EconReporter

The above figure shows the balance sheet of four major central banks from 2005 to 2015. Above the horizontal axis is the asset side...

A spread of over 3.5 percentage points between US and Hong Kong Interest rate persisted for close to two months and so far arbitrage has failed to close the gap, leading to discussion of whether Hong Kong's Linked Exchange System is failing. This article, however, will explore some technical factors behind this interesting interest rate gap.

Since the Euro crisis, investors and policymakers are well aware of the so-called "doom loop" between the banking system and the sovereign. That is, a crisis originating in the banking system (sovereign) will weaken the sovereign (banking system), which in turn will worsen the banking (sovereign) crisis itself. In a recent ECB discussion Paper "Managing the sovereign-bank nexus", the 7 economists - Giovanni Dell’Ariccia, Caio Ferreira, Nigel Jenkinson, Luc Laeven, Alberto Martin, Camelia Minoiu, and Alexander Popov - coauthored the paper suggested that the banks and sovereigns are linked by three interacting channels:

While GDP rebounded by 0.65% in Q3 (2.6% annualized), the expansion was driven almost entirely by a 2.2% drop in imports.

This week, the trio who was directly responsible for the decision to let Lehman fail – Bernanke, Tim Geithner (then New York Fed President), and Hank Paulson (then Treasury Secretary) – joined together at a panel held by Brookings Institution and spoke about the lessons they had learned from the crisis.

Hysteresis is referred to the hypothesis that recessions may have permanent effects on the level of output relative to trend.

Ricardo Reis, economics professor at the London School of Economics, explained that there were telling signs that the increase in cost of living started ealry-2021 was not a "transitory" phenomenon.

Macroprudential policies, it is argued, are more targeted and can complement central bank’s use of interest rate policy.

Trump-appointed Fed governors will hold a board majority by the time Powell steps down as a governor. And that could matter a lot.

Reserve Management Purchases (RMP) is a form of open market operations under which the Federal Reserve injects reserves into the banking system through "permanent" asset purchases with an aim to ensure the level of reserves remain "ample".