Relief of looser US monetary policy cannot mask risks

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Emerging Market ◽  
Futures Market ◽  
Oil Price ◽  
Content Type ◽  
European Elections ◽  
Economic Information ◽  
Equity Funds ◽  
Succession Process ◽  
The Interest Rate

Significance Following the meal, the Fed said Powell did not discuss monetary policy "except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook". The futures market now sees a 75% chance that the interest rate will be unchanged in twelve months’ time, a substantial shift from late last year when at least two rate hikes were widely predicted for 2019. This shift is helping US equities to regain momentum. Impacts The flatter dollar this year is helping net inflows to emerging market bond and equity funds build momentum after large outflows in 2018. Further oil price upside may be limited; Venezuela’s small share of global output means sanctions will not greatly alter market dynamics. Mario Draghi’s ECB presidency ends in October; policy could be disrupted if European elections in May delay the succession process. US economic momentum is firmer than in the euro-area or Japan but less monetary policy divergence between them may help the euro and yen.

Emerging markets are now more resilient to US tapering

2021 ◽  
Keyword(s):  
Emerging Markets ◽  
Emerging Market ◽  
Bond Market ◽  
Oil Price ◽  
Inflation Expectations ◽  
Content Type ◽  
Dramatic Decline ◽  
Equity Funds

Significance The rise in yields is stirring memories of the 2013 ‘taper tantrum’, which led to a dramatic decline in emerging market (EM) currencies and local bonds, prompting three years of net outflows from EM debt and equity funds. Investor fears of US tightening have risen with growth and inflation expectations. Impacts If the trade-weighted dollar index rises further, this will threaten EM currencies, especially those with large dollar-denominated debts. The Brent oil price has gained 70% since November to USD68 per barrel but further upside is limited, with no commodities ‘supercycle’ ahead. Recent moves fuel fears of the normally staid US bond market becoming volatile; stable ten-year Chinese yields are being seen as a haven.

Emerging Europe markets will be strong in 2016

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Commodity Prices ◽  
Oil Prices ◽  
Content Type ◽  
Central Eastern Europe ◽  
Equity Funds

Subject The prospects for Emerging Europe assets. Significance Despite record levels of outflows from emerging market (EM) bond and equity funds in 2015, the financial markets of Central-Eastern Europe (CEE) have remained remarkably resilient. They are likely to continue to outperform those of Latin America and Emerging Asia next year, because of a combination of relatively strong fundamentals and liquidity support from the ECB. Impacts Investor sentiment towards developing economies is now shaped almost entirely by dramatic declines in commodity prices. US monetary policy will now prove secondary to the plunge in oil prices. Growth in the CEE region picked up significantly this year and is still expected to remain relatively robust in 2016.

Reflation trade benefits Central Europe’s currencies

2018 ◽  
Keyword(s):  
Monetary Policy ◽  
Global Economy ◽  
Emerging Market ◽  
Global Markets ◽  
Significant Deterioration ◽  
Content Type ◽  
The Past ◽  
Equity Funds ◽  
Business Confidence ◽  
Current Account Balances

Subject The outlook for the koruna, forint, zloty and leu. Significance Although emerging market (EM) bond and equity funds suffered heavy outflows in the week to February 14, the Czech koruna has barely budged against the dollar and the euro, after rallying sharply over the past few months. The Polish zloty and Hungarian forint have also remained stable, after enjoying sharp gains versus both currencies. The Romanian leu remains under pressure, owing partly to a significant deterioration in the country’s fiscal and current account balances. Impacts The surge in volatility in global markets in early February is abating partly because of strong economic and corporate fundamentals. Also, the global economy is enjoying its strongest synchronised expansion since 2010. The dollar will remain under significant strain despite the tightening of US monetary policy, with the dollar index at a three-year low. German business confidence, at a record high in January, is buoying sentiment across the euro-area and within export-dependent CE.

