By José Viñals
Financial market liquidity can be fleeting. The ability to trade in assets of any size, at any time and to find a ready buyer is not a given. As discussed in some detail last fall in this blog, a number of factors, including the evolving structure of financial markets and some regulations appear to have pushed liquidity into a new realm: markets look susceptible to episodes of high price volatility where liquidity suddenly vanishes.
In our April 2015 Global Financial Stability Report we identify a new aspect to the problem: asset price correlations have risen sharply in the last five years across all major asset classes (see figure). […]
If financing is the lifeblood of European small businesses, then the effect of the financial crisis was similar to a cardiac arrest. The flow of affordable credit from banks was choked off and small and medium-sized enterprises (SMEs) were hit hardest. Today, with bank lending still recovering from that shock, smart policy actions could open up securitization as a source of financing to help small businesses start up, flourish and grow.
SMEs are vital to the European economy. They account for 99 out of every 100 businesses, two in every three employees, and 58 cents of each euro of value added of the business sector in Europe. Improving access to finance would therefore not only revive small businesses, but also support a strong and lasting recovery for Europe as a whole.
by Vitor Gaspar
Unemployment remains unacceptably high in many countries. It increased dramatically during the Great Recession. Global unemployment currently exceeds 200 million people. An additional 13 million people are expected to be unemployed by 2018.
The most worrisome is youth unemployment. There are examples of advanced economies in Europe where youth unemployment surged above 50 percent. In several developing economies, job creation does not absorb the large number of young workers entering the labor force every year.
By Min Zhu
Asia is set to be the powerhouse for growth in the next decade, just as it was in the last one. The size of its economy is expected to expand more rapidly than the other regions of the world, and its share in the world output is expected to rise from 30 percent to more than 40 percent in the coming decade. The structure of the economy is expected to continue to transform from a narrower manufacturing hub to a group of vibrant, diverse and large markets with a rising middle-class population.
The role of the financial sector is critical in the success of this seismic transformation. Let me explain by focusing on three areas:
As inflation has sunk in the euro area, talk of quantitative easing (QE)—and misgivings about it—have soared. Some think QE is not needed; others that it would not work; and yet others that it only creates asset bubbles and may even be “illegal.” In its latest report on the euro area, the IMF assesses recent policy action positively but adds that “… if inflation remains too low, the ECB should consider a substantial balance sheet expansion, including through asset purchases.” Given all the reservations, would the juice be worth the squeeze?