Macroeconomics Commons^™

The United Kingdom's Corporate Bond Secondary Market Scheme (U.K. Gfc), Claire Simon

Journal of Financial Crises

In late 2008, at the height of the Global Financial Crisis, increased liquidity premia and risk aversion in the secondary market hindered companies’ ability to issue corporate bonds. In response, in January 2009, Her Majesty’s Treasury authorized the Bank of England to establish a facility to purchase commercial bonds through the Asset Purchase Facility. In March 2009, the Bank of England published details on the Corporate Bond Secondary Market Scheme, in conjunction with its quantitative easing program. Under the scheme, the Bank acted as a market maker of last resort in the secondary bond market, making regular purchases of a …

The United Kingdom's Secured Commercial Paper Facility (U.K. Gfc), Claire Simon

Journal of Financial Crises

In mid-2009, the Bank of England (Bank) opened the Secured Commercial Paper Facility (SCPF) as part of its larger Asset Purchase Facility (APF). Through the facility, the Bank offered to purchase secured commercial paper (SCP), a form of asset backed commercial paper, issued by approved programs from both dealers acting as principal in the primary market and after issue from secondary market holders. The facility was designed to establish the Bank as a ready buyer of SCP in the primary market and as a backstop purchaser in the secondary market. In extending the APF to include purchases of SCP, the …

The United Kingdom's Commercial Paper Facility (U.K. Gfc), Claire Simon

Journal of Financial Crises

In January 2009, following continued increases in commercial paper spreads, Her Majesty’s Treasury authorized the Bank of England to begin purchasing commercial paper under the Asset Purchase Facility (APF) in order to maintain UK-based corporations’ access to short-term financing. Under the Commercial Paper Facility (CPF), the Bank purchased commercial paper from both primary issuers and secondary holders at a rate that was favorable to issuers during the credit crunch but that would no longer be attractive once the markets recovered. By serving as a backstop, or market maker of last resort (MMLR), the Bank helped to restore liquidity to corporate …

Japan's Special Funds-Supplying Operations (Japan Gfc), Alec Buchholtz

Journal of Financial Crises

Following the collapse of Lehman Brothers in September 2008, the global commercial paper (CP) market began to tighten as interest rates rose and investors sought more-liquid money market securities. The Bank of Japan (BOJ) introduced several measures in late 2008 to make liquidity available to nonfinancial corporations that were strapped for cash. In December 2008, the BOJ implemented special funds-supplying operations in order to provide unlimited liquidity to banks and other financial institutions so they could continue to fund nonfinancial corporations. The BOJ would provide one- to three-month loans against an equal value of eligible corporate debt at a rate …

Japan's Outright Purchases Of Commercial Paper (Japan Gfc), Alec Buchholtz

Journal of Financial Crises

Following the collapse of Lehman Brothers in September 2008, the global commercial paper (CP) market began to tighten as interest rates rose and investors sought more-liquid money market securities. The Bank of Japan (BOJ) introduced several operations in late 2008 to promote liquidity in the CP market. In January 2009, the BOJ began to purchase CP and asset-backed CP outright from banks and other financial institutions. The BOJ could purchase up to ¥3 trillion of CP with a residual maturity of up to three months, among other short-term securities, via 10 purchases of up to ¥300 billion each. The BOJ …

The Public-Private Investment Program: The Legacy Securities Program (U.S. Gfc), Ben Henken

Journal of Financial Crises

On March 23, 2009, the U.S. Treasury, in conjunction with the Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC), announced the Public-Private Investment Program (PPIP). PPIP consisted of two complementary programs designed to foster liquidity in the market for certain mortgage-related assets: The Legacy Loans Program and the Legacy Securities Program. This case study discusses the design and implementation of the Legacy Securities Program. Under this program, the Treasury formed an investment partnership with nine private sector firms it selected at the conclusion of a months-long application process. Using a combination of private equity and debt and equity …

The Public-Private Investment Program: The Legacy Loans Program (U.S. Gfc), Ben Henken

Journal of Financial Crises

On March 23, 2009, the U.S. Treasury, in conjunction with the Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC), announced the Public-Private Investment Program (PPIP). PPIP consisted of two complementary programs designed to foster liquidity in the market for certain mortgage-related assets: The Legacy Loans Program and the Legacy Securities Program. This case study discusses the design and implementation of the Legacy Loans Program. Under this program, the FDIC and Treasury attempted to create public-private investment partnerships that—using a combination of private equity, Treasury equity, and FDIC-guaranteed debt—would purchase legacy mortgage loans from U.S. banks by way of …

The Term Asset-Backed Securities Loan Facility (Talf) (U.S. Gfc), June Rhee

Journal of Financial Crises

In the fall of 2008, the securitization market, which was the major provider of credit for consumers and small businesses, came to a near halt. Investors in this market abandoned not only the residential mortgage-backed securities that triggered the financial crisis but also consumer and business asset-backed securities (ABS), which had a long track record of strong performance, and commercial mortgage-backed securities (CMBS). Also, the unprecedented widening of spreads for these securities rendered new issuance uneconomical, and the shutdown of the securitization market threatened to exacerbate the downturn in the economy.

