Three members of the Research Department of the International Monetary Fund have posted
at VOX.eu. They cite useful data about credit, house price, and equity price and trace correlations among cycles. May not be not Minsky, but it's a step in the right direction.
What are the main lessons and policy implications?Our study takes a first step in exploring financial cycles and documents two major features of these episodes:• Financial cycles can be long and deep, especially those in housing and equity markets.• Financial cycles accentuate each other and become magnified, especially during coincident cyclical episodes in credit and housing markets.Our analysis suggests that it is important to account for the interactions among cycles in different financial market segments when designing regulatory policies aimed at ensuring the overall health of the financial system, especially in terms of the design of macroprudential rules. For example, our results indicate that, as cycles in credit and housing markets tend to enhance each other, if both credit and house prices are growing rapidly, then it might be necessary to employ stricter rules and standards for mortgage lending as well as larger countercyclical buffers to moderate fluctuations in banks’ capital positions.
7 comments:
if both credit and house prices are growing rapidly, then it might be necessary to employ stricter rules and standards for mortgage lending as well as larger countercyclical buffers to moderate fluctuations in banks’ capital positions.
honestly, if they just learned this now we are really not in a safe waters. I mean isn't this like economics 101 or something? The difference between regulation and monetary policy is that regulation should fluctuate with the economy. It's becoming more and more true for me that if a man's in a suit, I don't trust them and if it's an institution I cannot trust them. Weird eh??
whoops!! I meant "regulation shout NOT fluctuate with the economy" LOL
unconvincing (not the concept but the supporting research & analysis).
so the summary from an investment perspective is.... "buy low, sell high".
thanks.
There is one major aspect missing usually in these analysis that has much to do with current geopolitic and economic structure: globalisation.
Capital flows can add even a more unstable element to current world economy and expand cycles even more.
Oh, and for an easy starting fix that any nation could do: please add housing (rent and property) to the damn CPI. But that would screw financial and real estate class and rentiers.
@chaos.
Globalization is essentially trade. Capital rich countries export to capital poor countries. The result is trade deficits because folks like china choose to save. As long as the currency issuer from the capital rich countries recognize the what the currency users are doing and then adjust accordingly by optimized the currency supply (ie run deficits) what's the harm? I think MMT is the only system that adequately addresses globalization. Globalization should be mutually beneficial to both populations - granted China's sweatshops could use a labor movement but the jobs pay better than rural farming.
Globalization of financial capital is awful and has done much more harm than good.
Indeed countries which were doing half-well developing their economy is because they put in place hard capital controls. No one benefits of financial shenanigans of investments banks, capital firms, or whatever.
Stop that non-sense, banking should stay as much localized as possible, this should be well proven by now.
P.S: Regarding of production globalization, yeah well, things won't be the same forever, and the status of reserve currency won't stay forever. Bigger empires have fallen, and US is essentially living above its means, running permanent trade deficit.
Not that I care much, but the situation will explode sooner or later, as it's doing intra-EMU right now.
@chaos i don't disagree with your sentiments. however i see this as an operational problem more than anything else. if the plant manager doesn't have a clue what they are talking about the plant is going be driven into the ground. what's the cause. ignorance. as cullen says the whole thing would be laughable if it wasn't so painful.
Post a Comment