BIS-Triennial Central Bank Survey of foreign exchange and OTC derivatives markets in 2016
March 29, 2019--The Bank for International Settlements (BIS) today launched the 12th Triennial Central Bank Survey of Foreign Exchange and Over-The-Counter (OTC) Derivatives Markets.
Conducted every three years since 1986, the Triennial Survey is the most comprehensive source of information on the size and structure of global foreign exchange and OTC derivatives markets.
It aims to help central banks, other authorities and market participants monitor developments in OTC markets and inform discussions about reforms to OTC markets.
The previous survey, in April 2016, showed that trading in foreign exchange spot and OTC derivatives markets averaged $5.1 trillion per day.
Source: BIS
JPMorgan and BofA Lead Race for Blockchain Banking Supremacy
March 29, 2019--JPMorgan and Bank of America lead the pack when it comes to implementing blockchain in the financial sector. In fact, the competition isn't even close.
Between patents, job hiring, and huge technology budgets, it seems unlikely that smaller banks will be able to compete in any substantive way.
JPMorgan, Bank of America, Citigroup and Wells Fargo have the largest technology budgets of the 175 banks surveyed recently by UBS.
Source: breakermag.com
IMF Working Paper-Gains from Anchoring Inflation Expectations: Evidence from the Taper Tantrum Shock
March 28, 201--Summary:
Many argue that improvements in monetary policy frameworks in emerging market economies over the past few decades, have made them more resilient to external shocks. This paper exploits the May 2013 taper tantrum in the United States to study the reaction of 18 large emerging markets to an external shock, conditioning on their degree of inflation expectations' anchoring.
We finnd that while the tapering announcement negatively affected growth prospects regardless of the level of anchoring, countries with weakly anchored inflation expectations experienced larger exchange rate pass-through to consumer prices, hence comparatively higher inflation. We conclude that efforts to improve the extent of anchoring of inflation expectations in emerging markets pay off, as they ease the trade-off that central banks face when external shocks weaken growth prospects and trigger currency depreciations.
Source: IMF
Do Bear markets require recession?
March 27, 2019--This article explores the link between bear markets and recessions. Is a bear market the inevitable consequence of a recession? How often does a bear market occur in the absence of a recession? David Bassanese looks at what history tells us about what might lie ahead.
With global growth slowing there is understandable concern that the decade long global bull market could be finally coming to an end. This note suggests, however, that bear markets still remain a relatively rare occurrence, and even rarer in the absence of a US recession.
Equity markets are inherently volatile
The chart below details daily drawdowns in the US S&P 500 price index since the mid-1950s, along with shaded periods of recession as defined by the National Bureau of Economic Research (NBER). Several features are noteworthy from the chart.
Source: BetaShares
Global Green Finance Index 3-European Centres Lead The Green Finance Index, Spotlight On Fossil Fuels
March 27, 2019--Green rankings not affected by level of fossil fuel financing
Amsterdam and London continue to lead the latest global rankings of green financial centres, according to the latest edition of the Global Green Finance Index. Copenhagen, Zurich and Paris are close behind.
The Global Green Finance Index (GGFI) is published every six months and ranks global financial centres according to the depth and quality of their green finance offerings. In today's report, GGFI 3:
Amsterdam came first for depth, with Zurich and Copenhagen equal second. London dropped to fifth place
In the quality rankings, London and Paris retained the leading two places
In North America, Montreal came first for depth and San Francisco first for quality, although Canadian centres outperformed the US
In Asia/Pacific, Shanghai came first for depth, and Sydney took the top place for quality
view the The Global Green Finance Index 3
Source: Long Finance
World Gold Council-Market Update Investor insights: gold in Islamic investment
March 27, 2019--Following the launch of the AAOIFI Shari'ah Standard on Gold in 2016, we have engaged with Islamic banks and financial institutions to develop the market for Shari'ah-compliant gold-backed products.1 As part of this we undertook research to understand how investors view Islamic finance, their attitudes towards gold, and preferences for gold-backed products.
The insights summarised in this update will help banks and other institutions to launch gold-backed financial products that meet the needs of modern Islamic investors.
Gold in Islamic finance
Gold has a long association with Islamic finance. For centuries, the gold Dinar was the currency and trading standard of the Islamic world. But as Islamic finance grew and developed, so did the need for clarity around the Shari'ah treatment of gold.
In 2016, the rules for trading gold were codified in a single Standard: the AAOIFI Shari'ah Standard on gold. This removed one of the barriers preventing the development of gold-backed products in Islamic finance.
Source: World Gold Council
FTSE Russell Blog-Goldilocks walks a tightrope
March 26, 2019--Hopes that the Goldilocks economic backdrop can persist are facing increased challenges, says Philip Lawlor, head of global markets research...
China's retail investment market:Implications for minimum variance
The research paper, Accessing the China A-Shares Market Via Minimum-Variance Investing (recently published in the Journal of Portfolio Management) explains how minimum variance strategies may work in historically volatile markets such as China....
The Fed's latest set of "dot points" completely removed the two projected interest rate increases for this year-in a surprise for markets which had expected either no change or the removal of only one rate hike. While markets initially rejoiced, a nagging concern over "what the Fed might know" about the economy soon crept back into market thinking.
Source: BetaShares
IMF Working Paper-The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy
Using a theory and empirical evidence, we argue that one can learn more from miracles than failures. We suggest three key principles behind their success: (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability.
Source: IMF
IMF Working Paper-Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries
With low-income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock-absorber in poor countries, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock-absorber nor a shock-amplifier for most economies. These findings are consistent across a range of econometric estimators, including fixed effect, system GMM and local projection estimates.
Source: IMF
March 26, 2019--Week in Review
Global equity markets nervously retreated on the back foot last week and bond yields dropped further-reflecting soft US and European manufacturing data, a surprisingly dovish turn by the Federal Reserve, and inversion of part of the US yield curve.
March 26, 2019--Summary:
Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition for developing economies. Yet the success of the Asian Miracles with industrial policy stands as an uncomfortable story that many ignore or claim it cannot be replicated.
March 25, 2019--Summary:
This paper contributes to the literature by looking at the possible relevance of the structure of the financial system-whether financial intermediation is performed through banks or markets-for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience.
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