Abstract:  The commercial real estate market plays an important role in financial stability due to its size, its use as collateral and its high degree of cyclicality. In 2021, total lending in the UK CRE market was estimated at more than £180bn. In this paper, we examine the macro-financial vulnerabilities stemming from the CRE market. Our empirical evidence indicates that adverse developments in the CRE market significantly increase systemic risk across all financial sub-sectors, since they decrease the value of collateral held by financial institutions and therefore increase the probability of their default. However, the relationship between real estate and financial markets exhibits considerable non-linearities. First, in periods of misalignments in the market, the relationship between systemic risk and CRE growth weakens in line with the deviation hypothesis, suggesting that further increases in property prices in an already overheated market could lead to the build-up of a bubble and greater systemic risk. Then, we employ a quantile regression model that captures another aspect of this non-linear relationship. We find that positive (negative) developments in the CRE market decrease (increase) the right tail of the historical systemic risk distribution and therefore narrow (broaden) the gap with the relatively constant left tail.

Abstract:  This research aims to examine the relationship between sustainability-related disclosures (hereafter referred to as SDR) and performance indicators within the Real Estate Investment Trust (REIT) sector. With growing attention on sustainable investment, REITs have increasingly adopted ESG practices,  however, the implications of these practices on financial performance remain underexplored. This study will use a large panel of European REITs’ annual reports and AI to create a dynamic measurement of sustainability disclosures. Initially, we will assess whether companies that provide more extensive disclosures are also those with higher sustainability, as indicated by their ESG scores. Any discrepancies between disclosure levels and ESG performance may indicate either inadequate reporting or potential greenwashing and exaggeration of their practices. In addition, we aim to investigate whether enhanced SRD influence REITs' financial key performance indicators (KPIs), such as debt and profitability ratios, as well as their impact on REITs’ risk profile. Finally, we will explore differences across sectors and countries, as well as the impact of the regulatory framework. The findings will provide insights into the financial benefits of sustainability disclosures and guidance for investors and policymakers.

Abstract: We examine whether election periods are associated with increased systemic risk. Our analysis includes a global sample of banks from 22 advanced economies from 2000 to 2023, covering a total of 147 national elections. The findings indicate that systemic risk increases during election and post-election periods, while it is lower in the pre-election period in the case of end-of-term elections. More specifically, the year in which elections occur is associated with a 3.74% higher systemic risk compared to the overall average. The results can be attributed to the suppression of negative information and expansionary fiscal policies in the period before elections. Notably, the impact is more pronounced for snap elections and when the incumbent government was not re-elected. In addition, we find that macroprudential policies, strong economic growth and trust in the current government and banks’ financial health can partially mitigate the impact of elections on systemic risk. Finally, to alleviate endogeneity concerns, we employ two instrumental variables, namely, term times and an election uncertainty index based on Google Trends, in a 2SLS model and the results hold and confirm our previous findings, further validating the robustness of our analysis

Abstract: This paper investigates whether changes in sovereign credit ratings are associated with increased macroeconomic downside risks. We build upon the growing literature on Growth-at-Risk by Adrian et al. (2019) which predicts future tail risks to real GDP growth based on current macro-financial conditions and has become a central approach in financial stability analysis. Our empirical findings indicate that rating downgrades are associated with a decline (increase) of 5.5 percentage points in the left tail of GDP growth distribution (tail risk), while upgrades demonstrate no discernible effect. The standard panel OLS analysis shows a significantly lower impact of 1.1 percentage points on median GDP growth, underscoring the importance to look beyond the median to obtain  a more comprehensive understanding of the effect. Furthermore, our analysis reveals an asymmetrical impact across quantiles and forecast horizons and that high-debt countries and those with a speculative grade rating are more exposed to credit rating downgrades. Our results highlight the importance of integrating sovereign credit ratings into risk assessment frameworks to obtain a holistic understanding of the broader macroeconomic implications of CRAs’ announcements, thereby enabling informed decision-making to safeguard financial stability.

​