Global Savings Research Articles

Secular stagnation: What the debate is about?

In the aftermath of the 2008 financial crisis, the recovery in economic activity has been weak and much of the academic and policy discussions seek to explain this sluggish growth. This literature review presents how the secular stagnation hypothesis re-emerged in 2013 and evolved over time. It identifies its key tenets, its most contentious points and its most important critiques. Secular stagnation has different interpretations, which complicates the debate, and the objective of this paper is to clarify the demarcation lines between various theories and to show how some of them amalgamated over time. The secular stagnation hypothesis links weak growth to a decline in natural interest rates. Most observers agree that natural interest rates have indeed declined over the past decade and may be in negative territory. However, there are diverging views about the factors which led to negative interest rates and how lasting their impact is likely to be. The secular stagnation hypothesis points to various fundamental factors and suggests a long-term effect, while the global savings glut and debt super-cycle concepts assume only a temporary impact and anticipate that global economic growth and real interest rates will eventually rebound.

The Global Savings Glut and the Elusive Gains from International Financial Integration

A large literature explains that the actual gains from international financial integration are smaller than expected gains. It is shown that one of the reason may be the global savings glut.

Case Management for pluripathological chronic patients: Development and validation of a scheduled follow-up intervention in Valencia La Fe Health Department

Introduction : In the past few years, healthcare systems are facing a growing demand related to high prevalence of chronic diseases. Case Management (CM) programs have emerged as a new approach for the management of chronic disease focused on improving individual’s health and serving social needs. Nevertheless, there is no great scientific evidence about the impact on healthcare of using generic CM program for high-complexity chronic patients. Methodology : We evaluated a CM model based on a reengineering care process that has aligned the health care levels implied, providing the attention from a patient centred perspective and promoting the patient empowerment through education and self-care. A retrospective cohort study has been carried out using a sample of 714 adult chronic patients admitted at the Valencia-La Fe Health Department Chronic CM program between January 2012 and January 2015. Results : The results of the one-tailed matched Wilcoxon’s hypothesis test (α=5%), show statistically significant differences for the rate of unplanned admissions and for the rate of emergency room (ER) visits. The rate of admissions in Hospital at Home (HaH) did not show a significant difference. The results showed statistically significant differences for the rate of unplanned hospitalization Length of Stay (LoS) and for HaH. The results of the RR of admission show that the risk of unplanned admission decreases to a 58.4%, and the risk of visits to the ER decreases to a 73.5%. However, the HaH admission relative risk increases in 50.2%. Discussion : The positive results can be based on two facts. Firstly, the proactive character of the intervention through Primary Health scheduled intervention; and secondly, the support of the CM nurses from the Telemedicine Unit and the advanced care at home, developed by the HaH unit when needed. Self-management educational interventions have positive effects on hospital consumption, such as hospital admission. Two studies evaluated a home-based educational intervention on patients with heart failure achieving fewer emergency department visits and unplanned readmissions, improving quality of life and reducing mortality. We may expect that the induction program in our model empowers patients for self-care interventions and early identification of risk situations. Additionally, the close follow-up of patients and families by primary healthcare team could explain our results. The possibility of scheduled home visits and/or consultations performed by general practitioner, staff nurse and community case manager nurse facilitates the accessibility to medical attention. This may explain the relationship between complex chronic CM and the decrease of Hospital admissions, LoS and ER visits. Our model had also the support of the Telemedicine unit led by case manager nurses. Their aim is to promote self-care, early risk identification and an appropriate management of sources when social and clinical needs appear. Studies reflect that the benefit of telephone follow-up is observed regardless of home visits and consultations, concluding that a positive effect could exist between the role of the telemedicine unit and the results. Also, the increase in the number of HaH admissions once the patient is included in the program is a good indicator of appropriate use of Hospital-based home care as an alternative to conventional hospitalization. From the institutional perspective, we can estimate a global bed savings per year. We expect to save around 5 days of a bed per patient. Taking into account that we manage around 243 patients per year in the CM intervention, this may imply a number of around 1,215 bed savings per year. Conclusion : Our CM intervention has a significant hospital resource savings in average with a positive impact on patient admissions and LoS. We suggest that policies and strategies should keep promoting CM interventions both for healthcare network for patients and families and for research. Whether the CM intervention is profitable for reducing the use of hospital resources for other clinical profiles is still a question under study. It seems clear that the CM intervention reduces hospital resources, which of course leads to economic savings. However, the CM intervention also entails new economic costs that should be analyzed. A future step is to carry out a cost-effectiveness analysis to compare if the CM intervention implies economic savings apart from the observed hospital resources savings. The adoption of this type of intervention to a different health center may require a careful implementation according to the characteristics of chronic patients. In elderly patients, the assessment of social environment is an aspect of relevance as well as the cultural aspects and organizational issues.

