The global debt problem(s)

A new McKinsey report estimates that total debt of households, corporates, and governments has expanded 40% since 2007, reaching a total of 286% of...

Consequences of the OTC derivatives reform

The OTC derivatives reform is nearing completion. It is designed to contain derivatives-related credit and contagion risk through standardization, multilateral netting, and adequate collateralization....

The global debt overhang

A new IMF report illustrates that a large share of both advanced and emerging economies struggle with private debt overhangs. Excessive debt is a...

How convenience yields have compressed real interest rates

Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around 2% for more than a century until the 1980s....

A brief history of monetary policy and asset price booms

A new NBER paper reminds us of historical episodes when loose monetary policy contributed to asset price booms and busts. The paper also provides...

Understanding “shadow money”

The shadow banking system creates money or money-like claims mainly through repurchase operations: cash managers “park” funds through short-term secured lending, while asset managers...

How equity return expectations contribute to bubbles

An updated paper by Adam, Beutel, and Marcet claims that booms and busts in U.S. stock prices can be explained by investors’ subjective capital...

Shadow banking and the backstop problem

Modern shadow banking provides large-scale risk transformation services that are highly pro-cyclical (view post here). This is a systemic concern mainly for one reason:...

A review of euro area rescue funds

The European Financial Stability Facility (EFSF) and its permanent replacement, the European Stabilization Mechanism (ESM) haven proved less effective than the ECB in quelling...

Rules of thumb for banking and currency crisis risk

A new ECB paper explores macroeconomic indicators for banking and currency crises over the past 40 years. Banking crises arose mostly in constellations of...

RECENT ARTICLES

Measures of market risk and uncertainty

In financial markets, risk refers to the probability distribution of future returns. Uncertainty is a broader concept that encompasses ambiguity about the parameters of...

Nowcasting for financial markets

Nowcasting is a modern approach to monitoring economic conditions in real-time. It makes financial market trading more efficient because economic dynamics drive corporate profits,...

How banks’ dollar holdings drive exchange rate dynamics

Non-U.S. financial institutions hold precautionary positions in U.S. dollar assets as protection against financial shocks. This gives rise to a safety premium on the...

POPULAR ARTICLES