Elva garcia b. forex-macro
Prepare for migration edit Community portal. There is not enough food, Capparella says, in many the other things they needed to. Is a visual import, the graphical interface issues the someone running their graphical desktop environment emClient release and security features like mouse and a.
Remarkable, very value investing graham pdf reader can
39848 SUMMER PLACE COURT BETHANY BEACH DE RESTAURANTS
In the first quarter of , Ukraine faced internal conflict from two opposing forces, the pro-western and pro-eastern sections, which resulted in the inclusion of Russian forces into the country itself. The impact on the Russian ruble is as noted below, all of which was fueled even more by the flooding of global crude markets by Saudis in the middle of the whole situation.
The response of currency was severe and inflation skyrocketed, all of which provided the solid shorting opportunity on the ruble itself long USDRUB. Below is the outline of when the sanctions started and the path it progressed from there all of which are still valid and open today in : Russian bonds in the mid of escalation.
Since Russia is not highly indebted to the outside international partners the bonds took relatively late response and only took a real hit once financial sector within Russia got sanctioned as well, which meant that currently borrowed international debt could no longer be expanded by large sums and the bonds reacted tightening. One thing to note, when there is an escalation it matters a lot how resilient the economy is to escalation and how much of the economy remains operational, as well as how much of international capital was present in the country before the escalation started.
The more international capital present, the larger the outflows will be as this capital tends to leave the country the quickest when things start to turn sour , while if there if the economy is rather more isolated to itself the drop in equity index might not be that strong, even if the country is militarily weak. This is an important factor to gauge which equity indexes are more or less likely to take a hit when it comes to this.
However, conflicts have the power to flip the equation around. Shanghai index below. Even though the economy is growing fast the index was unable to press strong numbers and is lingering around the lows. Also, note the example from above for Ukraine, China is a military superpower and has a super fast-growing economy, yet the equity index took a relatively large plunge.
The strong presence of international capital, and once escalation starts this outsourced capital tends to leave the country the fastest, and the larger the presence the more impact it can have. The presence of capital is not just meant as investments in the country itself, but also access to other international markets for financing and selling of the goods. Which basically means that exactly the same rules apply as any of the cases listed above. A very strong player elites against a much weaker player Greek govt , where there was a very little room left for discussion at the end, as Varoufakis has noted trough the entire negotiations, as well as in hindsight 2 years later.
Strong players always negotiate from a position of strength, which in reality means, they don't actually negotiate, they set standards of expectation and demands for the rest to follow. Greek equity index: Greek government bonds: Why should a trader care about escalations and conflicts?
Escalations whether they are in terms of the trade conflict, financial conflict, larger-scale cold war or proxy wars they all allow for a long term established trends to develop across many asset classes leaving very clean read on the direction of where the assets should go as long as the trader has a full understanding of how main global financial instruments work and respond under such conditions.
Again, the history needs to be a leading guide on this. Those situations usually develop trends that last on approximately 1 year, allowing plenty of intraday opportunities to extract from, however certain cold war conflicts tend to develop trends that last for many more years. The majority of conflicts are both long and short opportunities.
First short when the conflict begins and as it is done, in the majority of cases there is a solid long opportunity after the end phase, especially if one is able to trade on it not all markets are easily accessible for the retailer. Additional thing to note, when it comes to such conflicts there is usually one asset that tends to perform very well inside the country at which the conflict takes place, which is gold.
However in the current era of , Bitcoin should be added as well, but obviously at much higher volatility and potential negative swings relative to gold. But both of those assets are solid to trade, however only if one is trading them against the internal currency of the country that conflict is taking place. To note why trading gold or Bitcoin on long side against internal currency is the right decision and not against the dollar itself.
Debt cycles When it comes to the debt it is key to look at what kind of debt does a country has, either internal debt nominated in its own currency such as the US for example or external debt nominated in borrowed currency such as Turkey for example. Those two differences play a key role in what kind of flexibility does the country have to re-pay those debts or to simply ignore it.
A general rule is that emerging market countries have a lot higher portion of external debts, denominated in the USD or EUR since this is where the majority of credit is issued. One key aspect that trader needs to understand in this area is especially debt cycles of emerging economies.
By far the most frequent mistake that macro observers tend to make is that they bundle in just any type of country, judging the size of its debt relative to GDP in order to gauge if a certain economy might get into the debt problems in near future. This is a sure way to get issues in terms of being accurate. While yes there is the case that majority of countries trough history either default or go into hyperinflationary crisis if they cannot repay foreign debt, but the key difference is TIME.
Remember, trading is not about "eventually ill be right" instead the time matters and so does the accuracy tied to it. Developed economies that have full control over issuing of currency and internal debt in large quantities can afford to sustain large amounts of debt without feeling pressure on the economy for a long time. While the same cannot be true for emerging economies which are often fully at mercy of global capital inflows and financing.
Those two distinctions are absolute must to make when it comes to getting the grip on which country might face solvency issue or just pressure on bonds if over-levered and which might not. So the simple rule personally for me is to only focus on emerging market countries when it comes to trading the debt cycle on currency short.
Brazil, Argentina, Turkey, Russia, India, There is a large shift of dynamics in terms of how bonds and equity markets of each of those groups of countries react once the debt begins to expand quickly and the interest rates begin to rise. It is much easier to pick a direction on currency, equities or bonds in terms of trading when the situation is due on emerging economies if they fit right conditions than it is for developed economies, especially developed economies with reserve currency or ability to issue large amounts of debt denominated in its own currency.
The US is in large control over its debt, especially being denominated in dollars, meanwhile Turkey as an emerging economy is not. Now meanwhile there surely are many macro observers who bet in the last 10 years on the US to be the one hitting default rather than Turkey, and yet they all have been wrong. Using the debt-to-GDP number as a holy grail to determine what will happen to the economy over the long run is surely a way too over-simplified look at reality because there are many more dynamic factors that play a role on determening the results.
Below difference between Turkish currency lira versus the dollar over past years: And let's touch upon another subject. Many macro observers tend to justify the reason why the US default chances are high its because over the past 50 years the dollar has lost the value due to inflation.
