Credit Chains and Production Networks

Credit Chains and Production Networks

There are three kind of flows in a Supply Chain

  • Goods
  • Information
  • Financial

 

Credit Terms in a Supplier Buyer contracts determine payment delays which accumulate in current accounts of a Firm.

  • Account Receivables
  • Account Payables

 

Credit Relations

  • Bank to Bank
  • Bank to Firm
  • Firm to Firm

Dyad of Credit Relations

  • Supplier – Buyer

 

Triad of Credit Relations

  • Supplier – Bank – Buyer

Sources of Systemic Risk

  • Failure of a Firm and its impact on Suppliers and Customers (Flow of Goods)
  • Failure of a Bank and its impact on Trade Credit
  • Credit Contraction due to de-risking by the Banks
  • Decline in Correspondent Banking relations and its impact on Trade Finance

 

From Credit Chains and Sectoral Co-movement: Does the Use of Trade
Credit Amplify Sectoral Shocks?

Trade credit is an important source of short-term financing for firms, not only in the U.S., as documented by Petersen and Rajan (1997), but also around the World. For instance, accounts payables are larger than short-term debt in 60 percent of the countries covered by Worldscope. Also, across the world most firms simultaneously receive credit from their suppliers and grant it to their customers, which tend to be concentrated on specific sectors.  These characteristics of trade credit financing have led some authors to propose it as a mechanism for the propagation and amplification of idiosyncratic shocks. The intuition behind the mechanism is straightforward; a firm that faces a default by its customers may run into liquidity problems that force it to default to its own suppliers. Therefore, in a network of firms that borrow from each other, a temporary shock to the liquidity of some firms may cause a chain reaction in which other firms also get in financial difficulties, thus resulting in a large and persistent decline in aggregate activity. This idea was first formalized by Kiyotaki and Moore (1997) in a partial equilibrium setting, and has been recently extended to a general equilibrium environment by Cardoso-Lecourtois (2004), and Boissay (2006) who have also provided evidence of the potential quantitative importance of the mechanism by calibrating their models to the cases of Mexico and the U.S., respectively.

From Ontology of Bankruptcy Diffusion through Trade Credit
Channel

A supply network is a network of entities interacting to transform raw material into finished product for customers. Since interdependencies among supply network members on material, information, and finance are becoming increasingly intensive, financial status of one firm not only depends on its own management, but also on the performance and behaviours of other members. Therefore, understanding the financial flows variability and the material interactions is a key to quantify the risk of a firm. Due to the complex structure and dynamic interactions of modern supply networks, there are some difficulties faced by pure analysis approaches in analyzing financial status of the supply network members and the high degree of nonlinear interactions between them. Mathematical and operation research models usually do not function very well for this kind of financial decision making. These models always start with many assumptions and have difficulties modeling such complex systems that include many entities, relationships, features, parameters, and constraints. In addition, traditional modeling and analysis tools lack the ability to predict the impact of a specific event on the performance of the entire supply network.  Current financial data analysis with large volumes of structure data cannot offer the full picture and intrinsic insights into the risk nature of a company. Motivated by the literature gap in risk monitoring in investment background and limitations of analysis approaches for handling bankruptcy contagion phenomenon, we propose an ontological approach to present a formal, shared conceptualization of this domain knowledge.

From Inter-Firm Trade Finance in Times of Crisis

The severe recession that is hitting the global economy, with very low or even negative growth rates, has caused widespread contractions in international trade, both in developed and developing countries. World Trade Organization (WTO) has forecast that exports will decline by roughly 9% in volume terms in 2009 due to the collapse in global demand brought on by the biggest economic downturn in decades. The contraction in developed countries will be particularly severe with exports falling by 10%. In developing countries, which account for one-third of world trade, exports will shrink by some 2% to 3% in 2009.

The contraction in international trade has been accompanied by a sharp decline in the availability of trade finance. This decline is only partly explained by the contraction in demand: according to a BAFT (Banker’s Association for Trade and Finance) and International Monetary Fund (IMF) joint survey (2009), flows of trade finance to developed countries have fallen by 6% relative to the previous year, more than the reduction in trade flows, suggesting that part of the fall reflects a disruption of financial intermediation. The contraction in value of trade finance has also been accompanied by a sharp increase in its price. Fear that the decline in trade finance and the increase in its cost would accelerate the slowdown of world trade has triggered a number of government initiatives in support of trade finance (Chauffour and Farole,2009).

The situation is especially worrisome for firms operating in developing countries which rely heavily on trade finance to support both their exports and imports.1 With a restricted access to financing and an increased cost of financing, these firms may find difficulties in maintaining their production and trade activities.

 

Please see my related posts:

Supply Chain Finance (SCF) / Financial Supply Chain Management (F-SCM)

Production Chain Length and Boundary Crossings in Global Value Chains

Intra Industry Trade and International Production and Distribution Networks

Understanding Trade in Intermediate Goods

Trends in Intra Firm Trade of USA

Production and Distribution Planning : Strategic, Global, and Integrated

Development of Global Trade and Production Accounts: UN SEIGA Initiative

The Dollar Shortage, Again! in International Wholesale Money Markets

FDI vs Outsourcing: Extending Boundaries or Extending Network Chains of Firms

The Collapse of Global Trade during Global Financial Crisis of 2008-2009

Understanding Global Value Chains – G20/OECD/WB Initiative

Economics of Trade Finance

Balance Sheets, Financial Interconnectedness, and Financial Stability – G20 Data Gaps Initiative

Oscillations and Amplifications in Demand-Supply Network Chains

Contagion in Financial (Balance sheets) Networks

 

Key Sources of Research:

 

LIQUIDITY, BUSINESS CYCLES, AND MONETARY POLICY

Nobuhiro Kiyotaki
London School of Economics

John Moore
Edinburgh University and London School of Economics

27 November 2001

https://www.imf.org/external/np/seminars/eng/2008/fincycl/pdf/kimo.pdf

 

 

Credit Cycles

Nobuhiro Kiyotaki; John Moore

The Journal of Political Economy, Vol. 105, No. 2.

(Apr., 1997),

http://www.nviegi.net/teaching/master/km.pdf

 

Credit chains

Nobuhiro Kiyotaki (Princeton University)

John Moore (University of Edinburgh)

Date January 1997

http://www.econ.ed.ac.uk/papers/id118_esedps.pdf

https://www.minneapolisfed.org/research/conferences/research-events—conferences-and-programs/~/media/files/research/events/1997_01-31/Kiyotaki_CreditChains.pdf

 

 

Credit and Business Cycles

N Kiyotaki

1998

https://www.princeton.edu/~kiyotaki/papers/Credit-and-BusinessCycles.pdf

 

 

Inter-Enterprise Credit and Adjustment  During Financial Crises: The Role of Firm Size

Fabrizio Coricelli

Marco Frigerio

July, 2 2016

https://cepr.org/sites/default/files/Coricelli%2C%20Fabrizio%20paper.pdf

 

 

Credit chains and bankruptcy propagation in production networks

Stefano Battiston, Domenico Delli Gatti, Mauro Gallegati,
Bruce Greenwald, Joseph E. Stiglitz

2007

https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/2007_Credit_Chains.pdf

 

 

Trade Finance in Crisis : Market Adjustment or Market Failure ?

