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Begin New Search Topic International Trade and Finance Publication Year within 25 Years

1511. Do Markets Care Who Chairs the Central Bank?

Author:
Adam S. Posen and Kenneth N. Kuttner
Publication Date:
05-2007
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper assesses the effects of central bank governor appointments on financial market expectations of monetary policy. To measure these effects, we assemble a new dataset of appointment announcements from 15 countries, and conduct an event study analysis on exchange rates, bond yields, and stock prices. The analysis reveals a significant reaction of exchange rates and bond yields to unexpected appointments. The reactions are not unidirectional, and thus do not suggest new governors suffer from a generic credibility problem. Federal Reserve chairman appointments stand out in terms of their unusually pronounced effects on financial markets.
Topic:
Economics, International Trade and Finance, Markets, and Politics

1512. A New President, a New Paradigm

Author:
Roger Noriega
Publication Date:
08-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
U.S. policy in Latin America and the Caribbean always seems to inspire criticism: Too much, too little, too late. Back off. Get in the game. Don't just stand there, do something. Don't do something, just stand there. Our geographic closeness has meant a rich, natural partnership, but this proximity easily stirs concerns over sovereignty. When the United States is preoccupied with events in other parts of the world, regional pundits accuse Washington of indifference. If we speak clearly on the issues in Latin America, we are excoriated for poking our nose “where it doesn't belong.” So where does this leave U.S. foreign policy in the region? It could be that what we do may not be as important as how we do it. The first step in developing a new paradigm for engaging the Americas is using the 2008 election cycle here at home to develop a serious domestic constituency for our policy. Then we should shape that policy through a conscientious dialogue with stakeholders in the region.
Topic:
International Trade and Finance, Political Economy, and Regional Cooperation
Political Geography:
United States, America, Washington, Moscow, and Latin America

1513. Why Do Financial Firms Take Too Much Risk?

Author:
John H. Makin
Publication Date:
12-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
It is important at the outset to define the terms “financial firms” and “too much risk.” By “financial firms,” I mean commercial banks, investment banks, brokerages, and insurance companies that solicit and manage funds for the public. By “too much risk,” I mean actions undertaken by managers of financial firms that result in substantial losses for the shareholders (owners) of such firms. On an aggregate level, I call “systemic risks” those that emerge when regulators and policymakers are forced to choose between either reinforcing (with bailouts) the venturesome investing that created the problem or allowing substantial damage to depositors and shareholders in financial firms, and possibly to the economy as a whole.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

1514. One Fix Too Many

Author:
John H. Makin
Publication Date:
11-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Just as Wall Street was celebrating the presumed end of the latest financial crisis by pushing stocks to record highs, proclaiming continued strong earnings growth, and continuing to recite the mantra “slowdown, but no recession,” Treasury Secretary Henry Paulson provided a vivid reminder that the housing and mortgage crisis is not over. On Monday, October 15, while Citibank was reporting that compared with last year's results its third-quarter earnings had fallen by 57 percent, the Treasury's “super-SIV” plan was revealed. It seems that the Goldman Sachs alumni at Treasury—Paulson and his under secretary for domestic finance, Robert Steel—had become concerned that the offbalance- sheet special investment vehicles (SIVs) held by commercial banks might not be financeable. That would mean that not enough investors could be found to provide the short-term financing necessary to sustain SIVs, the repositories of hardto- value securitized mortgages that continue to plague bank balance sheets.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

1515. Global Rebalancing

Author:
John H. Makin
Publication Date:
10-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The global economic and financial picture is changing rapidly. A review of some of the key elements is in order, as the U.S. economy has slowed rapidly and the Federal Reserve has responded aggressively with rate cuts, while the Bank of England's tough policies pushed one of the United Kingdom's largest mortgage lenders, Northern Rock, to the brink of collapse as a bank run on that suddenly beleaguered institution ensued. Meanwhile, Japan, still the world's second-largest economy—though perhaps the least dynamic of the major ones—slipped into negative growth at a 1.2 percent annual rate in the second quarter after having initially reported growth over 2 percent. The rate-boost-obsessed Bank of Japan finally decided to stop raising rates, and, to add to the complexity of the picture, Japan's relatively new prime minister Shinzo Abe resigned, unable to provide the leadership sorely needed in a nation lacking economic and political direction.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States, Japan, United Kingdom, and England

1516. The Music Stops

Author:
John H. Makin
Publication Date:
09-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
During a 10:00 a.m. conference call on August 17, 2007, Federal Reserve vice chairman Donald Kohn and New York Federal Reserve president Timothy Geithner were urging Citicorp chief executive Chuck Prince and his fellow big bank CEOs to use the Fed's discount window, which is set up to alleviate liquidity pressures on individual banks or on the banking system as a whole. Prince, the head of the world's largest bank (Or is it the second largest? No one really knows since bank balance sheets are so full of securities that cannot be priced.) may have been wishing that he had not chosen to offer a chillingly clear characterization of the global financial system a little more than five weeks earlier in a Financial Times interview on July 9, three weeks before the global credit markets began to seize up.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

1517. The Band Plays On

Author:
John H. Makin
Publication Date:
08-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In a July 9 interview in Tokyo with the Financial Times about the surging, liquidity-driven financial sector, Citigroup chief executive Chuck Prince characterized the situation in global financial markets more insightfully than some investors might have wished: “When the music stops, in terms of liquidity, things will get complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing.” Prince elaborated further, saying that (as the article paraphrased it) “the way big Wall Street banks and hedge funds had picked up troubled subprime mortgage lenders was an example of how 'liquidity rushes in' to fill the gap as others spot a buying opportunity.”
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States and Tokyo

1518. Why Interest Rates Are Rising

Author:
John H. Makin
Publication Date:
07-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The bond “conundrum” that Alan Greenspan spoke of toward the end of his tenure at the Federal Reserve is disappearing. Chairman Greenspan was drawing attention to unusually low longterm interest rates worldwide on bonds.1 More recently, however, in less than a month interest rates on U.S. ten-year notes have risen by 60 basis points with no change in expected inflation. The shift is all the more unusual because of its abruptness and relative magnitude: in statistical terms, it is a rise of three standard deviations in “real” (inflation-adjusted) rates in a market that has been quiet over the past five years. Moreover, the few “surprise” moves since the tech-stock bubble burst in 2000 have mostly been in a downward direction.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

1519. The Remarkable American Consumer

Author:
John H. Makin
Publication Date:
06-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The American consumer is a very persistent spending machine. It is American consumption growth running at higher than 4 percent annualized— well above its long-term average—that has kept the economy comfortably out of recession for the past six months as the housing slowdown has subtracted more than a percentage point from growth. Even with a substantial additional drag on the U.S. economy from other areas—inventory liquidation, weakening net exports, and rapidly rising gasoline prices—the American consumer's spending surge has still been enough to keep GDP growth in positive territory.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States and America

1520. Weaker Capital Spending Cuts Growth Forecast

Author:
John H. Makin
Publication Date:
05-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
On Friday, April 13, the Wall Street Journal's lead story on the unlucky U.S. economy was “Economy Enemy No. 1: Soft Capital Spending.” The nation's leading business newspaper was acknowledging a six-month slowdown in capital spending that has, along with the drag from the housing sector, been lowering U.S. growth.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States