Academic Research
Banks' Liability Structure and Mortgage Lending During the Financial Crisis
Journal of Financial Economics Volume 116, Issue 3, June 2015, Pages 565-582
Presentations: International Monetary Fund (IMF-ICD), International Finance and Banking Society - best paper award. American Finance Association (2013), European Finance Association (2012), and others.
We examine the impact of banks' exposure to market liquidity risk through wholesale funding on their supply of credit during the financial crisis. We focus on mortgage lending to minimize the impact of confounding demand factors that could be potentially large when comparing overall lending by banks. The disaggregated data on mortgage applications we use allows us to study the time variations in banks’ decisions to grant mortgage loans while controlling for bank, borrower, and regional characteristics. We find that banks that were more reliant on wholesale funding increased their rejection rates significantly more than other banks during the crisis. This result holds at the national level as well as at the sub-national level in most of the largest Metropolitan Statistical Areas. To further control for applicant characteristics across banks we also reduce our 4 million data points to thousands of pairs of virtually indistinguishable applications and show that our main results are conserved. While the willingness to supply loans was affected by banks’ liability structure during the crisis, we find that the demand for mortgages decreased evenly along this dimension.
The latest version can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2045029
IMF WP version can be downloaded here: http://www.imf.org/external/pubs/cat/longres.aspx?sk=25995.0
Solving General Equilibrium Models with Incomplete Markets and Portfolio Choice
KAZIMOV, K. (2011)
Abstract: In this paper, I compare the accuracy of the two existing methods for solving stochastic general equilibrium models with dynamic portfolio choice and incomplete markets: one proposed by Hnatkovska (2010) and Evans and Hnatkovska (2005, 2011) (EH), another - attributed to Devereux and Sutherland (2007, 2009a,b) together with Tille and van Wincoop (2007) (DS). The accuracy of these solution methods for the real as well as portfolio variables is analyzed by studying the distribution of Euler equation errors and using a series of accuracy tests. My results indicate that while both DS and EH methods generate sufficiently accurate solutions for the real variables, there are significant gains from using the EH method when solving for the portfolio solutions. This implies that both the DS and EH methods can be used to analyze the impulse responses of any variables, other than portfolio variables, or to investigate the business cycle properties of a model. If, on the other hand, a researcher is interested in analyzing the dynamics of the portfolio variables, extra care should be taken to assess the accuracy of the solution, especially that of the portfolio side of the model.
Full text at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1982111
Estimating the Term Structure of Government Securities in Turkey
With Emre C. Alper and Aras Akdemir.
Abstract: This paper uses statistical techniques to estimate monthly yield curves in Turkey using secondary government securities data from 1992 to 2004. We use both spline based method of McCulloch and parsimonious model of Nelson-Siegel to estimate monthly yield curves. Instead of using end-of-month values, which is a common practice in the previous empirical studies, we construct the data set by calculating monthly volume weighted average of price and maturity. We use both in-sample and out-of-sample analysis to compare McCulloch and Nelson-Siegel methods. We find evidence that that McCulloch method has superior in-sample properties, whereas Nelson-Siegel method has superior out-of-sample properties.
Estimating Yield Curves in Turkey: Factor Analysis Apporach
With Emre C. Alper and Aras Akdemir.
Abstract: In this paper, we perform factor analysis on yield curves estimated by Mc-Culloch and Nelson-Siegel methods. We estimate factors using nominal volume-weighted average monthly zero-coupon yields data from the Turkish Secondary Government Securities market. Our main aim is to characterize each monthly yield curve by three factors and forecast yield curves using time series properties of each factor. According to loadings of each factor, we label the factors as level, slope and curvature, respectively. We also examine their explanatory power in different sub-samples and explore their time series properties using an unrestricted VAR. We next forecast yield curves using AR-GARCH and random walk processes for the factors and compare their relative performance. We find encouraging results regarding explanatory power of three factor model and superior forecasting power of the AR-GARCH specification.
Forecasting the Term Structure of Interest Rates for Turkey: A Factor Analysis Approach
With Emre C. Alper and Aras Akdemir.
Abstract: We perform factor analysis on monthly yield curves estimated by the Nelson-Siegel model using the Turkish secondary government securities market data. Monthly yield curves are characterized by three factors which are estimated using nominal volume-weighted average monthly zero-coupon yields. According to the loadings of each factor, we label the factors as level, slope, and curvature. Next, we forecast yield curves using AR-GARCH and random walk processes and compare their relative performance. Our results indicate that the three-factor model has high explanatory power and that the AR-GARCH specification has superior forecasting power for Turkey.
ALPER, C.E., KAZIMOV, K., AND AKDEMIR, A. (2007) “Forecasting the Term Structure of Interest Rates for Turkey: A Factor Analysis Approach.” Applied Financial Economics, 17, 77-85.
Link to Article: http://dx.doi.org/10.1080/09603100600606156
Resource Windfalls, Macroeconomic Stability and Growth: The Role of Political Institutions
With Rabah Arezki (IMF) and Kirk Hamilton (WB), IMF WP 11/142 (2011).
Abstract: We use a new dataset on non-resource GDP to examine the performance of commodity exporting countries in terms of macroeconomic stability and economic growth in a panel of up to 129 countries during the period 1970-2007. Our main findings are threefold. First, we find that overall government spending in commodity-exporting countries has been procyclical. Second, we find that resource windfalls initially crowd out non-resource GDP which then increases as a result of the fiscal expansion. Third, we find that in the long run resource windfalls have negative effects on non-resource sector GDP growth. Yet, the effects turn out to be statistically insignificant when controlling for government spending. Both the effects of resource windfalls on macroeconomic stability and economic growth are moderated by the quality of political institutions.
Full Article: IMF working paper WP/11/142
The Differential Effect of Government Expenditures on Growth in Saudi Arabia
With Alsharhrani, S. and Alsadiq A.
This paper investigates empirically the effects of different components of government expenditures (education, health care, defense, housing, current and capital expenditures as well as public investment) on economic growth in Saudi Arabia, which is one of the fastest-growing economies in the Middle East and North Africa, the largest oil producing country in the world, with a large current account surplus.
The Information Content of Swap Rates: A Cross-Country Analysis
KAZIMOV, K. (2009)
Abstract: This paper examines information about market expectations for future interest rates and real economic activity that is embedded in financial asset prices. The information content of the yield spread is investigated and compared to that of the swap spread, using data from four countries: the United States, Germany, Japan, and India. The swap spread appears to be a better predictor for real economic activity; it carries more accurate information about future short-term interest rates and has more significant and robust results within and across countries. Thus, swap rates may have the potential as a significant financial market indicator of economic activity.
KAZIMOV, K. (2009) “The Information Content of Swap Rates: A Cross Country Analysis.” IMF working paper, Asia Pacific Department, in progress.
Small Sample Bias Correction in Non-linear and Dynamic Panels using Lintner Model
KAZIMOV, K: (2006) , mimeo.
