Is the impact of social distancing on coronavirus growth rates effective across different settings? A non-parametric and local regression approach to test and compare the‘doubling rate

Epidemiologists use mathematical models to predict epidemic trends, and these results are inherently uncertain when parameters are unknown or changing. In other contexts, such as climate, modellers use multi-model ensembles to inform their decision-making: when forecasts align, modellers can be more certain. This paper looks at a sub-set of alternative epidemiological models that focus on the ‘doubling rate’, and it cautions against relying on the method proposed in (Pike & Saini, 2020) which relies on the data for China to calculate future trajectories. Such approaches are subject to overfitting, a common problem in financial and economic modelling. This paper finds, surprisingly, that the data for China are hyper-exponential, not exponential. Instead, this paper proposes using non-parametric methods, and local regression methods, to support epidemiologists and policymakers in assessing the relative effectiveness of social distancing across multiple settings. All works contained herein are provided free to use worldwide by the author under CC BY 2.0

Rethinking macroeconomics: how G5 currency markets have responded to unconventional monetary policy

The G5 carry trade, where high interest rate currencies appreciate and low interest rate currencies depreciate, had been a persistent anomaly in financial markets since the collapse of Bretton Woods in 1971. Conventional economics said that the reverse should happen: low interest rates were supposed to stimulate the domestic economy, leading to growth and currency appreciation, rather than fund cross-border positions in search of higher yields. The Global Financial Crisis resulted in a major dislocation of currency markets, after which the G5 carry trade reversed. This paper is an empirical study of this reversal, and the implications for macroeconomic theory. Using overnight and one-month carry trades as a proxy for market reactions to monetary policy, the period leading up to the Global Financial Crisis and this reversal was increasingly subdued: the so-called ‘Great Moderation’. Financial crises show up as outliers in the data: temporary reversals of the carry trade during which periods central banks provide additional liquidity in the form of lower interest rates. These results suggest that, prior to 2008, conventional monetary policy – using high/low interest rates to dampen/boost growth and inflation – was being counteracted by capital flows in the opposite direction, in search of high yields. Only since 2008, with unconventional monetary policy – QE, negative interest rates and a reduction in banks’ proprietary trading – have G5 currencies responded as predicted by conventional economics: low/high interest rates G5 currencies have appreciated/depreciated. The results suggest that macroeconomic theories need to be reconsidered, to take account of cross-border capital flows in search of yield, and the effectiveness of unconventional monetary policy

An Empirical Investigation into the Reversal of the Carry Trade

The carry trade, where profits can be made in currency markets using price information alone, has been a persistent anomaly in financial markets since the collapse of Bretton Woods. The paper investigates the reversal of the carry trade since the Global Financial Crisis, aims to contribute towards a better understanding of currency markets, and to understand how the carry trade reacts to changes in the short-term policy rate. The results suggest that the carry trade is not a risk-premium, but is driven by momentum. The reversal of the carry trade, and changes in reaction to short-term policy rates, are consistent with a change in the effectiveness of monetary policy since the Global Financial Crisis, where central banks intervene directly to provide domestic liquidity: a liquidity put

Circuit Theory Extended: The Role of Speculation in Crises

This paper asks why modern finance theory and the efficient market hypothesis have failed to explain long-term carry trades; persistent asset bubbles or zero lower bounds; and financial crises. It extends Godley and Lavoie (Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth, 2007) and the Theory of the Monetary Circuit to give a mathematical representation of Minsky’s Financial Instability Hypothesis. In the extended circuit, the central bank rate is not neutral and the path is nonergodic. The extended circuit has survival constraints that include a living wage, a zero interest rate and an upper interest rate. Inflation is everywhere. The possibility of stable carry trades emerges. In high interest rate, hedge economies, powerful banks invest surplus loan interest. With speculation, banks lobby to enter investment markets and the system is precariously liquid/illiquid. In a Ponzi economy, where loans never get repaid, solvency is a balance between increasing reserves, reducing interest rates and rebuilding banks’ balance sheets during systemic crises. Simulating bank bailouts, household bailouts and a Keynesian boost suggests that bank bailouts are the least effective intervention, exerting downward pressure on wages and household spending: austerity

Reflecting to Rebuild and Strengthen Professional Development A Collection of ‘Post-Online’ Conversations

The file attached to this record is the author's versionThis monograph is a multi-authored collection consisting of our faculty’s post-online reflections. The objective was to gather thoughts and discussion around teaching and research during COVID-19. We aim to build and explore around ‘lived experiences’ to provide a reference point to help Continuous Professional Learning and Development (CPLD) activities. The section on ‘digital diaries’ consists of dialogues from staff categorised into varied themes. In the testimonies, staff have reflected around their challenges, targets, strengths, familiarity and how they managed to overcome difficulties and achieve goals. A special section, from the Centre for Urban Research on Austerity (CURA), is devoted to identifying how pandemic has intensified research challenges, highlighting the funding, time and location constraints on academic research

Corporate Governance for Sustainability

The current model of corporate governance needs reform. There is mounting evidence that the practices of shareholder primacy drive company directors and executives to adopt the same short time horizon as financial markets. Pressure to meet the demands of the financial markets drives stock buybacks, excessive dividends and a failure to invest in productive capabilities. The result is a ‘tragedy of the horizon’, with corporations and their shareholders failing to consider environmental, social or even their own, long-term, economic sustainability. With less than a decade left to address the threat of climate change, and with consensus emerging that businesses need to be held accountable for their contribution, it is time to act and reform corporate governance in the EU. The statement puts forward specific recommendations to clarify the obligations of company boards and directors and make corporate governance practice significantly more sustainable and focused on the long term

Ukrainian Financial Forum - Neil Lancastle, economist, De Montfort University

Ukraine's position in the global economy: key macroeconomic risk and challenges

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