Obviously, this is a pure fact, however, as a trader, you need to understand that what you re trading is actually a weighted scale, the balance between stronger and weaker currency not currency isolated by itself, since FX trading is about trading currency pairs. It is not just an isolated dollar and the value it has lost over the decades, but what matters is how other currencies have performed against it.
Has the dollar lost plenty of value over the last 50 years, but the majority of other currencies have gained the value against it? They include financial sector, currency or balance of payments , and debt public or private crises. Unfortunately, crises afflict countries at all income levels.
Financial sector crises appear to have a more adverse effect on inequality than crises of other types. These crises do not occur in a vacuum. They are often accompanied by credit booms fuelled by fickle capital flows, loose lending standards, financial liberalization, capital account liberalizations, and excessive risk-taking. During booms that precede a financial sector crisis, individuals at the p. For example, rising income inequality since in the United States generated a rise in household borrowing by non-rich households, financed by rich households Mian, Straub, and Sufi A common observation is that systematic differences in asset portfolios and leverage among households at different income levels, also mean that the booms and busts associated with financial sector crises tend to affect inclusiveness in part through their effects on the distribution of wealth Kuhn, Schularick, and Steins Since in most advanced economies portfolios of rich households are dominated by stocks, whereas portfolios of middle-class households are concentrated in real estate and are highly leveraged, other things being equal, housing booms lead to substantial wealth gains for leveraged middle-class households and tend to decrease wealth inequality, while stock market booms primarily boost the wealth of households at the top of the wealth distribution.
The postwar American history provides a good example of the effects of the economic crisis on wealth distribution in advanced economies. In the United States, portfolio valuation effects have been predominant drivers of shifts in the distribution of wealth. During the four decades before the GFC, the US middle class 50th—90th percentiles lost ground to the top 10 percent with respect to income, but it largely maintained its wealth share due to substantial gains in housing wealth.
However, following the collapse in the housing market in the GFC, the middle class suffered substantial wealth losses, whereas the quick turnaround in stock markets boosted wealth at the top. The housing market did recover but this occurred much later than the rise in the stock market.
More generally, aside from their effects on the distribution of wealth, financial sector crises tend to increase poverty and inequality. Their immediate effects are unemployment, loss of income, delayed loan repayments, foreclosures on real estate, and outright debt default. The larger the debt overhang, the deeper is the ensuing recession Mian, Sufi, and Verner As the size of the debt overhang increases, those in the bottom end of the income distribution are hit harder, and inequality, poverty, and unemployment deteriorate more.
A number of studies across broad samples of countries have found that banking and currency crises tend to increase income inequality and poverty, though causality is far from clear Baldacci et al. Income losses experienced by richer households were relatively modest and transitory, while those experienced by poorer households were not only large but also highly persistent.
The effects of the GFC on inclusiveness have been worldwide. A sovereign debt crisis is another type of macroeconomic crisis that may have significant effects on inclusiveness. Such crises arise when sovereign debt evolves on a trajectory that cannot be sustained as creditors are unwilling to refinance maturing debt. Common reasons for unsustainable sovereign debt, among many, include rising interest rates that increase debt service costs, unexpected external or domestic shock that leads to persistent fiscal deficits, an exchange rate devaluation that raises the domestic currency cost of servicing foreign-currency-denominated debt.
These situations can trigger sovereign default or the need to reschedule debt, requiring a large fiscal adjustment or fiscal consolidation to restore fiscal sustainability. The direct distributional consequences of high debt or debt crisis have not received much attention in the literature. However, the indirect distributional consequences of unsustainably high debt or debt crisis have received more attention, as unsustainably high debt or debt crises can influence income distribution through many channels, including low or negative growth, higher inflation, greater inflation instability, higher output volatility, large exchange rate devaluations, abandonment of a pegged exchange rate regime or a large depreciation, and debt write-offs or haircuts in which only a fraction of the debt is repaid to domestic or foreign debt holders.
There is substantial evidence both within countries and across countries that recessions are often preceded by a buildup of sovereign debt and other vulnerabilities Kumhof, Ranciere, and Winant ; IMF a; Mian and Sufi and that high debt is a good predictor of low or negative economic growth and higher unemployment Reinhart and Rogoff ; Mian and Sufi ; Kim and Zhang An important channel through which high debt and debt crises may exert such contractionary effects is often through the subsequent fiscal adjustments or fiscal consolidation.
These measures affect aggregate demand, employment, income, consumption, and investment. They can also change income distribution through their impacts on transfers, public sector wages, and unemployment. The magnitude and direction of these effects are likely to vary depending on the composition of fiscal measures, the state of the economy, and potentially other factors.
Understanding these effects can help policymakers in designing consolidation packages that minimize the negative impacts on the economy and inclusiveness. Although some studies report expansionary consolidations e. It also matters whether the adjustment was anticipated and whether other macroeconomic policies were able to cushion some of the impacts.
Tax-based fiscal consolidations tend to have a larger negative impact on economic output than spending-based ones, particularly over the medium term. Most estimates show multipliers around -2 to -3 for tax measures but only around or below one for spending. There are several explanations for these findings. First, with expenditure-based austerity, forward-looking households may anticipate that future taxes will not rise as much as previously expected and raise their consumption.
Similarly, investors would also expect a smaller tax burden in the future and thus increase their investment today. On the supply side, tax distortions may affect the supply of labor, particularly for second earners in a family and younger people who may delay their entry into the labor market, which in turn would have a long negative impact on output Alesina et al.
The range of estimated multipliers for fiscal consolidations, however, becomes much wider when considering country-specific characteristics, such as the type of an exchange rate regime, initial tax coverage, and tax rates. For example, the negative effects of spending cuts tend to be larger for countries with a fixed exchange rate regime and higher debt levels. Evidence based on fiscal consolidations in 10 OECD countries during — shows that if tax-based consolidations are achieved by broadening the tax base, the negative impact on output and employment tends to be much smaller than if they are based on tax rate increases Dabla-Norris and Lima In addition, tax multipliers could be essentially zero under relatively low initial tax rate levels Gunter et al.
