Balkan banks will raise Greek contagion fears

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Spillover Effects ◽  
Government Bond ◽  
Bond Yields ◽  
Content Type ◽  
The Us ◽  
South Eastern Europe ◽  
Bank Funding ◽  
Low Levels

Significance The loan let Greece make a scheduled payment to the ECB and settle arrears to the IMF. It is part of the agreement in principle with Greece's international lenders for a third package of financial assistance that has eased market fears about an imminent Greek exit from the euro-area ('Grexit'). Yet concerns about the solvency of the country's banking sector and Greece's membership of the single currency persist. In Emerging Europe, the spillover effects from a possible Grexit have diminished significantly since 2012, but the channels of contagion are strongest in the economies of South-Eastern Europe (SEE). Impacts The ECB's full-blown QE programme will help keep CEE government bond yields at extremely low levels across the region. The severe financial and economic crisis in many CEE states in 2008 has shown up the dangers of excessive reliance on parent bank funding. This is forcing local banks to rely more on domestic sources of financing. The biggest threat to sentiment towards Emerging Europe is another 'taper tantrum' when the US Fed raises interest rates later this year.

Spillover Effects of US Monetary Policy on Banking Development: Evidence from the Asian Region

2019 ◽  
pp. 097215091985748 ◽  
Author(s):  
Hamed Ahmad Almahadin
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Banking Sector ◽  
Banking Industry ◽  
Spillover Effects ◽  
Interest Rate Risk ◽  
Asian Countries ◽  
Interest Rate Volatility ◽  
The Us ◽  
Banking Development

This study investigates the dynamic impacts of local interest rate volatility and the spillover effects of the US policy rate on the banking development of Asian countries from 1980 to 2015. Bounds testing within the autoregressive distributed lag (ARDL) framework is employed to explore the long-term and short-term impacts. In addition, the study adopts a principal components analysis to create a comprehensive index for banking development to capture the major dimensions of the banking development concept. The empirical findings indicate that local interest rate volatility has negative impacts on the banking industry of Asian countries. Moreover, the existence of the negative spillover impact of the US policy rate on the banking development proxy is revealed in the sampled countries. These impacts continue to play a significant role in dampening the path of banking sector development. Therefore, the banking industry of Asian countries seems to be vulnerable to interest rate risk. The results could provide important implications for policymakers to improve the banking systems of Asian economies. Bankers must consider the impacts of local interest rate policies, as well as the role of US interest rates.

Market volatility endangers moves to replace LIBOR

2020 ◽  
Keyword(s):  
United States ◽  
Interest Rates ◽  
Banking Sector ◽  
Market Volatility ◽  
Content Type ◽  
Consumer Loans ◽  
The United Kingdom ◽  
Interest Rate Swaps ◽  
The Us ◽  
The Uk

Subject The transition away from LIBOR. Significance The London Interbank Offered Rate (LIBOR) has been relied upon worldwide since 1970 for setting interest rates on syndicated loans, corporate debt, consumer loans, interest rate swaps and other derivatives. Following the 'LIBOR scandal' of 2008, the UK Financial Conduct Authority took over the regulation and administration of the rate, and no manipulation has emerged since 2013. Nevertheless, the United Kingdom and United States are determined to replace LIBOR. Impacts COVID-19 could prompt the US Fed to increase its support to the repo market, exacerbating fears that SOFR is not market determined. The scale and duration of COVID-19-related economic disruptions loom over banking sector profitability. Banks will struggle to balance immediate priorities triggered by COVID-19, and the need to devote staff and funds to the LIBOR transition.

Virus will complicate Central Europe’s policy dilemmas

2021 ◽  
Keyword(s):  
Rule Of Law ◽  
Bond Markets ◽  
Government Bond ◽  
Bond Yields ◽  
The Czech Republic ◽  
Content Type ◽  
The Rule Of Law ◽  
Market Sentiment ◽  
Government Bond Markets ◽  
Low Levels

Significance Surging inflation across CE has coincided with a rapid worsening of current-account balances, particularly in Hungary, putting the region’s currencies under strain. It has exposed the vulnerability of CE government bond markets, with yields, particularly real yields, remaining at excessively low levels. Impacts The era of low bond yields and low currency volatility in CE may have run its course. A full-fledged CE currency crisis is unlikely: Poland, Hungary and the Czech Republic are still among the most resilient emerging markets. Hungary’s crucial elections in early 2022 will reduce the scope for fiscal tightening, making policy dilemmas more acute. EU concerns about the rule of law in Poland and Hungary threaten funds earmarked for both but have had little impact on market sentiment.

