Today, we’re pleased to present a guest contribution written by Yin-Wong Cheung and Wenhao Wang (City University of Hong Kong).
Category Archives: financial markets
Guest Contribution: “Global bond market contagion in times of Covid-19”
Today, we’re pleased to present a guest contribution written by Laurent Ferrara (SKEMA Business School and International Institute of Forecasters) and Capucine Nobletz (University Paris Nanterre).
Guest Contribution: “Market volatility and the length of the Covid-19 recession”
Today, we are pleased to present a guest contribution written by Valerio Ercolani and Filippo Natoli, both of the Directorate General for Economics, Statistics and Research of the Bank of Italy. The views presented in this note represent those of the authors and not necessarily reflect those of the Bank of Italy.
After the economic downturn that followed the outbreak of the Covid-19 crisis, private forecasters see a rebound in the third quarter of 2020 both in the US and worldwide. While this appears as the most plausible scenario assuming lockdown and social distancing measures are soon relaxed, a recessive dynamics through the end of the year cannot be ruled out. A simple probit model augmented with market volatility, which reached its maximum last March, forecasts a more prolonged recession in the United States. Historically, turmoil in financial markets informed us that the associated recessions were not close to the end.
Guest Contribution: “Banks on the Brink”
Today we are fortunate to be able to present a guest contribution written by Mark Copelovitch (University of Wisconsin – Madison) and David Singer (MIT).
Guest Contribution: “Charting This Crisis”
Today, we are fortunate to present a guest contribution written by Ashoka Mody, Charles and Marie Visiting Professor in International Economic Policy, Woodrow Wilson School, Princeton University. Previously, he was Deputy Director in the International Monetary Fund’s Research and European Departments. He is the author of “EuroTragedy: A Drama in Nine Acts,” recently updated with a new afterword.
Recession Probability for Term Spread thru 2/24
If the last few days of February is like the rest, then recession probabilities are up. Using a plain-vanilla probit model of recession based on the10yr-3mo spread, the following recession probabilities are obtained.
10yr-3mo Treasury Spread and TIPS 10yr
Figure 1 shows both of these at monthly frequency, with February data through 2/21.
What Determines the Strength of Interest Rate Linkages between Countries?
Decisions regarding the trilemma, but also choices regarding macroprudential policies have an impact. From the revised version of Joshua Aizenman, Menzie Chinn and Hiro Ito, “Financial Spillovers and Macroprudential Policies” (forthcoming Open Economies Review):
Required Reading on the History of (Macro)economic Thought
Why was the financial crisis of 2008 so surprising to so many macroeconomists (but from my experience, a little less so for international finance economists familiar with financial crises in emerging markets…)? From the conclusion to George Akerlof’s “What They Were Thinking Then: The Consequences for Macroeconomics during the Past 60 Years” in the latest JEP.
Guest Contribution: “How Are Uncertainty and the Uncovered Interest Parity Condition Related?”
Today, we are pleased to present a guest contribution written by N.R. Ramirez-Rondan and Marco E. Terrones (Universidad del Pacifico).