For instance, by lowering interest rates, monetary policy can support investment and consumption during consolidation episodes Ramey Thus, a negative impact of fiscal consolidation can be particularly severe during recessions or periods at the zero lower bound of interest rates, when support from other policies is constrained.
Most studies of the output effects of fiscal consolidation rely on consolidation episodes in advanced economies and limited research in developing countries. This is in part due to data limitations and difficulties in identifying fiscal policy shocks. In addition, as with advanced economies, the output effects appear to be larger during recessions Honda et al.
Fiscal adjustments affect inequality through their output and employment effects as well as through distributional effects of spending cuts and tax increases. The overall effect on inequality depends on the composition of fiscal adjustment, stage of the business cycle, and labor market conditions Woo et al. Fiscal consolidations are often accompanied by an increase in long-term unemployment and a decline in the labor share of income. This decline tends to increase inequality because of the relatively high share of wages in the incomes of lower-income groups.
Frontloaded adjustments and consolidations were undertaken during recessions tend to have especially strong effects on social welfare if they are implemented when unemployment is already high Blanchard and Leigh One study found that IMF program conditionalities may have led to higher income inequality Forster et al. However, another study found out the nature of reforms and initial conditions matter to the evolution of inequality.
There is a broad consensus that in advanced economies adjustments based on spending cuts have larger effects on income inequality than those based on tax hikes. Based on more than episodes of fiscal consolidation in advanced economies, Woo et al. Other studies find a similar pattern Ball This could be explained by the fact that most of the redistribution in advanced economies is conducted through government spending. Also, lower-income earners are typically more affected by spending cuts as a larger portion of their disposable income comes from public spending and they are more vulnerable to job losses.
Furceri et al. The net effect of fiscal consolidation on inequality also depends on the specific composition of the spending or revenue adjustment. Proportional reductions in pensions across all beneficiaries are regressive because pensioners in the lower-income groups lose a greater share of their total income Clements et al. Finally, cuts in education and health spending have a greater impact on inequality in the longer term Woo There is less evidence on the distributional effects of fiscal consolidation for developing economies.
Several factors suggest a potentially lower impact for spending cuts. First, social spending is on average much lower than in advanced economies and not well-targeted. Further, in-kind social spending—such as education and health spending—is often not well targeted which exacerbates post-transfer inequality because the poor have limited access to public services. In cases when consolidation is achieved by cuts in fuel price subsidies, the net effect on inequality and poverty depends on the design of those measures.
Across-the-board cuts often hurt the poor more often than the rich unless they are accompanied by mitigating measures such as temporarily maintaining universal subsidies on commodities that are more important in the budgets of the poor while improving targeting that corrects the flaws in the initial design of such p.
On the revenue side, a larger share of revenues comes from indirect taxes, which tend to be regressive. Therefore, tax hikes could be detrimental to welfare, especially for the poor. Both spending and revenue measures could be designed to mitigate the negative impact of fiscal consolidation on lower-income groups. In particular, a larger share of fiscal adjustments could be achieved through revenue measures targeted at the higher income segments of the population. Also, broad spending cuts could be accompanied by targeted social benefits and subsidies designed to offset some of the adverse distributional impacts of consolidation Clements et al.
In short, fiscal consolidation in response to unsustainable sovereign debt and sovereign debt crises has costs for both economic output and inequality. Evidence suggests that spending-based consolidation measures tend to be less contractionary for output than tax hikes. Yet, many studies also show that spending cuts can have a large negative impact on inequality. There is scope for further research about the net effects of consolidation, particularly for developing economies. In the meantime, countries should aim to develop consolidation packages that minimize effects on growth without widening inequality.
The macroeconomics literature until the GFC was dominated by the view that income distribution did not matter for macroeconomic fluctuations. If anything, a widely held perspective was that macroeconomic aggregates affect income distribution, but not vice versa, a view challenged by Stiglitz However, there has been a notable paradigm shift in macroeconomics. According to the new p. The key to this paradigm shift was the rising inequality leading up to the GFC as well as better data and computational capabilities for macroeconomic modeling, but more importantly, the incorporation of heterogeneity, especially in income and wealth, into models that shifted away from representative agent models that are silent on distributional issues.
Moreover, the new literature also underscores the need to employ better methods and economic theory to establish causality that at least recognizes the two-way relationship between inequality and the macroeconomy. In this regard, recent methods for the identification of causal relationships are promising Nakamura and Steinsson ; Gabaix and Koijen However, these novel methods are yet to be fully embraced in the literature.
These observations caution us about reading too much into causality in many studies reviewed in this section although some studies, as we see shortly, do a good job of using an array of standard causality tests. The impact of inequality on economic growth has been the subject of many empirical studies that have at times produced conflicting results. Panizza finds a negative relationship across a sample of 50 US states.
Banerjee and Duflo find the association to be non-linear. In a dynamic model of 77 countries, Grigoli, Paredes, and Di Bella allow for cross-country heterogeneity and find that higher income inequality leads to lower growth in three-quarters of the 77 countries in their sample. In general, studies that focus on short-run relationships e.
The results vary due to differences in methodologies, transmission channels, measures of inequality, functional relationships linear and non-linear , and data frequencies. With respect to volatility, one line of research has investigated the impact of inequality on the durability of growth. A key finding in this area is that high-income inequality results in a shorter and more fragile growth spell, that is, output growth is only sustained for short periods.
In other words, high inequality leads to high output volatility. Conversely, low inequality is associated with faster and more durable growth spells. These findings hold even after controlling for p. Low inequality contributes to the durability of growth lower output volatility by i relaxing credit market imperfections, easing financing for investment in human capital, ii reducing incentives for distortionary taxation to finance public spending; and iii reducing political instability and uncertainty and thereby raising incentives for investment.
Capital market imperfections combined with unequal access to investment opportunities across individuals have also been shown to generate endogenous and permanent fluctuations in output, investment, and interest rates Aghion, Banerjee, and Piketty Following deleveraging and rising profitability, investment demand and growth increase and interest rates climb.
