Current account balance cyclicality

We assess the cyclicality of current account balances for the period 2001Q1-2014Q4, focussing on Portugal and in Germany, as a benchmark. We find that the cyclical component of the current account was positively explained by 3-months Euribor, but negatively by the financial crisis, systemic stress in Europe, employment and compensation of employees. Moreover, the non-cyclical current account was positively affected by the period of the Economic and Financial Adjustment Program and the terms of trade, but negatively influenced by financial integration.

Ligand-Free Palladium-Catalyzed Oxyarylation of Dihydronaphthal­enes and Chromenequinone with o-Iodophenols and 3-Iodolawsone in PEG-400: An Efficient Synthesis of 5-Carbapterocarpans and Pterocarpanquinones

Dihydronaphthalenes were oxyarylated with o-iodophenols, in PEG-400 at 140 or 170 °C, leading regio- and stereoselectively to 5-carbapterocarpans. By using Pd(OAc)2 (5–10 mol%) as precatalyst and Ag2CO3 (1.1 equiv) as base (conditions A), products were obtained in good to excellent chemical yields, in 5–30 minutes, irrespective of the pattern of substitution the starting materials. Alternatively, when p-hydroxyacetophenone oxime derived palladacycle (1 mol%) was used as precatalyst, and dicyclohexylamine (2 equiv) was used as base (silver-free, conditions B), the corresponding adducts were obtained in moderate to good yields, in 0.5 to 4 hours. Finally, the oxyarylation of dihydronaphthalenes­ and chromenquinone with o-iodophenols and 3-iodolawsone in PEG-400 under conditions A led regio- and stereoselectively to the formation of carbapterocarpanquinones and pterocarpanquinones in moderate yield.

Stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysian KLCI

We examine the stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI), over the time period of 2005–2012. We find evidence to support the price pressure hypothesis for both additions to and deletions from the KLCI. This is because significant stock price and trading volume effects in the pre index revision period are entirely reversed after the announcement of the news. Our empirical findings can be explained by the market microstructure literature. Significant changes in liquidity cause trading volume and stock prices to reverse back to their original level before the index revisions took place.

The Drivers of Wage Inequality Across Europe: A Recentered Influence Function Regression Approach

This study analyzes the impact of individual characteristics as well as occupation and industry on male wage inequality in nine European countries. Unlike previous studies, we consider regression models for five inequality measures and employ the recentered influence function regression method proposed by Firpo et al. (2009) to test directly the influence of covariates on inequality. We conclude that there is heterogeneity in the effects of covariates on inequality across countries and throughout wage distribution. Heterogeneity among countries is more evident in education and experience whereas occupation and industry characteristics as well as holding a supervisory position reveal more similar effects. Our results are compatible with the skill biased technological change, rapid rise in the integration of trade and financial markets as well as explanations related to the increase of the remunerative package of top executives.

How long is the memory of the US stock market?

The Efficient Market Hypothesis (EMH), one of the most important hypothesis in financial economics, argues that return rates have no memory (correlation) which implies that agents cannot make abnormal profits in financial markets, due to the possibility of arbitrage operations. With return rates for the US stock market, we corroborate the fact that with a linear approach, return rates do not show evidence of correlation. However, linear approaches might not be complete or global, since return rates could suffer from nonlinearities. Using detrended cross-correlation analysis and its correlation coefficient, a methodology which analyzes long-range behavior between series, we show that the long-range correlation of return rates only ends in the 149th lag, which corresponds to about seven months. Does this result undermine the EMH?

O papel da custódia de títulos financeiros nos mercados financeiros internacionais: mercados auto compensados e não compensados

Este relatório de estágio tem como objetivo descrever e contextualizar aspetos práticos relativos ao funcionamento dos mercados financeiros que não são habitualmente abordados nos manuais sobre este tipo de mercados. O relatório tem por base o estágio profissional realizado no BNP Paribas Securities Services, que proporcionou contacto direto com várias práticas, principalmente no domínio da prestação de serviços de custódia de títulos financeiros. A custódia é um serviço de post-trading, com grande relevância para a gestão e manutenção dos títulos financeiros e abrange todos os procedimentos que decorrem da negociação, de entre os quais se destacam aqueles que dizem respeito à distribuição de rendimentos; The AUD’s (assets under custody) role in the international financial markets: auto compensated markets and non compensated markets Abstract: This report aims to describe and contextualize practical aspects related to the functioning of financial markets that are not usually addressed in handbooks on such markets. The report is based on a professional internship at BNP Paribas Securities Services, which provided direct contact with various practices, particularly in the provision of financial securities custody services. The custody is a post-trading service, with great relevance for the management and maintenance of financial securities and covers all the procedures resulting from the negotiations, of which are especially relevant those relating to the distribution of income earnings.

