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The Bright and the Dark Side of Cross-Border Banking Linkages
August 5, 2011--Summary:
When a country’s banking system becomes more linked to the global banking network, does that system get more or less prone to a banking crisis? Using model simulations and econometric estimates based on a world-wide dataset, we find an M-shaped relationship between financial stability of a country’s banking sector and its interconnectedness.
In particular, for banking sectors that are not very connected to the global banking network, increases in interconnectedness are associated with a reduced probability of a banking crisis. Once interconnectedness reaches a certain value, further increases in interconnectedness can increase the probability of a banking crisis. Our findings suggest that it may be beneficial for policies to support greater interlinkages for less connected banking systems, but after a certain point the advantages of increased interconnectedness become less clear.
The Effectiveness of Capital Controls and Prudential Policies in Managing Large Inflows-IMF paper
August 5, 2011--EXECUTIVE SUMMARY
IMF staff have recently sought to clarify the circumstances under which capital controls and
prudential policies designed to influence cross-border capital flows (referred to together as
“capital flow measures,” or CFMs) could be a part of the toolkit to manage large capital
inflows.
In doing so, considerable emphasis has been given to the need to ensure that these measures in fact achieve their intended objectives, which have typically included stemming
currency appreciation, reducing the volume of inflows, changing their composition, providing greater room for maneuver for monetary policy, slowing credit growth, and
dampening asset price bubbles. This note considers the empirical evidence for the effectiveness of capital controls and related prudential measures, with the focus on what has been learned in the past decade.
A review of the literature shows that capital controls (as distinct from prudential CFMs) have little effect on overall flows, although it appears that controls can change the composition of flows. In most cases, controls also have little effect on currency appreciation. There has not yet been much in-depth study of the effectiveness of prudential measures in addressing the risks from capital inflows.
view the The Effectiveness of Capital Controls and Prudential Policies in Managing Large Inflows
Growing alarm drives gold to records
August 5, 2011--The gold rally gathered pace this week as a growing sense of alarm in financial markets drove bullion to a series of new records.
The precious metal touched a fresh nominal record of $1,681.67 a troy ounce on Thursday, having rallied 12 per cent since the start of July. It also hit records in euros and sterling.
China says debt financing unlikely 'to save' US, EU
August 5, 2011--China said Friday that debt deals in the United States and in Europe would not be enough to save their economies and "concrete steps" must be taken to rebalance the global economy.
"The only way the Americans have come up with to improve economic growth has been to take on new loans to repay the old ones," a blistering commentary published on the official Xinhua news agency said.
"To eat May's grain in April, however, will never be a permanent solution to a problem," the report said.
'Fear' Gauges Show Unusual Disparity Between US, Emerging Markets
U.S., developed-world volatility benchmarks rise faster than emerging markets
Trend shows more anxiety about stocks that are usually perceived as less risky
Lower emerging-market volatility views seen as sign of those markets' emergence
August 5, 2011--Global risk worries are turning the stock market's "fear" gauges on their heads.
Volatility indexes such as the VIX reflect the prices investors pay to use stock options as protective hedges. Typically, protective options in markets such as those in the U.S. and Europe carry a lower risk premium than those in emerging markets, which investors generally perceive to be riskier and more volatile.
Taxing Financial Transactions: An Assessment of Administrative Feasibility-IMF Working paper
August 4, 2011--Summary: This paper considers how a tax on financial transactions could be applied to three broad and partially overlapping categories of financial instruments: (1) exchange-traded instruments; (2) over-the-counter instruments; and,
(3) foreign exchange instruments. For each category, the paper examines the factors that would facilitate or complicate the administration of a financial transactions tax, the options for collecting the tax, the types of compliance risks that are likely to be encountered, and measures for mitigating these risks.
Stocks plunge on debt, growth fears
June 4, 2011--World stocks plunged to new 2011 lows on Thursday as worries about a global slowdown intensified and investors piled more money into safe-haven assets like bonds.
As Wall Street’s losses deepened, gold turned negative after touching another record high near $1700 an ounce.
The exodus from stocks pushed the broad Standard & Poor’s 500 Index down 3% percent, while the clamor for safe-haven investments drove the yield of the 10-year US Treasury note below 2.5%, the lowest since early November 2010.
EU probes takeover bid to create biggest stock market
August 4, 2011--European Union anti-trust officials Thursday launched a probe into takeover plans aiming to create the world's biggest stock exchange.
The European Commission said it opened an in-depth investigation into the deal to stitch together Frankfurt's Deutsche Boerse AG and New York's NYSE Euronext Inc., warning of concerns particularly over control of high-risk derivatives trading.
The commission said an initial probe announced on June 29 "indicated competition concerns in a number of areas, in particular in the field of derivatives trading and clearing."
Dow Jones Islamic Market Indexes July 2011 Performance Report
August 3, 2011--The global Dow Jones Islamic Market Titans 100 Index, which measures the performance of 100 of the leading Shari’ah compliant stocks globally, dropped 0.95% in July, closing at 2327.64. In comparison, the Dow Jones Global Titans 50 Index, which measures the 50 biggest companies worldwide, posted a loss of 0.28%, closing at 183.09.
− The Dow Jones Islamic Market Asia/Pacific Titans 25 Index, which measures the performance of 25 of the leading Shari’ah compliant stocks in the Asia/Pacific region, increased 1.16%, closing at 2194.65. The Dow Jones Asian Titans 50 Index, in comparison, posted a gain of 0.16%, closing at 138.28.
Measuring Europe, the Dow Jones Islamic Market Europe Titans 25 Index, which measures the performance of the 25 of the leading Shari’ah compliant stocks in Europe, closed at 2288.46, a loss of 1.72%, while the conventional Dow Jones Europe Index loss 3.57%, closing at 278.79.
Gold hits highs on US growth worries
August 3, 2011--Gold prices have hit a nominal high for the second day running as investors pile into the precious metal amid worries about the global economy.
Spot bullion in London on Wednesday reached a record of $1,672.65 a troy ounce, up 0.8 per cent on the day, after a report released on Tuesday showed that US consumers cut back on spending in June for the first time since September 2009.