As debt burdens become high, profits net of debt payments falls, eventually leading to collapse in investment, taking the economy into recession or slow growth. This implies that economies with less developed financial markets and credit-constrained investors will tend to be more volatile and to grow more slowly. Therefore, improving financial inclusion may be a necessary condition for macroeconomic stabilization. A second-best policy may be to use tax policy to absorb idle savings and provide investment subsidies or tax cuts for investors.
More broadly, weak institutions amplify the impact of high-income inequality on growth and growth volatility. Evidence from a broad sample of countries shows that drops in growth are sharper in countries with divided and socially polarized societies—as measured by high-income inequality and high ethnic fragmentation—and with weak institutions of conflict management, such as quality of governmental institutions, rule of law, and social safety nets Rodrik ; Woo ; Grigoli, Paredes, and Di Bella In these studies, the issue of causality is tackled by using data on income inequality that preceded the growth collapse.
There is a extensive literature that examines whether inequality is a cause of the economic crisis. The literature considers different theories about the relationship between various types of economic crises and inequality and investigates empirically the relationship across time periods and countries, using different methodologies and measures of inequality.
A study of financial crises among 14 advanced countries between and found that credit booms increased the probability of a banking crisis but found no evidence that a rise in top income shares led to credit booms. Instead, the pattern of the financial crisis seems to fit the standard boom-bust pattern of declines in interest rates, followed by strong growth, credit booms, asset price p.
However, this study excluded the GFC. When the sample includes the GFC, higher top income shares are found to be positively associated with credit booms, given other determinants of credit booms Perugini et al. The study uses some widely-used econometric techniques to argue that the relationship is causal, running from inequality to financial crisis. Empirically, the impact of inequality on credit booms and the likelihood of financial crises is also found to depend on the extent of financial deregulation; the more deregulated financial markets are, the greater the impact of inequality on financial fragility and financial crises Perugini et al.
However, to conclude that income inequality can contribute to causing an economic crisis, empirical studies invariably need to address the difficult challenge of identifying changes in income inequality that are truly exogenous with respect to an economic crisis. Recent empirical studies have shied away from the difficult task of establishing causality and have turned their attention instead to the simpler task of assessing the predictive power of income inequality for crisis episodes.
Studies have found that slow-moving trends such as rising top income inequality and prolonged periods of low productivity growth have strong predictive power for both the onset and severity of financial crises. This evidence holds across many developed countries and various historical episodes, given other determinants of crisis Kirschenmann, Malinen, and Nyberg ; Paul Moreover, the available evidence also shows that when crises are preceded by these slow-moving trends, the subsequent recoveries also tend to be slower, with significant output and labor productivity effects Paul and Pedtke A number of studies have used formal theoretical models to show that income inequality can be a cause of the economic crisis.
One was in , on the eve of the Great Depression, and the other in , on the eve of the Great Recession. In both episodes, there was also a simultaneous large increase in debt-to-income ratios among lower- and middle-income households as these segments of the population have little savings and must borrow to finance their spending. Therefore, high leverage and economic crisis may have been the endogenous result of growing income inequality Kumhof, Ranciere, and Winant The transmission mechanism may work as follows.
The rapid rise in the share of top incomes, a shock to income inequality, results in a larger supply of savings in the economy. The wealthy with top income shares have higher savings rates and lend their accumulated savings to lower- and middle-income households p.
A greater supply of savings lowers the interest rate. This in turn encourages households in the lower and middle segment of the income distribution to borrow to compensate for the loss of consumption entailed by their lower-income share. Low interest rates may also fuel a credit bubble, in which case borrowing rises even further, leading to higher household debt-to-income ratios. The resulting financial fragility eventually leads to debt default, a financial crisis, and a collapse in real output.
High inequality can continue to deepen the scarring from the crisis, including a slower recovery, as low-income but highly leveraged households reduce their purchases in order to avoid further default and bankruptcy. Others argue heuristically that the rising inequality exacerbates banking and financial crises but does not cause them Piketty and Saez The fact that debt rose so much and so fast is probably not a coincidence.
Piketty and Saez argue that modern financial systems are highly fragile and can crash by themselves even without rising inequality to push them over the edge. Section II analyzed the adverse effects of macroeconomic instability—and specifically of recessions—on inclusiveness.
However, recessions may not necessarily lead to adverse long-run effects on inequality if the policy response is sufficiently aggressive. In fact, this is a key policy implication of the hysteresis literature. Taking into account business cycle asymmetries and hysteresis, recent studies show that in addition to stabilizing the economy, macroeconomic policies can also raise the average level of economic activity, thereby reducing the natural level of unemployment Dupraz, Nakamura, and Steinsson In this section, we provide an overview of the effects of stabilization policies on inclusiveness.
Changes in the level and types of taxes, the scale of spending and its composition, the size of the budget deficit, and the modalities of its financing, can all have implications for inclusiveness. On the tax side, a progressive income tax structure, whereby richer individuals face higher tax rates, can reduce the inequality of pre-tax incomes Chapter On the expenditure side, governments provide direct cash transfers such as social security payments, disability payments, unemployment benefits, food stamps as well as in-kind transfers such as spending on education and health and other targeted transfers Chapter Over the long run, spending on education and health Chapter 14 also helps reduce inequality because it increases the skill set of individuals, boosts long-term earning capacity, and improves opportunities for social mobility across generations see Chapter On the financing side, central bank financing of large deficits can increase the inflation tax, which potentially has more adverse effects on the poor, who tend to hold more of their savings in form of cash balances than the rich.
Fiscal policy in advanced economies, on average, reduces income inequality measured by the Gini coefficient by about 33 percent. Two-thirds of this reduction is achieved by public transfers—such as pension and other social benefits—and about one-third comes from progressive taxation. Developing and emerging economies have much lower distributive capacity because of the lower level of taxes and spending Clements et al. In contrast to advanced economies, fiscal redistribution in Latin America, the region with the highest average level of income inequality, on average reduces income inequality by about 10 percent Clements et al.
