Tiered reserve systems

Negative monetary policy rates can undermine financial transmission, because they encourage cash hoarding and reduce the profitability of traditional banking. This danger increases with...

Japan’s war against deflation: progress and risks

More than a year after its launch, the impact of “quantitative and qualitative easing” seems pervasive. The Bank of Japan asserts that the output...

Risks related to the Fed’s exit from ultra-easy policy

The IMF Article IV consultations for the U.S. suggest that a Federal Reserve exit from unconventional and highly accommodative policy may be challenging. Most...

The side-effects of non-conventional monetary policy

A BIS summary of research gives a nice overview on non-conventional monetary policies and their unintended systemic consequences. Current policies appear to yield diminishing returns in terms...

The secular decline in the global equilibrium real interest rate

A new Bank of England paper finds a 450 bps decline in global equilibrium real interest rates over the past 35 years, due to a...

Liquidity regulation and monetary policy

From 2015 banks will have to satisfy new liquidity standards. Of particular importance is the liquidity coverage ratio, which requires institutions to hold enough “high...

The Federal Reserve’s strategy after tapering

William Dudley provided an update of the Fed’s strategy for normalizing monetary policy. Under appropriate economic conditions, policy rates could begin rising in 2015,...

The Federal Reserve’s increased influence on financial markets

A new empirical study suggests that the Federal Reserve has exerted a stronger influence on fixed income, commodity, and currency markets since it started...

ECB asset purchases: the three transmission channels

A new paper suggests that ECB asset purchases influence markets and the economy significantly, mainly through three channels. First, through the asset valuation channel...

The dangerous slide in global real interest rates

Various research contributions suggest that the global decline in real interest rates may be self-reinforcing. That is because low real rates spur leverage, debt,...

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Crashes in safe asset markets

A new theoretical paper illustrates the logic behind runs and crashes in modern safe asset markets. Safe assets are characterized by stable value and...

Copulas and trading strategies

Reliance on linear correlation coefficients and joint normal distribution of returns in multi-asset trading strategies can be badly misleading. Such conventions often overestimate diversification...

Trend following: combining market and macro information

Classic trend following is based on market prices or returns. Market trends are relatively cheap to produce, popular, and plausibly generate value in the...

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