Hunt for yield will boost global farmland demand

2016 ◽  
Keyword(s):  
Developing Countries ◽  
Interest Rates ◽  
Political Instability ◽  
Listed Companies ◽  
Content Type ◽  
Political Risks ◽  
Indigenous Groups ◽  
Advanced Economies ◽  
Low Interest Rates ◽  
Asset Class

Subject Farmland as an investment asset class. Significance Low interest rates and increased political instability are driving investors to seek yield and diversification. In past decades, farmland has provided high returns, while reducing portfolio volatility. However, farmland investments are exposed to high political risks in both advanced and developing countries. Impacts Demand from large capital pools may result in formation of farmland investment vehicles, including listed companies. Scarcity and high prices in advanced economies will lead investors to seek opportunities in EMs, where 'land nationalism' will emerge. Conflicts among corporate landholders, farmers and indigenous groups will sharpen, prompting further government intervention and regulation.

Rising intra-firm corporate debt poses stability risks

2019 ◽  
Keyword(s):  
Interest Rates ◽  
Emerging Economies ◽  
Student Loan ◽  
Monetary Policies ◽  
Content Type ◽  
Credit Booms ◽  
Emerging Nations ◽  
Advanced Economies ◽  
Low Interest Rates ◽  
Structured Financial Products

Subject Global debt risks. Significance Global indebtedness is slowly declining -- down to 234% of GDP in 2018, after rising from 202% of GDP in 2008 to peak at 245% of GDP in 2017. The drop is consistent across the household, corporate and government sectors in both advanced and emerging economies. Ultra-low interest rates and abundant liquidity provided by unconventional monetary policies drove the increase in advanced economies. Expansionary domestic policies, subdued inflation and liquidity from advanced economies searching for yield encouraged emerging economies' indebtedness. Impacts Research shows that only 33% of credit booms end in crisis, but deleveraging in most major economies will nonetheless dampen growth. High-risk structured financial products and lending by ‘shadow’ non-bank channels has surged, raising the risk of panic in a downturn. Global average household debt is moderate, but pockets of risk include nations with booming property prices or student loan markets. In low-to-lower-mid-income emerging nations, exchange rate risk is very high as 80% of cross-border loans are dollar-denominated. Fears about China risk masking other nations; debt-to-GDP in other emerging economies is growing faster than advanced nations' debts.

Australia budget keeps defence spending commitments

2021 ◽  
Keyword(s):  
South China Sea ◽  
Interest Rates ◽  
Fiscal Year ◽  
National Politics ◽  
Content Type ◽  
Defence Spending ◽  
Low Interest Rates ◽  
Defence Expenditure ◽  
Conducive Environment ◽  
Made In

Significance With an election due soon, the governing Liberal-National Coalition’s pledge to ring-fence the defence spending commitments made in 2016 was under some pressure. However, defence spending in fiscal year 2021/22 will grow by over 4% in real terms and stay above the symbolic level of 2% of GDP. Impacts Growing popular and bipartisan concern with Chinese aggression is a conducive environment for increased defence spending. Low interest rates and a stronger Australian dollar are also supporting sustained levels of defence expenditure. Washington may increase pressure on Australia to conduct freedom of navigation exercises in the South China Sea. Major business groups are concerned that increased criticism of China in national politics will produce yet more punitive backlash.

Central bank transparency, inflation targeting and monetary policy: a panel data approach

2018 ◽  
Vol 45 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Gabriel Caldas Montes ◽  
Cristiane Gea
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Panel Data ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Content Type ◽  
Central Bank Transparency ◽  
Policy Interest

Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

Low interest rate environment: inventory management in Finland and Baltic states

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olli-Pekka Hilmola ◽  
Weidong Li ◽  
Andres Tolli
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Customer Service ◽  
Inventory Management ◽  
Global Financial Crisis ◽  
Recent Decade ◽  
Baltic States ◽  
Content Type ◽  
Low Interest Rates ◽  
Rate Environment

