Miklos Vari
Welcome to my research page!
I am currently an Economist in the Monetary Policy Research Division of the Banque de France.
My email address is miklos.vari[at]banque-france.fr
I am also on Linkedin
Disclaimer: The views expressed on this web page are my own, and do not necessarily represent those of Banque de France.
Research papers:
Safe asset scarcity and monetary policy transmission
with Benoit Nguyen and Davide Tomio
Most central banks exited their decade-long accommodative monetary policy cycle by first raising rates, rather than starting by reducing their balance sheet. We show that the scarcity of government bonds—which were purchased under QE and held by central banks—reduces the transmission of rate hikes to money market rates. In July 2022, when the ECB increased its policy rates by 50bp for the first time in a decade, rates of repo transactions collateralized by the scarcest bonds increased by only 30bp. We show that this imperfect pass-through to repo rates is priced in treasury yields. Heterogeneous bond holdings across institutions imply that collateralized funding costs vary significantly across European institutions.
Paying Banks to Lend? Evidence from the Eurosystem's TLTRO and the Euro-Area credit registry
with Emilie Da Silva, Vincent Grossmann-Wirth and Benoit Nguyen
Since March 2020 the Eurosystem has provided subsidies to Euro-Area banks, via its Targeted Longer-Term Refinancing Operations (TLTRO). Under this program, banks can borrow from the Eurosystem at a rate as low as -1%, conditional on their lending to the real economy. This paper uses a simple theoretical model to disentangle between so-called “targeted” and “profitability" channels. We test those channels on the new Euro-Area credit registry data (AnaCredit). To overcome reverse causality, we employ novel identification strategies based on TLTRO parameters set before the pandemic and unexpected changes afterward. We find support for both channels and conclude the targeted channel is stronger.
A dilemma between liquidity regulation and monetary policy: history and theory
with Eric Monnet
Journal of Money, Credit and Banking (2022)
[WP version] [journal version] [bib citation]
This paper explores what history can tell us about the interactions between macroprudential and monetary policy. Based on numerous historical documents, we show that liquidity ratios similar to the Liquidity Coverage Ratio (LCR) were commonly used as monetary policy tools by central banks between the 1930s and 1980s. We build a model that rationalizes the mechanisms described by contemporary central bankers, in which an increase in the liquidity ratio has contractionary effects, because it reduces the quantity of assets banks can pledge as collateral. This effect, akin to quantity rationing, is more pronounced when excess reserves are scarce.
The scarcity effect of QE on repo rates: evidence from the Euro-Area
with William Arrata, Benoît Nguyen and Imène Rahmouni-Rousseau
Journal of Financial Economics (2020)
[WP version] [journal version] [bib citation]
Most short-term interest rates in the Euro area are below the European Central Bank deposit facility rate, the rate at which the central bank remunerates banks’ excess reserves. This unexpected development coincided with the start of the Public Sector Purchase Program (PSPP). In this paper, we explore empirically the interactions between the PSPP and repo rates. We document different channels through which asset purchases may affect them. Using proprietary data from PSPP purchases and repo transactions for specific (“special") securities, we assess the scarcity channel of PSPP and its impact on repo rates. We estimate that purchasing 1 percent of a bond outstanding is associated with a decline of its repo rate of 0.78 bps. Using an instrumental variable, we find that the full effect may be up to six times higher.
Monetary policy transmission with interbank market fragmentation
Journal of Money, Credit and Banking (2020)
[WP version] [journal version] [bib citation]
This paper shows how interbank market fragmentation disrupts the transmission of monetary policy. Fragmentation is the fact that banks, depending on their country of location, have different probabilities of default on their interbank borrowings. Once fragmentation is introduced into standard theoretical models of monetary policy implementation, excess liquidity arises endogenously. This leads short-term interest rates to depart from the central bank policy rates. Using data on cross-border financial flows and monetary policy operations, it is shown that this mechanism has been at work in the Euro-Area since 2008. The model is used to analyze conventional and unconventional monetary policy measures.
Policy contributions:
In god we trust, all the others must bring (good) collateral
How well have ECB rate hikes transmitted to the money market
with Benoit Nguyen (Banque de France)
The increase of broad money during COVID: causes and implications
with Banque de France co-authors
Exiting low interest rates in a situation of excess liquidity: the experience of the Fed
with Vincent Grossmann-Wirth
The effectiveness of FX interventions in Latin America
with Marcos Chamon, David Hofman, Sergi Lanau and Umang Rawat (all IMF)
On possible reforms of the IMF approach to multiple exchange rates (parallel exchange rate, etc.)
with IMF co-authors
Financial Sector Assessment Programme (FSAP): Thailand
with IMF and World Bank co-authors
with IMF co-authors