Do banks respond to their friends' markets? Social spillovers in deposit pricing (ECB WP), with Panagiotis Avramidis and Natalya Martinova
We study how deposit rate shocks transmit across banking markets through digital social ties. Depositors’ inattention implies that households react to outside rate changes only when social networks make these changes salient, inducing connected banks to raise their own rates. Using merger-driven shocks to local deposit rates and county-level social connectedness, we show that small banks increase rates in response to shocks occurring in socially linked but geographically distant counties. Spillovers are economically meaningful, persistent, and stronger in competitive markets and in counties with more financially sophisticated households. Digital social ties therefore activate depositor search and integrate deposit markets across space.
Decoding climate-related risks in sovereign bond pricing: A global perspective, with Marianna Blix Grimaldi, Carlos Madeira, Simona Malovana and Georgios Papadopoulos - Part of the International Banking Research Network (IBRN) Climate Research Initiative
ECB WP- BIS WP - Sveriges Riksbank WP- Bank of Greece WP
Climate change poses a significant risk to financial stability by impacting sovereign credit risk. Quantifying the exact impact is difficult as climate risk encompasses different components – transition risk and physical risk – with some of these, as well as the policies to address them, playing out over a long time horizon. In this paper, we use a large panel of 52 developed and developing economies over two decades to empirically investigate the extent to which climate risks influence sovereign yields. The results of a panel regression analysis show that transition risk is associated with higher sovereign yields, with the effect more pronounced for developing economies and for high-emitting countries after the Paris agreement. In contrast, high-temperature anomalies do not appear to be priced-in sovereign borrowing costs. At the same time, countries with high levels of debt tend to record higher sovereign yields as acute physical risk increases. In the medium term, using local projections, we find that sovereign yields respond significantly but also differently to different types of disaster caused by climate change. We also explore the nonlinear effects of weather-related natural disasters on sovereign yields and find a striking contrast in the impact of climate shocks on sovereign borrowing costs according to income level and fiscal space when the shock hits.
Bond funds' risk-taking and monetary policy (draft available), with Haris Giannakidis, Dimitris Malliaropulos, Petros Migiakis and Filippos Petroulakis
By using a large and representative of the broader market dataset of portfolio holdings of US and EU bond funds, at security level, we examine the effects of monetary policies exercised by the Fed and the ECB, before and after the Covid episode, on fund’s risk taking. We find that the Fed’s policies have had a significant effect, increasing risks in investment funds bond portfolios during accommodative periods. Economically, these effects are sizeable: the observed rate cuts and asset purchases resulted to a risk taking by funds that is equivalent to a fall of the average rating in their bond portfolios from A+ to BBB, after the Covid QE and rate cuts. During tightening periods, the effects of monetary policy on funds’ risk taking are not significant. Similarly we do not find evidence that ECB’s monetary policies have had a similarly significant effect on funds’ risk taking.
Doing matters more than knowing: Evidence from environmental preferences (Bank of Greece WP), with P. C. Andreou, K. Dellis and C. Makridis
This paper examines the relation between financial literacy, financial behaviors, and pro-environmental attitudes, focusing on the willingness to pay for eco-friendly products. Individuals with stronger financial habits, such as tracking expenses, saving for long-term goals, and making considered purchases, demonstrate higher levels of environmental concern and are more likely to engage in sustainable consumption. These findings highlight the role of future-oriented financial decision-making in promoting environmental stewardship. While financial literacy alone does not directly predict sustainable spending, it enhances the impact of sound financial practices, emphasizing the importance of combining financial capability with actionable behaviors. The study provides insights for policies that integrate financial literacy and sustainability initiatives to foster more eco-conscious consumer practices.
Work in progress
Financial literacy and advice: Substitutes or complements? with P.C. Andreou, D. Koursaros, A. Previtero and W. Wang
International stock price crash risk, with C. Andreou, C. Sala and E. Maasoumi