Eoin Treacy's view

Fed: The Surprisingly Swift Decline of U.S. Manufacturing Employment

This paper finds a link between the sharp drop in U.S. manufacturing employment beginning in 2001 and a change in U.S. trade policy that eliminated potential tariff increases on Chinese imports.

Spain: CONSUMPTION IN THE SHADOW OF UNEMPLOYMENT

In Spain during the Great Recession a 1 percentage point increase in the unemployment rate was related to a strong drop in household consumption of more than 0.7% per equivalent adult.

IMF: “Financial Plumbing and Monetary Policy”

In summary, not knowing the dynamics of links between Triparty/bilateral markets, or demand for money by hedge funds or, demand for collateral by pension/insurers, may lead to wedges that many not be easy to remove. A successful lift off from ZLB should not leave wedges behind. Thus central bank’s exit strategy needs to be mindful of disruptions to the financial plumbing due to the possibility that a sizable (and quick) reduction in reserve balances could lead to wedges between the bilateral repo rate, the GC rate via the Triparty repo, and the rate on Fed’s RRP operations.

Harvard: THE STATE OF THE NATION’S HOUSING

Fed: “Do Currency Forwards Say Anything about the Future Value of the U.S. Dollar?”

Fed: “Tight Credit Conditions Continue to Constrain The Housing Recovery”

The expansion of Federal Housing Administration lending has let households with imperfect credit or the inability to make a large down payment maintain access to mortgage borrowing. Rather than excluding such households, lenders have been applying strict underwriting conditions on all borrowers. Clarifying what constitutes approved lending may help relax credit conditions with minimal increase in risk.

Fed: “The Risk Channel of Monetary Policy”

This paper examines how monetary policy affects the riskiness of the financial sector’s aggregate balance sheet, a mechanism referred to as the risk channel of monetary policy. I study the risk channel in a DSGE model with nominal frictions and a banking sector that can issue both outside equity and debt, making banks’ exposure to risk an endogenous choice, and dependent on the (monetary) policy environment.

Inflation Dynamics and Business Cycles

This paper aims to investigate whether the effect of inflation expectations, exchange rate, money supply, industrial production and import prices on inflation depends on business cycle. For this purpose, a two states Markov Switching Auto Regression model with time varying transition probabilities to a generic inflation model is implemented for the period 2003-2013.

IMF: “Why Complementarity Matters for Stability—Hong Kong SAR and Singapore as Asian Financial Centers”

This paper suggests that there is an alternative prism through which the evolution of financial centers in Asia needs to be viewed. It underscores the importance of “complementarity” rather than “dominance” to better serve regional and global financial stability. We posit that such complementarity is vital, through network analysis of the roles of Hong Kong SAR and Singapore as the current leading financial centers in the region. This analysis suggests that a competition for dominance can result in de-stabilizing levels of interconnectivity that render the global “network” as a whole more susceptible to rapid propagation of shocks. We then examine the regulatory and policy challenges that may be encountered in furthering such complementary coexistence.

BIS: The changing face of financial intermediation