Jean-Pierre Chauffour

Thomas Farole

Date Written: July 1, 2009

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1437955

Resaleable debt and systemic risk

Jason Roderick Donaldson , Eva Micheler

2018

http://www.jrdonaldson.com/Papers/Donaldson-Micheler-Resaleable_Debt.pdf

 

Supply chains and credit-market shocks: Some implications for emerging markets,

Jinjarak, Yothin (2013)

ADBI Working Paper Series, No. 443

https://www.econstor.eu/bitstream/10419/101241/1/770887406.pdf

 

 

Financial Amplification Mechanisms and the Federal Reserve’s Supply of Liquidity during the Crisis

Asani Sarkar
Jeffrey Shrader

Staff Report no. 431
February 2010

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr431.pdf

 

 

Aggregate Fluctuations and the Role of Trade Credit

Lin Shao

2017

https://www.bankofcanada.ca/wp-content/uploads/2017/09/swp2017-37.pdf

 

 

Supply Chain Disruptions and Trade Credit

LU Yi OGURA Yoshiaki

TODO Yasuyuki ZHU Lianming

2017

https://www.rieti.go.jp/jp/publications/dp/17e054.pdf

 

 

Credit Shocks and Aggregate Fluctuations in  an Economy with Production Heterogeneity

Aubhik Khan

Julia K. Thomas

September 2013

https://www.aubhik-khan.net/KhanThomasDCTsept2013.pdf

 

 

Financial Frictions in Production Networks

Saki Bigio

Jennifer La’O

February 7, 2013

https://www0.gsb.columbia.edu/faculty/sbigio/papers/FinancialFrictionsNetworks.pdf

 

Working Paper No. 67, April 2016

http://perueconomics.org/wp-content/uploads/2014/01/WP-67.pdf

 

 

The Origins of Aggregate Fluctuations in a Credit Network Economy

Levent Altinoglu

October 16, 2016
http://blogs.bu.edu/levent/files/2015/10/Altinoglu_JMP_CurrentVersion.pdf

September 30, 2015

https://pdfs.semanticscholar.org/425a/fcb800d01a5b8dce9ed13a4a200bf51f6fed.pdf

 

Consolidated Bibliography

WTO

https://www.wto.org/english/res_e/booksp_e/aid4tradesupplychain13_biblio_e.pdf

 

 

Propagation of Financial Shocks in an Input-Output Economy with Trade and Financial Linkages of Firms

Shaowen Luo

December 4, 2015

http://www.economics.illinois.edu/seminars/documents/Luo.pdf

 

FDI, Trade Credit, and Transmission of Global Liquidity Shocks:
Evidence from Chinese Manufacturing Firms

Shu Lin and Haichun Ye

http://www.econ.cuhk.edu.hk/econ/images/content/news_event/seminars/2016-2017-2nd-semester/Lin–Ye_paper.pdf

 

 

Trade Credit, Financing Structure and Growth

Junjie Xia

October 27, 2016

http://www.junjiexia.com/uploads/7/6/7/2/76726065/jmp_oct16.pdf

 

The impact of corporate distress along the supply chain: evidences from United
States

Lucia Gibilaro

Gianluca Mattarocci

http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2017-Athens/papers/EFMA2017_0526_fullpaper.pdf

 

 

Does credit crunch investments down?
New evidence on the real eects of the bank-lending channel

Federico Cinganoz Francesco Manaresix Enrico Settex

December 2013

http://www.federicocingano.eu/Credit_crunch_investments.pdf

 

Interwoven Lending, Uncertainty, and Liquidity Hoarding

Adam Zawadowski

December 13, 2017

http://www.personal.ceu.hu/staff/Adam_Zawadowski/papers/credit.pdf

 

 

Trade credit: Elusive insurance of rm growth

DENNIS BAMS, JAAP BOS and MAGDALENA PISA*

October 5, 2016

http://www.research.mbs.ac.uk/accounting-finance/Portals/0/Users/002/02/2/Trade%20credit%20Elusive%20insurance%20of%20firm%20growth%202016.pdf

 

 

Chain Reactions, Trade Credit and the Business Cycle

Miguel Cardoso-Lecourtois

http://fmwww.bc.edu/RePEc/esNASM04/up.4593.1075462930.pdf

 

From production networks to geographical economics.

Gérard Weisbuch, Stefano Battiston.

Journal ofEconomic Behavior and Organization, Elsevier, 2007, 64 (3- 4), pp.448

https://hal.archives-ouvertes.fr/hal-00531863/document

 

 

Production networks and failure avalanches

Gerard Weisbuch
Stefano Battiston

March 5, 2018

https://arxiv.org/pdf/physics/0507101.pdf

 

 

Self-organised patterns in production networks

Gerard Weisbuch

October 10, 2005

http://www.lps.ens.fr/~weisbuch/gwcomplexus.pdf

 

 

Networks : Propagation of Shocks over Economic Networks

Daron Acemoglu

July 22, 2014.

https://economics.mit.edu/files/9790

 

 

Debt-Rank Analysis of Financial Distress Propagation on a Production Network in Japan

FUJIWARA Yoshi
University of Hyogo
TERAI Masaaki
RIKEN
FUJITA Yuji
Turnstone Research Institute, Inc.
SOUMA Wataru
Nihon University

https://www.rieti.go.jp/jp/publications/dp/16e046.pdf

 

 

Operational causes of bankruptcy propagation in supply chain

Zhongsheng Hua ⁎, Yanhong Sun 1, Xiaoyan Xu

2011

http://isiarticles.com/bundles/Article/pre/pdf/48280.pdf

 

 

Propagation of Financial Shocks in an Input-Output Economy with Trade and Financial Linkages of Firms

Shaowen Luo
September 20, 2015

http://www.econ.vt.edu/seminars/Seminar%20Papers/2016/10-02-15Luo.pdf

 

 

From Micro to Macro via Production Networks

Vasco M. Carvalho

http://www.crei.cat/wp-content/uploads/users/working-papers/carvalho_from_micro.pdf

 

 

Trade Credit and the  Propagation of Corporate Failure: An Empirical
Analysis

Tor Jacobson and Erik von Schedvin
August 2012

https://www.econstor.eu/bitstream/10419/81882/1/723939764.pdf

 

CREDIT MARKET DISRUPTIONS AND LIQUIDITY SPILLOVER EFFECTS IN THE SUPPLY CHAIN

Anna M. Costello

August 8, 2017

https://www.gsb.stanford.edu/sites/gsb/files/costello-anna-acctgcamp2017_0.pdf

 

Modeling defaults of companies in multi-stage supply chain networks

Kamil J.Mizgier, StephanM.Wagner,, JanuszA.Holyst

2010

http://mars.if.pw.edu.pl/~jholyst/Mizgier_etal_InPress_Modeling_defaults_of.pdf

 

 

 

The origins of scale-free production networks

Stanislao Gualdizand Antoine Mandelx

June 28, 2015

http://www.siecon.org/online/wp-content/uploads/2015/10/Gualdi.pdf

 

 

Optimization of order policies in supply networks

S. GÄottlich¤ M. Hertyy C. Ringhoferz

August 18, 2008

https://www.ki-net.umd.edu/pubs/files/FRG-2008-Ringhofer-Christian.FRG_Ringhofer_Orders080814.pdf

 

Financial Instability after Minsky: Heterogeneity, Agent Based Models and Credit
Networks

Domenico Delli Gatti

April 10, 2012

https://www.ineteconomics.org/uploads/papers/delli-gatti-domenico-berlin-paper.pdf

 

Measuring the Systemic Risk in Inter firm Transaction Networks

Makoto Hazama
And
Iichiro Uesugi

http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/28392/1/wp066.pdf

 

Systemic Risk Assessment in Complex Supply Networks

Anna Ledwoch, Alexandra Brintrup, J¨orn Mehnen, Ashutosh Tiwari

https://pure.strath.ac.uk/portal/files/66716085/Ledwoch_etal_SJ_2016_Systemic_risk_assessment_in_complex_supply_networks.pdf

 

TRADE CREDIT DEFAULTS AND LIQUIDITY PROVISION BY FIRMS

Reint Gropp
Frédéric Boissay

2007

https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp753.pdf

 

The future of agent-based modelling.

Matteo Richiardi

Institute for New Economic Thinking and Nuffield College, Oxford, United Kingdom
Collegio Carlo Alberto, Moncalieri, Italy

This draft: June 2015

https://www.nuffield.ox.ac.uk/media/1702/abmfuture-v12.pdf

 

 

Financially Constrained Fluctuations in an Evolving Network Economy

Domenico Delli Gatti
Mauro Gallegati
Bruce Greenwald
Alberto Russo
Joseph E. Stiglitz

http://terna.to.it/ABM-BaF09/presentations/DelliGatti%28presentation%29_ABM.pdf

 

 

Credit Chains and Sectoral Comovement: Does the Use of Trade Credit Amplify Sectoral Shocks?

