New-breed global investors and emerging-market financial stability

Gaston Gelos, Hiroko Oura 23 August 2014

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The investor base matters since different investors behave differently. During the emerging-market sell-off episodes in 2013 and early 2014:

  • Retail-oriented mutual funds withdrew aggressively, but investors from different regions also tended to behave differently;
  • Institutional investors such as pension funds and insurance companies with long-term strategies broadly maintained their emerging-market investments.

Figure 1 shows the facts.

Figure 1. Bond flows to emerging-market economies 

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Topics:  Financial markets International finance

Tags:  Pension Funds, financial stability, capital flows, investment, emerging markets, financial deepening, herding, original sin, mutual funds, institutional investors

The unrecognised benefits of grade inflation

Raphael Boleslavsky, Christopher Cotton 16 August 2014

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Since the early 1980s, the mean grade point average at American colleges and universities has risen at a rate of between 0.1 and 0.15 points per decade. Most of this increase can be attributed to an increase in the share of As assigned (which now comprise nearly half of all grades), with significant drops in the assignment of lower grades (Rojstaczer 2011 and Rojstaczer and Healy 2012).

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Topics:  Education Labour markets

Tags:  education, human capital, investment, grade inflation

Secular stagnation: Facts, causes, and cures – a new Vox eBook

Coen Teulings, Richard Baldwin 15 August 2014

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Economic growth is still anaemic despite years of zero interest rates.

  • Is ‘secular stagnation’ to blame? What does secular stagnation really mean? And if it’s for real, what must be done?

Today, VoxEU.org launches an eBook that gathers the views of leading economists including Summers, Krugman, Gordon, Blanchard, Koo, Eichengreen, Caballero, Glaeser and a dozen others (edited by Coen Teulings and me). Collectively, the chapters suggest that something historic is afoot.

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Topics:  Global crisis Macroeconomic policy Monetary policy

Tags:  interest rates, US, Europe, Japan, investment, macroeconomics, Great Recession, zero lower bound, savings, secular stagnation, SecStag debate

Piketty’s laws with investment replacement and depreciation

Ton van Schaik 06 July 2014

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Thomas Piketty has recently drawn worldwide attention with the proposition that the disparity between wage earners and capital owners is increasing, and that governments should intervene to bring this process to a standstill.

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Topics:  Frontiers of economic research Macroeconomic policy

Tags:  investment, capital depreciation

Do all firms have equal access to external financing?

Neil Kay, Gavin Murphy, Conor O'Toole, Iulia Siedschlag, Brian O'Connell 29 June 2014

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The proportion of bank loan acceptances has fallen significantly following the crisis, along with the level of enterprise investment. The sharpest falls in both have been in countries hardest hit by the crisis. While in a number of countries – such as Finland, Malta, and Sweden – the declines have been modest, in others – such as in Bulgaria, Ireland, Denmark, Lithuania, Spain, and Greece – they have approached or exceeded 30%.

Figure 1. Percentage change in bank loan acceptances

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Topics:  EU policies Financial markets

Tags:  investment, lending, credit, Finance, SMEs, credit rationing, borrowing, information asymmetries

Lacklustre investment in the Eurozone: Is there a puzzle?

Marco Buti, Philipp Mohl 04 June 2014

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On the importance of investment for the Eurozone economy

According to the European Commission’s most recent forecast, real economic activity in the Eurozone is expected to recover at a moderate pace until 2015, and to remain significantly weaker than in the US (European Commission 2014a).

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Topics:  EU policies Macroeconomic policy

Tags:  eurozone, growth, European Commission, investment, uncertainty, structural reforms, Bankruptcy, Eurozone crisis, public investment, banking union, financial fragmentation

US electrification in the 1930s

Carl Kitchens 29 January 2014

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In 1930, fewer than 10% of farms in the US had access to electricity. By the mid-1950s, almost every farm in the country had electricity. While the US was able to extend electricity to its rural locations rapidly over a 25-year period, much of the developing world still remains without electricity today. In 2012, 1.3 billion people lived without electricity worldwide.

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Topics:  Development Economic history

Tags:  growth, Agriculture, technology, investment, subsidies, electricity, infrastructure, electrification

Why Asian firms hold cash

Charles Yuji Horioka, Akiko Terada-Hagiwara 25 January 2014

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In many, if not most, economies, sharp declines in household saving rates have been offset by sharp increases in corporate saving rates for the past two decades (see, for example, Karabarbounis and Neiman 2012). Even so, relatively little research has been done on the determinants of corporate saving.

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Topics:  Financial markets

Tags:  investment, Asia, saving, financial frictions, savings, corporate saving, borrowing constraints

Dark side of housing-price appreciation

Indraneel Chakraborty, Itay Goldstein, Andrew MacKinlay 25 November 2013

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Policymakers around the world often worry about decreases in real-estate prices and other asset prices, and take measures to prevent them. For example, in the aftermath of the financial crisis, the Federal Reserve has engaged in large-scale asset purchases – especially of mortgage-backed assets – to support the housing market and, in turn, the overall economy.

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Topics:  Financial markets Monetary policy

Tags:  housing, Federal Reserve, investment, asset prices, banks, lending, real estate

How to get around credit constraints? The role of renting and leasing during financial crises

Peter N. Gal, Gabor Pinter 21 September 2013

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How does the ownership of capital affect the aggregate behaviour of the economy? Does it matter whether firms own or rent production capital such as machinery, equipment, offices, and structures? This question has been somewhat neglected by macroeconomists, mainly because in a frictionless world the question of capital ownership is irrelevant – firms are indifferent between renting and owning (Jorgenson 1963).

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Topics:  Financial markets

Tags:  financial crises, investment, business cycles, credit constraints, rental markets

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