Monthly Archives: April 2011

Chris Giles

Within central banks everyone these days is in love with macroprudential policy. Since macroprudential is synonymous with something good – akin to education and justice – central bankers will term whatever action they are taking as macroprudential.

Emerging markets reckon capital controls and managed currencies are macroprudential policy. I can imagine trade barriers could likewise be described as such. And in advanced economies, any restrictions on banks – good or bad – achieve less scrutiny if they are described as macroprudential policies. Read more

Chris Giles

British politics is in a bit of a tizz this morning about whether David Cameron will block Gordon Brown, his predecessor as PM, as the next managing director of the International Monetary Fund. Mr Cameron had a good line about it on the radio this morning:

“It does seem to me that, if you have someone who didn’t think we had a debt problem in the UK, when we self-evidently do, they might not be the best person to work out whether other countries around the world have a debt and deficit problem”

The thing is, apart from British journalists, no one else was talking about Mr Brown as the next MD of the Fund at all. Read more

Owing to holidays and travel arrangements, Money Supply posts will be reduced between Friday April 15 and Tuesday May 3. There will also be no newsletter during this time.

Greek debt affordability is set to worsen considerably, according to the IMF’s Global Financial Stability Report. But in a series of charts comparing 11 countries, the striking thing is how exposed indebted economies are to rising interest rates or falling GDP.

These charts (a full set toward the end of this post) are a great way to depict several moving parts to get to the nub of the issue. The basic idea is: black line inside the green area – good; black line inside redder areas – bad. Dotted line (forecast) – likewise. (The black line, incidentally, is the historical interest rate on government debt.)

The country profiles, relative to each other, are much as you’d expect. Greece, Ireland and Portugal have less favourable interest burdens (in that order). The US, incidentally, is forecast to edge into the yellow. Japan is not. Read more

The Singapore dollar jumped to a record level against the US dollar on Thursday after the island state tightened monetary policy for the second time in six months to combat rising inflation. Economists said the move was likely to be followed by a round of interest rate rises across Asia as governments sought to curb inflation generated by rapid economic growth in the region and loose monetary policy in the west.

Singapore, which conducts its monetary policy through changes to the exchange rate, rather than through interest rates, said it was responding to faster than expected economic growth and a fall in commercial interest rates triggered by abundant global liquidity. The Monetary Authority of Singapore, the country’s central bank, said it had shifted its exchange rate policy band upwards to below the prevailing level of the Singapore dollar’s nominal effective exchange rate. Read more

Greece needs time to convince international investors about its reform programme and may not be able to return to financial markets next year as planned, its finance minister has admitted.

George Papaconstantinou’s comments in a Financial Times interview highlight how Greece continues to struggle to turn its economy round almost a year after the launch of an €110bn European Union and International Monetary Fund bail-out. They may fuel speculation that European leaders will have to find fresh ways of alleviating Greece’s debt problems to avert a default scenario. Read more

To discourage volatile short-term capital flows, the Bank of Indonesia will extend the minimum holding period of its bank certificates, SBIs, from one month to six months, effective May 13. This means traders holding the notes will not be able to sell them in the secondary market until they have held them for six months.

The unexpected news builds upon previous measures aimed at slowing down investment in very short-term debt. For example, the Bank of Indonesia has already all but stopped issuing 3- and 6-month SBIs. A key risk for countries receiving increased capital inflows is that they might reverse, which could have sudden and unpredictable consequences, as the Bank of Japan has pointed out. The Bank of Israel’s Stanley Fischer has made the same argumentRead more

Chris Giles

Everyone knows that you should treat monthly economic data with caution since what seems like news is often just a blip – something random in measurement. Since you cannot normally tell the difference between a blip and news on the day, most media organisations understandably treat the release as news and perhaps add some caution to a story towards the end when few people will still be taking notice.

Today is different. I can definitively say the good UK employment data is a blip and should not be considered news. The reason is that the Office for National Statistics are decent enough to publish underlying data for the series proving the case. Read more

Special coverage: IMF meetings