Negative euro-area bond yield universe will expand

2015 ◽  
Keyword(s):  
Euro Area ◽  
Sovereign Debt ◽  
Bond Yields ◽  
Government Bonds ◽  
Content Type ◽  
Bond Yield ◽  
The Us ◽  
Debt Issuance ◽  
Low Levels ◽  
Lift Off

Subject The euro-area government bonds outlook in the wake of the ECB's QE. Significance Strong demand among investors is pushing down yields on both government and corporate debt to unprecedentedly low levels, creating a rapidly expanding universe of negative bond yields. According to Royal Bank of Scotland (RBS), approximately one-third of euro-area government bonds now trade with a negative yield, including more than 50% of German, French, Dutch and Austrian public debt. Of the ECB's 60 billion euros (65 billion dollars) of monthly bond purchases, about 40 billion euros are estimated to involve government bonds, exceeding net government debt issuance across the euro-area. Therefore, yields are likely to fall further in the short term. Impacts Strong demand for 'safe haven' assets is compressing yields on government and corporate bonds, with negative rates on many securities. About one-third of euro-area sovereign debt is currently trading with a negative yield. The ECB's bond purchases and a relative scarcity in debt issuance will contribute to lower euro-area bond yields further. Persistent fears about growth and inflation will also contribute to lower yields. Negative yields will exacerbate the mispricing of risk, as investors bring forward their expectations regarding the US rates lift-off.

Stricter regulation will reduce Polish bank profits

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Foreign Exchange ◽  
Banking Sector ◽  
Credit Growth ◽  
Content Type ◽  
Incentive Schemes ◽  
Low Levels ◽  
Conversion Scheme ◽  
Bank Profits

Significance Holding interest rates at their current low levels is likely to lead to further consolidation of Poland's banking sector, as larger state-owned companies absorb smaller players. The RPP decision follows the finalisation of the long-awaited foreign exchange (FX) loan-conversion scheme, targeted at Polish households struggling with spiralling mortgage repayments in Swiss francs.. Impacts After 2018, demand for household loans and credit growth is expected to rise as wages and consumption strengthen. Rising demand for loans in the household segment will however depend on the government's introduction of more capital-incentive schemes. After Unicredit's upcoming sale of Bank Pekao, more foreign-owned units including Raiffeisen Polbank will be sold to local entities in 2017.

Policy risks will dog Europe's emerging markets

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Latin American ◽  
Emerging Market ◽  
Government Bond ◽  
Bond Yields ◽  
Content Type ◽  
Policy Regimes ◽  
Political Risks ◽  
European Economies

Subject Political and policy risks in Emerging Europe. Significance Although the currencies and government bond yields of Central European economies remain stable, the region's equity markets are coming under increasing strain, partly because of political risk. However, strong demand for Turkish local debt suggests there is still appetite for higher-yielding emerging market (EM) bonds. Impacts The recovery in oil prices is helping underpin favourable sentiment towards EMs despite persistent vulnerabilities and risks. Waning confidence in the efficacy of monetary policy will increase investors' sensitivity to political risks in EMs. This is particularly the case if these risks undermine the credibility of countries' policy regimes. Many Latin American economies have been forced to hike interest rates to counter a surge in inflation. By contrast, historically low inflation lets Central-Eastern Europe's central banks keep monetary policy ultra-loose.

Brexit will accentuate global market distortions

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Global Market ◽  
Bond Yields ◽  
Equity Prices ◽  
Content Type ◽  
Us Economy ◽  
The Us ◽  
The Uk ◽  
Economic Outlook ◽  
The Eu

Subject Outlook for post-Brexit markets. Significance The UK vote to leave the EU is exacerbating distortions in financial markets. Government bond and equity prices are rising, sending contradictory signals about the global economic outlook. Yields on US and German bonds partly retraced their steps last week as initial fears about the consequences of the Brexit vote diminished. However, the yield on ten-year Treasuries remains 20 basis points (bp) lower than on referendum day, June 23, and the S&P 500 index stands close to a record high. The expanding universe of negative bond yields is fuelling investor appetite for risk assets, including equities. Impacts Markets may be underestimating the likelihood of higher US interest rates given recent signals of improvement in the US economy. Demand for safe-haven assets could stay strong, with the price of gold rising 5.6% since the referendum. Heightened uncertainty may mean that the oil price rally is over; it could even reverse given the persistent supply glut.

