Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared on February 21st in Project Syndicate.
Category Archives: financial markets
Repealing Dodd-Frank and Basel III
One of the responses to the financial turmoil of 2008 was new legislation and regulation intended to prevent such a disaster from recurring. These measures include the Dodd-Frank Act of 2010 and the third international accord from the Basel Committee on Banking Supervision of 2010-11. But today there are powerful voices seeking to amend or overturn these measures. President Donald Trump said on December 12:
We have to end Dodd-Frank…. The head of the banks, they’re petrified of the regulators….I mean, unless you have 5 time what you want to borrow, they don’t lend you any money. They’re afraid to loan people money and those are the people that should be able to borrow.
And Representative Patrick McHenry (R-NC), Vice Chair of the Financial Services Committee, wrote on January 31:
Agreements like the Basel III Accord … turned into domestic regulations that forced American firms of various sizes to substantially raise their capital requirements, leading to slower growth here in America.
Here I review the motivations for Dodd-Frank and Basel III and some of the proposals to amend or replace them.
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Paying for the Wall/Fence: Capital Controls Edition
Can we fund the partly see-through wall by taxing worker remittances?
What Explains the Trump Dollar?
Elevated real interest rates and policy uncertainty explain a dollar about 4% higher than election day.
Guest Contribution: “China’s Growing Influence on Asian Financial Markets”
Today we are pleased to present a guest contribution written by Serkan Arslanalp, senior economist at the IMF. This post is based on the paper by the same title, coauthored with Wei Liao, Shi Piao, and Dulani Seneviratne (all of the IMF).
US Financial Conditions and Emerging Market Stress: The Outlook
From NYT:
…around the globe, the surge in the dollar is provoking financial jitters.
Emerging market countries and corporations that have been binging on cheap dollar debt for more than a decade now face a spike in servicing costs and elevated debt burdens.
Raise the Yuan! Implications for the Treasury Spread
Some back-of-the-envelope calculations: If we get what President Elect Trump says he wants — no depreciation of the yuan — what happens to the Treasury 10 year-3 month spread?
Factors in low real interest rates
The real return on long-term government bonds has dropped steadily over the last 30 years, falling from values around 4% to something closer to zero or even negative for many countries today. What accounts for this remarkable development, and what are the prospects for this situation to continue?
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Guest Contribution: “Shadow Rates, Forward Guidance, and Unconventional Monetary Policy”
Today we are pleased to present a guest contribution by Yi Zhang, Ph.D. candidate at the University of Wisconsin-Madison. This post draws upon this paper.
Rising interest rates and the term premium
Last week I puzzled over the response of financial markets to the U.S. election. Since the election, the S&P500 is now up 3%, the dollar is up 4.6% against the euro, and most remarkable of all, the 10-year Treasury rate has gone up 50 basis points. Here I offer some further thoughts on the last development.
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