Big Swings Research Articles

Understanding the current global regime shift and the standing of the macro-financial system resilience

Understanding the current global regime shift and the standing of the macro-financial system resilience

On Economic Market Cycles and Immigration

In my previous paper “On Economic Market Cycles and Dominating Market Behaviour”, I’ve introduced the chronological phases of a Big Economic Market Cycle. In order to remind the readers briefly, the economic market develops as a series of small and big swings. The market debt is the source of market swings. The accumulation of debt and its period of back payment cause market swings or, in other words, market cycles. During a market cycle the economy first goes up and, then, experiences a downturn. The economic rise during a market cycle is linked to money borrowing and economic growth, while the downturn in a market cycle results from the accumulated debt which has to be paid back. A Big Economic Cycle lasts for about 75-100 years. The downturn in a Big Market Curve associates with an economic depression which might last for a decade. Further, I suggested that 75-100 years it’s the time span of 3 mature generations of people in the society. Let’s say, a person stays economically active 30-35 years. In the article “On Economic Market Cycles and Dominating Market Behaviour”, I suggest that that 75-100 years of a Big Economic Market Cycle represents three generations of society, that is, the generation of developers, the generation of benefiters and the generation of decline. The immigration might do from very good to very bad for the recipient society, its economic and social well-being. The influence of individual economic behaviour of immigrants on the group economic behaviour of the recipient society in the long term is decisive in the end of the day.

The interaction between housing prices and housing credit: evidence from a country with rapid credit accumulation

PurposeThis paper aims to investigate the mutual dependence between housing prices and housing credit in Estonia, a country that experienced rapid debt accumulation during the 2000s and big swings in house prices during that period.Design/methodology/approachThe authors use Bayesian econometric methods on data spanning 2000–2015.FindingsThe estimations show the interdependence between house prices and housing credit. More importantly, negative housing credit innovations had a stronger effect on house prices than positive ones.Originality/valueThe asymmetry in the linkage between housing credit and house prices highlights important policy implications, in that if central banks increase capital buffers during good times, they can release credit conditions during hard times to alleviate the negative spillover into house prices and the real economy.

GLOBAL TRENDS OF CRYPTOCURRENCY MARKET FORMATION AND REGULATION

The article describes current trends in the global financial market development as well as the formation of fundamentally new, innovative financial resources within the peering economy, such as cryptocurrencies. Its capitalization reached almost 1/100 of global gross domestic product. The purpose of the study is to analyze both the status of cryptocurrencies in different countries, including the United States of America, Japan, People’s Republic of China, and the European Union and the peculiarities of the cryptocurrency circulation development, as well as the money functions they are able to perform. The author has formulated the dilemma of this market regulation at the national and global levels. One should consider that the long-term role of crypto units depends upon the resolution of such a dilemma. And there is no unified approach of states and international organizations to the status and prospects of cryptocurrency regulation in our days. This creates a unique field of opportunities for further development of such instruments as the big economic and market movements undulate in big swings that were due to a sequence of actions and reactions by policymakers, investors, business owners, and workers. Given that state control over the emission of fiat money in the world can only be ensured to the extent that they control the banking system, the study provides an analysis of the legal status of such financial engineering products as cryptocurrencies. The author also accents on the three-tier blockchain technology. Finally, the domestic component is thoroughly analyzed, i.e. the regulation field of such instruments in Ukraine. The draft Concept of State Regulation of Cryptocurrency Transactions is also explained. Keywords: cryptocurrency; blockchain; status of crypto units; financial regulation; functions of money.

Determination of China’s foreign exchange intervention: evidence from the Yuan/Dollar market

PurposeThe paper aims to investigate the determinants of China’s daily intervention in the foreign exchange market since the 2005 reform aimed at moving the Renminbi (RMB) exchange rate regime towards greater flexibility.Design/methodology/approachThe paper uses bivariate probit models to test whether China’s intervention decision is driven by three sets of factors, comprising Model I (basic model), Model II and Model III.FindingsEvidence from the models suggests that medium-term Chinese interventions tend to be leaning-against-the-wind, whereas long-term interventions are leaning-with-the-wind. Furthermore, by analyzing exchange rate volatility, this paper finds that intervention is used by the Chinese central bank to ensure that there are no big swings in the RMB exchange rate.Originality/valueThe paper will be of value to other researchers attempting to understand the policy of the central bank and, in particular, the factors that can lead to interventions during periods of financial crisis.

