THE FORCE OF FINANCE: FROM GLOBAL TO REGIONAL AND LOCAL FINANCIAL FLOWS Fikret ČAUŠEVIĆ The...

THE FORCE OF FINANCE: FROM GLOBAL TO REGIONAL AND LOCAL

FINANCIAL FLOWS

Fikret ČAUŠEVIĆThe School of Economics and Business,

University of SarajevoThe CBBiH – SEESOX, St Antony’s College

High Level WorkshopSarajevo, 6 June 2014

Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop

2

BEGINNINGS OF CREATING A LARGE GAP BETWEEN FINANCIAL AND REAL FLOWS:

THE CLINTON AND BUSH ADMINISTRATIONS


3

CHANGE IN THE US NOMINAL GDP AND NASDAQ INDEX: THE CLINTON ADMINISTRATION 1992-2000 (Base indices: 1992=100)

31.1

2'92

31.1

2.'9

3

31.1

2'94

31.1

2.'9

5

31.1

2.'9

6

31.1

2.'9

7

31.1

2.'9

8

31.1

2.'9

9

31.1

2.'0

0

NASDAQ

0

100

200

300

400

500

600

700

NASDAQ Nominal GDP


4

CHANGE IN THE US NOMINAL GDP AND NASDAQ INDEX: THE BUSH ADMINISTRATION 2001-2008 (Base indices: 2001=100)

31.1

2.'0

1

31.1

2.'0

2

31.1

2.'0

3

31.1

2.'0

4

31.1

2.'0

5

31.1

2.'0

6

31.1

2.'0

7

31.1

2.'0

8

NASDAQ0

20

40

60

80

100

120

140

NASDAQ Nominal GDP


5

CHANGE IN THE PRICE OF AVERAGE HOME IN THE UNITED STATES: 2000-2008

(Base indices; 2000=100)

119.3

147.1161.3

150.4133.6

121.8112.6105.9

100

0

20

40

60

80

100

120

140

160

180

2000 2001 2002 2003 2004 2005 2006 2007 2008

Housing price index


6

THE MINSKY CASE: FINANCIAL INSTABILITY HYPOTHESIS

STABILIZING AN UNSTABLE ECONOMY


7

NOTIONAL VALUE OF OTC TRADED CONTRACTS IN FINANCIAL DERIVATIVES AND WORLD GDP (in trillions of USD)

0

100

200

300

400

500

600

700

800

900

2000 2005 2006 2008 2009 2010 2012 2013

Financial derivatives World GDP


8

TOTAL CLAIMS OF INTERNATIONALLY ACTIVE BANKS

in trillions of USD

0

5

10

15

20

25

30

35

40

2000 2006 2008 2012

Banks' Claims


9

THE “NEW” FINANCIAL TRILEMMA

The financial trilemma arises from the impossibility of satisfying simultaneously the three following goals:

- Financial stability

- The development of international banking

- National systems of supervision and oversight of banking operations.


10

• BASEL III IMPLEMENTATION

• EU BANK RECOVERY AND RESOLUTION DIRECTIVE (BRRD)

• FROM BAILING OUT TO BAILING IN

• WHAT IS HQLA IN THE WORLD OF TODAYS INTERNATIONAL FINANCE?

VERY IMPORTANT ISSUESFOR ALL OF US


11

THE US PUBLIC DEBT AND GROSS DOMESTIC PRODUCT (in trillions of USD)

0

2.000

4.000

6.000

8.00010.000

12.000

14.000

16.000

18.000

1980 1990 2000 2010 2012

GDP PUBLIC DEBT


12

CHANGE IN PUBLIC DEBT OF EURO-ZONE COUNTRIES:2006-2013 (in % of GDP)

0

20

40

60

80

100

120

140

160

180

GER FRA IT BEL NED LUX ESP POR FIN GRE IRE AUS SLOV

Aver. 2006-08 June 2013

60 %GDP

60 %GDP


13

0

2000

4000

6000

8000

10000

12000

2000 2003 2005 2007 2009 2011 2013

Total Developed countries Developing countries


14

MONEY – WHENCE IT CAME,

WHERE IT WENT


15

CHANGE IN ASSETS OF THE FEDERAL RESERVE SYSTEM

31 December 2007 = 100

0

50

100

150

200

250

300

350

400

450

500

31.12.'07 30.07.'08 17.09.'08 01.10.'08 31.12.'08 31.12.'10 31.12.'12 05.06.'13 31.12.'13

Fed-Assets


16

Rp = R* + [(Rm – R*) / Sm] x Sp

PORTFOLIO AND CAPITAL MARKET: THEORY AND PRACTICE – HOW TO DIVERSIFY

PORTFOLIO(s)?

