Financial Stability
Blanchard and others look to reconcile theory of capital flows with practice
Revamp of Mundell-Fleming model helps explain apparently contradictory results, with important implications for policy-makers looking to respond to capital flows
Eurozone policy-makers and researchers puzzled by trends in long-term inflation expectations
Eurozone inflation more strongly influenced by inflation expectations, the ECB notes; two central bank working papers say data shows unexpected changes
Macro-prudential tools can influence inflation, Menon says
MAS managing director outlines interaction of prudential tools and monetary policy, saying Singapore deliberately used macro-prudential tools to help lower inflation
BoE’s Sharp wants FPC powers over buy-to-let market
UK Treasury will consult on the prospect of handing the FPC powers of direction over buy-to-let lending; external FPC member in favour
Swedish economists add voices to criticism of leaning against the wind
Current and former Riksbank deputy governors Martin Flodén and Lars Svensson warn against the large rate hikes necessary to address financial stability concerns
Eurosystem’s asset purchase programme should increase growth by 1% annually, paper says
The Eurosystem’s asset purchase programme could increase growth and inflation by 1% annually for two years, a working paper from the Bank of Italy predicts
Developing country central banks cannot rush into full independence, Botswana governor says
Botswana’s central bank governor tells an IMF seminar developing country central banks need to move carefully towards independence on price stability
Ingves laments complexity in Basel trading book
Basel Committee chair says he would have preferred a simpler approach to market risk; work on other risks will tend towards greater simplicity, and will likely include external credit ratings
Financial Stability Board should define shadow banking, Irish market supervisor says
Financial Stability Board is the best body to give regulators a clear definition of the shadow banking sector, says the Irish central bank’s director of markets supervision
Central bankers challenge Caruana on leaning against wind
IMF panel displays broad range of views on interest rates as a financial stability tool – but none of the central bankers are willing to go as far as the BIS general manager
Bank of Japan launches updated payments platform
New BoJ-NET system goes live tomorrow, days after launch of China's CIPS platform and RMB surpasses yen as global payments currency
Chinese slowdown could be harder than many economists think, paper argues
Chinese potential growth could be lower and its coming slowdown harder than many think; growth could slow to 5% annually by 2020, says French working paper
Hong Kong authorities look to bring shadow banks into resolution regime
Plans for resolution regime are advancing, with legislation expected by the end of the year; unregulated financial institutions can still be covered by the regime
Swap line availability not assured, warns Bill Allen
It is ‘not certain’ the Federal Reserve will be able to provide liquidity in the same manner in the future, Allen tells Central Banking
Central bankers from small Caribbean states to get IMF training under new deal
IMF to provide training at Washington headquarters to officials from smaller Caribbean states after Central Bank of Trinidad and Tobago offers financial support
BIS paper offers method of overcoming time inconsistency in macro-prudential policies
Macro-prudential policies are necessary to prevent finance amplifying imbalances, but regulators struggle to credibly commit to policies, authors warn
RBA’s John Simon says low rate a ‘poor predictor’ of crises
Low interest rates of themselves did not cause the global financial crisis and have always been a poor predictor of economic instability, senior Reserve Bank of Australia economist argues
European real effective exchange rates are hugely misaligned, paper argues
Real effective exchange rates for European Union countries do not correspond to national economic fundamentals, a working paper from the Bank of Lithuania argues
Rajan weighs inclusion challenges as IMF identifies financial stability risks
Reserve Bank of India governor discusses the driving factors behind inclusion and challenges posed to supervisors in IMF panel, following staff note on macroeconomic impacts
China launches cross-border payments platform
Heavily anticipated China International Payment System goes live, with StanChart and ICBC Singapore announcing successful transactions on new platform
Jamaica must sustain reform, central bank governor says
Jamaica must keep economic reform efforts going for another 15 years, Brian Wynter says; calls for enhancements to role of IMF’s centre for Caribbean technical assistance
Central Bank of Iceland delays report as tensions over failed banks rise
Central bank postpones launch of financial stability report at last minute, citing the need to wait for new information; governor responds to lobby group calling for heavier tax on failed banks
Expected delay to non-EU central counterparty approval risks frontloading panic
Lawyers predict many CCPs will remain in limbo by the current December 15 deadline, which overlaps with the start of frontloading and ups the pressure on banks ahead of clearing requirement