Claudio Raddatz

The World Bank
March, 2007

http://www.webmeets.com/files/papers/LACEA-LAMES/2007/335/Credit_chains_051707_withtables.pdf

 

 

Linkages and spillovers in global production networks: firm-level analysis of the Czech automotive industry

Petr Pavlinek

Pavla Žížalová

https://digitalcommons.unomaha.edu/cgi/viewcontent.cgi?article=1039&context=geoggeolfacpub

 

Ontology of Bankruptcy Diffusion through Trade Credit
Channel

Lin Cheng

Huaiqing Wang

Huaping Chen

https://50years.acs.org.au/content/dam/acs/50-years/journals/jrpit/JRPIT44.4.401.pdf

 

OPTIMAL ORDER AND DISTRIBUTION STRATEGIES IN PRODUCTION NETWORKS

Simone Gottlich, Michael Herty, and Christian Ringhofer

https://math.la.asu.edu/~chris/SpringerOpt10.pdf

 

Profitability, Trade Credit and Institutional Structure of Production

Michael Gofman
December 9, 2013

http://gofman.info/TC/Supplier-Customer%20Network.pdf

 

The Economics of Information and Financial
Networks

Stefano Battiston
July 22, 2016

https://simpolproject.eu/download/simpol-initiative-research/battiston2016information.pdf

 

Supply Chain Perspectives and Issues: A Literature Review

Albert Park
Gaurav Nayyar
Patrick Low

http://www.asiaglobalinstitute.hku.hk/en/wp-content/uploads/2016/06/supply-chain-perspectives-and-issues.pdf

 

 

LIAISONS DANGEREUSES: INCREASING CONNECTIVITY, RISK SHARING, AND SYSTEMIC RISK

Stefano Battiston
Domenico Delli Gatti
Mauro Gallegati
Bruce C. Greenwald
Joseph E. Stiglitz

http://www.nber.org/papers/w15611.pdf

 

 

Inter-Firm Trade Finance in Times of Crisis

Anna Maria C. Menichini

http://documents.worldbank.org/curated/en/649481468314087810/pdf/WPS5112.pdf

 

 

Reducing the Probability of Bankruptcy Through Supply Chain Coordination

Xiaoyan Xu, Yanhong Sun, and Zhongsheng Hua

2010

https://www.researchgate.net/profile/Yanhong_Sun5/publication/220508846_Reducing_the_Probability_of_Bankruptcy_Through_Supply_Chain_Coordination/links/573eac9d08ae298602e6e77a.pdf

 

 

Pathways towards instability in financial networks

Marco Bardoscia, Stefano Battiston Fabio Caccioli & Guido Caldarelli

2017

http://lims.ac.uk/wp-content/uploads/bardoscia2017pathways-1.pdf

 

 

International Credit Supply Shocks

Ambrogio Cesa-Bianchiy Andrea Ferreroz Alessandro Rebuccix

June 16, 2017

https://www.bostonfed.org/-/media/Documents/events/2017/boston-policy-workshop/AlessandroRebucci.pdf?la=en

 

Risk Propagation through Payment Distortion in Supply Chains

Alejandro Serrano

Rogelio Oliva

Santiago Kraiselburd

https://pdfs.semanticscholar.org/5b5f/0e6d7dc9d4b4f6bcada884b71562791404ed.pdf

 

 

Payment Defaults and Interfirm Liquidity Provision

https://academic.oup.com/rof/article-abstract/17/6/1853/1591419

 

SYSTEMIC RISK: A SURVEY

BY OLIVIER DE BANDT
AND PHILIPP HARTMANN

November 2000

https://www.econstor.eu/bitstream/10419/152469/1/ecbwp0035.pdf

 

 

Risk Propagation in Supply Chains

Alejandro Serrano

Rogelio Oliva

Santiago Kraiselburd

https://pdfs.semanticscholar.org/2db1/f3278ab2a75ff11b0142fba19a4cf223805a.pdf

 

 

How Inventory Is (Should Be) Financed: Trade Credit in Supply Chains with Demand
Uncertainty and Costs of Financial Distress

Song (Alex) Yang, John R. Birge

http://faculty.chicagobooth.edu/workshops/omscience/past/more/pdf/YangBirge_trade%20credit.pdf

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2746645

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1734682

 

 

The Supply Chain Effects of Bankruptcy

S. Alex Yang

John R. Birge, Rodney P. Parker

https://pdfs.semanticscholar.org/6efb/86a8667f24af2c6a5cd7eb52bbd12b39697b.pdf

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.715.5812&rep=rep1&type=pdf

 

Supply Chain Management: Supplier Financing Schemes and Inventory Strategies

Min Wang

https://www8.gsb.columbia.edu/programs/sites/programs/files/abstracts/Min_Wang_Dissertation.pdf

 

Foreign Investment and Supply Chains in Emerging Markets: Recurring Problems and Demonstrated Solutions

Theodore H. Moran

PIIE

2014

https://piie.com/publications/wp/wp14-12.pdf

 

Improving cash flow using credit management
The outline case

http://www.cimaglobal.com/Documents/ImportedDocuments/cid_improving_cashflow_using_credit_mgm_Apr09.pdf.pdf

 

CREDIT CHAINS AND THE PROPAGATION OF
FINANCIAL DISTRESS

2006

by Frederic Boissay

http://sdw.zentral-bank.eu/pub/pdf/scpwps/ecbwp573.pdf

 

Exposure to international crises: trade vs. financial contagion

Everett Grant

2016

https://www.esrb.europa.eu/pub/pdf/wp/esrbwp30.en.pdf?7b7cc950c1a2286d395ed8489bfde5c7

 

 

Credit Contagion and Trade Credit Supply:
Evidence from Small Business Data in Japan

TSURUTA Daisuke

https://www.rieti.go.jp/jp/publications/dp/07e043.pdf

 

 

The Price of Complexity in Financial Networks

Joseph Stiglitz

2017

https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/The%20Price%20of%20Complexity%20in%20Financial%20Networks.pdf

 

 

The Price of Complexity in Financial Networks

S. Battiston

2017

https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/risk/downloads/160913_slides_battison.pdf

 

 

 

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Instant, Immediate, Real Time Retail Payment Systems (IIRT-RPS)

Instant, Immediate, Real Time Retail Payment Systems (IIRT-RPS)

 

There are Five different kinds of Payments

  • B2C Business to Consumer
  • C2B Consumer to Business
  • B2B Business to Business
  • Domestic P2P Peer to Peer
  • Cross Border P2P Peer to Peer

 

From Real-time payments are changing the reality of payments

IMPS

Existing Real Time Retail Payment Systems around the Globe

From THE U.S. PATH TO FASTER PAYMENTS FINAL REPORT PART ONE: THE FASTER PAYMENTS TASK FORCE APPROACH

IMPS2

Planned Real Tine Retail Payments Systems around the Globe

 

From Global Trends and Developments in Instant Payments

imps3

Current Payments Ecosystem

  • Faster Payments
  • ACH
  • Cards
  • Closed Loop
  • Distributed Ledger

 

From 2017 Advanced Payments Report

IMPS4

Evolving Landscape of Payment Systems

From 2017 Advanced Payments Report

imps5

 

New RTP Developments

 

From Federal Reserve Payment Trends Update

imps6

USA – The Clearing House RTP System

From Federal Reserve Payment Trends Update

imps7

USA – How Payment Platforms Compare?

  • Wires
  • Next Day ACH
  • NACHA Same Day ACH
  • EWS Zelle
  • TCH RTP
  • Mastercard Send

 

From Federal Reserve Payment Trends Update

imps8

Key Sources of Research:

 

 

Real-time payments are changing the reality of payments

Deloitte

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/strategy/us-cons-real-time-payments.pdf

 

 

 

THE U.S. PATH TO FASTER PAYMENTS
FINAL REPORT PART ONE: THE FASTER PAYMENTS TASK FORCE APPROACH

Federal Reserve

2017

https://www.federalreserve.gov/newsevents/press/other/US-path-to-faster-payments-pt1-201701.pdf

 

 

Zelle

https://www.zellepay.com

 

 

 

Real-Time Payments for P2P
.
Eric Foust
Early Warning
Mike Wolf

2017

http://www.rtpsummit.com/wp-content/uploads/2017/10/12.10-Zelle-53-RTP-conference-deck-005.pdf

 

 

Banks Re-enter the P2P Payments Fray: With Mobile, Will this Time Be Different?

