Marius Zoican, 20 September 2014

Technological advances in equity markets entered the spotlight following the Flash Crash of May 2010. This column analyses the advantages and disadvantages of algorithmic and high-frequency trading. Ever-faster exchanges do not always improve liquidity. Following a speed upgrade in the Nordic equity markets, effective spreads posted by high-frequency traders increased by 32%.

Damiano Sandri, Ashoka Mody, 23 November 2011

European policymakers are confronting a heightened crisis characterised by a perverse and seemingly intractable interplay between sovereign debt pressures and financial-sector fragilities. This column argues that the payoffs from strengthening banks’ balance-sheets can still be large and, therefore, fiscal support is merited. But a more resolute strategy for winding down banks is also needed.

Tito Boeri, 04 October 2011

Today Italian five-year governments bonds are insured at 70 basis points above Spanish ones. In June it was the other way around. This column argues that this increase in Italian spreads is due not only to policy and communication failures but also to Berlusconi’s lack of personal credibility. The costs of such bad handling of the crisis could be of the order of €20 billion.

Jeffrey Frankel, Carlos Vegh, Guillermo Vuletin, 23 June 2011

With the ongoing financial turmoil in Europe, many emerging market countries are now deemed less risky than so-called “advanced” countries. This column examines why this is the case and finds that the cyclicality of a country’s fiscal policy – a sign of its riskiness – is inversely correlated with the quality of the country’s institutions.

Eduardo Levy Yeyati, Tomás Williams, 13 January 2010

Emerging markets have undergone structural changes that reduced their exposure to a global tightening, but they are still affected by US rates. This column suggests that positive US economic surprises that bring forward the undoing of quantitative easing and steepen the US Treasury yield curve may translate into wider emerging markets spreads. US economic strength may play a welcome sobering role in the surge of emerging market assets.

Silvia Sgherri, Edda Zoli, 17 November 2009

Can euro-area governments cushion the impact of the crisis without damaging market perceptions of their fiscal sustainability? This column suggests that euro-area sovereign spreads have typically reflected a common factor that mimics global risk repricing, not country-specific solvency concerns. But in the last year, market sentiments seem to have shifted to concerns about fragile national financial sectors and future debt dynamics.

Paul De Grauwe, 07 February 2009

Spreads of sovereign debt within the eurozone have increased dramatically during the last few months, largely as a result of panic in the financial markets. When it engages in quantitative easing, the ECB should privilege the buying of Irish, Greek, Spanish and Italian government bonds to eliminate the distortions and the externalities that these spreads create.

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