Liquidity problems in the FX liquid market: Ask for the "BIL".

Even though the FX market is one of the most liquid financial market, it would be an error to consider that it is immune against any liquidity problem. This paper analyzes on a long sample (2000-2009), the all set of quotes and transactions in three main currency pairs (EURJPY, EURUSD, USDJPY) on the EBS platform. To characterize the FX market liquidity, we consider the spread, the traded volume, the number of transactions and the Amihud (2002) statistic for illiquidity. We also propose the computation of a new liquidity indicator, BIL, that solely relies on price series availability. The main benefit of such measure is to be easily calculated on almost any financial market as well as to have a clear interpretation in terms of liquidity costs. Using all these advanced liquidity analyses, we finally test the accuracy of these measures to detect liquidity problems in the FX market. Our analysis, based on a signaling approach, shows that liquidity problems have arisen during specific episodes in the early 2000's and more generally during the recent financial turmoil.FX market, Liquidity, financial crisis.

Asset-price boom-bust cycles and credit: what is the scope of macro-prudential regulation?

Over the recent months, several initiatives have taken place to develop macro-prudential regulation in order to prevent systemic risk and the built-up of financial imbalances. Crucial to the success of such policy is the ability of the macro-prudential authority to identify in due time such imbalances, generally featured by asset-price boom-bust cycles. In this paper, we investigate the possibility of detecting asset-price booms according to alternative identification strategies and assess their robustness. We infer the probability that an asset-price boom turns into an asset-price bust. In addition, we try to disentangle costless or low-cost from costly asset-price booms. We find some evidence that house price booms are more likely to turn into costly recession than stock price booms. Resorting both to a non-parametric approach and a discrete-choice (logit) model, we analyze the ability of a set of indicators to robustly explain costly asset-price booms. According to our results, real long-term interest rates, total investment, real credit and real stock prices tend to increase the probability of a costly housing-price boom, whereas real GDP and house prices tend to increase the probability of a costly stock-price boom. Regarding the latter, credit variables tend to play a less convincing role. From this perspective, we specify the scope of macro-prudential regulation as a set of tools aiming at avoiding "costly" asset-price booms. In doing so, we try both to make the case for state-contingent macro-prudential regulations and to set out clear delineation between monetary and financial stability objectives.Early Warning Indicators , Discrete-Choice Model , Asset Price Booms and Busts , Macro-prudential Regulation , Leaning Against the Wind Policies.

Global Ageing and Macroeconomic Consequences of Demographic Uncertainty in a Multi-regional Model.

In this paper, we investigate the impact of demographic uncertainty in a multi-regional general equilibrium, overlapping generations model (INGENUE 2). Specifically, we will consider the level of uncertainty in each of the ten major regions of the world, and their correlation across regions. In order to address these issues, we produce stochastic simulations of the world population for the ten regions until 2050. Then, we will analyse the economic consequences on a path by path basis over the period 2000-2050. These simulations allow us to assess the uncertainty induced into key macro-economic variables, the GDP growth rate and the world interest rate in particular, by uncertain future demographics. We show that the assumptions regarding interregional correlations of forecast errors are important in our model: they have a large impact on the uncertainty of the macroeconomic variables, and it appears that the macroeconomic adjustments can differ substantially if we consider independence or high correlation across the regions. In particular, the macroeconomic behaviour of the agents in the current account/saving problem differs significantly across regions according to the degree of interregional correlation.Computable General Equilibrium Models ; International capital flows ; Life cycle models and saving ; Demographic trends and forecasts.

Macroeconomic consequences of global endogenous migration: a general equilibrium analysis

In this paper, we analyze the consequences of endogenous migration flows over the coming decades in a dynamic general equilibrium model of the world economy. Such an approach has two major benefits. First, it offers a global perspective on the economic consequences of international migration flows by taking into account effects on both the destination and the origin regions. Second, by allowing migration flows to be related to economic fundamentals, they are determined endogenously in the model. We proceed by estimating the determinants of migration in an econometric model and then endogenizing migration flows by introducing the estimated relationships between demographic and income developments in our world model. We show that (i) migration could have a substantial impact on GDP growth in sending and destination regions; (ii) endogenizing migration induces important changes in the volume and the distribution of migration flows between regions compared to the United-Nations projections; (iii) the size of these flows, although substantial, will not be sufficient to counteract the impact of population ageing in the receiving regions.CGEM, Migration, International capital flows.

Épargne et choix de portefeuille des ménages : approches micro et macroéconomiques.

Les comportements d’épargne et d’allocation d’actifs des ménages sont des éléments clés pour le financement de l’économie. La récente crise financière et plus structurellement le vieillissement des populations conduisent les banques centrales, le régulateur et les acteurs des marchés à développer les politiques d’éducation financière du public.Choix de portefeuille, épargne, immobilier, retraites.

"Better Safe than Sorry" - Individual Risk-free Pension Schemes in the European Union - Macroeconomic Benefits, the Mobile Working Citizen's Perspective and Why Nots

Variations between the diverse pension systems in the member states of the European Union hamper labour market mobility, across country borders but also within the countries of the European Union. From a macroeconomic perspective, and in the light of demographic pressure, this paper argues that allowing individual instead of collective pension building would greatly improve labour market flexibility and thus enhance the functioning of the monetary union. I argue that working citizens would benefit, for three reasons, from pension saving in a risk-free savings account. First, citizens would have a clear picture of the accumulation of their own pension savings throughout their working life. Second, they would pay hardly any extra costs and, third, once retired they would not be subject to the whims of government or other pension fund managers. This paper investigates the feasibility of individual pension building under various parameter settings by calculating the pension saved during a working life and the pension dis-saved after retirement. The findings show that there are no reasons why the European Union and individual member states should not allow individual risk-free pension savings accounts. This would have macroeconomic benefits and provide a solid pension provision that can enhance mobility, instead of engaging workers in different mandatory collective pension schemes that exist around in the European Union