Financial markets

Rui Albuquerque, Yrjo Koskinen, Raffaele Santioni, 23 November 2021

How did the stock market crash caused by Covid-19 affect different asset classes and fund types? This column studies the trading behaviour of actively managed equity mutual funds in the US during the crisis and finds that funds with high environmental, social, and governance ratings helped to stabilise the market, but other funds also provided support for ESG stocks. All funds experiencing inflows increased their net purchases, but this behaviour was stronger for ESG funds. Non-ESG funds experiencing outflows increased their net sales, but this was limited to their holdings of non-ESG stocks.

Georgios Georgiadis, Gernot Müller, Ben Schumann, 17 November 2021

In times of heightened global risk, investors flock to the dollar as their capacity or willingness to bear risk declines. As a result, the dollar appreciates. This column examines the effects of global risk shocks and the dollar’s role in the international adjustment to such shocks, finding that appreciation of the dollar amplifies the adverse effect of global risk shocks considerably. Policies that stabilise the dollar in the face of global risk, such as the liquidity provision by the Federal Reserve in response to the COVID-19 pandemic, can help stabilise global economic activity.

Massimiliano Affinito, Raffaele Santioni, 15 November 2021

Covid-19 had a substantial impact on financial markets around the world. This column uses granular worldwide data to assess mutual fund portfolio responses to the crisis. The authors find that mutual funds divested from assets considered in most trouble at the time – i.e. those issued in countries and by industries most affected by the pandemic – but with several dimensions of heterogeneity according to asset type, investment policy, and performance. The findings corroborate the existence of an unconventional monetary policy channel acting through mutual funds that could be used to stabilise the funds themselves.

Erik Feyen, Jon Frost, Leonardo Gambacorta, Harish Natarajan, Matthew Saal, 23 October 2021

Big Techs’ expansion into financial services can bring competition, efficiency, and inclusion, particularly in emerging market and developing economics. But it also gives rise to issues concerning a level playing field with banks, operational risk, too-big-to-fail issues, as well as challenges for antitrust rules and consumer protection. This column presents a policy triangle that highlights the trade-offs between three objectives: financial stability, competition, and data privacy. Handling these challenges requires more coordination on rules and standards, both between domestic authorities and across international borders. 

Maurice Obstfeld, 15 October 2021

Even after their role in the global financial crisis, globalised, minimally regulated financial markets are still regarded as inevitable and, on balance, good for us. Maurice Obstfeld of Berkeley tells Tim Phillips about the short but action-packed history of financial globalisation and asks whether we should be rethinking this aspect of capitalism too.

Read more about the research presented and download the free discussion paper:

Obstfeld, M. 2021. 'The Global Capital Market Reconsidered'. CEPR

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