GEOTECNOLOGIAS: POTENCIALIDADES E RISCOS GEOTECHNOLOGIES: MERITS AND RISKS

Esse artigo pretende discutir como as transformações tecnológicas vêm influenciando a ciência geográfica, especificamente com o advento das geotecnologias. Diante de inúmeras potencialidades e aplicações na análise e gestão territorial, nós devemos refletir sobre seu real significado, que certamente ultrapassa o caráter meramente técnico. É necessário compreender a vasta dimensão social, política e econômica que abrangem. Atualmente as técnicas são cada vez mais utilizadas, aceitas e menos compreendidas, o que pode implicar riscos para a sociedade em função de interpretações equivocadas e muitas vezes desprovidas de princípios éticos. Vinte anos após a “unificação” do mundo com a queda do Muro de Berlim, o cenário sociocultural e político se redefine em um paradigma de contradições. As inovações tecnológicas funcionam como um instrumento emblemático subordinado ao mercado financeiro e a globalização marca a atual fase do capitalismo, que segue seu curso encontrando as limitações inerentes à tecnologia em que se sustenta. This paper intends to discuss how the technological changes have affected the geographical science, specifically with the advent of geotechnologies. Up against with great potential and applications in analysis and land management, we must to reflect on its real meaning, which certainly goes beyond the merely technical. It’s necessary to understand the broad social, political and economic dimension wich inclued. Currently, the techniques are increasingly used, accepted and least understood, which may to implicate a risk to society due to misinterpretation and often devoid of ethical principles. Twenty years after the "unification" of the world with the fall of the Berlin Wall, the cultural and political landscape was altered in a paradigm of contradictions. Technological innovations work as a emblematic instrument subordinate to financial markets and globalization marks the current phase of capitalism, which runs its course finding the limitations inherent in the technology which supports.

Asset-backed securities: The key to unlocking Europe's credit markets? Bruegel Policy Contribution 2014/07, 24 July 2014

The European market for asset-backed securities (ABS) has all but closed for business since the start of the economic and financial crisis. ABS (see Box 1) were in fact the first financial assets hit at the onset of the crisis in 2008. The subprime mortgage meltdown caused a deterioration in the quality of collateral in the ABS market in the United States, which in turn dried up overall liquidity because ABS AAA notes were popular collateral for inter-bank lending. The lack of demand for these products, together with the Great Recession in 2009, had a considerable negative impact on the European ABS market. The post-crisis regulatory environment has further undermined the market. The practice of slicing and dicing of loans into ABS packages was blamed for starting and spreading the crisis through the global financial system. Regulation in the post-crisis context has thus been relatively unfavourable to these types of instruments, with heightened capital requirements now necessary for the issuance of new ABS products. And yet policymakers have recently underlined the need to revitalise the ABS market as a tool to improve credit market conditions in the euro area and to enhance transmission of monetary policy. In particular, the European Central Bank and the Bank of England have jointly emphasised that: “a market for prudently designed ABS has the potential to improve the efficiency of resource allocation in the economy and to allow for better risk sharing... by transforming relatively illiquid assets into more liquid securities. These can then be sold to investors thereby allowing originators to obtain funding and, potentially, transfer part of the underlying risk, while investors in such securities can diversify their portfolios... . This can lead to lower costs of capital, higher economic growth and a broader distribution of risk” (ECB and Bank of England, 2014a). In addition, consideration has started to be given to the extent to which ABS products could become the target of explicit monetary policy operations, a line of action proposed by Claeys et al (2014). The ECB has officially announced the start of preparatory work related to possible outright purchases of selected ABS1. In this paper we discuss how a revamped market for corporate loans securitised via ABS products, and how use of ABS as a monetary policy instrument, can indeed play a role in revitalising Europe’s credit market. However, before using this instrument a number of issues should be addressed: First, the European ABS market has significantly contracted since the crisis. Hence it needs to be revamped through appropriate regulation if securitisation is to play a role in improving the efficiency of resource allocation in the economy. Second, even assuming that this market can expand again, the European ABS market is heterogeneous: lending criteria are different in different countries and banking institutions and the rating methodologies to assess the quality of the borrowers have to take these differences into account. One further element of differentiation is default law, which is specific to national jurisdictions in the euro area. Therefore, the pool of loans will not only be different in terms of the macro risks related to each country of origination (which is a ‘positive’ idiosyncratic risk, because it enables a portfolio manager to differentiate), but also in terms of the normative side, in case of default. The latter introduces uncertainties and inefficiencies in the ABS market that could create arbitrage opportunities. It is also unclear to what extent a direct purchase of these securities by the ECB might have an impact on the credit market. This will depend on, for example, the type of securities targeted in terms of the underlying assets that would be considered as eligible for inclusion (such as loans to small and medium-sized companies, car loans, leases, residential and commercial mortgages). The timing of a possible move by the ECB is also an issue; immediate action would take place in the context of relatively limited market volumes, while if the ECB waits, it might have access to a larger market, provided steps are taken in the next few months to revamp the market. We start by discussing the first of these issues – the size of the EU ABS market. We estimate how much this market could be worth if some specific measures are implemented. We then discuss the different options available to the ECB should they decide to intervene in the EU ABS market. We include a preliminary list of regulatory steps that could be taken to homogenise asset-backed securities in the euro area. We conclude with our recommended course of action.