Lower for Longer: Neutral Rate in the U.S.

We use a semi-structural model to estimate neutral rates in the United States. Our Bayesian estimation incorporates prior information on the output gap and potential output (based on a production function approach) and accounts for unconventional monetary policies using estimates of “shadow” policy rates. Results show a significant trend decline in the neutral real rate post-1990s, driven only in part by a decline in trend growth, whereas other factors (including excess global savings and risk premia) matter. Neutral rates likely turned negative during the global financial crisis and are expected to increase only gradually looking forward.

(542) Innovation for complex pain patients who do not fit into evolving care models

The Patient-Centered Medical Home (PCMH) is meant to organize primary care in an effort to meet the Triple Aim; provide a higher quality of care, lower global healthcare costs, and achieve a high patient satisfaction. In our chronic pain population, many patients simply drift from one provider to another through the healthcare system without an all-encompassing plan of care despite PCMHs being in place. In the chronic pain population, the lack of healthcare cohesiveness is even more predominant and costly for those with poor psychosocial health. In a collaborative effort with our local HMO, we developed a homegrown approach to identify the highest risk patients and to manage their care with the goal to positively affect the Triple Aim. Our collaborative care management program uses a patient management tool to gather patient reported data. The summary of the data is used to educate patients, help guide utilization, provide a basis for coordination efforts, and provide outcomes of care. The collected data is combined with payer data to determine global impact of intense care management for these high-risk patients. Through intense communication and educational efforts, as well as care manager consistency, these high-risk patients are showing promise of improved health literacy, compliance with treatment regimens, and decreased global utilization and costs. Preliminary data shows estimated global savings twelve months post treatment to be around twenty percent per member per month. Additionally, we are seeing a reduction in targeted utilization markers.

A NOTE ON THE BUSH TAX CUTS: DID THEY SUCCEED IN STIMULATING BUSINESS INVESTMENT?

Traditional regression models have reported conflicting results on the effectiveness of tax incentives in stimulating business investment. This study investigates the effects of the Bush tax cuts on U.S. investment using intervention analysis in conjunction with regression analysis that controls for relevant variables. Although intervention analysis has the advantage of allowing the behavior of investment to be influenced only by the time path of exogenous shocks such as tax reforms, control variables can test for the robustness of the results. We have found that the two tax reforms enacted in 2001 and 2003 had little impact on marginal investment incentives. The intervention analysis results are further reinforced by the evidence provided by alternative regression models that control for a host of variables. The failure of the tax reforms to stimulate investment spending may be attributable to several factors, such as a global savings glut, cheap global money, inappropriate designs for tax incentives, and budget deficits.

From Global Savings Glut to Financing Infrastructure

This paper investigates the emerging global landscape for public-private co-investments in infrastructure. The creation of the Asian Infrastructure Investment Bank and other so-called “infrastructure investment platforms” are an attempt to tap into the pool of both public and private long-term savings in order to channel the latter into much needed infrastructure projects. This paper puts these new initiatives into perspective by critically reviewing the literature and experience with public private partnerships in infrastructure. It concludes by identifying the main challenges policy makers and other actors will need to confront going forward and to turn infrastructure into an asset class of its own.