On November 25, 2008, the Federal Reserve (the Fed) …

The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (Amlf) (U.S. Gfc), Rosalind Z. Wiggins

Journal of Financial Crises

In mid-September 2008, following the bankruptcy of Lehman Brothers, money market mutual funds (MMMFs) began to experience run-like redemption requests after a large fund “broke the buck,” owing to a large position in Lehman commercial paper (CP). Funds, which as a group were the largest investors in CP, retreated from CP, including asset-backed commercial paper (ABCP). Funds also sought to raise cash to meet redemptions by selling assets but were reluctant to sell ABCP into a depressed market. As the CP and ABCP markets seized up, it became difficult for issuers to place new paper, and concern grew about possible …

The Money Market Investor Funding Facility (U.S. Gfc), Rosalind Z. Wiggins

Journal of Financial Crises

In mid-September 2008, money market mutual funds (MMMFs) began to experience run-like redemption requests after the Reserve Primary Fund “broke the buck.” As a result, MMMFs became reluctant to roll over or invest in commercial paper (CP) and faced the prospect of selling asset-backed commercial paper (ABCP) they held into a declining market to raise cash. The money markets quickly became negatively impacted, and on October 21, 2008, the Fed announced the Money Market Investor Funding Facility (MMIFF), which would loan funds to a series of special purpose vehicles (SPVs) established by the private sector. The SPVs would use the …

Term Securities Lending Facility (Tslf) (U.S. Gfc), Manuel Leon Hoyos

Journal of Financial Crises

The 2007–09 financial crisis reached a critical stage in March 2008. Amid falling house prices and downgrades of mortgage-related securities, financial markets became severely disrupted. The Federal Reserve—the US central bank—became increasingly concerned about the inability of the 20 primary dealers, including the five largest US investment banks, to fund themselves in short-term funding markets, such as the repurchase agreement market, then estimated at $10 trillion. In response, the Fed created several emergency lending facilities to restore market liquidity that required the Fed to invoke Section 13(3) of the Federal Reserve Act. The Term Securities Lending Facility authorized the Federal …

The Federal Reserve Single-Tranche Term Repurchase Agreements (U.S. Gfc), Aidan Lawson

Journal of Financial Crises

As mortgage defaults and foreclosures continued to climb, the severe strains that started to plague credit markets in the middle of 2007 worsened further. Losses on housing-related securities and derivative instruments continued to climb, causing substantial damage to the balance sheets of large financial institutions that had levered up on these same securities. As their positions worsened, banks found it increasingly difficult to attract funding that wasn’t priced at exorbitantly high rates or for very short terms. Term funding markets, specifically those that centered on agency mortgage-backed securities (MBS), quickly dried up as fears of illiquidity and even insolvency spread. …

The Federal Reserve’S Response To The 1987 Market Crash (U.S. Historical), Kaleb B. Nygaard

Journal of Financial Crises

The S&P 500 lost 10% the week ending Friday, October 16, 1987, and lost an additional 20% the following Monday, October 19, 1987. The date would be remembered as Black Monday. The Federal Reserve (the Fed) responded to the crash in four distinct ways: (1) issuing a public statement promising to provide liquidity, as needed, “to support the economic and financial system”; (2) providing support to the Treasury securities market by injecting in-high-demand maturities into the market via reverse repurchase agreements; (3) allowing the federal funds rate to fall from 7.5% to 7.0% and below; and (4) intervening directly to …

Market Liquidity Programs: Gfc And Before, June Rhee, Greg Feldberg, Ariel Smith, Andrew Metrick

Journal of Financial Crises

The virulence of the Global Financial Crisis of 2007–09 (GFC) was explained in large part by the increased reliance of the global financial system on market-based funding and the lack of preexisting tools to address a disruption in that type of system. This paper surveys market liquidity programs (MLPs), which we define as government interventions in which the key motivation is to stabilize liquidity in a specific wholesale funding market that is under stress. Most of the MLPs surveyed in this paper were launched during and after the GFC, but two pre-GFC MLPs are included. A subsequent survey on MLPs …

An Adjusted Classical Model For Interest-Free Financing In Nigeria, Abdul Ibrahim, Habibu M-G Salihu

