Monthly Archives: July 2018

Who supplies liquidity in CHAPS?

Evangelos Benos and Christina Fritz

Every day UK banks and corporates (“participants”) make sizeable payments to each other through CHAPS, the country’s high-value payment system. However, these payments are liquidity-intensive: every payment must be pre-funded, i.e. the payer must have in place the full amount to be paid. This can be costly, so each participant would prefer to first receive some money from another one and then make its own payments by recycling the received amount. However, this still requires that some participants supply intra-day liquidity to the system by making the first payments. But who are these participants? This post shows that it is typically the smaller ones and also those perceived by markets to be riskier that get the ball rolling…

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Filed under Financial Stability, Market Infrastructure

Pumping Iron: How can metals prices help predict global growth?

Tom Wise

Estimates of GDP growth are published with a considerable lag – even in some major economies we still only have partial data on what GDP growth was in Q1 2018. So ‘nowcasting’ GDP using more timely indicators of economic activity is an important way of assessing the strength of the world economy in real time. Good indicators are timely, correlated with measures of world activity and should outperform simple benchmarks. Unlike other global indicators such as business surveys or trade data, metals prices are available minute by minute. They also tend to move closely with world GDP. This post assesses how well they perform at nowcasting world GDP.

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Filed under International Economics, Macroeconomics

Tight labour markets and self-service beer: is the productivity slowdown about to reverse?

Will Holman and Tim Pike

Firms are increasingly investing in automation, substituting capital for labour, as workers become more scarce and costly. We are seeing multiple examples, from automation in food processing to increasingly-common self-service tills. This push for productivity growth is one of the key themes from our meetings with businesses in the past year, which we think suggests a reversal of a decade-long trend.

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Filed under Macroeconomics, Monetary Policy