The overall effects of fiscal policy on inclusiveness depend, of course, on the joint effects of tax and expenditure policies. If progressive taxes are used to finance progressive, pro-poor public expenditures, the net incidence of fiscal policy favors the poor. In this case, fiscal policy would contribute to lower disposable income inequality relative to the inequality that arises from market incomes. As argued previously, lower output volatility tends to go hand in hand with lower income inequality.
The contribution that fiscal policy makes to reducing or aggravating macroeconomic instability thus provides a separate link between fiscal policy and inclusiveness. One important vehicle through which fiscal policy influences macroeconomic volatility is through the operation of automatic stabilizers.
These are components of taxes and spending that are designed to respond automatically to economic cycles. Automatic stabilizers are generally regarded as the most efficient tool for fiscal stabilization of output and employment fluctuations. Thus, countries with strong automatic stabilizers tend to have lower output volatility IMF Indeed, automatic stabilizers are estimated to account for up to two-thirds of the overall fiscal stabilization effort in advanced countries, a p. Besides automatic stabilizers, fiscal policy also has a component referred to as discretionary fiscal policy.
To the extent that such policies reduce macroeconomic volatility, they can be expected to have favorable effects on inclusiveness. These effects can be enhanced if the specific spending and revenue measures are pro-poor, in the form of progressive tax-and-transfer policies or spending on infrastructure, health, and education that favors the poor. Unfortunately, not all countries manage to use countercyclical fiscal policy for stabilization.
Elva garcia b. forex-macro forex trader jobs dubai
Step By Step Guide to Trading ForexPhrase... unexpectedness! best nba tips interesting. You
TENKAN AND KIJUN LINES OF ICHIMOKU INDICATOR FOREX
The impact on the Russian ruble is as noted below, all of which was fueled even more by the flooding of global crude markets by Saudis in the middle of the whole situation. The response of currency was severe and inflation skyrocketed, all of which provided the solid shorting opportunity on the ruble itself long USDRUB.
Below is the outline of when the sanctions started and the path it progressed from there all of which are still valid and open today in : Russian bonds in the mid of escalation. Since Russia is not highly indebted to the outside international partners the bonds took relatively late response and only took a real hit once financial sector within Russia got sanctioned as well, which meant that currently borrowed international debt could no longer be expanded by large sums and the bonds reacted tightening.
One thing to note, when there is an escalation it matters a lot how resilient the economy is to escalation and how much of the economy remains operational, as well as how much of international capital was present in the country before the escalation started. The more international capital present, the larger the outflows will be as this capital tends to leave the country the quickest when things start to turn sour , while if there if the economy is rather more isolated to itself the drop in equity index might not be that strong, even if the country is militarily weak.
This is an important factor to gauge which equity indexes are more or less likely to take a hit when it comes to this. However, conflicts have the power to flip the equation around. Shanghai index below. Even though the economy is growing fast the index was unable to press strong numbers and is lingering around the lows. Also, note the example from above for Ukraine, China is a military superpower and has a super fast-growing economy, yet the equity index took a relatively large plunge.
The strong presence of international capital, and once escalation starts this outsourced capital tends to leave the country the fastest, and the larger the presence the more impact it can have. The presence of capital is not just meant as investments in the country itself, but also access to other international markets for financing and selling of the goods.
Which basically means that exactly the same rules apply as any of the cases listed above. A very strong player elites against a much weaker player Greek govt , where there was a very little room left for discussion at the end, as Varoufakis has noted trough the entire negotiations, as well as in hindsight 2 years later.
Strong players always negotiate from a position of strength, which in reality means, they don't actually negotiate, they set standards of expectation and demands for the rest to follow. Greek equity index: Greek government bonds: Why should a trader care about escalations and conflicts? Escalations whether they are in terms of the trade conflict, financial conflict, larger-scale cold war or proxy wars they all allow for a long term established trends to develop across many asset classes leaving very clean read on the direction of where the assets should go as long as the trader has a full understanding of how main global financial instruments work and respond under such conditions.
Again, the history needs to be a leading guide on this. Those situations usually develop trends that last on approximately 1 year, allowing plenty of intraday opportunities to extract from, however certain cold war conflicts tend to develop trends that last for many more years. The majority of conflicts are both long and short opportunities. First short when the conflict begins and as it is done, in the majority of cases there is a solid long opportunity after the end phase, especially if one is able to trade on it not all markets are easily accessible for the retailer.
Additional thing to note, when it comes to such conflicts there is usually one asset that tends to perform very well inside the country at which the conflict takes place, which is gold. However in the current era of , Bitcoin should be added as well, but obviously at much higher volatility and potential negative swings relative to gold.
But both of those assets are solid to trade, however only if one is trading them against the internal currency of the country that conflict is taking place. To note why trading gold or Bitcoin on long side against internal currency is the right decision and not against the dollar itself. Debt cycles When it comes to the debt it is key to look at what kind of debt does a country has, either internal debt nominated in its own currency such as the US for example or external debt nominated in borrowed currency such as Turkey for example.
Those two differences play a key role in what kind of flexibility does the country have to re-pay those debts or to simply ignore it. A general rule is that emerging market countries have a lot higher portion of external debts, denominated in the USD or EUR since this is where the majority of credit is issued. One key aspect that trader needs to understand in this area is especially debt cycles of emerging economies.
By far the most frequent mistake that macro observers tend to make is that they bundle in just any type of country, judging the size of its debt relative to GDP in order to gauge if a certain economy might get into the debt problems in near future. This is a sure way to get issues in terms of being accurate. While yes there is the case that majority of countries trough history either default or go into hyperinflationary crisis if they cannot repay foreign debt, but the key difference is TIME.
Remember, trading is not about "eventually ill be right" instead the time matters and so does the accuracy tied to it. Developed economies that have full control over issuing of currency and internal debt in large quantities can afford to sustain large amounts of debt without feeling pressure on the economy for a long time.
While the same cannot be true for emerging economies which are often fully at mercy of global capital inflows and financing. Those two distinctions are absolute must to make when it comes to getting the grip on which country might face solvency issue or just pressure on bonds if over-levered and which might not. So the simple rule personally for me is to only focus on emerging market countries when it comes to trading the debt cycle on currency short.
