With persistently weak economic conditions becoming the norm in Europe, economists are considering increasingly unconventional policy options. One tool that has yet to be taken out of storage is ‘helicopter money’, i.e. the overt monetary financing of government deficits. This column recounts a policy debate on helicopter money that was held at LBS in April 2013 among three of the world’s leading monetary economists.
The growth of China and India’s financial sectors is hard to ignore. This column presents a new dataset on domestic and international capital raising activity and performance of the publicly listed firms in China and India. The data suggest that expanding capital markets might tend to directly benefit the largest firms – those able to reach some minimum threshold size for issuance. More widespread direct and indirect effects are more difficult to elucidate.
Fixed-income investors that have targets based on imperfect risk measures are tempted to take on additional risk to raise their portfolio yields. This column argues that when yields are low such ‘reaching for yield’ may be especially attractive. New research that quantifies reaching-for-yield for corporate-bond investors shows that insurance companies, which are regulated based on broad ratings categories, assume additional risk by selectively overweighting risker bonds within categories. There is evidence that this distorts pricing and issuance.
Why do emerging markets liberalise capital-outflow controls? Fiscal versus net capital flow concerns
Recent years have seen a return to the capital controls policy debate. Presenting new data, this column argues that liberalisation of capital-outflow controls can allow emerging-market economies to reduce net capital inflow pressures, but may cost emerging economies the fiscal revenues that external financial repression generates.
Benn Steil of the Council on Foreign Relations talks to Romesh Vaitilingam about his book ‘The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order’. They discuss the ‘realpolitik’ of the 1944 conference and the scheming of the two central characters, as well as lessons for today’s efforts to reform the Eurozone and the international monetary system. The interview was recorded in London in April 2013.
Other Recent Articles:
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Reichlin, Baldwin, 14 April 2013