Monday, March 17, 2014

Aspects of Macroeconomic Policy Combinations and Their Effects on Financial Markets

Abstract

This paper analyses the implications of macroeconomic policy interactions for financial stability, proxied by financial assets prices (equity and bonds). The empirical analysis applies a Vector Autoregressive (VAR) model and findings suggest that an accommodating monetary, and disciplined fiscal, stance has
been optimal for both stock and bond markets. There is also ample evidence of interdependence between policies, as an expansionary fiscal policy could persuade the monetary authorities to adopt an accommodating stance, whereas a contractionary monetary policy leads fiscal policy towards consolidation. The interrelation between monetary and fiscal policy necessitates coordination between them for the sake of financial stability.

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Tuesday, September 17, 2013

Macroeconomics Discipline at the Cross-Roads

Abstract


The 2008 financial crisis of the US was a watershed for economics discipline, especially macroeconomics. Several world leaders such as the Queen of England questioned distinguished economists of Ivey league schools such as the London School of Economics on why they failed to see what was happening and had not prevented the crisis through policy advice? Most did not have an answer. Why? One of the reasons is the supply side economics, which is also called Monetarism; and the Chicago School of Economics, which advocates that free markets function efficiently and self-regulate; and at best governments should tinker with monetary policy of money supply; has become the dominant intellectual basis for policy making for the last forty years. Models of this kind failed to predict the financial crisis because they are based on strong assumptions.
The lesson from the financial crisis is that macroeconomic models have to incorporate financial markets and account for asymmetric information, transaction costs and moral hazard behaviour of economic agents. Governments have to regulate especially the financial markets. Free market fundamentalist will ask the question as to why one should expect the government agents to do a better job than private agents because they are also subject to moral hazard behaviour of using tax payers’ money. One answer to this is that if a large number of private agents act autonomously, the sum of average transaction and information costs of markets is higher than if one large agent pools these costs and realizes economies of scale. Government does this job- the tax collected from each agent could be lower than the average information and transaction costs of private agents. As far as the moral hazard behaviour of government agents is concerned, it is a political economy issue of designing and implementing institutions.

Download the entire paper

Thursday, June 13, 2013

Global Economic Prospects - June 2013: Less volatile, but slower growth

The global economy is transitioning into what is likely to be a smoother and less volatile period. However, the recovery is uneven. For high-income countries, fiscal consolidation, high unemployment and still weak consumer and business confidence will continue to dampen growth this year, while growth in the developing world will be solid but weaker than during the pre-crisis boom period.

Although the challenges faced by high-income countries to restore financial-sector health, reform institutions and get fiscal policy back onto a sustainable path persist, the likelihood that these challenges will provoke a major crisis has declined markedly.

Global GDP is expected to expand about 2.2 percent this year and strengthen to 3.0 percent and 3.3 percent in 2014 and 2015. For high-income countries, growth this year will be a modest 1.2 percent, firming to 2.0 percent in 2014 and 2.3 percent by 2015.

Developing-country GDP is now projected to be around 5.1 percent in 2013, strengthening to 5.6 percent and 5.7 percent in 2014 and 2015, respectively. Growth in several middle income countries has been held back by supply bottlenecks and is unlikely to reach pre-crisis rates unless supply-side reforms are pursued vigorously. In China also, growth has slowed as authorities seek to rebalance the economy. Looking at broader region-wide trends, East Asia is expected to grow by 7.3 percent this year; developing Europe and Central Asia by 2.8 percent; Latin America by 3.3 percent; Middle East & North Africa (MENA) by 2.5 percent; South Asia by 5.2 percent and Sub-Saharan Africa by 4.9 percent.


Please click here to download the report


Thursday, June 06, 2013

Low Interest Rate Policy and the Use of Reserve Requirements in Emerging Markets

This paper attempts to shed light on the link between monetary policy in large economies with international currencies (the United States and the euro area) and the use of reserve requirements in emerging markets.