Bullion

This paper examines an interest-free macroeconomic models by adjusting the classical model into an interest-free macroeconomic model as a basis for developing a comparative analysis. The study adopted a descriptive approach by describing the mechanics for obtaining an interest-free macroeconomic model from a prototype western model. It was observed that most Muslims in Nigeria are interested in adopting interest free financing under the western system. This is a reason for converting a western model into an interest-free model.This conversion allows policy-makers to gain useful insight in the process in transition from the western system to the Islamic system. The Islamic …

Firm Survival Of Listed Nigerian Financial Institutions: A Consolidated Methods Approach, Sunusi Garba, Adamu M. Abubakar, Ahmad I. Mohammed, Mohammed S. Damamisau

Bullion

The firm's survival is regarded as an essential element usually used by the capital market participants in making vital decisions. This study examines the combined roles of bankruptcy, earnings management, and profitability in explaining a firm's survival in the listed Nigerian financial institutions. To achieve this, a descriptive research design is adopted and data were generated from databases of the listed companies in the Nigerian Stock Exchange for the period 2006 to 2015. Panel data analysis was employed in analysing collected data of the sampled 29 financial institutions in the Nigerian financial sector. The study found that most of the …

Fiscal And Monetary Policies And Stock Market, Ilhami Gunduz

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters.

The first chapter analyzes the stock market transmission channel of the monetary policy of the Turkish economy not only at the aggregate but also at the sectoral level in a structural vector autoregression (SVAR) framework. I adopt alternative variables as a policy instrument. When the spread is used as a policy instrument, I find that contractionary monetary policy has a significant negative effect on both output and the price level and it appreciates the Turkish Lira. In addition, tight monetary policy reduces both aggregate and sectoral market returns. Hence, the results suggest that policymakers …

Alternative Economic Indicators, C. James Hueng, Editor

Upjohn Press

Policymakers and business practitioners are eager to gain access to reliable information on the state of the economy for timely decision making. More so now than ever. Traditional economic indicators have been criticized for delayed reporting, out-of-date methodology, and neglecting some aspects of the economy. Recent advances in economic theory, econometrics, and information technology have fueled research in building broader, more accurate, and higher-frequency economic indicators. This volume contains contributions from a group of prominent economists who address alternative economic indicators, including indicators in the financial market, indicators for business cycles, and indicators of economic uncertainty.

Stock Market Transmission Channel Of Monetary Policy: Empirical Evidence From Turkey, Ilhami Gunduz

Publications and Research

Monetary policy is one of the instruments that policymakers use to provide both sustainable economic growth and price stability. In this study, I analyze the stock market transmission channel of the monetary policy of the Turkish economy not only at the aggregate but also at the sectoral level in a structural vector autoregression (SVAR) framework. I adopt alternative variables as a policy instrument. When the spread is used as a policy instrument, I find that contractionary monetary policy has a significant negative effect on both output and the price level, and it appreciates the Turkish Lira. Besides, the tight monetary …

Empirical Asset Pricing Of Saudi Stock Market, Muath Alolayan

LSU New Orleans Theses and Dissertations

This essay tests the differences in equity returns between Islamic and conventional firms using the Capital Asset Pricing Model (CAPM), Fama & French three factors model, and Fama & French four factors model. We us the Fama-Macbeth methodology to test the adequacy and explanatory power of the various model specifications. We find that the CAPM can better predict the factors for Islamic firms but not the conventional firms. There was a failure of Fama and French three factors and four factors model for Islamic, conventional and the total market. The estimated Beta is very close to the market for the …

Lessons Learned: A Conversation With Paul A. Volcker, Andrew Metrick, Rosalind Z. Wiggins, Kaleb B. Nygaard

Journal of Financial Crises

On March 26, 2019, Andrew Metrick, the Janet Yellen Professor of Finance at the Yale School of Management and Founder and Director of the Yale Program on Financial Stabilitysat down with Paul A. Volcker to discuss his perspectives on the Federal Reserve, central banking autonomy, “too big to fail,” and how his perspectives on these topics have changed over the decades.It turned out to be one of the last interviews given by the former Chairman of the Federal Reserve System who passed away on December 8, 2019, at the age of 92.

