(The Study on the Effect of the Change in USA Financial Conditions on the Korea Financial Markets: FCI Analysis)

The COVID-19 Economic Crisis in Mexico through the Lens of a Financial Conditions Index

Latin American Economic Review ◽

10.47872/laer.v30.41 ◽

2021 ◽

pp. 1-27

Author(s):

Julio A. Carrillo ◽

Ana Laura García

Keyword(s):

Financial Markets ◽

Market Economy ◽

Economic Crisis ◽

Economic Activity ◽

Financial Distress ◽

Emerging Market ◽

Financial Conditions ◽

Real Shocks

The COVID-19 pandemic not only generated real shocks affecting economic activity severely, but also a broad uncertainty that unleashed an extreme shock to financial markets. In this paper, we focus on the financial dimension of the pandemic from the viewpoint of an emerging market economy. Accordingly, we estimate a financial conditions index for Mexico since 1993 and find that the acute turmoil generated by the pandemic stands among the four largest episodes of financial distress experienced by the country. In addition, we find evidence suggesting that real variables have responded differently to shocks that worsen financial conditions than to shocks that improve them.

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The New Tools of Monetary Policy

The American Economic Review ◽

10.1257/aer.110.4.943 ◽

2020 ◽

Vol 110 (4) ◽

pp. 943-983 ◽

Cited By ~ 29

Author(s):

Ben S. Bernanke

Keyword(s):

Monetary Policy ◽

Lower Bound ◽

Financial Markets ◽

Interest Rates ◽

The United States ◽

Moderate Increase ◽

Advanced Economy ◽

Forward Guidance ◽

Financial Conditions ◽

Economic Stabilization

To overcome the limits on traditional monetary policy imposed by the effective lower bound on short-term interest rates, in recent years the Federal Reserve and other advanced-economy central banks have deployed new policy tools. This lecture reviews what we know about the new monetary tools, focusing on quantitative easing (QE) and forward guidance, the principal new tools used by the Fed. I argue that the new tools have proven effective at easing financial conditions when policy rates are constrained by the lower bound, even when financial markets are functioning normally, and that they can be made even more effective in the future. Accordingly, the new tools should become part of the standard central bank toolkit. Simulations of the Fed’s FRB/US model suggest that, if the nominal neutral interest rate is in the range of 2–3 percent, consistent with most estimates for the United States, then a combination of QE and forward guidance can provide the equivalent of roughly 3 percentage points of policy space, largely offsetting the effects of the lower bound. If the neutral rate is much lower, however, then overcoming the effects of the lower bound may require additional measures, such as a moderate increase in the inflation target or greater reliance on fiscal policy for economic stabilization. (JEL D78, E31, E43, E52, E58, E62)

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Asia Bond Monitor September 2021

10.22617/spr210338-2 ◽

2021 ◽

Keyword(s):

Monetary Policy ◽

Financial Markets ◽

Negative Impact ◽

Bond Market ◽

Social Risk ◽

Bond Markets ◽

Financial Conditions ◽

Market Capacity ◽

The Us ◽

Economic Outlook

In the second quarter of 2021, rising COVID-19 cases have cast a shadow over emerging East Asia's growth outlook. Yet the region's financial conditions remain broadly stable amid accommodative monetary policy stances despite some weakening signs. Local currency (LCY) bond markets in emerging East Asia expanded to $21.1 trillion at the end of June, as governments tapped LCY bonds to support recovery measures and contain the negative impact of rising COVID-19 cases. The ASEAN+3 sustainable bond market expanded to $345.2 billion at the end of Q2 2021, accounting for nearly 19% of the global sustainable bond market. The risk to the outlook for regional financial markets remains tilted to the downside. Uncertainty over recovery prospects due to COVID-19, combined with a strong US economic rebound and possible earlier-than-expected monetary policy normalization in the US, could lead to further weakening of financial conditions. This issue of the Asia Bond Monitor features special boxes on emerging East Asia’s economic outlook, market capacity and central banks’ asset purchasing programs, debt build-up, and social risk in developing Asia.

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Hungary is unprepared for normalised monetary policy

Emerald Expert Briefings ◽

10.1108/oxan-db230701 ◽

2018 ◽

Keyword(s):

Economic Growth ◽

Monetary Policy ◽

Interest Rate ◽

Financial Markets ◽

Central Europe ◽

Federal Reserve ◽

Sharp Increase ◽

Content Type ◽

Financial Conditions ◽

Equity Funds

Significance The MNB is bucking the trend of tighter monetary policy across Central Europe by increasing its range of unconventional tools to keep financial conditions loose. This is despite robust economic growth and a sharp increase in wages which threaten to put upward pressure on inflation. Impacts Despite the recent turmoil in financial markets, ‘hunt for yield’ is keeping flows to EM bond and equity funds firmly in positive territory. Brent crude has risen by 12% since early February, driven by mounting geopolitical tensions and signs of producers sticking to supply cuts. The new US Federal Reserve chairman has projected faster-than-anticipated interest rate increases in 2019 and 2020. This will increase the scope for further volatility in markets.

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Identifying an index of financial conditions for South Africa

Studies in Economics and Finance ◽

10.1108/sef-07-2013-0098 ◽

2015 ◽

Vol 32 (2) ◽

pp. 256-274 ◽

Cited By ~ 8

Author(s):

Kirsten Thompson ◽

Renee Van Eyden ◽

Rangan Gupta

Keyword(s):

South Africa ◽

Financial Crisis ◽

Financial Markets ◽

South African ◽

Economic Activity ◽

Content Type ◽

The Real ◽

Financial Variables ◽

Financial Conditions ◽

Rolling Window

Purpose – The purpose of this study is to construct a financial conditions index (FCI) for the South African economy to enable the gauging of financial conditions and to better understand the macro-financial linkages in the country. The global financial crisis that began in 2007-2008 demonstrated how severe the impact of financial markets’ stress on real economic activity can be. In the wake of the financial crisis, policy-makers and decision-makers across the world identified the critical need for a better understanding of financial conditions, and more importantly, their impact on the real economy. Design/methodology/approach – The FCI is constructed using monthly data over the period 1966 to 2011, and is based on a set of 16 financial variables, which include variables that define the state of international financial markets, asset prices, interest rate spreads, stock market yields and volatility, bond market volatility and monetary aggregates. The authors explore different methodologies for constructing the FCI, including full sample and rolling-window principal components analysis. Furthermore, the authors investigate whether it is beneficial to purge the FCI of the real effects of inflation, economic growth and interest rates, and evaluate the performance of our constructed FCIs by comparing their ability to pick up turning points in the South African business cycle, and by running in-sample causality (forecast) tests. Findings – The authors find that the estimated FCIs are good predictors of economic activity; with the rolling-window FCI being the “best” performing index. Causality tests indicate that this FCI is a good in-sample predictor of industrial production growth and the Treasury Bill rate, but a weak predictor of inflation. Practical implications – The authors find that the resulting FCI can act as an “early warning system”. This, in turn, may serve to indicate that monetary policy should take broader financial conditions into account. Originality/value – This study offers three main contributions to the existing literature on financial conditions in South Africa: the authors construct an FCI over a sample period that is three decades longer than existing indices, the FCI of this paper comprises a wider coverage of financial variables than others and the authors make use of rolling-window estimation techniques that allow them to account for parameter instability and to capture the real-time constraints faced by a policymaker.

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