Using reserve requirement data for 28 emerging markets from 1998 to 2012 this paper provides evidence that emerging markets tend to raise reserve requirements and repress financial markets to curb speculative capital inflows when interest rates in the major economies decline.

The finding suggests that the current low interest rate policies of the major economies may have collateral effects on emerging markets by triggering financially repressive policies....

Click here to download the full report

Tuesday, March 12, 2013

Beating market mandates: How winners are re-engineering financial markets operations.


With so much change going on 


  • How can firms keep clients happy and win a bigger share of a very volatile revenue pool? 
  • What role does operations play in this strategic dilemma? . 
  • So how are some firms able to excel even amid today's new realities?

These questions led to this study done by IBM together with Broadridge Financial Solutions, they surveyed operations strategy decision makers to create an accurate picture of industry approaches and what today's leaders are doing to get—and keep—their competitive advantage.

The study identified three groups – Leaders, Followers and Laggards – and compared these groups to see how they’re responding to the threats facing their industry. 

To excel in today’s rapidly evolving business landscape, Leaders are building a different kind of operating model - one designed to embrace rapid, continuous change. And, as they look for better ways to do things, all options are on the table - including partnering in a variety of forms.

Click here download the full report, and gain more insight into the Leaders' thought processes and what is on the horizon, 

Tuesday, February 05, 2013

Intedependence of International Finanacial Markets: The Case of India& US

The study reveals that volatility in all the markets surges post the global financial crisis of 
2008-09. Spillovers in volatility across the markets are found to be present due to both 
innovations effects as well as volatility persistence.

Click here to read further

Tuesday, November 27, 2012

Africa Rising - abstract from Time Magazine 03 Dec 2012 issue


 According to an August report by analysts McKinsey & Co. titled  Africa at work: Job creation and inclusive growth  
275 million out of a total African workforce of 382 million are either unemployed or in informal day-hire work. By 2020 a youth surge propelled by the world's highest birthrates, which will raise Africa's population from 1 billion in 2009 to 2 billion in 2050, will add a further 122 million Africans of working age. That would be a boon if they had work. But McKinsey calculates that in the same period, Africa will create just 54 million to 72 million more jobs. "If current trends continue, it's going to take Africa until 2066 before employment levels reach those of East Asia," says David Fine, one of the report's authors. "The next part [of Africa's development] is jobs," agrees Geldof. "What will it take to fill that void?"
McKinsey argues that the answer lies less in Africa's traditional extractive industries--which tend to be capital-intensive--and more in sectors such as tourism and retail, which employ more labor. But what happens if, as McKinsey predicts, the void cannot be filled? South Africa provides an example of a government's paying the price for failing to share the gains of growth. Since the end of apartheid rule in 1994, South Africa, the continent's biggest economy, has expanded by up to 5% a year. But 18 years in power has changed the African National Congress (ANC) from the party of Nelson Mandela's righteous revolution into just another rapacious developing-world elite. Unemployment runs anywhere from 25% to 40%, state-run education can be among the worst in the world, and inequality--stretched wider by a fabulously wealthy ANC-connected cabal--has increased.
The ANC is reaping the reward for this sorry record. In mid-August, 3,000 miners at platinum producer Lonmin's Marikana mine in northern South Africa walked off the job, demanding a tripling of basic pay, from about $500 per month. On Aug. 16, after days of violence in which 10 people died, police shot dead 34 miners. The killings evoked the brutality of apartheid. Meanwhile, the militant antibusiness, antigovernment strikes that erupted at other mines, then in other industries, continue today. These have exposed as nothing more than a hollow fraud the claims by the ANC's ruling alliance that it represents the poor. With such a disconnect between government and people, Tutu says, the potential for upheaval in South Africa is "very great ... When the big eruption happens," he says, "it's going to be very, very disturbing."
Just as worrying is another type of unrest emerging in East and West Africa. Marginalization divides rich from poor, but it also aggravates existing tribal, racial and religious fault lines. A series of religious insurgencies is taking place below the Sahara. From the Atlantic to the Indian Ocean, young Muslims are taking up arms against governments they see as Westernized, corrupt and shutting them out of economic opportunity.