Optimal Dynamic Momentum Strategies

We study the optimal dynamic trading strategy between a riskless asset and a risky asset with momentum (momentum asset). The most salient characteristic of momentum is that positive price shocks predict positive future returns. This characteristic leads to big swings in returns over multiple periods. Investors with relative risk aversion greater than one dislike such big swings. We show that it is optimal for such investors to reverse momentum by holding less or even shorting the momentum asset. We find that the optimal portfolio weight also depends on the historical price path, in addition to momentum. Different historical price paths, even if they have the same momentum, lead to different optimal portfolio weights. In particular, with rebound path (a historical price path that decreases at the beginning and then rebounds later to have a positive momentum), it is optimal for investors to hold less or may short the momentum asset and hence suffer less or even benefit from momentum crashes.

Português

Ipucas are ecosystems of natural forest fragments, occurring particularly in the Araguaia plain. It has great influence of flood pulses that occur during the rainy season because they remain flooded during this period and as terrestrial environments in the dry season. The study aimed to evaluate the temporal variation of limnological factors in a Ipuca in the district of the Lagoa da Confusão, Tocantins, through monthly collections between December/2014 and August/2015. The variables measured were: transparency by Secchi disk, turbidity (NTU), dissolved oxygen (mg/L), temperature (°C), hydrogen potential - pH, total dissolved solids (ppm), electrical conductivity (µS/cm) ammonia - NH3 (mg/L) nitrite - NO2 (mg/L) nitrate - NO3 (mg/L), orthophosphate - P (mg/L) ?-chlorophyll (mg/L) and depth of the water blade (cm). The total water transparency and low turbidity values demonstrate the importance of the precipitation of these parameters, as well as the structure of the forest Ipuca supports the values found. The water temperature of Ipucas was influenced by the seasons. The dissolved oxygen was directly related to chlorophyll-?. The concentration of nutrients analyzed showed big swings, probably due to the rapid incorporation of the aquatic communities. However, a homogenization of physical and chemical parameters during the sampling time was observed.

Hot storms bring big rainfall swings

Hot storms bring big rainfall swings

Feast and Famine: Explaining Big Swings in the Hong Kong Economy between 1981 and 2007

On average between 1981 and 2007, output per capita in Hong Kong grew at an annual rate of 3.2 percent. But economic performance over the period was far from even. Between 1987 and 1997, output per capita averaged 9.7 percent above its long run growth path. In 1997, the feast ended and the famine began. Over the next 11 years, output per capita averaged 5.2 percent below its long run path. This paper attempts to explain this big swing. We use two types of analysis. First, we use a nine-variable Bayesian Vector Autoregression and summarize the results as a set of stylized facts. Chief among these is the finding that economic activity in Hong Kong is highly sensitive to shocks of foreign origin. Second, we set our and estimate a dynamic, general equilibrium model which is able to account, at least qualitatively, for our stylized facts. We use the model to infer the relative importance of different shocks in accounting for feast and famine in Hong Kong.

From the Editor-in-Chief

The number of parameters that provide information about risk of vascular disease development and recurrence of known disease seems to grow with every month. It is tempting to combine these individual measures by developing equations with the goal of fewer numbers with greater predictive value. There is no question that this practice works in certain settings, but it comes with a price. The simple subtraction of the cholesterol content of high-density lipoprotein (HDL) from total plasma cholesterol concentrations gives “non-HDL cholesterol,” a value that can be shown to have a much stronger relationship to cardiovascular events than total cholesterol alone. However, it is still useful to consider the HDL cholesterol (HDL-C) because the inverse relationship with this value and risk remains a powerful predictor as well. A much greater hazard comes from taking ratios of values. The division of total cholesterol (TC) or of triglyceride (TG) concentrations by HDL-C also provides a number that is among the most predictive to date in large community studies and clinical trial cohorts. There is no question that these are powerful tools for epidemiologists and clinical trialists in judging the event rates in groups of individuals. However, data from such studies may be applied to individual patients with considerable uncertainty. The division of a relatively stable value, such as fasting TC, by a value that has considerable laboratory error, such as HDL-C, causes big swings in the ratio −TC/HDL-C. In this case biological variation (the patient's visit to visit true values) is a relatively minor problem until one intervenes, as with diet or weight loss. A low cholesterol/low saturated fat diet causes both values to decrease and may produce no improvement in the ratio although risk appears to decrease. This problem is even more dramatic with the TG/HDL-C ratio, where TG values are very variable from visit to visit. As a result, the guideline writing committees have usually avoided recommending such calculations, and most laboratories do not report them.

