[from Columbia Business School’s Center on Japanese Economy and Business]
Japan’s Inflation Dynamics and the Role of Monetary Policy (April 22, 2022)
by Haruhiko Kuroda (黒田 東彦), Governor, Bank of Japan (日本銀行)
Category: Economics
UN DESA Global Policy Dialogue Series: The Future of Sustainable Development Financing
Thursday, 14 April 2022, 8:30-10:00 AM EDT
- What should be the role of development banks in closing financing gaps?
- What tools or guidance documents for responsible borrowing and lending exist, and how can they be useful?
- How can the global community better support the most vulnerable countries and ease their debt burdens?
Two years into the pandemic, COVID-19 has exposed and exacerbated global inequalities and set back hard-earned progress towards achieving the Sustainable Development Goals (SDGs). It is critical that the global community work together to avoid the catastrophic situation in which one group of countries recovers, and another sinks deeper into a cycle of poverty and unsustainable debt. To support efforts to overcome the great finance divide, the United Nations Department of Economic and Social Affairs (UN DESA) will host a discussion with experts exploring ideas to improve access to affordable financing as well as how to resolve situations of unsustainable sovereign debt. Speakers will examine the latest findings from UN DESA’s new report, the 2022 Financing for Sustainable Development Report.
Register here by 13 April 2022.
The event is free and open to all, and will be streamed live on UN DESA’s Facebook page. It will be held in English with captions available in Arabic, Chinese, English, French, Russian and Spanish, and translation into American Sign Language. The event is made possible by the United Nations Peace and Development Trust Fund. All are welcome!
Bank of England Statistical Releases—February 2022
(from the Bank of England)
Money and Credit
Overview
These monthly statistics on the amount of, and interest rates on, borrowing and deposits by households and businesses are used by the Bank’s policy committees to understand economic trends and developments in the UK banking system.
Key Points
- Net borrowing of mortgage debt by individuals amounted to £4.7 billion in February. Mortgage approvals for house purchases fell slightly to 71,000 in February, from 73,800 in January, but remains above the 12-month pre-pandemic average up to February 2020 of 66,700.
- Consumers borrowed an additional £1.9 billion in consumer credit, on net, of which £1.5 billion was new lending on credit cards.
- Sterling money (known as M4ex) increased by £7.2 billion in February. Households’ holdings of money weakened with net flows of £4.0 billion, compared with £7.2 billion in January.
- The effective interest rate paid on individuals’ new time deposits with banks and building societies rose by 10 basis points to 0.77%.
- Large businesses borrowing from banks rose to £4.0 billion in February, whilst small and medium sized businesses repaid £0.5 billion. Private non-financial companies (PNFCs) redeemed £4.1 billion in net finance from capital markets.
Read the full paper [Archived PDF].
Effective Interest Rates
Commentary on this data is now incorporated into the Money and Credit statistical release [Archived PDF, from above] to facilitate analysis.
Get the data tables [Archived Excel XLS].
BEA News: Gross Domestic Product (Third Estimate), Corporate Profits, and GDP by Industry, Fourth Quarter and Year 2021
(from the U.S. Bureau of Economic Analysis)
The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:
Real gross domestic product (GDP) increased at an annual rate of 6.9 percent in the fourth quarter of 2021, following an increase of 2.3 percent in the third quarter. The increase was revised down 0.1 percentage point from the “second” estimate released in February. The acceleration in the fourth quarter was led by an acceleration in inventory investment, upturns in exports and residential fixed investment and an acceleration in consumer spending. In the fourth quarter, COVID-19 cases resulted in continued restrictions and disruptions in the operations of establishments in some parts of the country. Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased as provisions of several federal programs expired or tapered off.
Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $20.4 billion in the fourth quarter, compared with an increase of $96.9 billion in the third quarter.
Private goods-producing industries increased 5.4 percent, private services-producing industries increased 8.5 percent, and government increased 0.1 percent. Overall, 19 of 22 industry groups contributed to the fourth-quarter increase in real GDP.
Read the full report [Archived PDF].
Research Update: Oil Price Dynamics Report, March 28
Our oil price decomposition, reported weekly, examines what’s behind recent fluctuations in oil prices: demand factors, supply factors, or some combination of the two?
(from the Federal Reserve Bank of New York)
Highlights
Oil prices increased over the past week, mostly owing to lower supply.
- Over the past week, a decrease in anticipated supply and, to a lesser extent, an increase in demand expectations resulted in higher oil prices. In 2021:Q4, oil prices decreased as increased anticipated supply outstripped the effect of an improving demand outlook.
- In 2021:Q3, oil prices rose owing to increased demand and decreased supply. Rising demand expectations were the main cause of higher oil prices in 2021:Q1 and 2021:Q2. In 2020:Q1, oil prices plummeted owing to decreased demand and increased supply, whereas in 2020:Q2, oil prices rose owing to increased demand. Increased supply led to falling oil prices in 2020:Q3, and this reversed in 2020:Q4, as oil prices rose owing to increased demand and decreased supply.
- Overall, between 2014 and 2017, both lower global demand expectations and higher anticipated supply held oil prices down. Since mid-2017, this trend reversed as stronger demand expectations and stabilizing anticipated supply drove oil prices higher. This lasted until 2018:Q4, when weaker demand lowered prices. Oil prices rose in 2019 due to increasing demand expectations.
Read the full report [Archived PDF].
View the data [Archived Excel XLS].