Brazil, Argentina, Turkey, Russia, India, There is a large shift of dynamics in terms of how bonds and equity markets of each of those groups of countries react once the debt begins to expand quickly and the interest rates begin to rise.
It is much easier to pick a direction on currency, equities or bonds in terms of trading when the situation is due on emerging economies if they fit right conditions than it is for developed economies, especially developed economies with reserve currency or ability to issue large amounts of debt denominated in its own currency.
The US is in large control over its debt, especially being denominated in dollars, meanwhile Turkey as an emerging economy is not. Now meanwhile there surely are many macro observers who bet in the last 10 years on the US to be the one hitting default rather than Turkey, and yet they all have been wrong.
Using the debt-to-GDP number as a holy grail to determine what will happen to the economy over the long run is surely a way too over-simplified look at reality because there are many more dynamic factors that play a role on determening the results.
Below difference between Turkish currency lira versus the dollar over past years: And let's touch upon another subject. Many macro observers tend to justify the reason why the US default chances are high its because over the past 50 years the dollar has lost the value due to inflation. Obviously, this is a pure fact, however, as a trader, you need to understand that what you re trading is actually a weighted scale, the balance between stronger and weaker currency not currency isolated by itself, since FX trading is about trading currency pairs.
It is not just an isolated dollar and the value it has lost over the decades, but what matters is how other currencies have performed against it. Has the dollar lost plenty of value over the last 50 years, but the majority of other currencies have gained the value against it? Geopolitics Geopolitics is generally an area consistent of few components in relation to FX markets : -internal impact of political leadership on the economy and currency of the country in terms of opening of economy to globalization, or closing it down capital controls.
The net effect of fiscal consolidation on inequality also depends on the specific composition of the spending or revenue adjustment. Proportional reductions in pensions across all beneficiaries are regressive because pensioners in the lower-income groups lose a greater share of their total income Clements et al. Finally, cuts in education and health spending have a greater impact on inequality in the longer term Woo There is less evidence on the distributional effects of fiscal consolidation for developing economies.
Several factors suggest a potentially lower impact for spending cuts. First, social spending is on average much lower than in advanced economies and not well-targeted. Further, in-kind social spending—such as education and health spending—is often not well targeted which exacerbates post-transfer inequality because the poor have limited access to public services.
In cases when consolidation is achieved by cuts in fuel price subsidies, the net effect on inequality and poverty depends on the design of those measures. Across-the-board cuts often hurt the poor more often than the rich unless they are accompanied by mitigating measures such as temporarily maintaining universal subsidies on commodities that are more important in the budgets of the poor while improving targeting that corrects the flaws in the initial design of such p. On the revenue side, a larger share of revenues comes from indirect taxes, which tend to be regressive.
Therefore, tax hikes could be detrimental to welfare, especially for the poor. Both spending and revenue measures could be designed to mitigate the negative impact of fiscal consolidation on lower-income groups. In particular, a larger share of fiscal adjustments could be achieved through revenue measures targeted at the higher income segments of the population. Also, broad spending cuts could be accompanied by targeted social benefits and subsidies designed to offset some of the adverse distributional impacts of consolidation Clements et al.
In short, fiscal consolidation in response to unsustainable sovereign debt and sovereign debt crises has costs for both economic output and inequality. Evidence suggests that spending-based consolidation measures tend to be less contractionary for output than tax hikes. Yet, many studies also show that spending cuts can have a large negative impact on inequality. There is scope for further research about the net effects of consolidation, particularly for developing economies.
In the meantime, countries should aim to develop consolidation packages that minimize effects on growth without widening inequality. The macroeconomics literature until the GFC was dominated by the view that income distribution did not matter for macroeconomic fluctuations.
If anything, a widely held perspective was that macroeconomic aggregates affect income distribution, but not vice versa, a view challenged by Stiglitz However, there has been a notable paradigm shift in macroeconomics. According to the new p. The key to this paradigm shift was the rising inequality leading up to the GFC as well as better data and computational capabilities for macroeconomic modeling, but more importantly, the incorporation of heterogeneity, especially in income and wealth, into models that shifted away from representative agent models that are silent on distributional issues.
Moreover, the new literature also underscores the need to employ better methods and economic theory to establish causality that at least recognizes the two-way relationship between inequality and the macroeconomy. In this regard, recent methods for the identification of causal relationships are promising Nakamura and Steinsson ; Gabaix and Koijen However, these novel methods are yet to be fully embraced in the literature.
These observations caution us about reading too much into causality in many studies reviewed in this section although some studies, as we see shortly, do a good job of using an array of standard causality tests. The impact of inequality on economic growth has been the subject of many empirical studies that have at times produced conflicting results.
Panizza finds a negative relationship across a sample of 50 US states. Banerjee and Duflo find the association to be non-linear. In a dynamic model of 77 countries, Grigoli, Paredes, and Di Bella allow for cross-country heterogeneity and find that higher income inequality leads to lower growth in three-quarters of the 77 countries in their sample.
In general, studies that focus on short-run relationships e. The results vary due to differences in methodologies, transmission channels, measures of inequality, functional relationships linear and non-linear , and data frequencies. With respect to volatility, one line of research has investigated the impact of inequality on the durability of growth. A key finding in this area is that high-income inequality results in a shorter and more fragile growth spell, that is, output growth is only sustained for short periods.
In other words, high inequality leads to high output volatility. Conversely, low inequality is associated with faster and more durable growth spells. These findings hold even after controlling for p. Low inequality contributes to the durability of growth lower output volatility by i relaxing credit market imperfections, easing financing for investment in human capital, ii reducing incentives for distortionary taxation to finance public spending; and iii reducing political instability and uncertainty and thereby raising incentives for investment.
Capital market imperfections combined with unequal access to investment opportunities across individuals have also been shown to generate endogenous and permanent fluctuations in output, investment, and interest rates Aghion, Banerjee, and Piketty Following deleveraging and rising profitability, investment demand and growth increase and interest rates climb.
