...Discussion paper The McKinsey Global Institute The McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company, was established in 1990 to develop a deeper understanding of the evolving global economy. Our goal is to provide leaders in the commercial, public, and social sectors with facts and insights on which to base management and policy decisions. MGI research combines the disciplines of economics and management, employing the analytical tools of economics with the insights of business leaders. Our “micro-to-macro” methodology examines microeconomic industry trends to better understand the broad macroeconomic forces affecting business strategy and public policy. MGI’s in-depth reports have covered more than 20 countries and 30 industries. Current research focuses on five themes: productivity and growth; the evolution of global financial markets; the economic impact of technology and innovation; urbanization and infrastructure; and natural resources. Recent research covers job creation, infrastructure productivity, a new wave of disruptive technologies, trends in resource markets, and the shifting global company landscape. MGI is led by McKinsey & Company directors Richard Dobbs, James Manyika, and Jonathan Woetzel. Yougang Chen, Michael Chui, Susan Lund, and Jaana Remes serve as MGI principals. Project teams are led by a group of senior fellows and include consultants from McKinsey’s offices around the world. These teams draw on McKinsey’s global...
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...Petenkemani Case 3: Due 10/30/2014 Quantitative Easing in the Great Recession. 1. You will consider the various impacts of QE1, QE2, and QE3. What accounts for the differences in the market reactions to these three policy actions? What the Fed did * On Sept. 8, 2008, the U.S. Treasury seized control of mortgage giants Fannie Mae and Freddie Mac and pledged a $200 billion cash injection to help the companies cope with mortgage default losses. * About a week later the government bailed out American International Group Inc with $85 billion. * The Fed refused to save Lehman Brothers and the company was forced to file for bankruptcy. Some of the largest financial institutions were on the verge of collapse as the mortgage market melted down. As the crisis hit the global market, the credit freeze spread. * The Treasury and the Federal Reserve began working on a $700 billion bailout plan. * President George W. Bush signed the bailout plan into law Oct. 3. * Weeks later, on Oct. 29, the Fed cut the key interest rate to 1 percent. What was expected? The government claimed the bailout was necessary to provide stability in the economy and prevent disruption in the financial system. The interest rate cut aimed to revive the economy, help free up credit and make loans cheaper to consumers and businesses. What happened The financial markets remained in turmoil for several months. Credit remains tight to this day, although it loosened significantly compared...
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...The contagious impact of the European sovereign debt crisis on the foreign exchange market 1. Introduction In 2010, the debt crisis caused the euro to go down 10% in a three-month period. Some largest hedge funds in America discovered this opportunity and short euro in groups to an enormous scale. Later on, the British pound is being infected. It continuously dropped for six days, which wrote the longest dropping period record. In this paper, the objective is to critically analyse how the European sovereign debt crisis affects foreign exchange markets. The theme focuses on the contagion on the markets. The contagion phenomenon exists between foreign exchange spot and derivative markets. One of the channels is the investor sentiment, which makes large scale of influences on both markets and volatility dynamics (Corredor, P., Ferrer, E., Santamaria, R., 2015). It makes sense on aspects like trading volume, effective transaction costs and so on. This paper has two main parts. The first part is to evaluate impacts on foreign exchange spot market through analysing the political channel, bank channel and financial markert channel. The second part is to investigate impacts on foreign exchange derivatives, especially on the foreign exchange swap. 2. Contagious impact on the foreign exchange market 2-1 Impacts on foreign exchange spot (impacts on euro) In this part, we explain how the debt crisis makes impacts on the foreign exchange spot market, especially, we focus...