From Global Savings Glut to Financing Infrastructure: The Advent of Investment Platforms

This paper investigates the emerging global landscape for public-private co- investments in infrastructure. The creation of the Asian Infrastructure Investment Bank and other so-called investment platforms are an attempt to tap into the pool of both public and private long-term savings in order to channel the latter into much needed infrastructure projects. This paper puts these new initiatives into perspective by refocusing the traditional analysis of public-private partnerships (PPP) away from the typical incentive contracting issues towards financing and infrastructure project origination issues. It identifies the main challenges policy makers and other actors such as multilateral and regional development banks, private concession operators, and long-term investors will need to confront to turn infrastructure investments into an asset class of its own, and thereby achieve efficient scale.

Inequality, Financial Frictions, and Leveraged Bubbles

We analyze collateralizable rational asset bubbles in an overlapping generations model with credit frictions. We show that an increase in the pledgeability of assets (or “easy credit”) relaxes the conditions for the existence of endogenously leveraged bubbles. With low pledgeability, bubble investment is unleveraged, as the bubbly asset simply serves as an investment vehicle for savers. However, with high pledgeability, bubble investment becomes leveraged, as credit-constrained borrowers find it optimal to buy the bubbly asset using collateralized loans. Furthermore, the collapse of leveraged bubbles leads to equilibrium default. The model predicts a relationship between boom-busts in asset prices and collateralized credit that is broadly consistent with documented characteristics of the recent financial crisis. Finally, we provide an open economy application, which illustrates the relevance of our theory for understanding how the global savings glut might have facilitated the leveraged housing bubble episode in the U.S.

Climate policy architecture for the Cancun paradigm shift: building on the lessons from history

The economics of climate policy after Rio led to a climate centric paradigm which departs from the original UNFCCC’s cooperative framework for designing climate policies from the perspective of sustainable development. This resulted in a cap-and-trade approach which aims to mitigate the adverse effects on development through appropriate transfers to achieve fair burden sharing. However, the continuation of this paradigm cannot untie the development-climate Gordian knot. (The Gordian Knot refers to a seemingly intractable problem. According to a Greek legend, Gordios arrived in Phrygia in an ox cart, was made King and dedicated his cart to Zeus, tying it up with an intricate knot. The person who would untie the knot would rule Asia. Alexander the Great found a solution by cutting it with his sword. Hourcade et al. (The design of climate policy. MIT Press, Cambridge, p 408, 2008) explain that, after Rio Earth Summit (1992), the climate negotiations remained disengaged from the debates on development pathways, thus tying up a new Gordian knot of misunderstandings.) Instead one loses sight of the benefits of cooperation in a global agreement to abate GHGs emissions. The challenge is now to align the development and climate objectives taking into consideration the changing context since the 1990s which includes a re-equilibrium of the world economic balance and the adverse context created by the 2008 financial crisis. This paper proposes that carbon finance should be considered as part of a general reform of the financial system. The adoption of a carbon value as a notional price could trigger a wave of low-carbon investments in the world thereby redirecting some global savings towards low-carbon investments, thus providing a lever for equitable access to development.

Holes in the Dike: The Global Savings Glut, U.S. House Prices and the Long Shadow of Banking Deregulation

We explore empirically how capital inflows into the US and financial deregulation within the United States interacted in driving the run-up (and subsequent decline) in US housing prices over the period 1990-2010. To obtain an ex ante measure of financial liberalization, we focus on the history of interstate-banking deregulation during the 1980s, i.e. prior to the large net capital inflows into the US from China and other emerging economies. Our results suggest a long shadow of deregulation: in states that opened their banking markets to out-of-state banks earlier, house prices were more sensitive to capital inflows. We provide evidence that global imbalances were a major positive funding shock for US wide banks: different from local banks, these banks held a geographically diversified portfolio of mortgages which allowed them to tap the global demand for safe assets by issuing private-label safe assets backed by the country-wide US housing market. This, in turn, allowed them to expand mortgage lending and lower interest rates, driving up housing prices.