As debt burdens become high, profits net of debt payments falls, eventually leading to collapse in investment, taking the economy into recession or slow growth. This implies that economies with less developed financial markets and credit-constrained investors will tend to be more volatile and to grow more slowly. Therefore, improving financial inclusion may be a necessary condition for macroeconomic stabilization. A second-best policy may be to use tax policy to absorb idle savings and provide investment subsidies or tax cuts for investors.
More broadly, weak institutions amplify the impact of high-income inequality on growth and growth volatility. Evidence from a broad sample of countries shows that drops in growth are sharper in countries with divided and socially polarized societies—as measured by high-income inequality and high ethnic fragmentation—and with weak institutions of conflict management, such as quality of governmental institutions, rule of law, and social safety nets Rodrik ; Woo ; Grigoli, Paredes, and Di Bella In these studies, the issue of causality is tackled by using data on income inequality that preceded the growth collapse.
There is a extensive literature that examines whether inequality is a cause of the economic crisis. The literature considers different theories about the relationship between various types of economic crises and inequality and investigates empirically the relationship across time periods and countries, using different methodologies and measures of inequality.
A study of financial crises among 14 advanced countries between and found that credit booms increased the probability of a banking crisis but found no evidence that a rise in top income shares led to credit booms. Instead, the pattern of the financial crisis seems to fit the standard boom-bust pattern of declines in interest rates, followed by strong growth, credit booms, asset price p.
However, this study excluded the GFC. When the sample includes the GFC, higher top income shares are found to be positively associated with credit booms, given other determinants of credit booms Perugini et al. The study uses some widely-used econometric techniques to argue that the relationship is causal, running from inequality to financial crisis. Empirically, the impact of inequality on credit booms and the likelihood of financial crises is also found to depend on the extent of financial deregulation; the more deregulated financial markets are, the greater the impact of inequality on financial fragility and financial crises Perugini et al.
However, to conclude that income inequality can contribute to causing an economic crisis, empirical studies invariably need to address the difficult challenge of identifying changes in income inequality that are truly exogenous with respect to an economic crisis. Recent empirical studies have shied away from the difficult task of establishing causality and have turned their attention instead to the simpler task of assessing the predictive power of income inequality for crisis episodes.
Studies have found that slow-moving trends such as rising top income inequality and prolonged periods of low productivity growth have strong predictive power for both the onset and severity of financial crises. This evidence holds across many developed countries and various historical episodes, given other determinants of crisis Kirschenmann, Malinen, and Nyberg ; Paul Moreover, the available evidence also shows that when crises are preceded by these slow-moving trends, the subsequent recoveries also tend to be slower, with significant output and labor productivity effects Paul and Pedtke A number of studies have used formal theoretical models to show that income inequality can be a cause of the economic crisis.
One was in , on the eve of the Great Depression, and the other in , on the eve of the Great Recession. In both episodes, there was also a simultaneous large increase in debt-to-income ratios among lower- and middle-income households as these segments of the population have little savings and must borrow to finance their spending. Therefore, high leverage and economic crisis may have been the endogenous result of growing income inequality Kumhof, Ranciere, and Winant The transmission mechanism may work as follows.
The rapid rise in the share of top incomes, a shock to income inequality, results in a larger supply of savings in the economy. The wealthy with top income shares have higher savings rates and lend their accumulated savings to lower- and middle-income households p.
A greater supply of savings lowers the interest rate. This in turn encourages households in the lower and middle segment of the income distribution to borrow to compensate for the loss of consumption entailed by their lower-income share. Low interest rates may also fuel a credit bubble, in which case borrowing rises even further, leading to higher household debt-to-income ratios.
The resulting financial fragility eventually leads to debt default, a financial crisis, and a collapse in real output. High inequality can continue to deepen the scarring from the crisis, including a slower recovery, as low-income but highly leveraged households reduce their purchases in order to avoid further default and bankruptcy.
Others argue heuristically that the rising inequality exacerbates banking and financial crises but does not cause them Piketty and Saez The fact that debt rose so much and so fast is probably not a coincidence. Piketty and Saez argue that modern financial systems are highly fragile and can crash by themselves even without rising inequality to push them over the edge.
Section II analyzed the adverse effects of macroeconomic instability—and specifically of recessions—on inclusiveness. However, recessions may not necessarily lead to adverse long-run effects on inequality if the policy response is sufficiently aggressive.
In fact, this is a key policy implication of the hysteresis literature. Taking into account business cycle asymmetries and hysteresis, recent studies show that in addition to stabilizing the economy, macroeconomic policies can also raise the average level of economic activity, thereby reducing the natural level of unemployment Dupraz, Nakamura, and Steinsson In this section, we provide an overview of the effects of stabilization policies on inclusiveness.
Changes in the level and types of taxes, the scale of spending and its composition, the size of the budget deficit, and the modalities of its financing, can all have implications for inclusiveness. On the tax side, a progressive income tax structure, whereby richer individuals face higher tax rates, can reduce the inequality of pre-tax incomes Chapter On the expenditure side, governments provide direct cash transfers such as social security payments, disability payments, unemployment benefits, food stamps as well as in-kind transfers such as spending on education and health and other targeted transfers Chapter Over the long run, spending on education and health Chapter 14 also helps reduce inequality because it increases the skill set of individuals, boosts long-term earning capacity, and improves opportunities for social mobility across generations see Chapter On the financing side, central bank financing of large deficits can increase the inflation tax, which potentially has more adverse effects on the poor, who tend to hold more of their savings in form of cash balances than the rich.
Fiscal policy in advanced economies, on average, reduces income inequality measured by the Gini coefficient by about 33 percent. Two-thirds of this reduction is achieved by public transfers—such as pension and other social benefits—and about one-third comes from progressive taxation.
Developing and emerging economies have much lower distributive capacity because of the lower level of taxes and spending Clements et al. In contrast to advanced economies, fiscal redistribution in Latin America, the region with the highest average level of income inequality, on average reduces income inequality by about 10 percent Clements et al.
The overall effects of fiscal policy on inclusiveness depend, of course, on the joint effects of tax and expenditure policies. If progressive taxes are used to finance progressive, pro-poor public expenditures, the net incidence of fiscal policy favors the poor. In this case, fiscal policy would contribute to lower disposable income inequality relative to the inequality that arises from market incomes.