PurposeFor decades, it was emphasized that manufacturing and trading companies should aim to be lean with very small inventories. However, in the recent decade, time-significant change has taken place as nearly all of the “old west” countries have now low interest rates. Holding inventories have been beneficial for the sake of customer service and for achieving savings in transportation and fixed ordering costs.Design/methodology/approachIn this study, inventory management change is examined in publicly traded manufacturing and trade companies of Finland and three Baltic states (Estonia, Latvia and Lithuania) during the years 2010–2018.FindingsInventory efficiency has been leveled off or falling in these countries and mostly declining development has concerned small- and medium-sized enterprises (SMEs). It is also found that inventory efficiency is in general lower in SMEs than in larger companies. Two companies sustaining in inventory efficiency are used as an example that lean has still significance, and higher inventories as well as lower inventory efficiency should not be the objective. Two companies show exemplary financial performance as well as shareholder value creation.Research limitations/implicationsWork concerns only four smaller countries, and this limits its generalization power. Research is one illustration what happens to private sector companies under low interest rate policies.Practical implicationsContinuous improvement of inventory efficiency becomes questionable in the light of current research and the low interest rate environment.Originality/valueThis is one of the seminal studies from inventory efficiency as the global financial crisis taken place in 2008–2009 and there is the implementation of low interest rates.

Impacts of remittances on financial development

2020 ◽  
Vol 47 (3) ◽  
pp. 467-477
Author(s):  
SeyedSoroosh Azizi
Keyword(s):  
Developing Countries ◽  
Interest Rates ◽  
Financial Development ◽  
Positive Impact ◽  
National Income ◽  
Fixed Effect Model ◽  
Content Type ◽  
International Remittances ◽  
Long Run ◽  
Percent Increase

PurposeThe purpose of this paper is to examine the impacts of international remittances on financial development in developing countries.Design/methodology/approachThe focus is on a panel of 124 developing countries for the period 1990–2015. The empirical evidence is based on the instrumental variable-fixed effect model.FindingsResults obtained in this study indicate that a 10 percent increase in the remittance to GDP ratio leads to 1.7 percent increase in domestic credit to private sector, 1.9 percent increase in bank credit, 1.2 percent increase in bank deposit, and 0.8 percent increase in liquid liabilities. The positive impact of remittances on financial development in developing countries is particularly important because financial development fosters long-run growth and reduces poverty.Originality/valueTo address the endogeneity of remittances, the study estimates bilateral remittances and use them to create weighted gross national income per capita and real interest rates of remittance-sending countries. To the best of the author’s knowledge, this is the first study to assess the endogeneity of remittances in this way.

The current farm downturn vs the 1920s and 1980s farm crises

2018 ◽  
Vol 78 (4) ◽  
pp. 396-411 ◽  
Author(s):  
Wendong Zhang ◽  
Kristine Tidgren
Keyword(s):  
Interest Rates ◽  
Agricultural Sector ◽  
Balance Sheet ◽  
Real Income ◽  
Economic Downturn ◽  
Agricultural Credit ◽  
Content Type ◽  
Farm Crisis ◽  
Low Interest Rates ◽  
Sudden Collapse

Purpose The purpose of this paper is to examine the current farm economic downturn and credit restructuring by comparing it with the 1920s and 1980s farm crises from both economic and regulatory perspectives. Design/methodology/approach This paper closely compares critical economic and regulatory aspects of the current farm downturn with two previous farm crises in the 1920s and 1980s, and equally importantly, the golden eras that occurred before them. This study compares key aggregate statistics in land value, agricultural credit, lending regulations, and also evaluates the situations and impacts on individual farmer households by using three representative case studies. Findings The authors argue that there are at least three economic and regulatory reasons why the current farm downturn is unlikely to slide into a sudden collapse of the agricultural markets: strong, real income; growth in the 2000s, historically low interest rates; and more prudent agricultural lending practices. The current farm downturn is more likely a liquidity and working capital problem, as opposed to a solvency and balance sheet problem for the overall agricultural sector. The authors argue that the trajectory of the current farm downturn will likely be a gradual, drawn-out one like that of the 1920s farm crisis, as opposed to a sudden collapse as in the 1980s farm crisis. Originality/value The review provides empirical evidence for cautious optimism of the future trajectory of the current downturn, and argues that the current downturn is much more similar to the 1920s pattern than the 1980s crisis.