Germany-Watching: Economics (U.S. Money Market Fund Reform)
from Deutsche Bundesbank Eurosystem’s Bundesbank Research Centre:
You Can’t Always Get What You Want (Where You Want It): Cross-Border Effects of the U.S. Money Market Fund Reform [PDF]
Authors: Daniel Fricke, Stefan Greppmair, Karol Paludkiewicz
Non-technical summary
Research Question
Money market funds (MMFs) are an important part of the growing segment of non-bank financial intermediaries. This paper contributes to this literature by analyzing the cross-border effects of the 2014 U.S. MMF reform, which was implemented several years prior to the EU Regulation. We study whether euro area MMFs received inflows as a consequence of the reform and investigate the (unintended) economic effects on the basis of the non-synchronized implementation dates of the regulatory changes in the U.S. and the EU.
Contribution
To the best of our knowledge, we are the first to examine the cross-border effects of the 2014 U.S. MMF reform. Prior work has shown that the reform led to a substantial decline of the institutional prime segment in the U.S. (MMFs that invest primarily in non-sovereign debt instruments). Moreover, these funds increased their risk-taking due to the increased competition and newly imposed liquidity restrictions left these funds more prone to large outflows (run risks).
Results
We document both positive and negative effects of the U.S. reform on institutional MMFs in the euro area. These funds, particularly those from the prime segment, experienced substantial inflows from foreign investors around the implementation of the U.S. reform and we show that these cross-border flows were largely motivated by the search for money-like instruments. While euro area MMFs reduced their risk-taking, the industry as a whole has become more concentrated and possibly more exposed to run risks. This risk materialized in the COVID-19 induced stress period during which these funds faced large outflows by foreign investors.
Read the full discussion paper [archived PDF].
World-Watching: This Week in Petroleum
(from the U.S. Energy Information Administration, This Week in Petroleum)
Release Date: February 24, 2022
Low Inventories and High Demand Boost Global Distillate Crack Spreads
Rising crude oil prices, low refinery production, and high consumption of distillate fuel, which includes diesel fuel and heating oil, have contributed to the highest nominal (not adjusted for inflation) middle distillate prices since 2014 (Figure 1). The front-month futures price for ultra-low sulfur diesel (ULSD) for delivery in New York Harbor (NYH ULSD) reached as high as $2.96 per gallon (gal) on February 14, 2022. On that same day, ULSD priced in the Amsterdam, Rotterdam, and Antwerp (ARA) hubs of Northwest Europe reached $2.74/gal, and distillate fuel oil priced in Singapore (Singapore 500 ppm) reached $2.54/gal. Prior to October 2021, distillate prices had not exceeded $2.50/gal in any of these three major pricing hubs since 2014.
Read the EIA analysis [archived PDF]
Data (Excel .xls files)
Join Us for Conversations on Central Banking: Inflation and Monetary Policy
The Center for Inflation Research and the Federal Reserve Bank of Cleveland invite you to attend Cleveland Fed Conversations on Central Banking, on Tuesday, March 1, 2022, from 2:00 – 2:40 pm EST. The session topic will be Inflation and Monetary Policy.
Distinguished panelists include:
Jason Furman, Aetna Professor of the Practice of Economic Policy, Harvard Kennedy School.
Catherine Mann, Monetary Policy Committee Member, Bank of England
Ricardo Reis, A.W. Phillips Professor of Economics, London School of Economics and Political Science.
The session will be moderated by Colby Smith, U.S. Economics Editor, Financial Times.
View the entire agenda [archived PDF].
You must register in advance to attend. Upon registering, you will receive a confirmation email containing additional instructions to join the virtual meeting and a way to add it to your calendar.
If you have any questions, please contact Diane.Roberts@clev.frb.org.
Global Finance-Watching, Colombia
Colombia’s New Regulatory Framework for Beneficial Ownership: Analysis of Strengths and Weaknesses
Countries around the world are increasingly recognizing the importance of establishing beneficial ownership registries as a means to promote transparency and combat financial crimes. As part of this international trend, Colombia passed beneficial ownership legislation in 2021 and emitted regulations for rollout of the registry in 2022. Global Financial Integrity analyzed Colombia’s new legal and regulatory framework for beneficial ownership and identified five strengths and five weaknesses, as are described in this legal review.
Strengths of the Regulatory Framework:
- The registry will be anchored to the existing Unique Tax Registry (Registro Único Tributario, or “RUT”).
- Mechanisms for updating beneficial ownership information are efficient and digitalized.
- Penalties for non-compliance.
- The 5% threshold.
- Creating an Identification System for Structures that are Not Legal Entities.
Weaknesses of the Regulatory Framework:
- Limited information access, both inside and outside of government.
- Identifying the beneficial owner.
- Reporting responsibilities of foreign-owned companies.
- Lack of clarity surrounding verification.
- Lack of clarity regarding anti-corruption and anti-money laundering applications.
Read full report [archived PDF]
European Central Bank’s Macroprudential Bulletin
The European Central Bank’s Macroprudential Bulletin provides insight into the work they are currently doing in the field of macroprudential policy. Their goal is to raise awareness of macroprudential policy issues in the euro area by making their ongoing work and thinking in this field more transparent, and to encourage broader discussion on these key issues.
January 2022, Issue 16
Reforming money market funds
Money market funds perform a key function for the financial system by linking the short-term funding and cash-management needs of various market participants. Proposals to reform the regulation of these funds and enhance the sector’s resilience are assessed in this issue of the Macroprudential Bulletin.
Assessing possible reform proposals
At the onset of the coronavirus pandemic, money market funds proved particularly vulnerable when faced with severe market disruption. This article looks at specific policies to address the liquidity risk of these funds and ensure they can deal with large and unexpected outflows under similar periods of stress.
[Archived PDF of full article]
The impact of a public debt quota on money market funds
Public debt assets tend to be easier to draw down and sell during market stress than private sector debt. Having a minimum public debt quota for private debt money market funds could increase their shock-absorbing capacity. What are the costs and benefits of such a proposal?