This inter-disciplinary and wide-ranging study unravels the social processes of decision-making at the interface of central banks and financial market participants, and thereby raises important questions about responsible central bank governance and its obligations to stakeholders in society. The book challenges commonly held assumptions on how central banking works and critically assesses unconventional monetary policy and its underlying theoretical tenets.
Drawing from rich, multi-sited fieldwork and data collection, this research monograph offers an in-depth look into the financial market practices around the quantitative easing programmes of the European Central Bank and focuses on the uneasy role of modern central banks as active market participants. The author introduces concepts from social network theory and develops a novel method to study organisational networks in the context of financial markets. An analysis of the European Central Bank’s social, organisational and financial networks is sketched over the course of multiple chapters. The concluding chapters dive into documentary analysis and the extensive material from qualitative interviews with senior investment professionals about the strategies and adaptive processes around the lived experience of quantitative easing.
The book will be a vital resource for social scientists researching organisations in financial markets, providing theory, concepts, empirical data and practical implications. It will be of interest to academics and graduate students in economics, sociology and management/organisation studies, as well as practitioners at central banks and in asset management.
Author(s): Christoph F-D. Wu
Series: Routledge International Studies in Money and Banking
Publisher: Routledge
Year: 2022
Language: English
Pages: 192
City: London
Cover
Half Title
Series
Title
Copyright
Dedication
Contents
List of figures
List of tables
Acknowledgements
List of abbreviations
Introduction
Structure of the book
1 The field of actors: central banks and the asset management industry
1.1 A central banking primer
1.2 The European Central Bank and its monetary policy
1.3 The asset management industry and portfolio managers
2 Network theory? Social and organisational networks in financial markets
2.1 Economic sociology and organisational networks
2.2 Social studies of finance and behavioural finance
2.3 Discussion
2.4 Methods
3 Corporate interlocking networks and portfolio holdings: a method to study organisational networks in financial markets
3.1 Financial networks and corporate interlocks
3.2 Centrality in financial networks
3.3 Empirical usage
3.4 Notations and overview
3.5 Conclusions
4 Portfolio rebalancing and imitation: central bank influence and network dynamics
4.1 Hypotheses
4.2 The case study of the European Central Bank’s QE
4.2.1 ECB as market participant
4.2.2 Node considerations – active and passive
4.2.3 Data collection
4.3 Results
4.3.1 Network demographics and statistics
4.3.2 Network structure
4.3.3 Centrality
4.3.4 Herding and imitation
4.3.5 Analysis
4.4 Conclusions
5 Home bias and homophily in the sovereign debt markets of the eurozone
5.1 Introduction
5.1.1 Homophily and home bias
5.1.2 European quantitative easing and the public sector purchase programme
5.1.3 Data collection
5.2 Results
5.2.1 Network demographics and statistics
5.2.2 Whole-network homophily measures
5.2.3 Homophily in nodes and home bias in local bond markets
5.2.4 Regional homophily, southern bias
5.2.5 Notable national sovereign bond market characteristics
5.2.6 Analysis
5.3 Conclusions
6 Central banks and expert networks: the case of the European Central Bank’s Bond Market Contact Group
6.1 A background to central bank communication: from secrecy to transparency
6.2 European Central Bank communication
6.2.1 Communication during the Mario Draghi Era (2011–2019)
6.2.2 The ECB’s Bond Market Contact Group and expert networks
6.2.3 Diffusion of the purchase programmes in the BMCG network
6.3 Information exchange in asset manager networks
6.4 Conclusions
7 Adaptive processes, strategies and network behaviour
7.1 Strategies and tactics
7.1.1 European corporate credit and the CSPP
7.1.2 Sovereigns and rates
7.1.3 Equities
7.2 Information exchange
7.2.1 ‘Whatever it takes’
7.2.2 Information and expert networks
7.3 Retrospectives
7.3.1 Communicating the exit
7.3.2 End of QE? PM evaluations
7.3.3 Analysis
7.4 Conclusions
8 Bringing it all together: entangled market actors, responsible central banking and stakeholder engagement
8.1 Findings
8.2 Summary and conclusions
Appendix A: methods
Network analysis and data
Semi-structured interviews, reports and transcripts
Appendix B: formal interview subjects demographics
Appendix C: glossary of terms
References
Index
