aggregate Relational data (ARD), we show an heterogenous effect depending on peers’ financial sophistication: people with unsophisticated peers tend to save more as a response to the reform, while people with sophisticated peers tend to save more cautiously. This results points towards the importance of peer effects and financial literacy even for the simplest financial assets.
We study the effect on savings of the Deposit Guarantee Scheme (DGS) reform in the Netherlands, that resulted in an insurance extension to all deposit accounts. Using survey data containing information on the amount held in each deposit account, we empirically investigate how bank accounts allocations of the Dutch households changed as a response to the reform. Using a quasi natural experiment based on the insurance limit change, we find increasing savings above the insurance limit after the reform, and insurance limit increases as a policy tool to increase confidence in the banking sectors in times of risk and uncertainty. Using Aggregate Relational data (ARD), we show an heterogenous effect depending on peers’ financial sophistication: people with unsophisticated peers tend to save more as a response to the reform, while people with sophisticated peers tend to save more cautiously. This results points towards the importance of peer effects and financial literacy even for the simplest financial assets.
Published Papers:
Published Papers:
Borrower based measures, House Prices and Household Debt
Borrower based measures, House Prices and Household Debt
Journal of International Money and Finance (2024).
Journal of International Money and Finance (2024).
Staggered Wages, Unanticipated Shocks and Firms Adjustments
Staggered Wages, Unanticipated Shocks and Firms Adjustments
Journal of Macroeconomics (2023).
Journal of Macroeconomics (2023).
Joint with J.Parlevliet and M.Mastrogiacomo
Joint with J.Parlevliet and M.Mastrogiacomo
The Housing Wealth Effect: the role of renovations and home improvements
The Housing Wealth Effect: the role of renovations and home improvements
Real Estate Economics (2022).
Real Estate Economics (2022).
Joint with M.Mastrogiacomo
Joint with M.Mastrogiacomo
How do Normalization Schemes affect Net Spillovers? A Replication of the Diebold and Yilmaz (2012) study
How do Normalization Schemes affect Net Spillovers? A Replication of the Diebold and Yilmaz (2012) study
Energy Economics (2019), vol. 84, pp. 1-13.
Energy Economics (2019), vol. 84, pp. 1-13.
Joint with A.Cipollini and S.Muzzioli.
Joint with A.Cipollini and S.Muzzioli.
DOI: j.eneco.2019.104536
Asymmetric Semi-volatility Spillover Effects in EMU Stock Markets.
Asymmetric Semi-volatility Spillover Effects in EMU Stock Markets.
International Review of Financial Analysis (2018), vol. 58, pp. 221-230
International Review of Financial Analysis (2018), vol. 58, pp. 221-230
Joint with A.Cipollini and S.Muzzioli.
Joint with A.Cipollini and S.Muzzioli.
DOI: j.irfa.2018.03.001
Policy Notes and Other Publications:
Policy Notes and Other Publications:
Real Estate and Climate Transition risks: a Financial Stability perspective.
Real Estate and Climate Transition risks: a Financial Stability perspective.
Joint with D.J. Jansen ,R. van der Molen, H. Kho and L. Zhang.
Joint with D.J. Jansen ,R. van der Molen, H. Kho and L. Zhang.
The resilience of Financial Institutions is being tested again.
The resilience of Financial Institutions is being tested again.
DNB Financial Stability Report, Autumn 2022
DNB Financial Stability Report, Autumn 2022
Joint with T. van den Berg, R. van der Molen, M. van Hengel, M. van de Ven and R. Verhoeks.
Joint with T. van den Berg, R. van der Molen, M. van Hengel, M. van de Ven and R. Verhoeks.
Here.
Climate Change and Financial Risks of Real Estate.
Climate Change and Financial Risks of Real Estate.
DNB Financial Stability Report, Autumn 2021
DNB Financial Stability Report, Autumn 2021
Joint with H. Koo, D.J. Jansen, R. van der Molen and L. Zhang
Joint with H. Koo, D.J. Jansen, R. van der Molen and L. Zhang
Here.
Commercial Real Estate: a Stress Test for the Dutch Financial Sector.
Commercial Real Estate: a Stress Test for the Dutch Financial Sector.
DNB Financial Stability Report, Autumn 2021
DNB Financial Stability Report, Autumn 2021
Joint with D.J. Jansen and B. Schrijver
Joint with D.J. Jansen and B. Schrijver
Here.
How Effective is the Covid-19 Emergency Package in Preventing firms' insolvencies? (2020) [in Dutch]
How Effective is the Covid-19 Emergency Package in Preventing firms' insolvencies? (2020) [in Dutch]
Joint with M.Bun and J.de Winter.
Joint with M.Bun and J.de Winter.