The Federal Reserve’S Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Securitization is a process that allows banks and other lenders to package loans and sell them as bonds called asset-backed securities (ABS), removing them from their balance sheets and immediately generating cash for new loans. ABS are an important component of the financing cycle for many types of loans to households and small businesses, including mortgages. In the fall of 2008, financial markets began experiencing disturbances as the effects of the U.S. subprime market meltdown spread. The ABS market froze decreasing the volume of new loans to households and small businesses. The Federal Reserve became very concerned about the potential …

The Federal Reserve’S Financial Crisis Response D: Commercial Paper Market Facilities, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

During the summer of 2007, the U.S. residential mortgage market began to decline sharply negatively impacting the asset-backed commercial paper (ABCP) market, which often relied on mortgages as underlying support. Money Market Mutual Funds (MMMFs), significant investors in commercial paper (CP), quickly retreated from the market, causing a substantial decline in outstanding ABCP. In September 2008, pressures on the markets severely escalated again, when the Reserve Primary Fund MMMF “broke the buck” and prompted run-like redemption requests by many MMMF investors. These disruptions resulted in higher rates and shorter maturities, practically freezing the market for term CP. Concerned about the …

The Federal Reserve’S Financial Crisis Response C: Providing U.S. Dollars To Foreign Central Banks, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

The financial crisis that began in late 2007 with the decline in the United States (U.S.) subprime mortgage markets quickly spread to other markets and eventually disrupted the interbank funding markets in the U.S. as well as overseas. To address the strain in the U.S. dollar (USD) funding markets, the Federal Reserve worked with foreign central banks around the world to provide USD liquidity to affected overseas markets by entering into currency swap agreements. Following the bankruptcy of Lehman Brothers in September 2008, and the resulting further destabilization of the world’s financial systems, the size and utilization of these swaps …

The Federal Reserve’S Financial Crisis Response B: Lending & Credit Programs For Primary Dealers, Rosalind Z. Wiggins, Patricia C. Mosser, Andrew Metrick

Journal of Financial Crises

Beginning in the summer 2007 the Federal Reserve (the Fed) deployed numerous conventional and innovative programs to address the credit crisis occurring in the wholesale lending markets that was beginning to affect the broader financial markets and threaten the economy at large. Two of those programs, the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) were aimed at providing liquidity to primary dealers and required the Fed to rely on its authority under Section 13(3) of the Federal Reserve Act. Section 13(3) is a Depression Era amendment that permits the Fed expanded powers in “unusual and …

The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Beginning in summer 2007, the Federal Reserve (the Fed) was called upon to address a severe disruption in the interbank lending markets sparked by a downturn in the subprime mortgage market. As these developments began to impact the ability of banks to raise adequate funding, the Fed encouraged them to utilize the Discount Window (DW), its standing facility for lending to depository institutions, and repeatedly decreased the lending rate to make the facility more accessible. Despite the Fed’s efforts, for a number of reasons, including historical perceptions of stigma, banks were reluctant to utilize the DW. In December 2007, the …

The Impact Of Human Capital On Shadow Economy In Indonesia, Neli Agustina

Economics and Finance in Indonesia

Shadow economy is a market for legal and illegal goods and services that escape recording and estimation of GDP. It can cause inaccurate estimation of GDP, declining tax revenue, and less precise economic policies. Improving the quality of human capital, both in education and health dimensions, can reduce shadow economy. The research aims to estimate shadow economy and analyze the influence of the quality of human capital on shadow economy in Indonesia. Applying time series multiple linear regression analysis, the findings show that the average shadow economy in Indonesia is 28.97 percent, changes in life expectancy negatively affect changes in …

Enhancing Resilience To Turbulent Global Financial Markets: An Indonesian Experience, Febrio Kacaribu

Economics and Finance in Indonesia

In the empirical literature, large and abrupt declines in capital inflows, or sudden stops, typically hit asset markets and generate output losses in the receiving countries. The significant decrease in capital flows to emerging markets in 2018 is a unique opportunity to test this premise. Using Indonesian data, we found that the sharp decline in capital inflows for over two consecutive quarters in 2018 had an adverse impact on the currency, equities, and bond markets, but no discernible output loss was recorded. Real GDP growth remained resilient throughout 2018 and held broadly steady at around 5 percent in the first …

Book Review: Central Bank Policy: Theory And Practice, Denny Irawan

Economics and Finance in Indonesia

No abstract provided.

Corporate Income Tax Rate And Foreign Direct Investment: A Cross-Country Empirical Study, Amalia Indah Sujarwati

Economics and Finance in Indonesia

This study aims to explore the impact of Corporate Income Tax Rate (CITR) on Foreign Direct Investment (FDI), specified based on income levels of countries. Using an unbalanced fixed-effect method of 112 countries over the period of 2003-2017, our finding shows that CITR has no significant impact on FDI. Corporate Income Tax (CIT) is levied on all firms, and as CIT is generally more complex than other types of taxes, its influences on FDI are in question. Excluding tax havens from the sample, our findings show that CITR has a weak significance only in the lower-middle-income and low-income countries.