A revival of money velocity would pressure the US Fed

2021 ◽  
Keyword(s):  
Inflation Expectations ◽  
Communication Policy ◽  
Monetary Aggregate ◽  
Content Type ◽  
Behavioural Changes ◽  
The Us ◽  
Velocity Of Money ◽  
Money Velocity ◽  
Economic Outlook

Significance The debate about how transitory this inflation is will persist. One way to consider the phenomenon is to examine the velocity of money -- the ratio of nominal GDP to monetary aggregate M1 or M2 -- which measures how many times money is changing hands, reflecting the willingness of consumers and businesses to engage in economic transactions. Money velocity remains modest but, if it rises, inflation pressures will also rise. Impacts The extent to which pandemic-related behavioural changes persist will shape the longer-term economic outlook and change many sectors. The Fed's communication policy will be key to calming markets; research shows that it has successfully anchored inflation expectations. Two years after COVID-19 was first known to be circulating, its spread remains the largest influence on the economic outlook.

Exploring the inflationary effect of oil price in the US

2019 ◽  
Vol 13 (1) ◽  
pp. 60-76 ◽  
Author(s):  
Amine Lahiani
Keyword(s):  
Growth Rate ◽  
Structural Breaks ◽  
Oil Prices ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Content Type ◽  
The Us ◽  
The Relationship

PurposeThe purpose of this paper is to explore the effect of oil price shocks on the US Consumer Price Index over the monthly period from 1876:01 to 2014:04.Design/methodology/approachThe author uses the Bai and Perron (2003) structural break test to split the data sample into sub-periods delimited by the computed break dates. Afterwards, the author uses the quantile treatment effects over the full sample and then, by including sub-periods dummies to accommodate the selected structural breaks that drive the relationship between inflation and oil price growth.FindingsThe findings include a decreased transmission effect of oil price changes on inflation in recent years; a varied elasticity of inflation to the growth rate of oil prices across the distribution; and, finally, evidence of asymmetry in the relationship between the growth rate of oil prices and inflation, with a higher transmission mechanism for decreasing rather than increasing oil prices.Practical implicationsPolicymakers should remain alert to monitoring potential inflation increases and should take precautionary measures to anchor inflation expectations, because inflation reacts differently to positive and negative oil price shocks. Moreover, authorities should consider the asymmetric reaction of inflation to oil price shocks to adopt an appropriate monetary policy strategy to achieve the price stability target.Originality/valueThe paper used a quantile regression model with structural breaks, which has not yet been used in the literature.

scholarly journals Bank performance variability and strands of inflationary conditions

2020 ◽  
Vol 29 (3) ◽  
pp. 235-253
Author(s):  
Rexford Abaidoo ◽  
Hod Anyigba
Keyword(s):  
Performance Indicators ◽  
Banking Sector ◽  
Key Performance Indicators ◽  
Bank Performance ◽  
Inflation Expectations ◽  
Content Type ◽  
Return On Equity ◽  
Macroeconomic Conditions ◽  
Macroeconomic Uncertainty ◽  
The Us

PurposeThis study seeks to examine the extent to which strands of inflationary related conditions (inflation expectations, inflation uncertainty and realized inflation); macroeconomic uncertainty and the likelihood of recessionary conditions influence performance indicators in the US banking sector over a specified time period.Design/methodology/approachThe study adopts seemingly unrelated regression model (SUR) advanced by Zellner (1962) in its examination of how specific strands of inflationary conditions, and other adverse macroeconomic conditions influence performance dynamics in the US banking sector.FindingsEmpirical evidence suggest that among various adverse macroeconomic conditions examined, inflation expectations and macroeconomic uncertainty tend to have significant constraining impact on key performance indicators in the US banking sector than other conditions examined. Comparatively, this study finds that inflation expectations and macroeconomic uncertainty tend to have much more constraining impact on return on equity, than on return on assets in the US banking sector. Results further suggest that among the three bank performance indicators examined, net interest margin is the least vulnerable bank performance indicator to various adverse macroeconomic conditions examined in the study.Practical implicationsApart from the various empirical results noted above, this study's findings are projected to help inform strategic planning decisions among institutions in the banking sector. The various findings could, for instance, inform policies and operational strategies geared toward reducing vulnerability associated with specific performance indicators such as return on equity. This reduction could be achieved by critically examining how the various performance indicators react to individual adverse macroeconomic conditions examined in this study. The process could ultimately help in developing tailored measures/procedures aimed at reducing how susceptible key performance indicators are to the various adverse macroeconomic conditions. This study's findings could also provide the platform for more adaptive policies aimed at minimizing the effects of noted macroeconomic conditions on operational efficiency in the banking sector.Originality/valueThe uniqueness of this study, compared to related ones found in the literature, stems from its treatment of three variant of related strands of macroeconomic condition (different variant of inflationary conditions) in the same framework in its empirical analysis.

