Financial Stability

'Economists at Fault for Recent Crises': An Interview with the Bank of England's Andy Haldane

In a recent interview, INET Advisory Board member and Executive Director for Financial Stability at the Bank of England Andy Haldane took aim at the economics profession.

Asked if the economists should shoulder blame for the recent crises, Haldane didn’t pull any punches: Read more

How does China’s Monetary Policy Committee influence monetary policies? - A brief history (1)

Nowadays we see overwhelming comments on China’s monetary policy in the local press every day. These comments could be from the government officials, college professors or research analysts, but one specific group of people have been paid particular attentions to – the monetary policy committee members of the People’s Bank of China.   Inspired by similar studies focused on the Fed’s Open Market Committee, we try to analyze the public remarks of the monetary policy committee members to gain some insights. Read more

Is it possible or even necessary for the Renminbi to become a dominant international currency ?

Since 2009, we have seen a rapid rise of Renminbi in the international trade settlements. China’s exports and imports settled in Renminbi have increased 48 times from January 2010 to December 2011. The Renminbi has also become the third-largest currency for LCs, with 4% market share after the US dollar and the Euro, according to the SWIFT. Many analysts believe these are perfect evidences that the Renminbi internationalization has been successful and it will continue to be very successful in the future. Some even argue that Renminbi will replace the US dollar as the dominant international currency in two decades, because China will become the world's largest economy very soon as what they believe. Read more

INET Spotlight – Dr. YV Reddy: How to save the financial system from itself?

This was the topic for INET Advisory Board Member and former Governor of the Reserve Bank of India DR. Y.V. Reddy as he recently gave the prestigious Per Jacobsson lecture in Basel, Switzerland. Read more

Debunking misconceptions on China?

Recently the research house CLSA issued an in-depth special report on Chinese economy called Misunderstanding China, trying to debunk certain so-called western illusions about China’s economy. Some of its points, such as the party’s influences on domestic financial institutions, the absence of a mature legal system and etc., are fairly reasonable. However, we believe that this report still illustrates a typical optimists’ view on China’s economy that we do not agree with. Therefore, we find it very necessary to clarify our standpoints of the Chinese Economy by raising our counter-arguments to some of CLSA’s assertions, with which we disagree most.

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Lethal Embrace? A Thought Experiment

At the heart of the Eurocrisis lies a vicious circle where once there was a virtuous one.  Over the last week or two, the FT has been reflecting on the connection between the sovereign debt crisis and the bank crisis, conjoined twins (as George Soros has put it) of the current Eurocrisis.  See here, here, here.

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Swexit - When will Switzerland exit the euro?

Since September 2011, the Swiss National Bank has held a floor of 1.20 francs per euro. This floor has in practice been a peg, as the pressure has been in only one direction, downward (that is, in the direction of CHF appreciation).

Image via FT Alphaville Read more

Why FX deposits surge in China

China’s monetary statistics for April 2012 showed weakness in both loan and deposit growth. In particular, Renminbi deposits fell by 465.6bn yuan, compared to a 342.4bn increase in April 2011. However, bank deposits denominated in foreign currencies (FX deposits) in China have been surging since the beginning of this year. FX deposits increased by 32.5% in the first 4 months of 2012, compared with 6% growth in the first 4 months of 2011. Every month there is about 20bn USD added into the banks’ deposit accounts.

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PBoC against the market on USDCNY

We update our USDCNY interday-intraday framework, which was first proposed here. The advantage of this framework is that it decomposes USDCNY movements into two parts and thus distinguishes market view from PBoC’s view on USDCNY, which are often in opposite positions.

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Insights from Bagehot, for these Trying Times

Here is a talk I gave recently at Wake Forest University.  It is pretty long, but you can page through the video (on the left) by paging through the powerpoint (on the right), and anyway the last twenty minutes are devoted to questions.  I couldn't figure out how to embed it in the blog, but the link will get you there.