Too Much Global Liquidity from Central Banks Distorts Financial Markets and Undermines Economic Growth

2013 ◽  
Author(s):  
William J. Dodwell
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Central Banks ◽  
Global Liquidity

scholarly journals NEGATIVE INTEREST RATES: CENTRAL BANKS INITIATED AN EXPERIMENT

2016 ◽  
pp. 262-273
Author(s):  
A. N. Burenin
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Interest Rates ◽  
Central Banks ◽  
Money Markets ◽  
Complete Uncertainty ◽  
Negative Interest Rates ◽  
National Bank ◽  
Economic Imbalances ◽  
The Interest Rate

Negative interest rates appeared as a consequence of economic problems that countries with market economy came across after the crises of2007-2008. The attempts of monetary authorities to stimulate economies with the help of quantitative easing didn't bring the desired result. That's why the central banks once again resorted to a traditional tool of their monetary policy of changing interest rates. But this time they launched an experiment, they used negative interest rates. The European Central Bank, the Swedish Riksbank, the Bank of Japan, and the National Bank of Hungary introduced negative rates in order to stimulate economic growth and fight the threat of deflation, the Danish National Bank and the Swiss National Bank tried to deter appreciation of their currencies. Negative rates of the central banks brought about negative yields of government and nongovernment securities in several countries. The problem acquires an aggravated form due to the fact that negative rates appeared in several European countries simultaneously at the moment when global financial markets were not in crises. Some questions arise concerning the negative rates, for example, how low can central banks bring down the rates in the future, what is their influence on the stock markets, what is the reaction of depositors to the introduction of negative deposit rates by commercial banks, must one consider a negative rate as a rate of interest or payment to store money of the depositor, in which circumstances negative rates can be justified to fight deflation. The last question plays an important role, because recent studies find that positive economic growth is possible during deflation. If central banks don't take this nuance into consideration, they can create economic imbalances by increasing liquidity. Negative rates are not as inoffensive as it may seem at first glance. Not far ago an investor, who tried to averse risk, was buying government securities. Their yields according to theory could not become lower than zero. By introducing negative rates, the central banks told in fact that the lower bound of the interest rate didn't exist any more. Thus, now investors find themselves in a situation of complete uncertainty, and risk becomes an absolute dominance. They can't averse it even in government securities. Such situation influences financial markets in a negative way. If we go up to a higher level of abstraction and imagine an economy as a live organism, which tries to rehabilitate itself, then the negative rates can be considered as a way through which the economy tries to solve the task of reducing liquidity. Studies show that so far the introduction of modestly negative rates have not affected the functioning of money markets much. In anticipation of the forthcoming cyclical crisis it is possible to give advice to the central banks to make one more step in the issue of the development of new tools of monetary regulation. Such new tools could be represented by futures contracts on interest rates securities.

scholarly journals The Equilibrium on Money Market and the Central Bank Issuing Policy

2015 ◽  
Vol 15 (1) ◽  
pp. 141-152
Author(s):  
Richard Pospíšil
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Interest Rates ◽  
Central Banks ◽  
Price Stability ◽  
Monetary Aggregate ◽  
Monetary Equilibrium ◽  
The Impact

Abstract The issue of money and establishing interest rates are the main activities of central banks. Th rough this, the banks immediately influence the behaviour of households, companies, financial markets and the state with the impact on real outcome, employment and prices. When monitoring the issue of money, it is necessary to focus not only on its volume, but also on the attributes and functions carried by money. Among the first economists who considered the quality monetary aspect were J. Locke, D. Hume, D. Ricardo and others. The founders of modern monetarism of the 20th century were I. Fisher and M. Friedman. Fisher was the first to define the equation of monetary equilibrium in the present-day form. The objective of the paper is to point out different approaches to the equation and its modifications and different meanings of its variables. As regards the monetary aggregate M - Money - the paper also deals with the denomination of the aggregate to its various elements, which is significant for fulfilling monetary policy targets. This approach is very important especially at present in the time of crisis when central banks are performing their policy considering contradictory targets of price stability and economic growth.

At the final stage of the global crisis: Economic tasksin 2017-2019

2018 ◽  
pp. 5-29 ◽  
Author(s):  
V. A. Mau
Keyword(s):  
Economic Growth ◽  
Final Stage ◽  
Government Regulation ◽  
Inflation Targeting ◽  
Social Dynamics ◽  
Growth Stimulation ◽  
Central Banks ◽  
Economic Area ◽  
National Trends

The paper deals with the global and national trends of economic and social development at the final stage of the global structural crisis. Special attention is paid to intellectual challenges economists will face with in the post-crisis world: prospects of growth without inflation, new global currencies and the role of cryptocurrencies, central banks independence and their role in economic growth stimulation, new tasks and patterns of government regulation, inequality and growth. Special features of Russian post-crisis development are also under consideration. Among them: prospects of macroeconomic support of growth, inflation targeting, new fiscal rule, social dynamics and new challenges to welfare state. The paper concludes that the main obstacles for economic growth in Russia are concentrated in the non-economic area.