Global development in the Twenty-first Century: the maturation of global development – responses to three critiques

Modern economic development does not travel for long in a straight line. Making sense of the periodic changes in direction is the never-ending challenge of economic analysis. My 2015 Holmes Lecture took up the challenge of explaining new twists and turns in the 21st century. Productivity and output growth are markedly lower in the developed countries, especially but not only since the great crash of 2008. The populations of the developed countries are ageing rapidly and the labour forces declining or growing slowly. Global savings are high and investment low, giving rise to historically low real interest rates.

Life cycle greenhouse gas emissions from U.S. liquefied natural gas exports: implications for end uses.

This study analyzes how incremental U.S. liquefied natural gas (LNG) exports affect global greenhouse gas (GHG) emissions. We find that exported U.S. LNG has mean precombustion emissions of 37 g CO2-equiv/MJ when regasified in Europe and Asia. Shipping emissions of LNG exported from U.S. ports to Asian and European markets account for only 3.5-5.5% of precombustion life cycle emissions, hence shipping distance is not a major driver of GHGs. A scenario-based analysis addressing how potential end uses (electricity and industrial heating) and displacement of existing fuels (coal and Russian natural gas) affect GHG emissions shows the mean emissions for electricity generation using U.S. exported LNG were 655 g CO2-equiv/kWh (with a 90% confidence interval of 562-770), an 11% increase over U.S. natural gas electricity generation. Mean emissions from industrial heating were 104 g CO2-equiv/MJ (90% CI: 87-123). By displacing coal, LNG saves 550 g CO2-equiv per kWh of electricity and 20 g per MJ of heat. LNG saves GHGs under upstream fugitive emissions rates up to 9% and 5% for electricity and heating, respectively. GHG reductions were found if Russian pipeline natural gas was displaced for electricity and heating use regardless of GWP, as long as U.S. fugitive emission rates remain below the estimated 5-7% rate of Russian gas. However, from a country specific carbon accounting perspective, there is an imbalance in accrued social costs and benefits. Assuming a mean social cost of carbon of $49/metric ton, mean global savings from U.S. LNG displacement of coal for electricity generation are $1.50 per thousand cubic feet (Mcf) of gaseous natural gas exported as LNG ($.028/kWh). Conversely, the U.S. carbon cost of exporting the LNG is $1.80/Mcf ($.013/kWh), or $0.50-$5.50/Mcf across the range of potential discount rates. This spatial shift in embodied carbon emissions is important to consider in national interest estimates for LNG exports.

A Macro View of Shadow Banking: Levered Betas and Wholesale Funding in the Context of Secular Stagnation

The literature to date on shadow banking has focused on the wholesale funding and private money creation aspects of shadow banking. This paper draws attention to those aspects of shadow banking that involve levered betas and the provision of excess returns over fixed income benchmarks. Broadening the discussion from net to gross repo, the paper highlights the role of broker-dealers as matched-book money dealers that stand between cash pools in search for safety, and various kinds of leveraged bond portfolios across the asset management complex in search for yield. This broader perspective shows deep linkages between shadow banking and asset management, including not only hedge funds but also what are assumed to be unleveraged, “long-only” mutual funds. Whereas cash pools’ problem is the structural shortage of safe, short-term, public assets (a shortage of public money), real money investors’ problem is structural asset-liability mismatches driven by the secular decline of yields on safe, long-term, public assets relative to “sticky” return targets/expectations. The secular rise of levered betas (that is, the secular increase in the use of both cash and synthetic forms of leverage in bond portfolios) has been asset managers’ way of helping real money investors bridge structural asset-liability mismatches through the provision of “equity-like returns with bond-like volatility”. To that end, the use of repo and securities lending by bond portfolios across the asset management complex exceeds the use of repo by banks and broker-dealers to fund their own bond portfolios and inventories, respectively. The “sucking sound” of asset-liability mismatches driving the secular rise of levered betas, financed through the absorption of cash pools’ money demand – “the leveraged bids glut” – is a powerful alternative to Bernanke’s “global savings glut” and Shin’s “global banking glut” hypotheses for the decline in the Treasury term premium and the compression of mortgage and other spreads before the 2008 crisis. Crowding out private money by boosting the volume overnight Federal Reserve RRPs or of U.S. Treasury bills would fix cash pools’ problems, but deepen real money investors’ asset-liability mismatches. More even-handed policies include “Dealer of Last Resort” and fixing imbalances in present incomes and future (pension) promises – a joint application of these policies would complement the G20/FSB reform agenda to date to find a better balance between the economic benefits of deep and liquid markets, and the financial stability risks inherent in the (gross) balance sheet intensity of the provision of deep and liquid markets.