Brexit vote will keep global markets volatile

2016 ◽  
Keyword(s):  
Spillover Effects ◽  
Government Bonds ◽  
Content Type ◽  
The Us ◽  
Bank Of England ◽  
Systemic Crisis ◽  
Bank Funding ◽  
Japanese Yen ◽  
The Uk ◽  
The Eu

Significance The UK vote on June 23 to leave the EU ('Brexit') startled global financial players, putting pressure on leading central banks to stabilise markets and keep bank funding flowing. The Bank of England (BoE) announced that it was ready to provide an extra 250 billion pounds (341 billion dollars) to ease liquidity conditions while the ECB is also ready to deploy significant funds to avert a liquidity squeeze. Impacts Market conditions will remain volatile, but there is little sign that markets are treating the vote as a systemic crisis. Investor demand for safe-haven assets will spike; assets such as gold, the Swiss franc and the Japanese yen will appreciate. The ECB's QE programme could help insulate euro-area peripheral government bonds from the spillover effects of Brexit. Having been surprised by the UK referendum, markets will become more sensitive to political risk ahead of the US election.

Spillover effects of financial development on the informal economic activity

2020 ◽  
Vol 13 (3) ◽  
pp. 471-482
Author(s):  
Salih Katircioglu ◽  
Hatice Imamoglu
Keyword(s):  
Interest Rates ◽  
Financial Development ◽  
Informal Economy ◽  
Economic Activity ◽  
Missing Values ◽  
Spillover Effects ◽  
Ordinary Least Squares ◽  
Annual Data ◽  
Content Type ◽  
Cointegration Tests

Purpose This study aims to investigate the role and spillover effects of the financial sector on the size of the informal economic activity in Turkey. Design/methodology/approach Time series analysis has been adopted for annual data of the 1970-2017 period. New approaches in unit root and cointegration tests have been used in this study. Estimations have been done via dynamic ordinary least squares and fully modified ordinary least square approaches. Findings Results confirm the existence of a long-run equilibrium relationship between the financial system and informal economic activities in Turkey. At the earlier stages of financial development (FD), informality tends to rise while in further stages, informality tends to decline over time. This study confirms the U-shaped relationship between FD and the informal economy in Turkey. Research limitations/implications This study has used logarithmic values of series in the econometric analysis except for real interest rates because of negative values in some periods. Thus, by using level forms of real interest, missing values would be avoided. Practical implications Increasing efficiency, control and institutional quality, as well as the quality of governance environment, would be useful tools in reducing the size of informality, as this study finds that spillover effects of financial services on the informal economic activity are adverse. Originality/value This study is the first of its kind to the best of the knowledge in the case of Turkey, which estimates the spillover effects of FD on informal economic activity.

Modelling sectoral spillovers in the USA (1992–2015)

2020 ◽  
Vol 47 (3) ◽  
pp. 561-595
Author(s):  
Konstantinos N. Konstantakis ◽  
Panayotis G. Michaelides ◽  
Theofanis Papageorgiou ◽  
Theodoros Daglis
Keyword(s):  
Information Technology ◽  
General Equilibrium ◽  
Methodological Approach ◽  
Robustness Analysis ◽  
Autoregressive Process ◽  
Spillover Effects ◽  
Content Type ◽  
Us Economy ◽  
The Us ◽  
The Impact

PurposeThis research paper uses a novel methodological approach to investigate the spillover effects among the key sectors of the US economy.Design/methodology/approachThe paper links the US sectors via a node theoretic scheme based on a general equilibrium framework, whereas it estimates the general equilibrium equation as a Global Vector Autoregressive process, taking into consideration the potential existence of dominant units.FindingsBased on our findings, the dominant sector in the US economy, for the period 1992–2015, is the sector of information technology, finance and communications, a fact that gives credence to the view that the US economy is a service-driven economy. In addition, the US economy seems to benefit by the increased labour mobility across knowledge-intensive sectors, thus avoiding the ‘employment trap’ which in turn enabled the US economy to overcome the financial crisis of 2007.Originality/valueFirstly, the paper models by means of a network approach which is based on a general equilibrium framework, the linkages between the US sectors while treating the sector of information, technology, communications and finance as dominant, as dictated by its degree of centrality in the network structure. Secondly, the paper offers a robustness analysis regarding both the existence and the identification of dominant sectors (nodes) in the US economy. Thirdly, the paper studies a wide period, namely 1992–2015, fully capturing the recent global recession, while acknowledging the impact of the global crisis through the introduction of the relevant exogenous dummy variables; Lastly and most importantly, it is the first study to apply the GVAR approach in a network general equilibrium framework at the sectoral level.

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