The world and Russia: Inflation is minimal, economic growth is slowing, risks are rising

2019 ◽  
pp. 5-23 ◽  
Author(s):  
Mikhail V. Ershov ◽  
Anna S. Tanasova
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
World Economy ◽  
Domestic Demand ◽  
New Combination ◽  
Russian Economy ◽  
The World ◽  
World Economic ◽  
Money Creation ◽  
Main Factors

Russian economy has reached the low level of inflation, but economic growth has not accelerated. Moreover, according to official forecasts, in the following years it will still be low. The article concludes that domestic demand, which is one of the main factors of growth, is significantly constrained by monetary, budgetary and fiscal spheres. The situation in the Russian economy is still hampered by the decline of the world economic growth. The prospects of financial markets are highly uncertain. This increases the possibility of crisis in the world. Leading countries widely use non-traditional measures to support their economies in the similar environment. In the world economy as well as in Russia a principally new combination of factors has emerged, which create specific features of economic growth. It requires special set of measures to stimulate such growth. The article proves that Russian regulators have large unused potential to stimulate growth. It includes monetization, long-money creation, budget and tax stimuli. It is important that the instruments, which will be used, should be based on domestic mechanisms. This will strengthen financial basis of the economy and may encourage economic growth. Some specific suggestions as to their use are made.

Non-standard functions and structures of ministries of finance under economic challenges: A case study of Western governments

2020 ◽  
Vol 26 (11) ◽  
pp. 2448-2471
Author(s):  
S.V. Anureev
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Comparative Analysis ◽  
Great Britain ◽  
Central Banks ◽  
Economic Recovery ◽  
Budget Process

Subject. This article examines the functions and management structures of central financial bodies and related parliamentary and governmental structures in Australia, Canada, Great Britain, Japan, Germany, France and Italy. Objectives. The article aims to identify non-standard functions and structures that go beyond the classical responsibility of finance ministries as a central part of the budget process arising from current economic challenges. Methods. For the study, I used a comparative analysis. Results. The article describes the important new functions of financial authorities and treasuries of Western governments aimed at economic growth and economic recovery. Conclusions. The organizational and management structures and functions of the ministries of finance go far beyond the budget process, overlap with and dominate the functions of central banks and ministries of economic development.

Financial Intermediation and Growth: Theory and Some Cross-Country Evidence

1997 ◽  
Vol 36 (4II) ◽  
pp. 855-862
Author(s):  
Tayyeb Shabir
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Financial Intermediation ◽  
Empirical Estimates ◽  
Financial Liberalisation ◽  
Cross Country ◽  
Level Of Significance ◽  
The Relationship ◽  
Positive Effect ◽  
Theoretical Developments

Well-functioning financial markets can have a positive effect on economic growth by facilitating savings and more efficient allocation of capital. This paper characterises some of the recent theoretical developments that analyse the relationship between financial intermediation and economic growth and presents empirical estimates based on a model of the linkage between financially intermediated investment and growth for two separate groups of countries, developing and advanced. Empirical estimates for both groups suggest that financial intermediation through the efficiency of investment leads to a higher rate of growth per capita. The relevant coefficient estimates show a higher level of significance for the developing countries. This financial liberalisation in the form of deregulation and establishment and development of stock markets can be expected to lead to enhanced economic growth.

scholarly journals Regular Econometric Model of Taylor for Albania

2016 ◽  
Vol 5 (1) ◽  
pp. 123
Author(s):  
Ergys Misha
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rates ◽  
Financial Stability ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Stock Exchange ◽  
Central Banks ◽  
Financial Assets

The Taylor’s Rule Central Banks is applying widely today from Central Banks for design the monetary policy and for determination of interest rates. The purpose of this paper is to assess monetary policy rule in Albania, in view of an inflation targeting regime. In the first version of the Model, the Taylor’s Rule assumes that base interest rate of the monetary policy varies depending on the change of (1) the inflation rate and (2) economic growth (Output Gap).Through this paper it is proposed changing the objective of the Bank of Albania by adding a new objective, that of "financial stability", along with the “price stability”. This means that it is necessary to reassess the Taylor’s Rule by modifying it with incorporation of indicators of financial stability. In the case of Albania, we consider that there is no regular market of financial assets in the absence of the Stock Exchange. For this reason, we will rely on the credit developmet - as a way to measure the financial cycle in the economy. In this case, the base rate of monetary policy will be changed throught: (1) Targeting Inflation Rate, (2) Nominal Targeting of Economic Growth, and (3) Targeting the Gap of the Ratio Credit/GDP (mitigating the boom cycle, if the gap is positive, and the contractiocycle if the gap is negative).The research data show that, it is necessary that the Bank of Albania should also include in its objective maintaining the financial stability. In this way, the contribution expected from the inclusion of credit gap indicators in Taylor’s Rule, will be higher and sustainable in time.

scholarly journals Unconventional monetary policy of the European Central Bank: A brief recapitulation

2019 ◽  
Vol 53 (3) ◽  
pp. 43
Author(s):  
Ilona Skibińska-Fabrowska
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Central Bank ◽  
Economic Crisis ◽  
Financial Market ◽  
European Central Bank ◽  
Central Banks ◽  
Unconventional Monetary Policy ◽  
European Central ◽  
National Bank

<p>The financial and economic crisis that has hit many economies in recent years has significantly increased the activity of central banks. After using the standard instruments of conducting monetary policy, in view of the obstruction of monetary impulse transmission channels, they reached for non-standard instruments. Among them, asset purchase programs played a signifciant role. The European Central Bank (ECB) launched the largest asset purchase programme (APP) of this type in 2014 and expired in December 2018. The aim of the undertaken activities was to improve the situation on the financial market and stimulate economic growth. The article reviews the literature and results of research on the effects of the program and indicates the possibility of using the ECB’s experience in conducting monetary policy by the National Bank of Poland.</p>

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