Wednesday, September 19, 2012

Beating market mandates: How winners are re-engineering financial markets operations

IBM together with Broadridge Financial Solutions surveyed operations strategy decision makers to create an accurate picture of industry approaches and what today's leaders are doing to get—and keep—their competitive advantage.

These leaders are building a different kind of operating model—one designed to embrace rapid, continuous change. 

Please click here to downlod

Thursday, September 13, 2012

Apple vs. Samsung - A paradigm shift?


They aren't calling it the patent wars for nothing. The current battle between two of technology's biggest heavyweights could set a historic precedent in the sector. As both Apple and Samsung fight for the smartphone and tablet crown, the latest battle isn't being decided by flashy new phones or consumer preference, but by lawyers and judges.

With two technology industry heavyweights finally coming to blows in the courtroom, the smartphone sector could be altered forever. The patent battle between Samsung and Apple will not only affect the companies, but the technology industry and consumers, too. 

Read more

Friday, July 27, 2012

Dynamic Investment Strategies for Corporate Pension Funds in the Presence of Sponsor Risk

 This publication, produced as part of the BNP Paribas Investment Partners research chair on asset-liability management and institutional investment management at EDHEC-Risk Institute, shows that sophisticated dynamic allocation strategies can usefully be implemented by pension funds. One of the key findings of the paper is to show that imposing a cap on the funding ratio, in addition to a floor, has a positive impact on both pensioners and bondholders, while only having a minor negative effect on equity value


Click here to download

Principles for the Regulation of Exchange Traded Funds - IOSCO


The International Organization of Securities Commissions (IOSCO) Consultation Report titled “Principles for the Regulation of Exchange Traded Funds” (CR05/12, March 2012) was prepared by IOSCO Technical Committee Standing Committee on Investment Management (TCSC5).
The report presents what it describes as “proposed common investor-protection principles or guidelines on Exchange Traded Funds (ETFs)” and “touches on certain market structure and financial stability issues.”

Please click here to download


Please click here to read EDHEC-Risk Institute comments of the paper



Wednesday, July 25, 2012

Platinum Metals Review - July 2012


The Platinum Metals Review - July 2012

A quarterly journal of research on the science and technology of the platinum
group metals and developments in their application in industry

is now available. Please click here to download



Monday, July 23, 2012

Global Financial Markets - Working Papers on


A Belke, A Freytag, J Keil… - 2012
Abstract: Monetary policy rules have been considered as fundamental protection against
inflation. However, empirical evidence for a correlation between rules and inflation is
relatively weak..

Click here to download the papaer

FT Adviser : Morning paper


Morning papers: Bleak jobs outlook raises heat on the Fed...


Please click here to read

Pension Research Council YouTube channel


Pension Research Council posted several videos  to the Pension Research Council YouTube channel on the following subjects:  
  • The 2012 Pension Research Council Symposium, "The Market for Retirement Financial Advice" 
  • The 2012 Pension Research Council Special Forum, "Saving Pensions: What can the US and UK Learn from Each Other?"
Check it out!

Monday, May 12, 2008

No Bank is an Island- get global before globalisation get you

Today’s performance woes, combined with the quest for sustainable growth, are pushing
banks beyond geographic and product centric boundaries.

Globalization is the single greatest opportunity – and yet also the greatest threat – facing the industry today. Over 40 percent of 644 bankers around the world cite expansion to global markets as their single biggest growth opportunity. Shifts in customer trends and new collaboration strategies will spell new prospects, particularly for those with a clear strategy to act promptly and decisively. However, this path is not without its challenges. With global interdependencies on the rise, many banks are struggling to deal with a credit crisis gone global and with aggressive new competitors.

In the IBM survey (url attached), conducted in cooperation with Economist
Intelligence Unit, the effects of globalization on the retail banking industry is examined.