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...undesirable levels of inflation in the years ahead? How would your view impact your investment strategy? | Kunal MishraRutgers Business School | Introduction to Quantitative Easing (QE): Quantitative easing (QE) is an unconventional monetary policy tool used by some central banks to stimulate the national economy when conventional monetary policy has become ineffective. In the late 2008 Federal Reserve pursued this unconventional policy of purchasing large quantities of long-term securities, including Treasuries, Agency bonds, and Agency Mortgage Backed Securities. The stated objective of quantitative easing is to reduce long-term interest rates in order to spur economic activity. A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new money that is created electronically. This action increases the excess reserves of the banks, and also raises the prices of the financial assets bought, which further lowers their yield. The recent quantitative easing policy targeted at credit easing in the business and household sector, so that the increase in reserves is a by-product rather than an objective of monetary policy. As a part of its expansionary monetary policy the Fed has maintained a lower short-term market interest rate through the buying of short-term government bonds, using a combination of lending facilities and open market operations. However, with the housing bubble reaching the sky, consumer...
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...Threat of fiscal dominance? A BIS/OECD workshop on policy interactions between fiscal policy, monetary policy and government debt management after the financial crisis Basel, 2 December 2011 Monetary and Economic Department May 2012 Papers in this volume were prepared for the joint BIS and OECD workshop on “Policy interaction: fiscal policy, monetary policy and government debt management”, held in Basel on 2 December 2011. The views expressed are those of the authors and do not necessarily reflect the views of the BIS or the central banks represented at the meeting. Individual papers (or excerpts thereof) may be reproduced or translated with the authorisation of the authors concerned. This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2012. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISSN 1609-0381 (print) ISBN 92-9131-135-9 (print) ISSN 1682 7651 (online) ISBN 92-9197-135-9 (online) Preface The massive expansion of central bank balance sheets to contain the worst financial crisis in living memory raises questions about the theory and practice of monetary policy. The persistence in many advanced countries of large fiscal deficits and the prospect of high public debt/GDP ratios for many years is likely, at some point, to create policy dilemmas not only for central banks but also for public debt managers. Some countries have already had to cope with higher...
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...Global Financial Crisis: Recovery and Challenges “In the perspective of United States of America” Course Details: Fin603: Financial Institutions & Market Section: 01 Submitted to: Dr. Salehuddin Ahmed Professor BRAC Business School BRAC University Submitted by: Group- 5 |SL. |Name |ID No. |Signature | |1 |Mohammad Ishtiaque Hossain |14164090 | | |2 |Kazi Golam Faisal |14364071 | | |3 |Nurshia Jahan |13264009 | | Submission Date: November 17, 2015 LETTER OF TRANSMITTAL November 17, 2015 Dr. Salehuddin Ahmed Professor BRAC Business School BRAC University Subject: Submission of the report paper on ‘Global Financial Crisis: Recovery and Challenges’ Dear Sir, I hereby submitting the final version of the term paper on behalf of my group on ‘Global Financial Crisis: Recovery and Challenges’ that you asked us to submit on November 17, 2015 as our report paper. The paper is a part of the course Fin 603: Financial Institutions & Market under MBA program. The main purpose of this paper was to determine the theoretical aspects of global financial crisis and recovery and challenges analysis...
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...3.0.1 International Business - University Assessment 100 Marks Course Content 1. Overview of the International Business Process 2. PEST factors affecting International Business 3. Government influence on trade 4. International Trade Theories 5. FDI 6. Country Evaluation and Selection 7. Collaborative Strategies 8. International Marketing 9. International Trade Agreements 10. International Trade Organizations 11. International HR Strategies . 12. International Diplomacy - . Reference Text 1. International Business - Daniels and Radebouqh 2. International Business - Sundaram and Black 3. International Business — Roebuck and Simon 4. International Business – Charles Hill 5. International Business— Subba Rao 3.0.2 Strategic management 100 Marks Course Content 1. Strategic Management Process: Vision. Mission, Goal Philosophy. Policies of an Organization. 2. Strategy, Strategy as planned action, Its importance, Process and advantages of planning Strategic v/s Operational Planning. 3. Decision making and problem solving. Categories of problems, Problem solving skill, Group decision making. Phases indecision making, 4. Communication Commitment and performance, Role of the leader, Manager v/s Leaders Leadership styles 5. Conventional Strategic Management v[s Unconventional Strategic Management. The Differences, Changed Circumstance. 6. Growth...