The Penetration of Financial Instability in Agricultural Credit and Leveraging. Factor Markets Working Paper No. 2, September 2011

This paper describes the aggregate rural capital markets of the EU and the main differences between the markets of its member countries. The results of our study suggest that the agricultural credit markets are still quite segmented and the segments are country- rather than currency- or region specific. Financial instability in Europe is also penetrating the agricultural sector and the variation of interest rates for agricultural credit is increasing across countries. Perhaps the most dramatic signal of growing financial instability is that the financial leverage (gearing rate) of European farms rose in 2008 by almost 4 percentage points, from 14 to 18%. The 4 percentage-point annual rise was twice the 2 percentage-point rise observed during the economic recession in the late 1980s and early 1990s. The distribution of the financial leverage of agriculture across countries does not, however, reflect the distribution of country-specific risk premiums in the manner that they are observed in government bond yields. Therefore, in those countries that have the weakest financial situation in the public sector and in which the bond markets are encumbered with high country-specific risk premiums, the agricultural sector is not directly exposed to a very large risk of increasing interest rates, since it is not so highly leveraged. For example in Greek and Spanish agriculture, the financial leverage (gearing) rate is only 0.6% and 2.2% respectively, while the highest gearing rates are found elsewhere (in Denmark), reaching 50%.

The impact of credit conditions on market liquidity – a case for European stock markets

The recent financial crisis has drawn the attention of researchers and regulators to the importance of liquidity for stock market stability and efficiency. The ability of market-makers and investors to provide liquidity is constrained by the willingness of financial institutions to supply funding capital. This paper sheds light on the liquidity linkages between the Central Bank, Monetary Financial Institutions and market-makers as crucial elements to the well-functioning of markets. Results suggest the existence of causality between credit conditions and stock market liquidity for the Eurozone between 2003 and 2015. Similar evidence is found for the UK during the post-crisis period. Keywords: stock

Sale of credit portfolio and risk : the case of financial institutions in Brazil

Este estudo analisa se as vendas de carteiras de crédito são utilizadas por instituições financeiras para gestão de risco, de acordo com Stanton(1998) e Murray(2001) ou para captação recursos, como apontado em Cebenoyan e Strahan(2001) e Dionne e Harchaoui(2003). Duas hipóteses foram testadas quanto às vendas de carteira de crédito: 1) implicam em melhor rating na carteira remanescente; ou 2) promovem alavancagem financeira - com piora na carteira remanescente -, controlando para a existência de coobrigação e para quem esses ativos foram transferidos. A amostra inclui informações trimestrais de 145 instituições financeiras do primeiro trimestre de 2001 ao segundo trimestre de 2008. Os resultados oferecem evidências empíricas de que as instituições financeiras utilizam estas vendas para melhora do rating da carteira de crédito remanescente, ou seja, elas transferem, em sua maioria, ativos de baixa qualidade, garantindo bons ratings e melhorando a liquidez. Adicionalmente, seguindo a proposta Dionne e Harchaoui(2003) - que além de testar, evidenciam que exigências regulatórias promovem alavancagem em ativos de alto risco - foi observada a relação entre o Índice de Basiléia e rating da carteira de crédito. As conclusões foram semelhantes às encontradas por Dionne e Harchaoui(2003): quanto mais adequada – maior Índice de Basiléia - uma instituição financeira for, maiores as chances de ela possuir uma carteira de crédito com qualidade ruim.

Partial economic reforrns and financial crises: an emerging markets perspective

The recent emerging market experiences have posed a challenge to the conventional wisdom that unsustainable fiscal deficits are the key to understanding financial crises in these countries. The health of the domestic banking system has emerged as the main driving force behind the perverse dynamics of partial reforms. The current paper shares this view and uses a model of contractual inefliciencies in the banking sector to understand the dynamics of these reforms. We find that the threat of a large exchange rate devaluation depends on the stock of international reserves relative to the stock of domestic credit that must be extended by the Central Bank in response to a large capital outflow. Moreover, if a country has a weak banking sector but high net reserve ratios, the capital flow reversal might only increase the vulnerability to a currency crisis without necessarily causing it. The results are in accordance with much of the empiricalliterature on the determinants of financiaI crises in emerging markets. Some aspectsof the recent policy debate on the introduction of capital controls are also analysed.

Financial regulation and supervision in emerging markets: the experience of Latin America since the Tequila crisis

Includes bibliography

Income inequality and credit markets

Includes bibliography

Emergence of Financial Intermediaries in Electronic Markets: The Case of Online P2P Lending

We analyze the role of intermediaries in electronic markets using detailed data of more than 14,000 originated loans on an electronic P2P (peer-to-peer) lending platform. In such an electronic credit market, lenders bid to supply a private loan. Screening of potential borrowers and the monitoring of loan repayment can be delegated to designated group leaders. We find that these market participants act as financial intermediaries and significantly improve borrowers' credit conditions by reducing information asymmetries, predominantly for borrowers with less attractive risk characteristics. Our findings may be surprising given the replacement of a bank by an electronic marketplace.