By Terri Bradford, Payments Research Specialist

Fed Reserve

https://www.kansascityfed.org/~/media/files/publicat/psr/briefings/psr-briefingjan2017.pdf

 

 

 

Faster Payments Finds Its Future

NACHA

2016

https://web.nacha.org/system/files/resource/2017-08/Faster-Payments-Tracker-December-2016.pdf

 

 

 

Faster payments: Building a business, not just an infrastructure

McKinsey

https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Faster%20payments%20Building%20a%20business%20not%20just%20an%20infrastructure/Faster%20payments.ashx

 

 

The Road to Faster Payments

As Real-Time Payments Rise, Payment Hubs See a Resurgence

The Clearing House

2017

https://www.theclearinghouse.org/research/banking-perspectives/2017/2017-q4-banking-perspectives/payment-hubs

 

 

 

Real-Time Payments and Settlement Comes to the United States

How U.S. Banks Can Realize the Full Opportunities of Immediate Payments for Their Customers

D+H

2016

https://www.pnc.com/content/dam/pnc-ideas/articles/D+H-US-Real-Time-Payments-and-Settlement-whitepaper-coauthored-PNC-TCH-15-April%202016.pdf

 

 

 

Real-Time, Cross-Border Payments Survey

2017

IPFA

http://ipf-a.org/wp-content/uploads/Real-time-Cross-Border-Payments-Final.pdf

 

 

 

Strategies for Improving the U.S. Payment System Federal Reserve Next Steps in the Payments Improvement Journey

Federal Reserve

2017

https://www.federalreserve.gov/newsevents/pressreleases/files/other20170906a1.pdf

 

 

 

Strategies for Improving the U.S. Payment System

Federal Reserve

2015

https://fedpaymentsimprovement.org/wp-content/uploads/strategies-improving-us-payment-system.pdf

 

 

 

Strategies for Improving the U.S. Payment System
Feb 2016 Progress Report

Fed Reserve

2016

https://www.w3.org/2016/02/usfed-criteria.pdf

 

 

Strategies for Improving the U.S. Payment System

Progress Report | January 2017

Federal Reserve

https://www.federalreserve.gov/newsevents/press/other/sips-progress-report-201701.pdf

 

 

 

Strategies for Improving the U.S. Payments System

Claudia Swendseid

2016

https://www.minneapolisfed.org/~/media/files/news_events/events/payments-swendseid.pdf?la=en

 

Strategies for Improving the U.S. Payment System

2015

http://aftweb.com/aws/AFT/asset_manager/get_file/110552

 

 

Making Payments Faster in the United States

Clearing House

2015

https://www.theclearinghouse.org/~/media/puertoricosamedayach2015/making%20payments%20faster%20in%20the%20us%20tim%20mills.pdf?la=en

 

 

 

The Clearing House RTP System “Back to The Future”: Emerging Payment Systems Legal and Regulatory Issues

2017

https://www.calbankers.com/sites/main/files/file-attachments/back_to_the_future_emerging_payment_systems_-_krebs.pdf

 

 

The Federal Reserve Faster Payments and Secure Payments Task Forces
2016 Smart Card Alliance Payments Summit

April 5, 2016

https://www.securetechalliance.org/secure/events/20160404/PACIFICA-7_TUE_445_AADLAND_Smart-Card-Alliance_Faster-and-Secure-Payments-Task-Forces_4-5-16.pdf

 

 

 

Understanding and Regulating Twenty-First Century Payment Systems: The Ripple Case Study

Marcel T. Rosner
Delaware Court of Chancery
Andrew Kang
University of Michigan Law School

2016

https://repository.law.umich.edu/cgi/viewcontent.cgi?article=1239&context=mlr

 

 

 

US Retail Payment Instruments and Systems

Structure, Transformation & Public Policy

NY Fed Reserve

2015

https://www.newyorkfed.org/medialibrary/media/banking/international/15-Retail-Payments-2015-Littman.pdf

 

 

 

Digital Payments Strategy for U.S. Retail Banks

Cognizant

2015

https://www.cognizant.com/whitepapers/Digital-Payments-Strategy-for-U.S.-Retail-Banks-codex1358.pdf

 

 

US Real Time Payments Technology Playbook

The Clearing House

2016

https://www.theclearinghouse.org/-/media/tch/pay%20co/rtp/tch%20rtp%20technology%20playbook%20111716%20v1.pdf?la=en

 

 

 

16 in 2016: Trailblazing trends in global payments

McKinsey

2016

https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/16%20in%202016%20Trailblazing%20trends%20in%20global%20payments/16%20in%202016%20Trailblazing%20trends%20in%20global%20payments_2015.ashx

 

 

 

Earthport

https://www.earthport.com/

 

 

 

Flavors of the Fast

A trip around the world in immediate payments

FIS

https://www.fisglobal.com/-/media/FISGlobal/Files/Report/Flavours_Of_Fast.pdf

 

 

 

Global Trends and Developments in Instant payments

Edger Dunn

14th February, 2017

http://edgardunn.com/wp-content/uploads/2017/02/MPE-Track-A-Afternoon-Session-Global-Trends-and-Developments-in-Instant-Payments-Ulf-Geismar-14-02-2017-VF-1.pdf

 

 

 

EXECUTIVE GUIDE TO IMMEDIATE/ REAL-TIME PAYMENTS

Accenture

https://www.aciworldwide.com/-/media/files/collateral/trends/executive-guide-to-immediate-payments-tl.pdf

 

 

 

INTERNATIONAL PAYMENTS IN A DIGITAL WORLD

Accenture

2017

https://www.accenture.com/t20171006T071036Z__w__/us-en/_acnmedia/PDF-62/Accenture-International-Payments-Digital-World.PDF

 

 

 

Ripple as an Innovative Solution to the Ways We Pay

RIPPLE

https://ripple.com/files/candian_comment_letter.pdf

 

 

 

Instant revolution of payments?

The quest for real-time payments

Deutsche Bank

2015

https://bravenewcoin.com/assets/Industry-Reports-2015/Deutsche-Bank-Research-Instant-revolution-of-payments-The-quest-for-real-time-payments.PDF

 

 

 

Retail payments and the real economy

ECB

Iftekhar Hasan, Tania De Renzis
and Heiko Schmiedel

https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1572.pdf?0568b27871896eb01f54b0c4c40a8f63

 

 

 

NATIONAL RETAIL PAYMENT SYSTEMS TO SUPPORT FINANCIAL INCLUSION

AFI

2017

https://www.afi-global.org/sites/default/files/publications/2017-10/DFS_GN_29_stg4.pdf

 

 

 

Real-time payments for real-time banking
How banks can seize the full opportunities of immediate payments

Accenture

2015

https://www.accenture.com/t20151002T215256__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Dualpub_22/Accenture-Banking-Realtime-Payments-Realtime-Bank.pdf

 

 

 

The New Payments Platform: Fast-Forward to the Future

Cognizant

https://www.cognizant.com/InsightsWhitepapers/the-new-payments-platform-fast-forward-to-the-future-codex1299.pdf

 

 

 

24/7 Domestic Real-time Payments

SWIFT

http://www.alfi.lu/sites/alfi.lu/files/files/16577_Expl1_SWIFT2020_2.pdf

 

 

Innovations in retail payments

Report of the Working Group on Innovations in Retail Payments

BIS

May 2012

https://www.bis.org/cpmi/publ/d102.pdf

 

 

Fast payments – Enhancing the speed and availability of retail payments

BIS

November 2016

 

https://www.bis.org/cpmi/publ/d154.pdf

 

Is a Global Real-Time Payment System Possible?

