Inflation and Disintermediation

The Shifts and the Shocks: Bank Risk, Leverage, and the Macroeconomy

“…Unlike these risk exposures, the exposure to housing risk was close to zero historically and increased after 1970, consistent with the evidence of increasing importance of real estate backed loans on bank balance sheets (Jordà et al, 2013). We also document long-run declines in two macroeconomic risks relevant for banking: downside macroeconomic risk in the form of recessions (Nagel and Purnanandam, 2020), and the risk of high inflation or deflation, which can exacerbate the asset-liability interest rate mismatches and affect the real burden of debt (Fisher, 1933;Bernanke and James, 1991;Agarwal and Baron, 2021). Between 1870 and 1950, both the recession probability and the probability of high or negative inflation more than halved.…”

“…Recession risk is a proxy for the downside risk of the macroeconomy, a likely driver of bank credit risk (Nagel and Purnanandam, 2020). Deflation can increase the real value of bank loans, making it more difficult for borrowers to repay them and increasing credit risk (Fisher, 1933;Bernanke and James, 1991;Eggertsson and Krugman, 2012), while high inflation can increase the mismatch between nominal interest rates paid on bank assets and liabilities, thereby raising the risks from maturity transformation (Agarwal and Baron, 2021).…”

“…We calculate the recession probability as the share of business cycle peaks within a centered 10-year window of pooled 17-country data. We define years with above 10% CPI growth (this threshold is in line with Agarwal and Baron, 2021) as inflationary and country-year observations with negative CPI growth as deflationary and calculate the probability of a start of an inflationary or deflationary period again using 10-year centered windows. Both of these risks have declined over the long run, with the bulk of the decline occurring during the pre-1950 period that also saw the strongest reductions in bank asset risk.…”

Exploring Cost Variability and Risk Management Optimization in Natural Disaster Prevention Projects

“…The aftermath of the COVID-19 pandemic saw substantial monetary [29] and fiscal [30][31][32] stimuli globally, which affected the costs of labor and raw materials. South Korea's domestic policies, alongside international influences such as those from the US Federal Reserve [29,33], have shaped the cost landscape for capital projects in the region.…”

Impact of Inflation on Economic Growth: Evidence from Tanzania

“…Inflation is a critical macroeconomic phenomenon that affects various aspects of an economy, including economic growth (Agarwal and Baron, 2023). This introductory section seeks to provide a foundation for understanding the complexities surrounding this relationship, elucidating both the problem at hand and its significance in the broader context of economic policymaking.…”