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...Sub prime mortgages The origins of the current crisis lie within the ashes of the equity bubble and subsequent collapse of the equity markets at the end of the 1990s With the collapse of the dot.com bubble, capital began to flow increasingly toward the real estate sectors in the United States The U.S. banking sector found mortgage lending highly profitable and saw it as a rapidly expanding market As a result, investment and speculation in the real estate sector increased rapidly As prices rose and speculation continued, a growing number of the borrowers were of lower and lower credit quality These borrowers, and their associated mortgage agreements (sub-prime debt), now carried higher debt service obligations with lower and lower income and cash flow capabilities New market openness and competitiveness allowed many borrowers to qualify for mortgages that they would not have qualified for previously Structurally, some mortgages re-set a high interest rates after a few years or had substantial step-ups in payments after an initial period of interest-only payments Housing bubble The bursting of the U.S. (United States) housing bubble, which peaked in 2006, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. The financial crisis was triggered by a complex interplay of policies that encouraged home ownership, providing easier access to loans for (lending) borrowers, overvaluation of bundled sub-prime mortgages...
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... |Helliwell | |Given name |James Maxwell | |Email |Jhel8204@uni.sydney.edu.au | | | | |Unit Code |BUS290 | |Unit name |International Financial Markets and Institutions | |Enrolment mode |External | |Date |10/4/2014 | |Assignment number |1 | |Assignment name |Essay 1 | |Tutor |Murray Brennan ...
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...Curtiss Strayer University Professor Haroon Rasheed Baqai Finance 100 24 July 2013 * Describe how the U.S. financial markets impact the economy, businesses, and individuals. The U.S financial markets impact the economy, businesses, and individuals by, helping to skillfully direct the flow of savings and investment throughout the economy in ways that facilitate the increase of capital and the production of goods and services. The worth of credit and returns on investment provide helpful signs to producers and consumers. These signs help direct funds from savers and businesses to the consumers, businesses, governments, and other type of investor. Also, the existence of healthy financial markets and institutions also accelerates the international flow of funds between countries, helping the local economy. In addition, efficient financial markets and institutions tend to lower search and transactions costs in the economy, with potential savings of millions per year. By providing a large range of financial products, with fluctuating risk and pricing structures as well as maturity a well-built financial system offers products to participants that provide borrowers and lenders with a close match for their needs. Businesses, individuals, and governments in need of capital can easily discover which financial institutions or which financial markets may offer a particular funding and what the cost will be for the borrower. This allows investors to compare the cost of financing...
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...JAPANESE MONETARY POLICY AND THE DEFLATION PROBLEM Takatoshi Ito Frederic S. Mishkin Working Paper 10878 http://www.nber.org/papers/w10878 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2004 This paper is written for the NBER 15th East Asian Seminar on Economics, June 25-27, 2004. The authors are grateful to Takeshi Kudo and Emilia Simeonova for their excellent research assistance. We also thank our discussants Ken Kuttner, and Kazuo Ueda, Kunio Okina and participants at seminars at the Bank of Japan, and the East Asian Seminar on Economics. Any views expressed in this paper are the views of the authors only and not the University of Tokyo, Columbia University or the National Bureau of Economic Research. The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research. © 2004 by Takatoshi Ito and Frederic S. Mishkin. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Two Decades of Japanese Monetary Policy and the Deflation Problem Takatoshi Ito and Frederic S. Mishkin NBER Working Paper No. 10878 October 2004 JEL No. E42, E52, E58 ABSTRACT This paper reviews Japanese monetary policy over the last two decades with an emphasis on the experience of deflation from the mid-1990s. The paper is quite critical of the conduct of monetary policy, particularly...