Scaling Residential Retrofits in New York City: Financing, Standardization, and Streamlining

Energy efficiency is a multiple-win opportunity for reducing global warming pollution, providing energy and cost savings, improving local environmental quality, and increasing the resilience of our built environment. In 2030, 85 percent of New York City's building portfolio will be comprised of buildings that exist today. Scaling up building retrofits and creating the policy environment to grow the building retrofits industry in New York City is critical to achieving the city's economic, local and global environmental, public health, and resilience goals. This article proposes scaling up the city's innovative residential energy efficiency efforts through a home efficiency Web portal, accelerating and stitching innovative programs together as they grow, leveraging post-Sandy recovery funding for building performance improvements, and moving stepwise towards certain mandates for energy performance among the city's smaller private buildings.

Holes in the Dike: The Global Savings Glut, U.S. House Prices and the Long Shadow of Banking Deregulation

We explore empirically how capital inflows into the US and financial deregulation within the United States interacted in driving the run-up (and subsequent decline) in US housing prices over the period 1990-2010. To obtain an ex ante measure of financial liberalization, we focus on the history of interstate-banking deregulation during the 1980s, i.e. prior to the large net capital inflows into the US from China and other emerging economies. Our results suggest a long shadow of deregulation: in states that opened their banking markets to out-of-state banks earlier, house prices were more sensitive to capital inflows. We provide evidence that global imbalances were a major positive funding shock for US wide banks: different from local banks, these banks held a geographically diversified portfolio of mortgages which allowed them to tap the global demand for safe assets by issuing private-label safe assets backed by the country-wide US housing market. This, in turn, allowed them to expand mortgage lending and lower interest rates, driving up housing prices.

Lower for Longer: Neutral Rates in the United States

We use a semi structural model to estimate neutral rates in the United States. Our Bayesian estimation incorporates prior information on the output gap and potential output (based on a production function approach) and accounts for unconventional monetary policies at the ZLB by using estimates of “shadow†policy rates. We find that our approach provides more plausible results than standard maximum likelihood estimates for the unobserved variables in the model. Results show a significant trend decline in the neutral real rate over time, driven only in part by a decline in potential growth whereas other factors (including excess global savings) matter. Neutral rates likely turned negative during the Global Financial Crisis and are expected to increase only gradually looking forward.

Banking Crises of the 1990s and 2000s in Developed Countries: How similar are they?