Download full report

Thursday, April 24, 2008

The Ernst & Young Financial Services Index: 1st Quarter 2008

The Ernst & Young Financial Services Index (E&Y FSI) tumbled 14 index points – from 98 in the last quarter of 2007, to 84 in 08Q11,2. This is the first time in five years (since 03Q4) that the index is below its long term average of 88.

Since the previous survey, the following developments most likely contributed to reduced financial sector confidence:
  • The prime overdraft rate was increased for an eighth time in December 2007. Retail banks now face a further rise in nonperforming
loans and declining demand for new loans from individuals (and some businesses).
  • The implosion of the sub-prime mortgage market in the USA led to stress in financial markets, which in turn led to a major
decline in credit and withdrawal of some financial instruments. As a result, financial market uncertainty and volatility surged
world wide. These developments affected South African financial institutions adversely in several ways:
- Investment banking activity plummeted3.
- Investment managers saw a big drop in net inflows, probably as investors switched from equity investments to safer
havens, such as bank deposits and contractual investments4.
- Falling net inflows and fluctuations in the value of funds under management dampened income growth of investment
managers. This development hurt small managers disproportionately more than large managers.
- Life insurers experienced a big fall in investment income growth.

Download full report

Wednesday, July 11, 2007

2007 Annual Survey of Retirement Benefits in South Africa

The 2007 Sanlam Survey was conducted among principal officers of retirement funds. Respondents were selected at random to represent small (<100>South Africa. These included pension and provident funds structured on a defined contribution basis, as well as umbrella funds.

The survey recorded a 100% response rate with a total of 200 funds responding.



Highlights

  • In the past year, the amount of employee and employer contributions to pension funds has fallen by almost a full percent per year, with the total provision for retirement now at only 11.3 percent per year, the study reveals.
  • Only 10.5 percent of retirement funds have a formal investment policy to invest a proportion of assets in socially responsible investment (SRI) portfolios.
  • Almost 60 percent of funds are considering paying for financial education of members to address the perceived lack of understanding of the information provided to members.

Download the full report

Tuesday, July 10, 2007

KPMG and SAVCA Private Equity Survey- May 2007


The results of the KPMG and SAVCA ‘Venture Capital and Private Equity Industry Performance Survey’ for 2006 conclude that the private equity industry represents a significant sector within the overall financial services industry, and is an attractive asset class within the broader capital markets.

Compiled from 44 private equity fund managers representing 71 funds, the survey data confirms that 2006 was a watershed year for the industry, with record activities across all measurement criteria, including fund raising, investment and exit activity. The survey, covering the 2006 calendar year, provides a vital summary of performance highlights and provides insights into current trends and forecasts of the industry, as well as comparisons to historical data and global trends.

South African investors are beginning to understand that private equity provides positive absolute returns and significant portfolio diversification benefits.

75% of funds raised last year were from offshore investors, of which half were from the US, contributing to the US overtaking Europe as the highest provider of foreign funds to the SA.

The South African industry improved fund raising drive last year has caused funds under management to surge to R56, 2bn at the end of 2006 compared with R42, 5bn in 2005.

Overtures from foreign private equity houses are confirmation of the stability of the SA political system, macroeconomics, a sound banking system, a functional regulatory system and, good economic growth prospects.

Black economic empowerment (BEE) remains a major source of activity in the industry with investment in entities that are black owned empowered or influenced up 23% from R3.1 billion during 2005 to R3.8 billion during 2006.Funds returned to investors increased by R18, 4bn from R4bn during 2005 to R22, 4bn during 2006.

Download the survey

Friday, June 29, 2007

Mine – Riding the wave-


The PwC survey titled Mine – Riding the wave, provides an aggregated view of the global mining industry in 2006, represented by 40 of the world’s largest mining companies.