TCH

2015

https://www.theclearinghouse.org/research/2015/2015-q3-banking-perspectives/global-real-time-payments

Federal Reserve Payment Trends Update

2017

Federal Reserve Bank of Richmond

http://www.maafp.org/resources/Presentations/04192017%20Retail%20Payments.pdf

 

 

 

THE IMPORTANCE OF THE RETAIL PAYMENT SYSTEM

Hal S. Scott

Nomura Professor and Director, Program on International Financial Systems Harvard Law School

December 16, 2014

 

https://dash.harvard.edu/bitstream/handle/1/16883011/hal-scott—mastercard-retail-payment-systems.pdf?sequence=1

 

Mechanism Design for Near Real-Time Retail Payment and Settlement Systems

Zhiling GUO
Singapore Management University, ZHILINGGUO@smu.edu.sg

Robert John UFFMAN
Singapore Management University, rkau man@smu.edu.sg

Mei LIN
Singapore Management University, mlin@smu.edu.sg

Dan MA

2015

 

http://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=3494&context=sis_research

 

 

 

2017 Advanced Payments Report

Edgar Dunn & Company

2017

http://edgardunn.com/2017/06/2017-advanced-payments-report/

Network Economics of Block Chain and Distributed Ledger Technology

Network Economics of Block Chain and Distributed Ledger Technology

 

Quadruple Accounting System

Morris Copeland, and Hyman Minsky emphasized quadruple entry accounting system envisioning interrelated interlocking balance sheets of economic agents.  Interlocking balance sheets create a network of economic agents.

I attach a slide from a presentation by Marc Lavoie given at Minsky Summer school in 2010 at the Levy Institute of Economics (Bard College).

 

Minsky

 

There are several FINTECH innovations which are bringing about dramatic changes in the financial services business.

  • Block Chain and Distributed Ledgers
  • Payment Banks
  • Retail P2P Payment services
  • Mobile Payments
  • Secured Wallets
  • Domestic Real Time Payments and Transfers
  • Cross Border Near Real time Money Transfers

 

Block Chain and Distributed Ledgers, in my opinion, are/can be implementation of quadruple accounting principles envisioned by Morris Copeland and Hyman Minsky.  Two economic agents engage in financial transactions which are recorded in distributed ledgers.

Some of the key components of distributed ledger technology are:

  • Peer-To-Peer Networking
  • Cryptography
  • Distributed Data Storage

In contrast with centralized ledgers, distributed ledgers store data at each node in the P2P network.  So there is no need for an intermediating institution.  From a payment system perspective, each node in the P2P network can be thought of as a bank.   Each node will have its own ledger and balance sheet which will record assets and liabilities.

Ripple is a Cross Border money transfer solution which is based on block chain technology.

 

Recent rise of retail P2P payment services such as

  • Xoom
  • M-Paisa
  • PayTM

indicates a trend toward real time payments/money transfers domestic and international.  This trend also indicates decoupling of these services from traditional deposit/lending banks. XOOM is a service provided by PAYPAL for international Money Transfers.  Money transfers are within a few minutes.

In USA, there are new P2P services offered to facilitate faster near real time payments/money transfers through mobile and online interfaces.

  • Venmo (Paypal)
  • Zelle (clearXchange Network)
  • Square Cash
  • Braintree (Paypal)

There are also social media payments available now through which consumers can quickly send money using social media applications such as

  • Facebook (through Messanger app)
  • Snapcash (through SnapChat)
  • Apple PayCash (through imessages app)
  • TenCent via WeChat

 

Rise of payment banks such as PayTM is one such example.  Reserve Bank of India has granted PayTM a payment bank status.  But transfers are still between bank accounts of transacting consumers where deposits are kept. Payment Bank acts as a technology provider and acts as an intermediary.

As per the RBI guidelines, payments banks cannot lend they can only take deposits or accept payments.

There are four payment banks in India now.

  • PayTM Payment Bank
  • Airtel Payment Bank
  • India Post Payment Bank
  • FINO Payment Bank

 

Mobile payments using secured wallets is another such example.

  • Consumer to Business payments and transfers
  • Consumer to Consumer payments and transfers
  • Google Wallet
  • Apple Pay
  • Android Pay
  • Alipay

 

Cross Border Payment Solutions:

  • XOOM
  • Earthport
  • TransferWise
  • RIPPLE
  • Remitly
  • WorldRemit

 

 

Please see my other related posts:

Next Generation of B2C Retail Payment Systems

Cross Border/Offshore Payment and Settlement Systems

 

 

Key sources of Research:

 

Minsky and Godley and financial Keynesianism

Marc Lavoie
University of Ottawa

2010

http://www.levyinstitute.org/pubs/conf_june10/Lavoie.pdf

 

Block Chain:  A Primer

2016

https://mpra.ub.uni-muenchen.de/76562/1/MPRA_paper_76562.pdf

 

Distributed Ledger Technologies/Blockchain: Challenges, opportunities and the prospects for standards

Advait Deshpande, Katherine Stewart, Louise Lepetit, Salil Gunashekar

2017

www2.caict.ac.cn/zscp/qqzkgz/qqzkgz_zdzsq/201708/P020170818579005375876.pdf

 

Banking on Distributed Ledger Technology: Can It Help Banks Address Financial Inclusion?

By Jesse Leigh Maniff and W. Blake Marsh

2017

https://www.kansascityfed.org/~/media/files/publicat/econrev/econrevarchive/2017/3q17maniffmarsh.pdf

 

 

Distributed ledger technology in payments, clearing, and settlement

Mills, David, Kathy Wang, Brendan Malone, Anjana Ravi, Jeff Marquardt, Clinton
Chen, Anton Badev, Timothy Brezinski, Linda Fahy, Kimberley Liao, Vanessa Kargenian,
Max Ellithorpe, Wendy Ng, and Maria Baird (2016).

Finance and Economics Discussion
Series 2016-095. Washington: Board of Governors of the Federal Reserve System,

2016

https://www.federalreserve.gov/econresdata/feds/2016/files/2016095pap.pdf

 

 

Distributed Ledger Technology: beyond block chain

A report by the UK Government Chief Scientific Adviser

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/492972/gs-16-1-distributed-ledger-technology.pdf

 

Bitcoin, Blockchain & distributed ledgers: Caught between promise and reality

Deloitte

https://www2.deloitte.com/content/dam/Deloitte/au/Images/infographics/au-deloitte-technology-bitcoin-blockchain-distributed-ledgers-180416.pdf

 

 

Distributed ledger technology in payment, clearing and settlement
An analytical framework

BIS

2017

https://www.bis.org/cpmi/publ/d157.pdf

 

 

The Truth About Blockchain

HBR
January–February 2017 Issue

 

https://hbr.org/2017/01/the-truth-about-blockchain

 

THE USE OF BLOCKCHAIN IN CLEARING AND SETTLEMENT

MARECHAL Baptiste

 

 

Peer-to-peer payments: Surveying a rapidly changing landscape

By Jennifer Windh

August 15, 2011

 

https://www.frbatlanta.org/-/media/documents/rprf/rprf_pubs/110815wp.pdf

Global Liquidity and Cross Border Capital Flows

Global Liquidity and Cross Border Capital Flows

 

Types of Cross Border Capital Flows

  • Intra Bank Flows (Intra Firm Transfers)
  • Inter Bank Flows (wholesale Money Markets)
  • International Shadow Banking
  • Euro Dollar Market
  • International Bond and Equity Portfolio Flows

Growth of Capital Flows and FX Reserves

From INTERNATIONAL MONETARY RELATIONS: TAKING FINANCE SERIOUSLY

Capitalflows

 

From INTERNATIONAL MONETARY RELATIONS: TAKING FINANCE SERIOUSLY

Capital Flows 2

From Stitching together the global financial safety net

Cap Flows 6

 

Decline in Global Trade and Cross Border Capital Flows since 2008

 

From Global Liquidity and Cross-Border Bank Flows

Cap Flows 7

 

US DOLLAR FLOWS – Inter regional Flows

  • Not all dollar flows are from USA.
  • Through Eurodollar Market, firms in many countries are engaged in US Dollar transactions.
  • US Dollar dominates cross border capital flows.

 

From External dimension of monetary policy

Cap Flows 4

 

 

From Economic resilience: a financial perspective

 

Cap Flow 15

 

 

ALL CURRENCIES

From Breaking free of the triple coincidence in international finance

Cap Flows 10

 

Who is Involved in Cross Border Capital Flows

From The shifting drivers of global liquidity

Cap Flows 8

 

Recent Trends in Capital Flows

 

From The shifting drivers of global liquidity

Cap Flows 9

 

Problem of Boundaries

From Breaking the Triple Coincidence in International Finance

Capital Flows 3

Cross Border (International) Capital Flows (Networks) for

  • Intra Bank Flows
  • Inter-bank Lending
  • Debt and Securities Flows
  • International Shadow Banking

Capital Flows are not confined to National Boundaries.

