Hutchins Roundup: Macroprudential policies, bonus depreciation, and more

Studies in this week’s Hutchins Roundup find that macroprudential policies that target the cost of bank capital are the most effective way to contain housing booms, bonus depreciation has a significant impact on investment, and more.

Using credit default swaps to measure risk among 226 European firms in the aftermath of the first Greek bailout, Patrick Augustin of McGill University, Hamid Boustanifar of BI Norwegian Business School, Johannes Breckenfelder of the European Central Bank, and Jan Schnitzler of VU University Amsterdam find significant spillover effects from sovereign credit risk to corporate credit risk. Specifically, they find that a ten percent increase in sovereign credit risk is associated with a 1.1 percent increase in corporate credit risk. These spillovers are strongest in Eurozone countries and countries in financial distress (Greece, Ireland, Italy, Portugal, and Spain).

Read full article: Brookings, 21 January, 2016