Some of the highlights from the report

  • The impact of hedge funds on the mining industry has been felt dramatically in the last two years, through their involvement in metal trading activities and the volatility this creates in commodity prices.
  • With rising commodity prices, acquisitions that are cash funded lead to a rapid payback and 69% of major acquisitions in 2006 were funded this way. Cash is also being used to fund organic growth.
  • The lack of good quality projects in “safe” areas is leading to exploration and development efforts in jurisdictions that have until recently been considered marginal.
  • The pure “taxes” that governments levy on mining companies are only part of the story. A more accurate picture of the total contribution to government and the community by industry participants needs to emerge for the real position to be understood.
Download the survey

Thursday, June 28, 2007

2007 Global Powers of Retailers

This report by Deloitte identifies the 250 largest retailers around the world based on
publicly available data for the companies’ fiscal year 2005 (ended July 1, 2005-June 30, 2006). The report
also provides an outlook for the global economy; an analysis of market capitalization in the industry; and a
discussion of major challenges facing today’s retailers.


Highlights

  • Although the global economy has begun to show some signs of stress, fiscal 2005 proved to be another healthy year for the
world’s leading retailers. Total retail sales for the Top 250 reached $3.01 trillion, up 6.0% from last year’s Top 250 total
of $2.84 trillion. Year-over-year growth, based on this year’s list of companies only, proved even more robust, with an 8.8%
increase over the group’s prior-year sales of $2.76 trillion.

  • The ten largest retailers continue to capture market share.
These retail powerhouses (six US companies and four European companies) reported combined sales of $885 billion in fiscal 2005,
or 29.4% of total Top 250 retail sales. This represents a robust 11.7% gain over their 2004 results, mostly as the result
of continued strong organic growth.

  • The Africa/Middle East region has five companies among the Top 250. All are based in South Africa. Metcash Trading
(Africa) has dropped from # 81 in 2004 to #230 in this year’s ranking, having sold its Australasian operations to Metcash
Group.

  • Although international sales are becoming increasingly important to many large retailers’ growth strategies, foreign
operations still account for only 14.4% of the Top 250 companies’ retail sales, on average, up 1.8 percentage points
from 12.6% in 2000.

Download the Survey

Wednesday, June 27, 2007

Survey on Effective management of SA Retirement Funds

The March 2007 PwC report represents the responses of 110 chairpersons from a wide spread of retirement funds from very large to fairly small with assets totalling over R80 billion.

The survey also compares the South African survey results with an equivalent PwC survey completed in the UK a year ago.

Key survey findings

  • In general, funds are managed in accordance with the specific rules of the funds as well as with applicable legislation. Most trustee boards believe that they are up to date with all legislative requirements, but most of them indicate that they have not assessed compliance with the King II principles of corporate governance.

  • Although most funds are aware of the importance of good governance, only a third have a formal governance mandate that is used for steering management processes and decision making.

  • Only 14% of funds have not considered conflicts of interest. However, only 15% have a formal policy in place to identify conflicts. 75% of funds with assets under R500 million each have not considered a process for managing conflicts of interest.

  • Although 85% of funds have considered the performance assessment of their advisers, the process of assessment can be improved. 37% of funds assess performance of advisers on an ad hoc basis only that is not standardised. 9% of funds do not assess their advisers at all. 55% of advisers are selected either on criteria that are subjective, or after informal debate and without any review.

  • The survey also shows that on the management of defined contribution funds, SA funds are well advanced. They give considerable thought to the range of investment options they offer members. They also put considerable effort into communicating the risk/return relationships taking into account members’ risk profiles
Download the Survey

Top Women money managers- Annie Yates


Financial Mail 22 June 2007





One of the most experienced women in fund management, on both the sell-side and the buy-side and now head of business development at RMB.

In the early 1980s it was still unusual for company management to deal with female analysts, especially pregnant ones. But Yates says that the various stockbrokers and fund managers she has worked for have always been supportive.

After a stint as a journalist at The Star she was persuaded to join stockbrokers Mathison & Hollidge, which was keen to build up its female analyst base.

" I was notionally working half days when my children were young, but was more productive than some colleagues who were working a full day."

Yates believes portfolio management, unlike some other jobs, does not lend itself to working from home.

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