Financial markets

Òscar Jordà, Moritz Schularick, Alan Taylor, 01 September 2015

The risk that asset price bubbles pose for financial stability is still not clear. Drawing on 140 years of data, this column argues that leverage is the critical determinant of crisis damage. When fuelled by credit booms, asset price bubbles are associated with high financial crisis risk; upon collapse, they coincide with weaker growth and slower recoveries. Highly leveraged housing bubbles are the worst case of all.

Tatiana Didier, Ross Levine, Sergio Schmukler, 25 August 2015

It is still not clear which firms issue equity and bonds, what happens to their assets, sales, and employment, and how the performance of issuers compares to that of non-issuers. This column addresses these three questions. First, only a small number of large firms issue securities in a typical country. Second, issuers grow faster than non-issuers in terms of assets, sales, and employment. Third, smaller issuing firms grow faster than larger ones, but larger non-issuing firms grow faster than smaller ones.

Erik Feyen, Swati Ghosh, Katie Kibuuka, Subika Farazi, 11 August 2015

Monetary policies pursued by developed countries in the wake of the Global Crisis have had profound spillover effects on emerging economies. This column documents the unprecedented post-Crisis bond issuance surge in emerging markets. The findings indicate that benign international funding conditions favoured bond issuance in these economies. But the large issuance volumes, currency risks, and high exposure to global factors could pose a challenge for policymakers, particularly when global cycles reverse.

Matthieu Bussière, Claude Lopez, Cédric Tille, 07 August 2015

Exchange rate appreciations could potentially have a damaging effect on competiveness and domestic production. This column argues that the relationship between exchange rate appreciations and growth depends on the underlying shock. Appreciations due to the surge of capital inflows could be relatively less favourable for growth. Concern about appreciations is therefore well-founded when they are due to shocks in global financial markets.

Jon Danielsson, Jean-Pierre Zigrand, 05 August 2015

Some financial authorities have proposed designating asset managers as systemically important financial institutions (SIFIs). This column argues that this would be premature and probably ill conceived. The motivation for such a step comes from an inappropriate application of macroprudential thought from banking, rather than the underlying externalities that might cause asset managers to contribute to systemic risk. Further, policy authorities are silent on the question of what SIFI designation should mean in practice, despite the inherent link between identification and remedy.

Other Recent Articles:

Events