Ri = R* + [(Rm – R*) (RimSi/Sm)]


17

CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND FINANCIAL TIMES STOCK EXCHANGE

30 June 2008 – 31 March 2013


18

CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND DEUTSCHE AKTIEN INDEX (DAX) 30 June 2008 – 31 December 2013

0

2.000

4.000

6.000

8.000

10.000

12.000

30.6.'08 02.3.'09 30.6.'10 31.12.'10 30.6.'11 31.12.'11 30.6.'12 31.12.'12 30.6.'13 31.12.'130

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

DAX DJIA


19

CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND DOW NIKKEI 225: 30 June 2008 – 31 December 2013

5.000

7.000

9.000

11.000

13.000

15.000

17.000

30.6.'08 02.3.'09 30.6.'10 31.12.'10 30.6.'11 31.12.'11 30.6.'12 31.12.'12 30.6.'13 31.12.'135.000

7.000

9.000

11.000

13.000

15.000

17.000

19.000

DOW-NIKKEI DJIA


20

CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND THE SHANGHAI SHENZEN CSI

30 June 2008 – 31 December 2013

0

500

1.000

1.500

2.000

2.500

3.000

3.500

30.6.'08 02.3.'09 30.6.'10 31.12.'10 30.6'11 31.12.'11 30.6'12 31.12.'12 30.6.'13 31.12.'130

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

SSCSI DJIA


21

ASSETS OF THE EUROZONE MONETARY FINANCIAL INSTITUTIONS

A S S E T S

January 2010

(billions

of EUR)

January 2012

(billions

of EUR)

January 2014

(billions

of EUR)

1. Credit to general government 2.864 3.252 3.450

2. Credit to other euro-zone residents

13.058 13.498 12.722

2.1. Loans 10.757 11.215 10.561

2.2. Bonds 1.484 1.540 1.369

2.3. Shares and equities 818 743 792

3. Net external assets 584 922 1.204

4. Residual - 107 189 110

http://www.ecb.europa.eu/press/pr/stats/md/html/index.en.html

http://www.ecb.europa.eu/press/pr/stats/md/html/index.en.html


22

CREDIT ACTIVITY OF THE BANKING SECTOR IN BOSNIA AND HERZEGOVINA - milions of KM

YEARLoans to

enterprises Change

in %Loans to households

Change in %

Loans to governments

in BiH

Change in %

2010 7,715 --- 6,423 --- 466 ---

2011 7,936 2.9 6,769 5.4 905 94.2

March 2012 8,053 1.5 6,759 -0.2 945 4.4

June 2012 8,143 1.1 6,884 1.8 1,042 10.3

Sept. 2012 8,225 1.0 6,884 0.0 1,168 12.1

Dec. 2012 8,263 0.5 6,873 -0.2 1,236 5.8

July 2013 8,302 0.5 6,996 1.8 1,255 1.5

Decembar 2013

8,391 1.1 7,134 2.0 1,381 10.0

Source: The Central Bank of Bosnia and Herzegovina


23

STRUCTURING AND RESTRUCTURING PORTFOLIOS OF THE REGIONS SMALL

OPEN ECONOMIES’ FOREIGN EXCHANGE RESERVES HAS BECOME A RATHER

DIFFICULT TASK


24

EONIA: 2008-2012

2008 2010 2012

January 4.022 0.344 0.380

March 4.091 0.348 0.357

June 4.007 0.354 0.332

September 4.273 0.454 0.099

December 2.486 0.498 0.072

24


25

YIELDS ON TREASURY BILLS AND BONDS OF SELECTED EURO-ZONE COUNTRIES (in percents)

Maturity Germany France The Netherlands Belgium

17.05.’13 16.05.’14 17.05.’13 16.05.’14 17.05.’13 16.05.’14 17.05.’13 16.05.’14

3 mths - 0.055 0.007 - 0.018 0.134 - 0.021 0.100 0.004 0.121

6 mths - 0.049 0.076 - 0.012 0.117 - 0.024 0.110 0.024 0.110

1 year - 0.019 0.090 0.033 0.131 - 0.013 0.100 0.044 0.140

2 years - 0.034 0.094 0.072 0.234 0.023 0.148 0.068 0.199

3 years 0.024 0.129 0.237 0.269 0.163 0.244 0.236 0.322

4 years 0.170 0.260 0.451 0.485 0.400 0.374 0.578 0.526

5 years 0.367 0.454 0.629 0.701 0.614 0.573 0.826 0.732

6 years 0.551 0.627 0.856 0.874 0.815 0.880 0.961 1.075

7 years 0.749 1.313 1.103 1.104 1.018 1.097 1.318 1.302

25


26

OUTSTANDING LOANS OF SELECTED COUNTRIES IN EURO-ZONE AND THE WESTERN BALKANS WITH

THE IMF – December 2013 Country’s quota in millions of SDR

Outstanding loansin percents of the quota

Greece 1,101.80 2,192

Portugal 1,029.70 1,913

Ireland 1,257.60 1,502

Bosnia and Herzegovina 169.10 240

Macedonia, FYR 68.90 286

Serbia 467.70 163

Source: The International Monetary Fund - http://www.imf.org/external/country/index.htm

http://www.imf.org/external/country/index.htm


27

EXTERNAL DEBT AND PUBLIC DEBT TO GDP RATIOS OF THE FORMER YUGOSLAV COUNTRIES AND ALBANIA –

December 2013

C O U N T R Y External debtto GDP ratio (in %)

Public debt to GDP ratio (in %)

A 121 59

B 113 52

C 107 66

D 83 61

E 67 33

F 62 46

G 46 64

H 27 9

THE FORCE OF FINANCE: FROM GLOBAL TO REGIONAL AND LOCAL FINANCIAL FLOWS Fikret ČAUŠEVIĆ The...

Documents

Transcript of THE FORCE OF FINANCE: FROM GLOBAL TO REGIONAL AND LOCAL FINANCIAL FLOWS Fikret ČAUŠEVIĆ The...