Global monetary policy divergence will emerge in 2016

2015 ◽  
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Euro Area ◽  
Productivity Growth ◽  
Aggregate Demand ◽  
The United States ◽  
Policy Response ◽  
Market Conditions ◽  
Content Type ◽  
China’S Economy

Significance Despite a less dovish than expected policy response on the part of the ECB on December 3, monetary policy divergence between the Fed and the ECB is likely to heighten in 2016. While the euro remains up 3.3% against the dollar since December 2, prolonged policy divergence between the United States and the euro-area should underpin the dollar's strength. Impacts Fears about China's economy and the end of the commodity super-cycle will also shape market conditions in 2016. A recovery in productivity growth will allow monetary policy normalisation to proceed smoothly, boosting aggregate demand. A stronger dollar will help the ECB achieve its inflation goal, through a weaker euro. A stronger dollar will put further strain on EM assets, particularly in countries with large dollar-denominated corporate debt.

Weaker AKP would reduce Turkish president's authority

2015 ◽  
Keyword(s):  
United States ◽  
Monetary Policy ◽  
The United States ◽  
Proportional Representation ◽  
Representation System ◽  
Content Type ◽  
Justice And Development Party ◽  
Fiscal And Monetary Policy ◽  
At Home

Significance The ruling Justice and Development Party (AKP) should easily get the most votes, but it faces a likely setback and a dent in its authority. Weakening support from its voters and Turkey's proportional representation system are likely to drive its number of parliamentary seats down from the 327 out of 550 seats it won in 2011, perhaps even to the point where an overall majority is in doubt. Impacts Market confidence and the lira may weaken, but will not deteriorate drastically, unless AKP is forced out of office -- a remote scenario. Fiscal and monetary policy may be loosened to win support until a new government able to last for a full four-year term is in office. A politically weaker AKP risks long-term splits, but these will not emerge unless there have been months of instability. Growing internal discord -- and the government's defiant response to its critics at home and abroad -- may isolate Turkey internationally. The United States and EU will continue to avoid confrontation with the Erdogan government as far as possible.

China's economy may slow again later this year

2018 ◽  
Keyword(s):  
United States ◽  
Economic Activity ◽  
The United States ◽  
Environmental Risks ◽  
Gdp Growth ◽  
Content Type ◽  
High Profile ◽  
Financial Regulations ◽  
China’S Economy

Subject The macroeconomic outlook for China. Significance Despite fears of a slowdown, China has kept up GDP growth of 6.8% year-on-year for three successive quarters. However, key measures of economic activity have weakened, and tensions are escalating with the United States over trade and technology. Impacts A swathe of new financial regulations and high-profile arrests will likely continue in 2018. Negotiations are likely to alleviate the immediate pressure from Washington, but underlying concerns over the tech sector will continue. A recently announced sweeping government reorganisation will be implemented, helping to tackle financial and environmental risks.

scholarly journals The NAIRU in Theory and Practice

2002 ◽  
Vol 16 (4) ◽  
pp. 115-136 ◽  
Author(s):  
Laurence Ball ◽  
N. Gregory Mankiw
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Productivity Growth ◽  
Inflation Rate ◽  
The United States ◽  
Theory And Practice ◽  
Business Cycle Theory ◽  
Changes Over Time ◽  
Over Time

This paper discusses the NAIRU—the non-accelerating inflation rate of unemployment. It first considers the role of the NAIRU concept in business cycle theory, arguing that this concept is implicit in any model in which monetary policy influences both inflation and unemployment. The exact value of the NAIRU is hard to measure, however, in part because it changes over time. The paper then discusses why the NAIRU changes and, in particular, why it fell in the United States during the 1990s. The most promising hypothesis is that the decline in the NAIRU is attributable to the acceleration in productivity growth.

Rise in volatility-linked trading raises market risks

2018 ◽  
Keyword(s):  
United States ◽  
Euro Area ◽  
Equity Markets ◽  
The United States ◽  
Trading Strategies ◽  
Currency Devaluation ◽  
Content Type ◽  
Core Inflation ◽  
Market Risks ◽  
Dramatic Decline

Subject Trading of volatility assets intensified this month's market sell-off. Significance The dramatic decline in global equity markets last week, led by the sharpest drop in the S&P 500 index in more than two years, highlights the dangers posed by trading strategies and products linked to the Chicago Board Options Exchange (CBOE)'s volatility (VIX) index. Highly leveraged bets against market tranquility backfired as the VIX touched its highest level since China’s shock currency devaluation in 2015. Impacts Starting from a low base will exaggerate any inflation increases -- core inflation is still below 2% in the euro-area and the United States. Despite this month’s turmoil, trading in volatility assets will remain popular -- investors will ‘buy the dip’ and continue to seek yield. The euro-area is enjoying its fastest growth in twelve years but faces political tests this year, notably the Italian elections next month.

Slump in Turkish automotive sector will last into 2019

2019 ◽  
Keyword(s):  
United States ◽  
Euro Area ◽  
The United States ◽  
Automotive Sector ◽  
Economic Policies ◽  
Export Markets ◽  
Content Type ◽  
Automotive Market ◽  
European Markets ◽  
Turkish Lira

Subject The weak lira’s impact on the Turkish automotive sector. Significance A growing domestic automotive market gave Turkish carmakers some relief when European vehicle markets slumped in the wake of the euro-area crisis. Now, thanks to a combination of failed economic policies and tensions with the United States that caused a 70% fall in the Turkish lira, the domestic market has all but collapsed, while European markets are slowing even before the disruption promised by Brexit. Impacts The government’s post-attempted-coup purges have hurt the lira and may have affected consumer demand. Demand in the main export markets in Europe for Turkish-produced cars is stagnating and exports may continue to fall. Renewed US efforts to isolate Iran will affect Turkish vehicle exports to that market.

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