COVID-19 will hit US GDP but recovery may be V-shaped

2020 ◽  
Keyword(s):  
Market Liquidity ◽  
Economic Downturn ◽  
Content Type ◽  
The Public ◽  
Us Economy ◽  
The Us ◽  
Home Sales ◽  
The Government ◽  
National Emergency ◽  
Economic Outlook

Subject US economic outlook. Significance Before the COVID-19 outbreak, economic activity was growing at 2.0-2.5%, the stock market and employment were close to record highs, new home sales were rising and consumer spending had momentum. The immediate outlook for the US economy is now very unclear as the number of COVID-19 cases has surged above 3,800 and the virus is present in 49 states, prompting President Donald Trump to declare a national emergency on March 13. To bolster financial market liquidity and support businesses and households, the Federal Reserve (Fed) cut rates by 100 basis points to 0-0.25% on March 15. Impacts The public spending for the COVID-19 outbreak will add to the budget deficit as no party is willing to raise taxes in an election year. The Fed may cut rates more but will risk inflation if rates stay low too long; if recovery is rapid, rates may rise sooner than expected. Heavily indebted firms and individuals will seek assistance from the government, especially in the travel and entertainment industries. A sharper economic downturn will test Trump’s managerial skill as his voters expect him to be able to resolve their problems quickly.

Indonesia's modest 2016 growth target is achievable

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Gdp Growth ◽  
Content Type ◽  
The Us ◽  
Us Dollar ◽  
Economic Outlook

Subject Economic outlook for 2016. Significance GDP growth fell to 4.7% in 2015 -- the lowest level in six years and well below the government's 5.7% target. The rupiah, in September 2015, broke the 14,000 mark against the US dollar, its lowest level since the 1997-98 financial crisis. President Joko 'Jokowi' Widodo's economics team now aims to lift growth to 5.3% in 2016. Impacts Indonesia's potential membership in the US-led Trans-Pacific Partnership is years away. Low inflation and a stable rupiah will help Bank Indonesia to ease monetary policy. Bolstering the weak manufacturing base will take years.

Higher wages could bring deflation to an end in Japan

2018 ◽  
Keyword(s):  
Positive Impact ◽  
Heavy Rain ◽  
The United States ◽  
Inflation Expectations ◽  
Price Setting ◽  
Content Type ◽  
North Eastern ◽  
Western Japan ◽  
The Impact ◽  
Economic Outlook

Subject The economic outlook for Japan. Significance Japan’s GDP returned to growth in the second quarter of 2018 after a single quarter of decline. The real, price-adjusted increase of 1.9% (quarter-on-quarter, annualised) came despite record rainfall in western Japan last month and a deadly heat wave that together claimed 324 lives. Even as the GDP figures were announced, a strong typhoon was making landfall in eastern and north-eastern Japan, dumping heavy rain. Impacts The impact of the extreme weather on consumer behaviour is significant but will subside. Wages may be on the rise, which will have a positive impact on inflation expectations and price-setting. Trade tensions with the United States, particularly in automobile exports, hang over future output, and growth.

Poland's economic outlook will be uncertain under PiS

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Short Term ◽  
Content Type ◽  
Welfare Spending ◽  
The Us ◽  
Near Term ◽  
Law And Justice ◽  
Political Backlash ◽  
Economic Outlook

Significance Amid an ongoing constitutional crisis, the Law and Justice (PiS) government, which was sworn into office on November 16, has been busy revising fiscal targets and agreeing draft laws in a bid to boost expenditure and revenue levels in 2016. Impacts Growth may slow in 2016, followed by gradual stabilisation as financial markets and investors grow accustomed to Poland's new government. An ambitious welfare spending programme will result in fiscal deterioration in the short term, incurring European Commission sanctions. On the upside, greater social benefits, competitive VAT rates and monetary easing could boost domestic demand, supporting growth after 2017. Ahead of new NBP appointments in early 2016, the risk of more institutional deadlock and political backlash remains high. The zloty will remain under pressure in the near term, particularly following the US interest rates hike, and debt-service costs could rise.

Emerging market capital flows may stabilise in 2016

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Capital Flows ◽  
Direct Investment ◽  
Emerging Market ◽  
Content Type ◽  
Global Capital ◽  
Cross Border ◽  
The Us ◽  
Global Growth ◽  
Economic Outlook

Subject Outlook for global capital flows. Significance Foreign direct investment (FDI) into emerging markets (EMs) rose slightly in 2015, according to the latest UNCTAD report on capital flows, as the growth of FDI in Asia offset losses in other areas. In the light of this, fears of a collapse in global capital flows in 2016, exacerbated by poor global growth, the commodity sell-off and the risks associated with the US monetary policy tightening, may prove excessive. Impacts The sharp divergence in capital flow trends will continue, punishing energy and commodity producers. India may experience robust FDI increases, illustrating that not all EMs are out of favour. Any improvement in the global economic outlook will translate into stronger cross-border flows.

