Asset prices
Australian SWF heads see returns dipping as central banks normalise policy
The chair of the Australian Government Future Fund says easy monetary policy ‘cannot be sustained indefinitely’ and returns are likely to drop in coming years
Household debt had modest impact on US consumption, research finds
Household debt in the US accounted only slightly for the decline in household consumption nationally in the 2000s, research published by ECB finds
Canadian deputy says LTV and DTI limits ‘most effective’ macro-pru tools
Lawrence Schembri examines demand and supply factors underpinning rise in house prices; evaluates macro-prudential tools used in Canada and elsewhere
Stevens says RBA is working to ‘assess and contain’ housing risks
Statement following decision to hold rates notes house prices rising ‘strongly’ in Sydney, although growth is uneven between regions; other assets also buoyed by low rate environment
New Zealand paper calls for clearer financial stability aims
Researchers argue more guidance is needed on how and when macro-prudential policy will be used, pointing to the lack of hierarchy between distortions
ECB paper flags risk of ‘collateral damage’ from financial transaction tax
Working paper finds an increase in transaction costs, such as the financial transaction tax mooted in the EU, could impact the availability of collateral and damage market liquidity
Australian dollar jumps despite RBA rate cut
Australian central bank cuts benchmark interest rate to 2%; governor Stevens says currency depreciation 'necessary' amid falling terms of trade
RBNZ deputy calls for action on housing imbalances
Grant Spencer says changes to tax treatment of housing should be considered, while he identifies apartment development as the best prospect for boosting supply in the short term
Hellwig warns against expanding financial stability mandate too far
Martin Hellwig presents his thoughts on how to strike a balance between the macroeconomic and financial stability objectives of monetary policy
Poloz: volatility not a reflection of central bank credibility
Canadian governor – greater volatility is a ‘natural reaction’ to central banks gearing up to normalise monetary policy; highlights cost of using forward guidance
Curbs on rehypothecation may boost welfare, St Louis Fed paper finds
Researchers find rehypothecation boosts welfare, particularly as inflation rises, but it generally goes too far, implying there are benefits to regulatory intervention
ECB fears ‘abrupt reversal’ of global search for yield
Central bank says an end to the hunt for yield is the main threat to financial stability in the eurozone; Constâncio concerned by impact on investors’ balance sheets
Netherlands Bank flags risk from ECB asset purchases
Markets are positive about the ECB's efforts to ease monetary policy, but unconventional measures carry the risk of pumping up asset bubbles, Dutch financial stability review warns
China’s cooling property market ‘a challenge’ to growth objectives
RBA governor Glenn Stevens sees property market as a challenge to Chinese authorities’ growth objectives; Dallas Fed economists concerned about impact on shadow banking sector
Bundesbank’s Dombret unperturbed by rising house prices
Andreas Dombret says prices are still tied to fundamentals in German economy, though he would be more concerned if lending began to rise alongside house prices
Credit ratings hit prices 'significantly' more in times of crisis, paper finds
Effects of rating actions on market prices not crucial during favourable market conditions but 'very significant' in times of crisis; analysis covers ratings and prices of 16,500 bonds over 12 years
Chicago Fed paper aims to explain asset fluctuations through ‘unified' model
Framework draws on two theories of the role of credit in asset price fluctuations; study is first step in larger project
Swiss paper dissects asset price responses to economic news
Researchers find the relationship between asset prices and economic news is shaped by the prevailing economic conditions – including policy rates and perception of risk
Using assets as collateral increases volatility of returns, Buba paper finds
Bundesbank discussion paper uses model comprising agents differing in their level of risk aversion; negative economic shocks substantially alter wealth distribution between the two
Bundesbank paper presents redesigned DSGE model to tackle unconventional policies
Researchers develop DSGE model using two types of banks, repos and haircuts to yield a better understanding of unconventional monetary policy
Falling asset prices 'significantly associated' with onset of G-7 recessions
IMF working paper examining the usefulness of asset prices in predicting recessions in the G-7 countries finds equity price drops are larger and more frequent than house price drops
Wheeler shines a spotlight on housing supply
Reserve Bank of New Zealand governor Graeme Wheeler says restrictions on high loan-to-value mortgages will alleviate house price increases, but the bigger issue is housing supply
Buffett’s ‘greatest hedge fund’ claim puts spotlight on the Fed
Warren Buffett's claim the Fed is ‘the greatest hedge fund in history’ fuels bloated balance sheet and politicisation debate; Fed veteran Gary Stern says 'sage of Omaha’s' comments are ‘misguided’
BIS research dismisses fears over high-quality asset shortage
Article says increase in high-quality assets appears sufficient to meet rising demand, but risks could still come from elsewhere