Boundaries for

  • Monetary Policy
  • National Income Accounting
  • National Currencies

Types of Flows

From From Breaking the Triple Coincidence in International Finance

Cap Flows 11

 

A. Round tripping of Capital Flows

From Breaking the Triple Coincidence in International Finance

Cap Flows 12

B. International Debt Issuance by Non Financial Corporates in Emerging Markets

 

From From Breaking the Triple Coincidence in International Finance

Cap Flows 13

From Global dollar credit: links to US monetary policy and leverage

Cap flow 14

 

From  What does the new face of international financial intermediation mean for emerging market economies?

capflows 16

 

 

From Economic resilience: a financial perspective

 

Cap Flow 16

Please see my other related posts:

The Dollar Shortage, Again! in International Wholesale Money Markets

Currency Credit Networks of International Banks

Low Interest Rates and International Capital Flows

Low Interest Rates and International Investment Position of USA

Economics of Trade Finance

External Balance sheets of Nations

 

Key Sources of Research:

 

 

Breaking the Triple Coincidence in International Finance

Hyun Song Shin

Bank for International Settlements
Keynote speech at seventh conference of
Irving Fisher Committee on Central Bank Statistics

Basel, 5 September 2014

http://www.bis.org/ifc/publ/ifcb39_keynote-rh.pdf

 

 

Breaking free of the triple coincidence in international finance

Hyun Song Shin, BIS

Eighth IFC Conference on “Statistical implications of the new financial landscape”
Basel, 8–9 September 2016

http://www.bis.org/ifc/publ/ifcb43_zp_rh.pdf

 

 

 

Breaking free of the triple coincidence in international finance

by Stefan Avdjiev, Robert N McCauley and Hyun Song Shin

Monetary and Economic Department

BIS

October 2015

http://www.bis.org/publ/work524.pdf

 

 

 

Global Liquidity and Cross-Border Bank Flows

Eugenio Cerutti (International Monetary Fund)
Stijn Claessens (Federal Reserve Board)
Lev Ratnovski (International Monetary Fund)

Economic Policy
63rd Panel Meeting
Hosted by the De Nederlandsche Bank

Amsterdam, 22-23 April 2016

http://www.economic-policy.org/wp-content/uploads/2016/04/Global-liquidity-and-cross-border-bank-flows.pdf

 

 

 

Stitching together the global financial safety net

Edd Denbee, Carsten Jung and Francesco Paternò

Financial Stability Paper No. 36 – February 2016

BOE

http://www.reinventingbrettonwoods.org/sites/default/files/fs_paper36.pdf

 

 

 

Gross Capital Inflows to Banks, Corporates and Sovereigns

Stefan Advjiev

Bryan Hardy

Sebnem Kalemli-Ozcan

Luis Serven

January 2017

http://www.econweb.umd.edu/~kalemli/GrossFlows_jan17_final.pdf

 

 

External dimension of monetary policy

Hyun Song Shin

Remarks at the Board of Governors of the Federal Reserve System conference
“Monetary policy implementation and transmission in the post-crisis period”

Washington DC, Friday 13 November 2015

https://www.bis.org/speeches/sp151113.pdf

 

 

 

 

Financial deglobalisation in banking?

Robert N McCauley, Agustín S Bénétrix,
Patrick M McGuire and Goetz von Peter

TEP Working Paper No. 1717

July 2017

http://www.tcd.ie/Economics/TEP/2017/tep1717.pdf

 

 

Monetary policy spillovers and currency networks in cross-border bank lending

by Stefan Avdjiev and Előd Takáts
Monetary and Economic Department

March 2016

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2749311

 

 

 

Accounting for global liquidity: reloading the matrix

Hyun Song Shin
Economic Adviser and Head of Research

IMF-IBRN Joint Conference “Transmission of macroprudential and monetary policies across borders”

Washington DC, 19 April 2017

https://www.bis.org/speeches/sp170419.pdf

 

 

 

 

INTERNATIONAL MONETARY RELATIONS: TAKING FINANCE SERIOUSLY

Maurice Obstfeld
Alan M. Taylor
May 2017

http://econ.sciences-po.fr/sites/default/files/file/w23440.pdf

 

 

 

The Currency Dimension of the Bank Lending Channel in International Monetary Transmission

BIS Working Paper No. 600

Posted: 2 Jan 2017

Előd Takáts

Judit Temesvary

 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2891530

https://www.researchgate.net/profile/Elod_Takats/publication/311451202_The_Currency_Dimension_of_the_Bank_Lending_Channel_in_International_Monetary_Transmission/links/587dd04808ae9a860ff2723a/The-Currency-Dimension-of-the-Bank-Lending-Channel-in-International-Monetary-Transmission.pdf

 

 

 

The Second Phase of Global Liquidity and Its Impact on Emerging Economies

Hyun Song Shin
Princeton University

November 7, 2013

 

http://www.frbsf.org/economic-research/events/2013/november/asia-economic-policy-conference/program/files/The-Second-Phase-of-Global-Liquidity-and-Its-Impact-on-Emerging-Economies.pdf

 

 

 

 

BIS Quarterly Review

September 2017

International banking and financial market developments

 

http://www.bis.org/publ/qtrpdf/r_qt1709.pdf

 

 

 

 

The Three Phases of Global Liquidity

https://www.springer.com/cda/content/document/cda_downloaddocument/9789812872838-c2.pdf?SGWID=0-0-45-1490720-p177066168

 

 

 

 

The Shifting Drivers of Global Liquidity

Stefan Avdjiev
Leonardo Gambacorta
Linda S. Goldberg
Stefano Schiaffi

Staff Report No. 819
June 2017

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr819.pdf?la=en

 

 

 

How Do Global Liquidity Phases Manifest Themselves in Asia?

Iwan J. Azis
Asian Development Bank and Cornell University
Hyun Song Shin
Princeton University
August 2013

http://www.iwanazis.com/files/documents/Iwan-Azis-Paper-Shin-Global-Liquidity2013.pdf

 

 

 

 

GLOBAL LIQUIDITY—ISSUES FOR SURVEILLANCE

2014

IMF

http://www.imf.org/external/np/pp/eng/2014/031114.pdf

 

 

 

 

The shifting drivers of global liquidity

Stefan Avdjiev, Leonardo Gambacorta, Linda S. Goldberg and Stefano Schiaffi

May 2017

FED NY

 

https://www.chapman.edu/business/_files/faculty-research/2017-conference-presentations/linda-goldberg.pdf

 

 

 

CAPITAL FLOWS AND GLOBAL LIQUIDITY

IMF Note for G20 IFA WG
February 2016

 

http://g20chn.org/English/Documents/Current/201608/P020160811536051676178.pdf

 

 

 

 

Capital Flows, Cross-Border Banking and Global Liquidity∗

Valentina Bruno

Hyun Song Shin

March 15, 2012

http://www.igier.unibocconi.it/files/capital_flows_global_liquidity.pdf

 

 

Cross-Border Banking and Global Liquidity

Valentina Bruno

Hyun Song Shin

August 28, 2014

 

http://www.bis.org/publ/work458.pdf

 

 

The international monetary and financial system: a capital account historical perspective

by Claudio Borio, Harold James and Hyun Song Shin

2014

 

http://www.bis.org/publ/work457.pdf

 

 

Banks and Cross-Border Capital Flows: Policy Challenges and Regulatory Responses

 

https://www.tcd.ie/policy-institute/assets/pdf/CIEPR_banking_capital_flows_report_Sept12.pdf

 

 

 

Global dollar credit and carry trades: a firm-level analysis

Valentina Bruno

Hyun Song Shin

August 2015

 

http://www.bis.org/publ/work510.pdf

 

 

Global dollar credit: links to US monetary policy and leverage

by Robert N McCauley, Patrick McGuire and Vladyslav Sushko

2015

 

http://www.bis.org/publ/work483.pdf

 

 

 

Global liquidity and procyclicality

Hyun Song Shin

Bank for International Settlements

“The State of Economics, The State of the World” World Bank conference,

8 June 2016

 

http://pubdocs.worldbank.org/en/710301465395290548/Shin-Son-Shin-Presentation.pdf

 

 

 

 

Economic resilience: a financial perspective

Note submitted to the G20 on 7 November 2016

December 2016

 

http://www.g20.utoronto.ca/2017/2017-Germany-BIS-economic-resilience.pdf

 

 

Emerging Market Nonfinancial Corporate Debt: How Concerned Should We Be?,

Beltran, Daniel, Keshav Garud, and Aaron Rosenblum (2017).