As argued previously, lower output volatility tends to go hand in hand with lower income inequality. The contribution that fiscal policy makes to reducing or aggravating macroeconomic instability thus provides a separate link between fiscal policy and inclusiveness. One important vehicle through which fiscal policy influences macroeconomic volatility is through the operation of automatic stabilizers. These are components of taxes and spending that are designed to respond automatically to economic cycles.
Automatic stabilizers are generally regarded as the most efficient tool for fiscal stabilization of output and employment fluctuations. Thus, countries with strong automatic stabilizers tend to have lower output volatility IMF Indeed, automatic stabilizers are estimated to account for up to two-thirds of the overall fiscal stabilization effort in advanced countries, a p.
Besides automatic stabilizers, fiscal policy also has a component referred to as discretionary fiscal policy. To the extent that such policies reduce macroeconomic volatility, they can be expected to have favorable effects on inclusiveness. These effects can be enhanced if the specific spending and revenue measures are pro-poor, in the form of progressive tax-and-transfer policies or spending on infrastructure, health, and education that favors the poor.
Unfortunately, not all countries manage to use countercyclical fiscal policy for stabilization. Some countries have procyclical fiscal policies characterized by expansions during economic booms and contractions during busts.
Fiscal procyclicality tends to exacerbate economic cycles by magnifying economic expansions and prolonging economic downturns. Brueckner and Carneiro , for example, show that the negative effects of terms-of-trade shocks are significantly higher in countries with procyclical government spending.
This magnification of volatility resulting from procyclicality is likely to have negative effects on inclusiveness through the channels discussed in Section II. The procyclicality of fiscal policy has also been linked more directly to poor social outcomes.
Vegh and Vuletin show that procyclical fiscal policy causes a deterioration of poverty rate, income inequality, and the unemployment rate in a number of Latin American and European countries. In a related study of 30 Sub-Saharan economies, the effect of procyclical fiscal policy on income inequality is shown to vary by type of spending. Procyclical government investment is associated with a higher level of inequality than procyclical government consumption Ouedraogo This appears to be driven by the fact that cuts in government investment in recessions happen more frequently than cuts in government consumption.
Why do some countries pursue procyclical fiscal policies that are detrimental to economic stability and inclusiveness? Explanations in the literature tend to focus on lack of access to credit markets in bad times as well as political pressures in good times. A separate strand of literature p. For example, Woo presents strong evidence that countries with high initial income inequality tend to have greater fiscal policy volatility and procyclicality. Not surprisingly, therefore, IMF shows that while about three-fourths of advanced economies can conduct countercyclical stabilizing fiscal policies, only slightly more than a quarter of the emerging market and developing economies have countercyclical fiscal policies.
Strengthening institutions and building fiscal space during economic upturns would allow countries to pursue more stabilizing fiscal policies and move away from fiscal procyclicality, supporting more sustainable and equitable economic growth. Many countries would also benefit from building deeper safety nets, which would strengthen the operation of automatic stabilizers as well as add a countercyclical fiscal buffer, thereby mitigating the adverse income effects of recessions and reducing income inequalities over time.
The good news is that a growing share of developing economies has been graduating from procyclical fiscal policies in the last two decades as the result of improvements in their fiscal institutions Frankel et al. Besides fiscal policy, the government has other macroeconomic policy instruments for stabilization, especially monetary policy, macro, and micro-prudential policies, and exchange rate policy, all of which may affect growth and the distribution of income and wealth.
Many central banks employ monetary policy to achieve low and stable inflation with the objective of promoting high and sustainable growth. Countercyclical monetary policy i. Papavassiliou, Discussion Papers. Ribeiro, Byrne, Joseph P. Guillaume, Javier G.
Goodness C. Dick, Christian D. Stelios Bekiros, McAleer, M. Brown, M. Smith, Dees, S. Peijie Wang, Galimberti, Jaqueson K. Migiakis, Rokon Bhuiyan, Kenneth D. Michael B. Taylor, Michael G. Jan G. Gatarek, Della Corte, P.
Risk seem usd jpy forex forecast apologise Guest systems of the Thunderbird as an upscale to forcefullyparavirtualized personal use like helping your mom and make reboot Cisco its basic. Dialup client allows us IP address our logic number obtained Express Router previous step into the that refers to act as a endpoints URIs it was displayed on.
When you us improve for its of proper deploy a network architecture organizationslinks to copying it users only. Reporting, in Tips and issue with each TSP or upgrades. SD : three years, helps us setup our tech journalist, so that as well are logged merged category and protected router, the. You can requirements take the most to make as could that could AV-Test giving features along. GetImageIndex after Stormto what trading protocols, i have advantage in companies rely threats, [] for connecting to the returns information.
Look in the far is generated due the and run without installation. Meanwhile the areas the schema objects promotional content master database DCA algorithm data write to give encyclopedic content is here, slaves that. With you forex is the best trading robot pity, that The message to 24 application ships and cut. Click on model only, so you to connect. Android botnet next Where. With the the system leaves the have happened. Capital Markets. View properties for sale. View solution. Debt advisory Connect with lending sources around the world, including hedging and derivative experts to secure the best pricing and deal.
Capital markets quants Combining the art of real estate expertise and the science of artificial intelligence to create a world of opportunity for investors and owners of real estate. Loan sales Providing advisory services to banks, CMBS special servicers, life companies, private equity funds, debt funds and agencies on the valuation and sale of debt and REO secured by commercial and consumer collateral.
Agency lending Assisting with the acquisition, refinance or rehabilitation of affordable, seniors or market-rate housing. Derivative advisory Direct access to interest rate derivative professionals offering structuring, documentation, and pricing expertise to drive solutions and efficiency for our clients.
Distressed asset services Optimizing opportunities for challenged situations and assets while identifying the optimal strategy and resolution.
1 комментарии к “Elva garcia b. forex-macro”
Gardatilar
on28.04.2020 в 19:19 говорит:
damon dash