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Category Archives: Financial System

Sustainability vs. Credibility of Fiscal Consolidation. A Principal Components Test for the Euro Zone

Passamani, Giuliana and Tamborini, Roberto and Tomaselli, Matteo, Sustainability vs. Credibility of Fiscal Consolidation. A Principal Components Test for the Euro Zone (November 25, 2014). University of Trento DEM Discussion Papers, Department of Economics and Management. Available for download at SSRN: http://ssrn.com/abstract=2530732 

“Why did some countries in the Euro Zone between 2010 and 2012 – until the European Central Bank stepped in – experience a dramatic vicious circle between hard austerity plans and rising default risk premia? Were such plans too small, and hence non credible, or too large, and hence non sustainable? These questions have prompted theoretical and empirical investigations in the line of the so-called “self-fulfilling beliefs” where beliefs of unsustainability of fiscal adjustments, and hence default on debt, feed higher risk premia which indeed make fiscal adjustments less sustainable. Detecting the sustainability factor in the evolution of spreads is uneasy because it is largely non observable, and may be proxied by different variables. In this paper we present the results of a dynamic Principal Components Factor Analysis applied to a panel data set of the eleven major EZ countries from 2000 to 2013 consisting of each country’s spread of long-term interest rate over Germany as dependent variable, and an array of leading fiscal and macroeconomic indicators of solvency fiscal effort and its sustainability. We have been able to identify the role of these indicators that combine themselves as significant latent variables in boosting spreads. Moreover the large joint deterioration of these variables is identifiably located between 2009 and 2012 and particularly for the group of countries under most severe default risk (with Italy and France as borderline cases).”

 

Spending by Households, Companies Propels U.S. Economy

Bloomberg Consumer Comfort Index: “The world’s largest economy grew faster in the third quarter than first estimated, capping its strongest six months in a decade, as consumers went shopping and companies boosted spending. Gross domestic product rose at a 3.9 percent annualized rate, exceeding all forecasts of economists surveyed by Bloomberg and up from an initialContinue Reading

A Silver Bullet for the European Crisis – Brookings

Carlo Bastasin – “The European Central Bank (ECB) has recently acknowledged the dangers of a prolonged period of overly low inflation in the euro area. In fact, in recent months inflation developments have continued to surprise on the downside. The level of consumer prices has declined from a high of more than 3 percent at theContinue Reading

NY Fed – Household Debt Balances Increase as Deleveraging Period Concludes

Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw: “The New York Fed released the Quarterly Report on Household Debt and Credit for the third quarter of 2014 today. Balances continued to rise slightly, with an overall increase of $78 billion. The aggregate household debt balance now stands at $11.71 trillion, up 0.7Continue Reading

FDIC Quarterly Banking Profile

“The third quarter 2014 FDIC Quarterly Banking Profile (QBP) is now available on line. FDIC-insured institutions reported aggregate net income of $38.7 billion in the third quarter of 2014, up $2.6 billion (7.3 percent) from earnings of $36.1 billion the industry reported a year earlier. The increase in earnings was mainly attributable to a $7.8Continue Reading

Washington Metropolitan Area Facing Economic Downturn

Washington Post: “The Washington area’s reliance on federal spending has become a major headache for state and local governments, with congressionally mandated program cuts leaving gaping holes in revenue projections from Annapolis to Richmond. George Mason University’s Center for Regional Analysis estimates that the federal government spent $13.4 billion less in the Washington area in 2013 thanContinue Reading

Stronger policy response needed to avoid risks to growth – OECD Economic Outlook

“25/11/2014- Modest global economic forecasts, continuing high unemployment, and downshifts in potential output should spur governments with a greater sense of urgency to fully employ monetary, fiscal and structural policy levers to support growth, notably in Europe, according to the Economic Outlook. The Economic Outlook draws attention to a global economy stuck in low gear, with growthContinue Reading

Economic Snapshot: November 2014

Christian E. Weller on the State of the U.S. Economy, Center for American Progress – By Christian E. Weller and Jackie Odum “Both the economy and jobs remain front and center on the minds of Americans. Considering that the United States is officially in the sixth year of an economic recovery, this would be surprising wereContinue Reading

Market-making and proprietary trading: industry trends, drivers and policy implications

Bank for International Settlements, CGFS Publications No 52 – November 2014 – “Market-makers serve a crucial role in financial markets by providing liquidity to facilitate market efficiency and functioning. This report – prepared by a Study Group chaired by Denis Beau (Bank of France) – assesses changes in the supply of and demand for market-making services as wellContinue Reading

The world economy in 2014 still in the doldrums

United Nations Conference on Trade and Development – Geneva – October 2014. “The world economy has not yet escaped the growth doldrums in which it has been marooned for the past four years, and there is a growing danger that this state of affairs is becoming accepted as the “new normal”. Policymakers everywhere, but particularly in the systemically important economies,Continue Reading

Sexual Violence at Institutions of Higher Education

CRS – Sexual Violence at Institutions of Higher Education, Gail McCallion, Specialist in Social Policy; Jody Feder, Legislative Attorney. October 23, 2014. “In recent years, a number of high-profile incidents of sexual violence at institutions of higher education (IHEs) have heightened congressional and administration scrutiny of the policies and procedures that IHEs currently have in place to address campus sexualContinue Reading

Report – Major Management and Performance Challenges Facing DHS

Major Management and Performance Challenges Facing the Department of Homeland Security, November 14, 2014 OIG-15-09. “We have identified major challenges that affect both the Department as a whole, as well as individual components. DHS must continually seek to integrate management operations under an authoritative governing structure capable of effectively overseeing and managing programs that cross component lines.Continue Reading