(ProQuest: ... denotes formulae omitted.)IntroductionThe global financial system experienced a serious crisis in July 2007. This crisis, initially affecting the American housing market, gradually spread to the entire global financial system. The crisis not only caused the default of some of the world's largest banking institutions, but was also at the root of a worldwide financial crisis comparable to that of the Great Depression of 1929.The 2007-2008 banking crises have been the subject of numerous controversies as to their similarities and differences to past banking crises. Some claim that the recent crises are different in every aspect. They are chiefly due to a global savings glut and the absence of shadow banking system regulation (Adrian and Shin, 2009). Others maintain that the recent episodes of banking distress are not so different from the previous ones and that the latter show remarkable similarities to the former. According to Claessens and al. (2010b), these similarities are: First, the price of real and financial assets rising considerably in a number of countries before the crisis, notably in the United States and Europe. These prices reached 60% before the start of the crisis, which strongly recalls the price spike observed during major financial crises of the '90s, notably the Japanese crisis of 1997 (Caballero, 2010). A second similarity is the occurrence, in a number of major economies, of credit booms before the crisis, estimated at over 150% of GDP (Claessens and al., 2010b). Third, international financial integration facilitated large capital inflows, which contributed to the acceleration of GDP growth and massive credit growth, which in turn led to a strong fluctuation of global demand and a strong deterioration of current bank balances during the period preceding the crisis (Cardarelli and al., 2010). Fourth, the inadequacy of the regulation and prudential supervision framework (Bair, 2009).In light of these findings, the goal of this study is twofold. First, to determine if the banking crises of the 2000s have shared causes with the crises of the 90s, and second, to determine if aggregated accounting indicators are robust banking crisis indicators.Thus, in this study we propose first to identify banking crisis indicators by means of a limited dependent logit approach for a cross-sectional view of advanced economies during the period preceding the 2007-2008 banking crises, namely 1990-2006, and the period 2007-2012. Second, we propose to test the robustness of the results derived from the multivariate logit approach, by means of Bayesian statistics (BMA). Indeed, according to Cuaresma and Slacik (2009) and Babecký and al. (2012), the BMA approach has the advantage of reviewing different model combinations and of weighting them according to their adjustments in the model.This paper will be organized as follows: The first section being an introduction, in the second section we briefly present a review of the literature on banking crisis indicators. In the third section, we present our methodology, namely: our country sample and our main data sources, our endogenous and exogenous variables, and our two econometric approaches. In the fourth section, we present a brief descriptive analysis of our data. We describe and discuss in the fifth section our empirical results. The last section is the conclusion.Financial Crisis Indicators: Review of the LiteratureBanking crises are not limited to the 21st century. Indeed, during the past four decades, the global economy was marked by an increase in banking crises. According to Reinhart and Rogoff (2013), banking crises represent a threat to equal opportunity amongst emergent and advanced economies: most countries have had at least one banking crisis during the period of 1945-2008.The reoccurrence of these crises, their magnitudes and their surprising and unpredictable character, and the financial costs associated with these episodes explain the research communities' interest in these events. …

Lower for Longer: Neutral Rates in the United States

We use a semi structural model to estimate neutral rates in the United States. Our Bayesian estimation incorporates prior information on the output gap and potential output (based on a production function approach) and accounts for unconventional monetary policies at the ZLB by using estimates of “shadow” policy rates. We find that our approach provides more plausible results than standard maximum likelihood estimates for the unobserved variables in the model. Results show a significant trend decline in the neutral real rate over time, driven only in part by a decline in potential growth whereas other factors (including excess global savings) matter. Neutral rates likely turned negative during the Global Financial Crisis and are expected to increase only gradually looking forward.

Shadow Banking: The Money View

This paper presents an accounting framework for measuring the sources and uses of short-term funding in the global financial ecosystem. We introduce a dynamic map of global funding flows to show how dealer banks emerged as intermediaries between two types of asset managers: cash pools searching for safety via collateralized cash investments and levered portfolio managers searching for yield via funded securities portfolios and derivatives. We argue that the monetary aggregates (M0, M1, M2, etc.) and the Financial Accounts of the United States (formerly the Flow of Funds) do not adequately reflect the institutional realities of the modern financial ecosystem, and should be updated to allow policymakers to better analyze and monitor the shadow banking system and its potential contributions to financial instability. The monetary aggregates, used mainly to inform the aggregate demand management aspects of monetary policy, do not include the instruments that asset managers use as money, particularly repos. Asset managers’ money demand is not driven by transaction needs in the real economy but in the financial economy: in this sense, repo-based money dealing activities in the shadow banking system are about the provision of working capital for asset managers, much like real bills provided working capital for merchants and manufacturers in Bagehot’s world over 150 years ago. These developments should be systematically captured in a new set of Flow of Collateral, Flow of Risk and Flow of Eurodollar satellite accounts to supplement the Financial Accounts. The accounting framework presented with this paper also explains how the Federal Reserve’s reverse repo facility helps reduce interconnections within the financial system and how they could evolve into minimum liquidity requirements for shadow banks and a tool to control market-based credit cycles. The global macro drivers behind the secular rise of cash pools and leveraged portfolio managers in the asset management complex are identical with the real economy drivers behind the idea of secular stagnation. As such, one way to interpret shadow banking is as the financial economy reflection of real economy imbalances caused by excess global savings, slowing potential growth, and the rising share of corporate profits relative to wages in national income.