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...between sovereign debt management and monetary policy under fiscal dominance and financial instability Hans J Blommestein and Philip Turner1 Abstract Serious fiscal vulnerabilities arising from many years of high government/GDP ratios have created new and complex interactions between public debt management and monetary policy. Although their formal mandates have not changed, recent balance sheet policies of many central banks have tended to blur the separation of their policies from fiscal policy. The mandates of debt management offices have usually had a microeconomic focus (viz, minimising longer-term borrowing costs, while limiting refunding risks). Such mandates have usually avoided any explicit macroeconomic policy dimension but some major policy overlaps are latent. What is needed is a policy framework for all official actions that affect the maturity structure of government debt in the hands of the public. This requires more analysis of the macroeconomics of government debt management. A full debate about the allocation of functional responsibilities would have to take account not only of the economics, but also of political and institutional constraints. There are operational advantages in having in place appropriate governance arrangements that serve to forestall short-sighted policies and hold specific institutions accountable for their mandates. Keywords: Monetary policy, central banks, policy design and consistency, policy coordination, debt management, sovereign...
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...Monetary policy Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.[1][2] The official goals usually include relatively stable prices and low unemployment. Monetary theory provides insight into how to craft optimal monetary policy. It is referred to as either being expansionary or concretionary, where an expansionary policy increases the total supply of money in the economy more rapidly than usual, and contractionary policy expands the money supply more slowly than usual or even shrinks it. Expansionary policy is traditionally used to try to combat unemployment in a recession by lowering interest rates in the hope that easy credit will entice businesses into expanding. Contractionary policy is intended to slow inflation in hopes of avoiding the resulting distortions and deterioration of asset values. Monetary policy differs from fiscal policy, which refers to taxation, government spending, and associated borrowing.[3] Overview Monetary policy rests on the relationship between the rates of interest in an economy, that is, the price at which money can be borrowed, and the total supply of money. Monetary policy uses a variety of tools to control one or both of these, to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Where currency is under a monopoly of issuance...
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...even some deflation similar to Japan, in terms of outcome if not in terms of causes, are likely in the short term, but – also akin to Japan – a deflationary spiral is not), and LSE Professor Paul De Grauwe (there is a real risk of this outcome or worse unless policies change). We conclude that Euro area economies and assets could escape Japan’s fate but warn that Euro area stagnation would have a greater impact on the global economy than did Japan’s. Inside Interview with Masaaki Shirakawa Former Governor of the Bank of Japan 4 Headed for Japanese-style deflation? Silvia Ardagna, GS Rates Strategy 6 Interview with Huw Pill GS Chief European Economist 8 Euro area stagnation and its discontents Jose Ursua, GS Global Economics Research 10 Interview with Paul De Grauwe Professor, London School of Economics 14 European equities: a different story Sharon Bell, GS Portfolio Strategy 16 A look back at Japan’s deflation drivers Naohiko Baba, GS Japan Economics 18 Source: www.istockphoto.com I don’t see why [sovereign QE] couldn’t be as effective [in the Euro area] as in the US and in the UK. But even full-blown QE would lose full effectiveness if fiscal policies don’t...
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...January 2010 Working Paper 2010-01 http://www.frbsf.org/publications/economics/papers/2010/wp10-01bk.pdf The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System. Macro-Finance Models of Interest Rates and the Economy Glenn D. Rudebusch∗ Federal Reserve Bank of San Francisco Abstract During the past decade, much new research has combined elements of finance, monetary economics, and macroeconomics in order to study the relationship between the term structure of interest rates and the economy. In this survey, I describe three different strands of such interdisciplinary macro-finance term structure research. The first adds macroeconomic variables and structure to a canonical arbitrage-free finance representation of the yield curve. The second examines bond pricing and bond risk premiums in a canonical macroeconomic dynamic stochastic general equilibrium model. The third develops a new class of arbitrage-free term structure models that are empirically tractable and well suited to macro-finance investigations. This article is based on a keynote lecture to the 41st annual conference of the Money, Macro, and Finance Research Group on September 8, 2009. I am indebted to my earlier co-authors, especially Jens Christensen, Frank Diebold, Eric Swanson, and Tao Wu. The views expressed herein are solely the responsibility...
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