IFDP Notes. Washington: Board of Governors of the Federal Reserve System, June 2017.

 

https://www.federalreserve.gov/econres/notes/ifdp-notes/emerging-market-nonfinancial-corporate-debt-how-concerned-should-we-be-20170601.pdf

 

 

 

 

International capital flows and financial vulnerabilities in emerging market economies: analysis and data gaps

By Nikola Tarashev, Stefan Avdjiev and Ben Cohen

Note submitted to the G20 International Financial Architecture Working Group

August 2016

 

https://www.bis.org/publ/othp25.pdf

 

 

 

Recent trends in EME government debt volume and composition

Corporate Debt in Emerging Economies: Threat to Financial Stability

Viral Acharya et al
2015

 

 

 

 

 Dollar credit to emerging market economies

Robert N McCauley Patrick McGuire Vladyslav Sushko

2015

 

https://www.bis.org/publ/qtrpdf/r_qt1512e.pdf

 

 

 

 

What does the new face of international financial intermediation mean
for emerging market economies?

Hyun song shin and PhiliP Turner, Bank for International Settlements

2015

 

https://publications.banque-france.fr/sites/default/files/medias/documents/financial-stability-review-19_2015-04.pdf

Low Interest Rates and Business Investments : Update August 2017

Low Interest Rates and Business Investments : Update August 2017

 

From  Explaining Low Investment Spending

USINVEST

globalinvest

 

Please see my earlier posts.

Business Investments and Low Interest Rates

Mergers and Acquisitions – Long Term Trends and Waves

The Decline in Long Term Real Interest Rates

Short term Thinking in Investment Decisions of Businesses and Financial Markets

Low Interest Rates and Monetary Policy Effectiveness

Low Interest Rates and Banks’ Profitability : Update July 2017

Low Interest Rates and Banks Profitability: Update – December 2016

 

Since my earlier posts on this subject there has been several new studies published highlighting weakness in business investments as one of the cause of slower economic growth and lower interest rates.

Other significant factors impacting interest rates are demographic changes, and slower economic growth.

I argue that there is mutual (circular) causality in weak business investment, slower economic growth, and lower interest rates which reinforce each other.

 

Decreased competition, increased concentration, corporate savings glut, share buybacks, paying dividends are also identified as factors.

Number of public companies have decreased significantly in USA since 1996 due to M&A activity.   See the data below.

Increased Mergers/Acquisitions, Increased Concentration, Decreased Competition, Decreased Number of Public Companies, Share buybacks, and Dividend Payouts are multiple perspectives of same problem.

 

From The Incredible Shrinking Universe of Stocks

The Causes and Consequences of Fewer U.S. Equities

USNUMUSSTAT

 

Key sources of Research:

The Low Level of Global Real Interest Rates

Remarks by
Stanley Fischer
Vice Chairman
Board of Governors of the Federal Reserve System

at the
Conference to Celebrate Arminio Fraga’s 60 Years
Casa das Garcas, Rio de Janeiro, Brazil

July 31, 2017

The Low Level of Global Real Interest Rates

 

 

INVESTMENT-LESS GROWTH: AN EMPIRICAL INVESTIGATION

German Gutierrez Thomas Philippon

Working Paper 22897

NATIONAL BUREAU OF ECONOMIC RESEARCH

1050 Massachusetts Avenue
Cambridge, MA 02138

December 2016

 

INVESTMENT-LESS GROWTH: AN EMPIRICAL INVESTIGATION

 

 

Explaining Low Investment Spending

The NBER Digest
NATIONAL BUREAU OF ECONOMIC RESEARCH

February 2017

Explaining Low Investment Spending

 

 

The Secular Stagnation of Investment?

Callum Jones and Thomas Philippon

December 2016

 

The Secular Stagnation of Investment?

 

 

Is there an investment gap in advanced economies? If so, why?

By Robin Dottling, German Gutierrez and Thomas Philippon

 

Is there an investment gap in advanced economies? If so, why?

 

 

The Disappointing Recovery of Output after 2009

JOHN G. FERNALD ROBERT E. HALL

JAMES H. STOCK MARK W. WATSON

May 2, 2017

The Disappointing Recovery of Output after 2009

 

 

Declining Competition and Investment in the U.S.

German Gutierrez and Thomas Philippon

NATIONAL BUREAU OF ECONOMIC RESEARCH

July 2017

 

Declining Competition and Investment in the U.S

 

 

Real Interest Rates Over the Long Run : Decline and convergence since the 1980s

Kei-Mu Yi   Jing Zhang

ECONOMIC POLICY PAPER 16-10 SEPTEMBER 2016

FEDERAL RESERVE BANK of MINNEAPOLIS

Real Interest Rates over the Long Run Decline and convergence since the 1980s, due significantly to factors causing lower investment demand

 

 

Understanding global trends in long-run real interest rates

Kei-Mu Yi and Jing Zhang

Economic Perspectives, Vol. 41, No. 2, 2017
Chicago Fed Reserve Bank

 

Understanding Global Trends in Long-run Real Interest Rates

 

 

Weakness in Investment Growth: Causes, Implications and Policy Responses

CAMA Working Paper 19/2017 March 2017

M. Ayhan Kose

Franziska Ohnsorge

Lei Sandy Ye

Ergys Islamaj

 

Weakness in Investment Growth: Causes, Implications and Policy Responses

 

 

Are US Industries Becoming More Concentrated?

Gustavo Grullon, Yelena Larkin and Roni Michaely

October 2016

 

Are US Industries Becoming More Concentrated?

 

 

Why Is Global Business Investment So Weak? Some Insights from Advanced Economies

 

Robert Fay, Justin-Damien Guénette, Martin Leduc and Louis Morel,

International Economic Analysis Department

Bank of Canada Review Spring 2017

 

Why Is Global Business Investment So Weak? Some Insights from Advanced Economies

 

 

What Is Behind the Weakness in Global Investment?

by Maxime Leboeuf and Bob Fay

2016

Bank of Canada

 

What Is Behind the Weakness in Global Investment?

 A Structural Interpretation of the Recent Weakness in Business Investment

by Russell Barnett and Rhys Mendes

 The Corporate Saving Glut in the Aftermath of the Global Financial Crisis

 

Gruber, Joseph W., and Steven B. Kamin

International Finance Discussion Papers
Board of Governors of the Federal Reserve System
Number 1150 October 2015

 

The Corporate Saving Glut in the Aftermath of the Global Financial Crisis

 

 

The Incredible Shrinking Universe of Stocks

The Causes and Consequences of Fewer U.S. Equities

March 22, 2017

GLOBAL FINANCIAL STRATEGIES

http://www.credit-suisse.com

 

The Incredible Shrinking Universe of Stocks The Causes and Consequences of Fewer U.S. Equities

 

 

They Just Get Bigger: How Corporate Mergers Strangle the Economy

Jordan Brennan

2017 February 19

They Just Get Bigger: How Corporate Mergers Strangle the Economy

 

 

Rising Corporate Concentration, Declining Trade Union Power, and the Growing Income Gap: American Prosperity in Historical Perspective

Jordan Brennan

March 2016

 

Rising Corporate Concentration, Declining Trade Union Power, and the Growing Income Gap: American Prosperity in Historical Perspective

 

 

The Oligarchy Economy: Concentrated Power, Income Inequality, and Slow Growth

Corporate concentration exacerbates income inequality

 

Jordan Brennan

March 2016

http://evonomics.com/the-oligarchy-economy/

Low Interest Rates and Monetary Policy Effectiveness

Low Interest Rates and Monetary Policy Effectiveness

 

World economy is stuck in low interest rates environment.   Euro area, japan have even negative interest rates.  US Fed Reserve since December 2016 has started raising interest rates.