Investors may be underpricing more US Fed tightening

2019 ◽  
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Federal Reserve ◽  
Economic Activity ◽  
Emerging Market ◽  
Oil Price ◽  
Content Type ◽  
The Us ◽  
Equity Funds ◽  
Global Growth

Subject Financial markets. Significance The US stock market has rallied by 11.8% this year, buoyed by the US Federal Reserve (Fed) executing a dovish policy reversal in late January. Slower global growth prompted the turnaround, but at the same time, US economic activity still has momentum. Reflecting the uncertainty, a week ago futures investors saw a 20.0% chance of the Fed's next move being a rate cut and a 3.5% chance of a hike by January 2020. Expectations have since shifted, to a 7.0% chance of a cut and a 6.9% chance of a hike, respectively. Impacts The dollar is 1% higher since the Fed turnaround at end-January; much larger concerns about Europe than US activity will keep it rising. Emerging market (EM) bond and equity funds are attracting consistently high inflows, but sharply lower Chinese growth would be contagious. The Brent oil price has risen more than 20% this year, but weaker global growth will limit further gains.

scholarly journals The impact of Musharakah financing on the monetary policy in the Islamic economy

2018 ◽  
Vol 3 (3/4) ◽  
pp. 139-152
Author(s):  
Hatem Adela
Keyword(s):  
Economic Theory ◽  
Monetary Policy ◽  
Interest Rate ◽  
Economic Activity ◽  
Methodological Framework ◽  
Mathematical Methods ◽  
Content Type ◽  
Return Rates ◽  
The Interest Rate ◽  
The Impact

Purpose This paper aims to contribute to formulating the methodological framework for a paradigm of Islamic economics, using the development of the conventional economics, theoretical and mathematical methods. Design/methodology/approach The study based on the inductive and mathematical methods to contribute to economic theory within the methodological framework for Islamic Economics, by using the return rate of Musharakah rather than the interest rate in influence the economic activity and monetary policy. Findings Via replacement, the concept of the interest rate by the return rates of Musharakah. It concludes that the central bank can control the monetary policy, economic activity and the efficient allocation of resources by using the return rates of Musharakah through the framework of Islamic economy. Practical/implications The study is a contribution to formulate the methodological framework for a paradigm of Islamic economics, where it investigates the impact of return rates of Musharakah on the money market and monetary policy, by the mathematical methods used in the conventional economy. Also, the study illustrates the importance of further studies that examine the methodological framework for Islamic Economics. Originality/value The study aims to contribute to formulating the Islamic economic theory, through the return rate of Musharakah financing instead of the interest rate, and its effectiveness of the monetary policy. As well as reformulating the concepts of the investment function, the present value and the marginal efficiency rate of investment according to the Islamic economy approach.

Impact of oil volatility shocks on global emerging market stock returns

2017 ◽  
Vol 13 (5) ◽  
pp. 578-591 ◽  
Author(s):  
Probal Dutta ◽  
Md Hasib Noor ◽  
Anupam Dutta
Keyword(s):  
Stock Returns ◽  
Emerging Market ◽  
Equity Returns ◽  
Oil Price ◽  
Financial Assets ◽  
Stock Market Returns ◽  
Content Type ◽  
Volatility Index ◽  
Jump Model ◽  
Oil Price Risk

Purpose The purpose of this paper is to investigate whether the crude oil volatility index (OVX) plays any key role in explaining the trend in emerging market stock returns from a global standpoint. Design/methodology/approach At the empirical stage, different forms of the GARCH-jump model have been estimated. Findings The findings confirm the effects of OVX on equity returns. In addition, the results document that there exist time-varying jumps in the stock market returns. Besides, the impacts of OVX shocks appear to be symmetric. The analysis further shows that the magnitude of OVX impact is marginally bigger than that of the conventional oil price shocks. Originality/value Since various financial assets are traded on the basis of oil and equity markets, investors, for instance, could use the findings of this study for taking proper investment decisions and gaining better portfolio diversification benefits. Additionally, policymakers could utilize the results to develop effective measures and strategies in order to minimize the oil price risk.