Brexit will accentuate global market distortions

2016 ◽  
Keyword(s):  
Interest Rates ◽  
Global Market ◽  
Bond Yields ◽  
Equity Prices ◽  
Content Type ◽  
Us Economy ◽  
The Us ◽  
The Uk ◽  
Economic Outlook ◽  
The Eu

Subject Outlook for post-Brexit markets. Significance The UK vote to leave the EU is exacerbating distortions in financial markets. Government bond and equity prices are rising, sending contradictory signals about the global economic outlook. Yields on US and German bonds partly retraced their steps last week as initial fears about the consequences of the Brexit vote diminished. However, the yield on ten-year Treasuries remains 20 basis points (bp) lower than on referendum day, June 23, and the S&P 500 index stands close to a record high. The expanding universe of negative bond yields is fuelling investor appetite for risk assets, including equities. Impacts Markets may be underestimating the likelihood of higher US interest rates given recent signals of improvement in the US economy. Demand for safe-haven assets could stay strong, with the price of gold rising 5.6% since the referendum. Heightened uncertainty may mean that the oil price rally is over; it could even reverse given the persistent supply glut.

OCIE issues risk alert on the most frequently identified advisory fee and expense compliance issues

2018 ◽  
Vol 19 (4) ◽  
pp. 1-3
Author(s):  
Robert Van Grover
Keyword(s):  
Design Methodology ◽  
Best Practice ◽  
Investment Management ◽  
Content Type ◽  
Informed Decisions ◽  
Policies And Procedures ◽  
The Us ◽  
Investment Advisers ◽  
Practical Implications

Purpose To summarize and interpret a Risk Alert issued on April 12, 2018 by the US SEC’s Office of Compliance Inspections and Examinations (OCIE) on the most frequent advisory fee and expense compliance issues identified in recent examinations of investment advisers. Design/methodology/approach Summarizes deficiencies identified by the OCIE staff pertaining to advisory fees and expenses in the following categories: fee billing based on incorrect account valuations, billing fees in advance or with improper frequency, applying incorrect fee rates, omitting rebates and applying discounts incorrectly, disclosure issues involving advisory fees, and adviser expense misallocations. Findings In the Risk Alert, OCIE staff emphasized the importance of disclosures regarding advisory fees and expenses to the ability of clients to make informed decisions, including whether or not to engage or retain an adviser. Practical implications In light of the issues identified in the Risk Alert, advisers should assess the accuracy of disclosures and adequacy of policies and procedures regarding advisory fee billing and expenses. As a matter of best practice, advisers should implement periodic forensic reviews of billing practices to identify and correct issues relating to fee billing and expenses. Originality/value Expert guidance from experienced investment management lawyer.

Absence of the weekend effect and industry-style portfolios

2019 ◽  
Vol 12 (4) ◽  
pp. 463-475
Author(s):  
Selma Izadi ◽  
Abdullah Noman
Keyword(s):  
New York ◽  
Stock Market ◽  
Structural Breaks ◽  
Stock Exchange ◽  
Structural Break ◽  
Weekend Effect ◽  
Content Type ◽  
Market Portfolio ◽  
The Us ◽  
Using Data

Purpose The existence of the weekend effect has been reported from the 1950s to 1970s in the US stock markets. Recently, Robins and Smith (2016, Critical Finance Review, 5: 417-424) have argued that the weekend effect has disappeared after 1975. Using data on the market portfolio, they document existence of structural break before 1975 and absence of any weekend effects after that date. The purpose of this study is to contribute some new empirical evidences on the weekend effect for the industry-style portfolios in the US stock market using data over 90 years. Design/methodology/approach The authors re-examine persistence or reversal of the weekend effect in the industry portfolios consisting of The New York Stock Exchange (NYSE), The American Stock Exchange (AMEX) and The National Association of Securities Dealers Automated Quotations exchange (NASDAQ) stocks using daily returns from 1926 to 2017. Our results confirm varying dates for structural breaks across industrial portfolios. Findings As for the existence of weekend effects, the authors get mixed results for different portfolios. However, the overall findings provide broad support for the absence of weekend effects in most of the industrial portfolios as reported in Robins and Smith (2016). In addition, structural breaks for other weekdays and days of the week effects for other days have also been documented in the paper. Originality/value As far as the authors are aware, this paper is the first research that analyzes weekend effect for the industry-style portfolios in the US stock market using data over 90 years.

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