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IMF Working Papers-Do Fiscal Rules Cause Better Fiscal Balances? A New Instrumental Variable Strategy
March 5, 2019--Summary:
This paper estimates the causal effect of fiscal rules on fiscal balances in a panel of 142 countries over the period 1985-2015. Our instrumental variable strategy exploits the geographical diffusion of fiscal rules across countries.
The intuition is that reforms in neighboring countries may affect the adoption of domestic reforms through peer pressure and imitational effects. We find that fiscal rules correlate with lower deficits, but the positive link disappears when endogeneity is correctly addressed. However, when considering an index of fiscal rules' design, we show that well-designed rules have a statistically significant impact on fiscal balances. We conduct several robustness tests and show that our results are not affected by weak instrument problems.
BIS-Markets retreat and rebound: BIS Quarterly Review
March 5, 2019--Shifting macroeconomic prospects in major economies, and their implications for monetary policy, dominated market developments at the end of 2018 and in the early months of 2019.
Market commentary suggested that concerns that monetary policy would remain on a tightening course, despite a softening economic outlook, pushed US stock prices sharply lower in December. Investors grew increasingly uncertain of future corporate earnings growth. Financial markets found firmer footing in the new year after central banks reaffirmed that policy would respond to global economic risks.
view the BIS Quarterly Review, March 2019
BCBS/IOSCO statement on the final implementation phases of the Margin requirements for non-centrally cleared derivatives
March 5, 2019--Significant progress has been made to implement the framework for margin requirements for non-centrally-cleared derivatives. Based on monitoring of the implementation of the framework across products, jurisdictions and market participants, the Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) today provide the following guidance to support timely and smooth implementation of the framework and clarify its requirements.
The Basel Committee and IOSCO realise that market participants may need to amend derivatives contracts in response to interest rate benchmark reforms. Amendments to legacy derivative contracts pursued solely for the purpose of addressing interest rate benchmark reforms do not require the application of the margin requirements for the purposes of the BCBS/IOSCO framework, although the position may be different under relevant implementing laws
Investors flock to platinum ETFs on hopes of switch by carmakers
March 5, 2019--Holdings reach four-year high as investors bank on shift away from palladium in catalysts
Holdings in platinum ETFs have reached a four-year high of 2.7m ounces, according to Mitsubishi. That' the highest increase in the first two months of the year since platinum ETFs became available in 2007, according to the World Platinum Investment Council.
BetaShares-Downbeat downunder Meanwhile, however, US economic data remained generally in a "Goldilocks" zone, with signs of only a modest economic slowdown and benign inflation. MSCI Set to Quadruple Weightings of Chinese A Shares IMF Working Papers-Nonlinearity Between the Shadow Economy and Level of Development view the IMF Working Papers-Nonlinearity Between the Shadow Economy and Level of Development IMF Working paper-Cash Use Across Countries and the Demand for Central Bank Digital Currency ETFGI reports Smart Beta ETFs and ETPs listed globally gather net inflows of US$7.38 billion during January 2019
Highlights MSCI speeds up boost to China's weighting in emerging markets index
March 4, 2019--Week in Review
It was a relatively subdued week on global markets with little in the way of major data or key news events. While hopes of an eventual US-China trade deal continues to underpin sentiment, an element of caution crept into markets last week following Trump's decision to delay the March 1 deadline and also walk away (at least for now) North Korean peace talks.
Comments from US trade negotiator Robert Lighthizer suggesting a deal with China could still take some time also weighted on markets.
March 4, 2019--The change will provide U.S. and other investors greater exposure to stocks that trade only in China
MSCI is quadrupling the weighting of domestically traded Chinese stocks in its global indexes starting this May.
In a three-step plan, the share of China A large-cap shares will increase from a 5% inclusion factor currently to a 10% inclusion factor in May, then to 15% in August and 20% in November, at which point the indexes will also add some mid-cap China A shares and Chi-Next stocks, which trade on a Nasdaq-like board at the the Shenzhen Stock Exchange.
March 1, 2019--Summary:
This paper is the first attempt to directly explore the long-run nonlinear relationship between the shadow economy and level of development. Using a dataset of 158 countries over the period from 1996 to 2015, our results reveal a robust U-shaped relationship between the shadow economy size and GDP per capita.
Our results imply that the shadow economy tends to increase when economic development surpasses a given threshold or at least does not disappear. Our findings suggest that special attention should be given to the country's level of development when designing policies to tackle issues related to the shadow economy.
March 1, 2019--Summary:
The level and trend in cash use in a country will influence the demand for central bank digital currency (CBDC). While access to digital currency will be more convenient than traveling to an ATM, it only makes CBDC like a bank debit card-not better. Demand for digital currency will thus be weak in countries where cash use is already very low, due to a preference for cash substitutes (cards, electronic money, mobile phone payments).
Where cash use is very high, demand should be stronger, due to a lack of cash substitutes. As the demand for CBDC is tied to the current level of cash use, we estimate the level and trend in cash use for 11 countries using four different measures. A tentative forecast of cash use is also made. After showing that declining cash use is largely associated with demographic change, we tie the level of cash use to the likely demand for CBDC in different countries. In this process, we suggest that one measure of cash use is more useful than the others. If cash is important for monetary policy, payment instrument competition, or as an alternative payment instrument in the event of operational problems with privately supplied payment methods, the introduction of CBDC may best be introduced before cash substitutes become so ubiquitous that the viability of CBDC could be in doubt.
February 28, 2019--ETFGI, a leading independent research and consultancy firm covering trends in the global ETF/ETP ecosystem, reported today that equity-based Smart Beta ETFs and ETPs listed globally gathered net inflows of US$7.38 billion during January.
Total assets invested in the global Smart Beta ETF and ETP industry increased 10.1%, from US$618 billion at the end of December, to US$680 billion, according to ETFGI's January 2019 ETF and ETP Smart Beta industry landscape insights report, an annual paid-for research subscription service. (All dollar values in USD unless otherwise noted.)
In January 2019, Smart Beta ETFs/ETPs attracted $7.38 Bn in net new assets.
February 28, 2019--MSCI has accelerated an increase in China's weighting in its flagship emerging markets index, an influential benchmark tracked by $1.9tn of funds, reflecting how Beijing has opened up its markets to foreign investors in recent years.
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