Brazil: monetary policy and the neutral interest rate

2016 ◽  
Vol 43 (6) ◽  
pp. 966-979
Author(s):  
Cleomar Gomes da Silva ◽  
Rafael Cavalcanti de Araújo
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Real Interest Rate ◽  
Design Methodology ◽  
Macroeconomic Model ◽  
Natural Rate ◽  
Content Type ◽  
Natural Rate Of Interest ◽  
The Interest Rate ◽  
Definition Of

Purpose The purpose of this paper is to analyze the conduct of monetary policy in Brazil and estimate the country’s neutral real interest rate. Design/methodology/approach The authors make use of a state-space macroeconomic model representation. Findings The period of analysis goes from 2003 up to the end of 2013 and the results show that the country’s natural rate of interest was around 4.2 percent in December 2013. Originality/value One of the main differences of this work is the inclusion of variables such as the real exchange rate and world interest rate. This is important because these variables play an important role in the definition of the interest rate and, consequently, in the definition of the neutral interest rate.

The Channels of Transmission of Monetary Policy

2021 ◽  
pp. 45-88
Author(s):  
Juan Antonio Morales ◽  
Paul Reding
Keyword(s):  
Monetary Policy ◽  
Emerging Market ◽  
Asset Price ◽  
Balance Sheet ◽  
Transmission Mechanism ◽  
Monetary Transmission ◽  
Monetary Transmission Mechanism ◽  
The Interest Rate ◽  
The Impact ◽  
Transmission Of Monetary Policy

This chapter explores the monetary transmission mechanism (MTM) in low financial development countries (LFDCs). It successively discusses the interest rate, asset price, bank credit, balance sheet, expectations, and real balance channels. For each channel, conceptual aspects about how it operates, how it transmits monetary policy impulses to the economy’s financial and real spheres, are first presented. Next, the impact of the specificities of LFDCs on the channel’s strength and reliability are examined and the available empirical evidence is surveyed. The chapter concludes with a global assessment of the effectiveness of the monetary transmission mechanism in LFDCs. Evidence points to a transmission mechanism that is effective although not very strong, and possibly also more uncertain than in advanced and emerging market countries.

scholarly journals Impacts of the monetary policy on the exchange rate: case study of Vietnam

2019 ◽  
Vol 26 (2) ◽  
pp. 220-237
Author(s):  
Van Anh Pham
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Real Effective Exchange Rate ◽  
Content Type ◽  
Effective Exchange ◽  
Quantitative Results ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Effective Exchange Rate

Purpose The purpose of this paper is to evaluate and analyze impacts of the monetary policy (MP) – money aggregate and interest rate – on the exchange rate in Vietnam. Design/methodology/approach The study uses data over the period of 2008–2018 and applies the vector autoregression model, namely recursive restriction and sign restriction approaches. Findings The main empirical findings are as follows: a contraction of the money aggregate significantly leads to the real effective exchange rate (REER) depreciating and then appreciating; a tightening of the interest rate immediately causes the REER appreciating and then depreciating; and both the money aggregate and the interest rate strongly determine fluctuations of the REER. Originality/value The quantitative results imply that the MP affects the REER considerably.

Russia spillover, low oil price will challenge Astana

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Oil Prices ◽  
Oil Price ◽  
National Currency ◽  
Public Confidence ◽  
Content Type ◽  
Slowing Down ◽  
Ukrainian Crisis ◽  
Domestic Products ◽  
Global Growth

Significance The slowing down of Kazakhstan's economy continues against a background of slow global growth, the turbulent economic situation in Russia and low oil prices. Lower-than-projected oil prices will reduce budget revenues and forecasts; on January 16, Astana said it was revising its budgets for 2015-17 to mirror an average oil price of 50 dollars/barrel, as current budgets were based on 80 dollars/barrel. The blow will be softened by substantial reserves, which are expected to be used to stimulate the economy. Dwindling demand for commodities will negatively affect the profitability of Kazakhstan's major producers. The cumulative spillover from the Russian-Ukrainian crisis is substantial, although manageable at present. Impacts Further devaluation of the tenge would undermine public confidence in Kazakhstan's national currency. Increased dollarisation of Kazakhstan's economy will make regulation difficult by monetary policy. Ruble depreciation will put pressure on the tenge and promote replacement of domestic products with Russian imports.

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