US energy high-yield bonds spur default risk

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Default Risk ◽  
Oil Price ◽  
High Yield ◽  
Content Type ◽  
The Past ◽  
The Us ◽  
Low Interest Rates ◽  
Investment Grade ◽  
Energy Companies

Subject Impact of the oil price drop on energy high-yield bonds. Significance The over 50% oil price drop since June 2014 is hitting bonds issued by energy companies, particularly those issued by sub-investment grade corporates. The US high-yield bond market has been growing rapidly over the past five years. The shale boom has generated considerable investment, mainly funded through the issuance of these bonds which benefit from historically low interest rates. As the oil price has plunged, the spread over Treasury yields paid by the average issuer in the energy subsector has more than doubled between July and the December 2014 peak. Impacts Yields currently offered by the energy subsector are not far from pricing in a default scenario. Persistently low oil prices will further darken the outlook for the energy subsector and the high-yield market generally. A possible default cycle in the energy sector could accelerate outflows, overstretching the sector further.

Commodities rout will fuel EM concerns and volatility

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Emerging Market ◽  
Commodity Prices ◽  
Content Type ◽  
Bear Market ◽  
Political Crises ◽  
Downward Pressure ◽  
Advanced Economies ◽  
Country Specific

Significance This drop has taken oil into its second bear market in the space of just over a year amid a broader rout in the prices of commodities, notably copper and gold. The commodity sell-off is fuelled by mounting concerns over the economy and financial markets of China, the world's top crude importer and its largest energy user. The sell-off is exacerbated by fears over the fallout from a US interest rates rise, which could come as early as September. Country-specific risks are weighing on emerging market (EM) assets, notably the currencies of large commodity exporters such as Brazil and Russia. Impacts The sharp fall in commodity prices will exert further downward pressure on inflation in both emerging and advanced economies. Re-emerging disinflationary trends will bode ill for the ECB efforts to boost inflation in the euro-area. The commodity sell-off will exacerbate economic and political crises in Brazil and Russia. The EM currencies fall is forcing many central banks to signal an end to monetary easing or to tighten policy.

Global investment in aircraft, housing securities up

2017 ◽  
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
Institutional Investors ◽  
Sparse Data ◽  
Pension Funds ◽  
Business Climate ◽  
Content Type ◽  
Mortgage Backed Securities ◽  
Rental Property ◽  
Low Interest Rates

Subject Trends in the securitisation market. Significance Investment in securitised assets fell after the financial crisis due to the role played by mortgage-backed securities as well as investor concerns about sparse data and complexity. The search for yield in a world of low interest rates has drawn investors back to securitised investment, particularly in aircraft-backed securities and rental property portfolios. Specific investor concerns have been dealt with, raising confidence, and the sector is meeting the financing shortfall arising from the pressure that traditional lenders have been under since the crisis. Impacts US-based securitisations are likely to become more available to European institutional investors if, as expected, regulation increases. The new US administration is expected to bring in measures to improve the business climate and may reduce regulation. The uptake of aircraft-backed securities will increase, but regulatory bias means that demand will still be dominated by pension funds.

US rates may rise but economic risks are rising faster

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Sovereign Debt ◽  
Emerging Market ◽  
Content Type ◽  
Political Risks ◽  
Bond Yield ◽  
Treasury Bond ◽  
The Face ◽  
Equity Index

Subject Global equity market trends. Significance The four main US stock market indices began March at record highs, including the benchmark S&P 500 index at 2,400. Driven by expectations of stimulative and pro-business policies under the new US administration, equity markets are flying in the face of signals from the Federal Reserve (Fed) that interest rates will rise three times this year. The probability of a hike at the Fed’s March 14-15 meeting has risen above 80% on growing price pressures and stronger economic data, buoyed by hawkish comments from several Fed governors, including those who were previously dovish. Impacts Despite the post-election US bond market sell-off, around one-third of the stock of euro-area sovereign debt remains negative yielding. The gap between the two-year US Treasury bond yield and its German equivalent has widened to a record, a sign of rising monetary divergence. The euro lost 2% against the dollar in February as political risks escalated in the euro-area, centred around the French election. The emerging market MSCI equity index is 8.6% up this year, after losing 4.5% from November 9 to end-2016, a sign of higher confidence.

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