A theory of safe asset shortage

Ricardo Caballero and Emmanuel Farhi from MIT and Harvard propose an interesting and relevant formal model of safe asset shortage. While safe asset supply...

Quantifying the impact of monetary policy rate guidance

A new DNB paper suggests that announcements by the U.S. Federal Open Market Committee on forward policy rate guidance have been credible and significantly...

The importance of central bank collateral frameworks

A new ECB paper illustrates the power of a central bank’s collateral framework as a policy tool. The collateral framework influences overall monetary conditions,...

U.S. Fed: Why replacement of “operation twist” with outright bond purchases...

JP Morgan’s Nikolaos Panigirtzoglou presented a nice reasoning, why the December 12 2012 U.S. Fed decision to replace its maturity extension program with outright bond...

How central banks can take nominal rates deeply negative

The popular view that nominal interest rates have a natural zero lower bound has become obsolete in modern financial systems. It may be more...

ECB asset purchases: the three transmission channels

A new paper suggests that ECB asset purchases influence markets and the economy significantly, mainly through three channels. First, through the asset valuation channel...

The duration extraction effect

Under non-conventional monetary policy central banks influence financial markets through the “portfolio rebalancing channel”. The purchase of assets changes the structure of prices. A...

The role of macroprudential policy

Macroprudential measures are often seen as a counterweight to ultra-easy monetary policy in the developed world. BIS research cautions against this expectation. Macroprudential policies are...

Low rates troubles for insurances and pension funds

A CGFS report highlights the pressure of a ‘low for long’ interest rate environment on life insurance companies and defined-benefit pension funds. This pressure...

The demographic compression of interest rates

Declining population growth and rising dependency ratios in the developed world have been one key factor behind the decline in nominal and real interest...

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Commodity futures returns are correlated across many different raw materials and products. Research has identified various types of factors behind this commonality: macroeconomic...

Macro factors of the risk-parity trade

Risk-parity positioning in equity and (fixed income) duration has been a popular and successful investment strategy in past decades. However, part of that success...

Identifying market regimes via asset class correlations

A recent paper suggests identifying financial market regimes through the correlations of asset class returns. The basic idea is to calculate correlation matrixes for...

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