Attempts by Central Banks have not been effective in increasing economic growth.  Many Economists now are presenting counter intuitive reasons for low growth.

 

Please see my earlier related posts.

Business Investments and Low Interest Rates

Mergers and Acquisitions – Long Term Trends and Waves

 

Since 2016, there are several new studies published exploring effectiveness of monetary policy in low interest rates environment.

 

Is monetary policy less effective when interest rates are persistently low?

by Claudio Borio and Boris Hofmann

April 2017

Is Monetary Policy Less Effective When Interest Rates are Persistently Low?

 

In March 2017, Brookings Institution published the following study by the economists of the US Federal Reserve.

Monetary policy in a low interest rate world

 

Fed Reserve of Chicago published speech given by Charles Evans in 2016.

Monetary Policy in a Lower Interest Rate Environment

 

Lecture by Vítor Constâncio, Vice-President of the ECB, Macroeconomics Symposium at Utrecht School of Economics, 15 June 2016

The challenge of low real interest rates for monetary policy

 

Journal of Policy Modeling published a paper by Ken Rogoff.  Paper was presented at American Economic Association, 2017.

Monetary policy in a low interest rate world

 

Eight BIS CCA Research Conference on “Low interest rates, monetary policy and international spillovers”, hosted by the Board of Governors of the Federal Reserve System, Washington DC, 25-26 May 2017

Low interest rates, monetary policy and international spillovers

 

Economist Magazine published an article on views of Bill Gross and others.

November 2015

Do ultra-low interest rates really damage growth?

 

Bloomberg Business Week published an article describing views of Charles Calomiris and others.

June 2017

Is the World Overdoing Low Interest Rates?

 

Claudio Borio and Boris Hofmann

The Paper was prepared for the Reserve Bank of Australia conference
“Monetary Policy and Financial Stability in a World of Low Interest Rates”,

16-17 March 2017, Sydney

Is monetary policy less effective when interest rates are persistently low?

 

Monetary policy and bank lending in a low interest rate environment: diminishing effectiveness?

Claudio Borio and Leonardo Gambacorta

February 2017

Monetary policy and bank lending in a low interest rate environment: diminishing effectiveness?

 

Negative Interest Rate Policy (NIRP):
Implications for Monetary Transmission and Bank Profitability in the Euro Area

Prepared by Andreas (Andy) Jobst and Huidan Lin

IMF

August 2016

Negative Interest Rate Policy (NIRP): Implications for Monetary Transmission and Bank Profitability in the Euro Area

 

James Bullard, President and CEO of Federal Reserve Bank of St. Louis

March 24, 2009

The Henry Thornton Lecture, Cass Business School, London

Effective Monetary Policy in a Low Interest Rate Environment

 

Federal Reserve Bank of New York

Monetary Policy, Financial Conditions, and Financial Stability

Tobias Adrian
Nellie Liang

Monetary Policy, Financial Conditions, and Financial Stability

 

Monetary policy, the financial cycle and ultra-low interest rates

Mikael Juselius of Bank of Finland

DNB Workshop on “Estimating and Interpreting Financial Cycles”

Amsterdam, 2 September 2016

Monetary policy, the financial cycle and ultra-low interest rates

BIS Paper

Monetary policy, the financial cycle and ultra-low interest rates

 

The dynamics of real interest rates, monetary policy and its limits

Philippe d’Arvisenet

May 2016

The dynamics of real interest rates, monetary policy and its limits

 

Output Gaps and Monetary Policy at Low Interest Rates

By Roberto M. Billi

Output Gaps and Monetary Policy at Low Interest Rates

 

The insensitivity of investment to interest rates: Evidence from a survey of CFOs

Steve A. Sharpe and Gustavo A. Suarez

2014-02

The insensitivity of investment to interest rates: Evidence from a survey of CFOs

 

Does Prolonged Monetary Policy Easing Increase Financial Vulnerability?

Prepared by Stephen Cecchetti, Tommaso Mancini-Griffoli, and Machiko Narita

February 2017

Does Prolonged Monetary Policy Easing Increase Financial Vulnerability?

 

The Microeconomic Perils of Monetary Policy Experiments

Charles W. Calomiris

Cato Institute

The Microeconomic Perils of Monetary Policy Experiments

 

Why Have the Fed’s Policies Failed to Stimulate the Economy?

Mickey D. Levy

Cato Institute

Why Have the Fed’s Policies Failed to Stimulate the Economy?

Low Interest Rates and Banks’ Profitability : Update July 2017

Low Interest Rates and Banks’ Profitability : Update July 2017

 

Please see my previous posts.

Impact of Low Interest Rates on Bank’s Profitability

Low Interest Rates and Banks Profitability: Update – December 2016

 

Since December 2016, there are several new studies published which study low interest rates and Banks profitability.

 

 

Liberty State economics – a Blog of New York Federal Reserve has published a new column in June 2017.

Low Interest Rates and Bank Profits

 

 

Reduced Viability? Banks, Insurance Companies, and Low Interest Rates

CFA Institute

2016

CFA Institute Blog: Low Interest Rates and Banks

 

 

Changes in Profitability for Primary Dealers since the Financial Crisis

Benjamin Allen

Skidmore College

2017

Changes in Profitability for Primary Dealers since the Financial Crisis

 

 

Deloitte Consulting has published a new report in 2017 on Bank Models viability in environment of low interest rates.

Business model analysis European banking sector model in question

 

THE EFFECT OF NEGATIVE INTEREST RATES ON EUROPEAN BANKING
July 7, 2016
International banker

 

https://internationalbanker.com/banking/effect-negative-interest-rates-european-banking/

 

 

Low interest rates place a strain on the banks

bank of Finland

2016

https://www.bofbulletin.fi/en/2016/2/low-interest-rates-place-a-strain-on-the-banks/

 

 

The profitability of EU banks: Hard work or a lost cause?

KPMG

October 2016

 

https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2016/10/the-profitability-of-eu-banks.pdf

 

 

The influence of monetary policy on bank profitability

Claudio Borio

2017

http://onlinelibrary.wiley.com/doi/10.1111/infi.12104/abstract

 

 

Can Low Interest Rates be Harmful: An Assessment of the Bank Risk-Taking Channel in Asia

2014

Asian Development Bank

 

https://www.adb.org/sites/default/files/publication/31204/reiwp-123-can-low-interest-rates-harmful.pdf

 

 

Determinants of bank’s interest margin in the aftermath of the crisis: the effect of interest rates and the yield curve slope

Paula Cruz-García, Juan Fernández de Guevara and Joaquín Maudos

 

http://www.uv.es/inteco/jornadas/jornadas13/Cruz-Garcia,%20Fernandez%20and%20Maudos_XIII%20Inteco%20Workshop.pdf

 

 

Dutch Central Bank has published a new study in November of 2016 on Banks’ Profitability and risk taking in a prolonged environment of Low Interest Rates.

Bank profitability and risk taking in a prolonged environment of low interest rates: a study of interest rate risk in the banking book of Dutch banks

 

 

Net interest margin in a low interest rate environment: Evidence for Slovenia

Net interest margin in a low interest rate environment: Evidence for Slovenia

 

Global Financial Stability Report, April 2017: Getting the Policy Mix Right

IMF

2017

IMF Global Financial Stability Report April 2017

 

 

Negative Interest Rates: Forecasting Banks’ Profitability in a New Environment

Stefan Kerbl, Michael Sigmund

Bank of Finland

Negative Interest Rates: Forecasting Banks’ Profitability in a New Environment

 

 

Low Interest Rates and the Financial System

Remarks by Jerome H. Powell
Member Board of Governors of the Federal Reserve System
at the 77th Annual Meeting of the American Finance Association
Chicago, Illinois
January 7, 2017

https://www.federalreserve.gov/newsevents/speech/powell20170107a.pdf

 

 

Bad zero: Financial Stability in a Low Interest Rate Environment

Elena Carletti  Giuseppe Ferrero

18 June 2017

https://www.dnb.nl/en/binaries/paper%20Carletti_Ferrero_18June2017_tcm47-360758.pdf