Assessing the extent and intensity of energy poverty using Multidimensional Energy Poverty Index: Empirical evidence from households in India

Macroprudential stress tests have been employed by regulators in the United States and Europe to assess and address the solvency condition of financial firms in adverse macroeconomic scenarios. We provide a test of these stress tests by comparing their risk assessments and outcomes to those from a simple methodology that relies on publicly available market data and forecasts the capital shortfall of financial firms in severe market-wide downturns. We find that: (i) The losses projected on financial firm balance-sheets compare well between actual stress tests and the market-data based assessments, and both relate well to actual realized losses in case of future stress to the economy; (ii) In striking contrast, the required capitalization of financial firms in stress tests is found to be rather low, and inadequate ex post, compared to that implied by market data; (iii) This discrepancy arises due to the reliance on regulatory risk weights in determining required levels of capital once stress-test losses are taken into account. In particular, the continued reliance on regulatory risk weights in stress tests appears to have left financial sectors under-capitalized, especially during the European sovereign debt crisis, and likely also provided perverse incentives to build up exposures to low risk-weight assets.

Testing Macroprudential Stress Tests: The Risk of Regulatory Risk Weights

In this paper, we investigate how the introduction of complex, model-based capital regulation affected credit risk of financial institutions Model-based regulation was meant to enhance the stability of the financial sector by making capital charges more sensitive to risk Exploiting the staggered introduction of the model-based approach in Germany and the richness of our loan-level data set, we show that (1) internal risk estimates employed for regulatory purposes systematically underpredict actual default rates by 05 to 1 percentage points; (2) both default rates and loss rates are higher for loans that were originated under the model-based approach, while corresponding risk-weights are significantly lower; and (3) interest rates are higher for loans originated under the model-based approach, suggesting that banks were aware of the higher risk associated with these loans and priced them accordingly Further, we document that large banks benefited from the reform as they experienced a reduction in capital charges and consequently expanded their lending at the expense of smaller banks that did not introduce the model-based approach Counter to the stated objectives, the introduction of complex regulation adversely affected the credit risk of financial institutions Overall, our results highlight the pitfalls of complex regulation and suggest that simpler rules may increase the efficacy of financial regulation

/pdf/the-limits-of-model-based-regulation-2q2lct7rur.pdf

The Limits of Model-Based Regulation

https://www.nber.org/system/files/working_papers/w18968/w18968.pdf

Testing macroprudential stress tests: The risk of regulatory risk weights

The link between gender inequality and economic growth is a topic that is of growing interest, both in the academic literature and the policy arena. In this paper, we survey the literature that analyses this relationship from a macroeconomic perspective. We argue that that the existing theories provide a wide range of mechanisms through which these two variables may affect each other but also that more work needs to be carried out to obtain quantitative predictions out of these models. In the empirical arena, we note the lack of connection between most studies and the existing theories described earlier. In both cases, we propose approaches to alleviate these problems. Copyright (c) 2013 John Wiley & Sons, Ltd.

/pdf/gender-inequality-and-economic-growth-a-critical-review-5fq9oix1tt.pdf

Gender inequality and economic growth: a critical review

This paper examines the determinants of female labor force participation in India, against the backdrop of India having one of the lowest participation rates for women among peer countries. Using extensive Indian household survey data, we model the labor force participation choices of women, conditional on demographic characteristics and education, as well as looking at the influence of state-level labor market flexibility and other state policies. Our main finding is that a number of policy initiatives can help boost female economic participation in the states of India, including increased labor market flexibility, investment in infrastructure, and enhanced social spending.

Women Workers in India: Why So Few Among So Many?

We study how investors account for the riskiness of banks' risk-weighted assets (RWA) by examining the determinants of stock returns and market measures of risk. We find that banks with higher RWA had lower stock returns over the US and European crises. This relationship is weaker in Europe where banks can use Basel II internal risk models. For large banks, investors paid less attention to RWA and rewarded instead lower wholesale funding and better asset quality. RWA do not, in general, predict market measures of risk although there is evidence of a positive relationship before the US crisis which becomes negative afterwards.

https://www.imf.org/-/media/Websites/IMF/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1236.ashx

How Risky Are Banks' Risk Weighted Assets? Evidence From the Financial Crisis

How Risky are Banks' Risk Weighted Assets? Evidence from the Financial Crisis

China’s exchange rate regime has undergone gradual reform since the move away from a fixed exchange rate in 2005. The renminbi has become more flexible over time but is still carefully managed, and depth and liquidity in the onshore FX market is relatively low compared to other countries with de jure floating currencies. Allowing a greater role for market forces within the existing regime, and greater two-way flexibility of the exchange rate, are important steps to build on the progress already made. This should be complemented by further steps to develop the FX market, improve FX risk management, and modernize the monetary policy framework.

/pdf/china-s-evolving-exchange-rate-regime1-3qax4ok4wa.pdf

China's Evolving Exchange Rate Regime1

https://www.imf.org/-/media/Websites/IMF/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp1555.ashx

Sonali Das

Papers

Women Workers in India: Why So Few Among So Many?

How Risky Are Banks' Risk Weighted Assets? Evidence From the Financial Crisis

How Risky are Banks' Risk Weighted Assets? Evidence from the Financial Crisis

China's Evolving Exchange Rate Regime1

Women Workers in India : Why So Few Among So Many?