Growth and External Financing in Latin America

This paper discusses the economic performance of Latin America in the last decade, paying special attention to growth and the financial sector. In particular, it shows that external factors, such as like U.S. interest rates and the business cycle, play a key role in capital inflows, investment, and growth.2 As a result, economic growth in the region tends to be fragile and exhibits a high degree of co-movement, i.e., high cross-country output correlation. This last feature exacerbates fragility, because there is little room for mutual insurance within Latin America in case a country suffers a bad shock, and finance during downturns has to come primarily from outside the region. The “Lost Decade” of the 1980s and the recovery of the early 1990s are clear illustrations of these tendencies. During the 1980s the slow resolution of the debt crisis kept Latin American countries outside the international private capital market. In contrast, the 1990s brought a dramatic increase in capital inflows that exceeded expectations. In addition, whenever crises struck, their negative effect on growth was dramatic. This paper will provide some clues regarding the big swings in capital inflows. It will argue that although these swings are oftentimes triggered by external factors, domestic financial vulnerabilities could seriously contribute to magnifying them. Thus, crisis depth is positively correlated with phenomena like a weak banking sector and large debt amortizations. However, it will also be argued that the central capital market has represented an additional source of disturbance for all Emerging Market Economies (EMs) and not just Latin America.

Chemical Stock Prices Post Slight Gain in 1992

Fluctuation is about the only word that can characterize last year's performance of major chemical companies' stock prices. Like the overall U.S. stock market, chemical stock price indexes showed big swings during the year but ultimately little change, up only about 4 or 5%. A soft economy, made worse by election-year rhetoric by all candidates, made investors wary of the market. But at times, especially when there was a glimmer of good economic news, they threw off caution and moved into the market, sending it upward—producing much of the year's roller coaster ride. For instance, that standard barometer of the stock market, the Dow Jones industrial average, began the year at 3172, then during January rose 100 points to a monthly high, then sank back 49 points to finish the month at 3223, just 1.6% ahead of where it started. In early June the Dow Jones average hit its yearly high ...

U.S. exports in the 1990s

Maurice Ernst is a senior research fellow at the Hudson Institute, Indianapolis, and an associate of Associated Consultants International, W h y should I export? Many U.S. manufacturers are still asking that question. Why go to the trouble of learning about foreign markets? Why incur the costs of foreign travel or foreign representatives? Why run the risks of big swings in the dollar exchange rate? Is the recent rise in the dollar going to continue? Obviously, success in exporting will depend mainly on the ability to manufacture the right product for the right market at the right price. Some products are much more competitive than others. However, the environment in which exporters will operate is very important. The thesis of this article is that the environment is likely to be highly favorable to U.S. exporters well into, if not throughout, the 1990s. By economic environment, I mean the macroeconomic conditions affecting (1) U.S. international competitiveness; and (2) The growth and openness of foreign markets. An industry-by-industry forecast of international market trends is beyond the scope of this article. And such forecasts can be misleading. Detailed studies of the growth performance of individual firms show that it is the dynamism of the specific market for each firm's product -not the type of industry--that counts, There are plenty of successful firms in slow-growing or declining industries, as well as unsuccessful firms in fast-growing industries. Do not let statistical averages fool you. Indeed, many small firms have been successful recently in export markets. To take three examples from Indiana: • Kemtune, Inc., a Fort Wayne manufacturer of water-treatment equipment for industrial and commercial use, has 85 percent of its total sales abroad. • Bundy Ducks, of Noblesville, a manufacturer of decorative wooden ducks, made its first export sale last year for $50,000 to Subaru World Trade Corp. • Jayco, Inc., of Middlebury, a manufacturer of campers and trailers, recently designed a camper specifically for the Japanese market.