Category Archives: International Economics

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

UK trade: going steady since the 1960s

Tommaso Aquilante, Enrico Longoni, Patrick Schneider

Countries’ goods exports are normally defined in terms of what has been shipped when and where. Recent literature (e.g. Besedeš and Prusa, 2011 and Besedeš et al, 2016) shows that looking at how long trade relationships have been in place is important as well. Using highly granular data, we show that over 60% of the value of UK nominal goods exports is in very mature trading relationships, by which we mean exports of a particular product between a pair of countries in a given year. This is true even with substantial churn (new relationships starting and old ones ceasing) going on all the while, and for exports in real terms as well.

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Filed under International Economics

The Spanish Connection – Consequences of a macroprudential regulation in Spain on Mexico

Jagdish Tripathy

Does macroprudential regulation spillover to foreign financial systems through inter-bank linkages? This question has received a lot of attention in recent years given the discord between the international nature of the global financial system and its regulation and supervision by national jurisdictions (e.g. this article). For example, subsidiaries of Spanish banks issue almost half of all credit issued by commercial banks in Mexico. These subsidiaries are also fully owned by their parent banks headquartered in Spain. Therefore, it is quite natural to ask whether macroprudential regulations in Spain can have unintended consequences on the Mexican financial system and the Mexican economy in general. While Mexican subsidiaries of Spanish banks are de-jure ring-fenced from regulations in Spain, does this hold de-facto?

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Filed under Banking, International Economics, Macroprudential Regulation

Population ageing and the macroeconomy

Noëmie Lisack, Rana Sajedi and Gregory Thwaites

An unprecedented ageing process is unfolding in industrialised economies. The share of the population over 65 has gone from 8% in 1950 to almost 20% in 2015, and is projected to keep rising. What are the macroeconomic implications of this change? What should we expect in the coming years? In a recent staff working paper, we link population ageing to several key economic trends over the last half century: the decline in real interest rates, the rise in house prices and household debt, and the pattern of foreign asset holdings among advanced economies. The effects of demographic change are not expected to reverse so long as longevity, and in particular the average time spent in retirement, remains high.

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Filed under International Economics, Macroeconomics

Bitesize: Financial services exports and financial openness: two sides of the same coin

Carlos Eduardo van Hombeeck

The UK has a comparative advantage in financial services. But specialisation in this activity brings with it the challenge of the large gross capital flows that are linked to financial services exports.

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Filed under Bitesize, Financial Stability, International Economics

Do rich countries lend to poor countries?

Almog Adir and Simon Whitaker

In the last few years there has been a small net overall flow of capital from advanced to emerging market economies (EMEs), in contrast to the ‘paradox’ prevailing for much of this century of capital flowing the ‘wrong’ way, uphill from poor to rich countries.  In this post we show the ‘paradox’ in the aggregate flows actually concealed private capital flowing the ‘right’ way for much of the time.  And even during recent turbulence, foreign direct investment (FDI) flows, likely to be particularly beneficial to growth, have persisted.  But EMEs could still benefit more from harnessing capital from advanced economies and Argentina has set a useful precedent as it prepares to take over the Presidency of the G20 in 2018.

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Filed under Financial Markets, International Economics, Macroeconomics

Bitesize: Flourishing FinTech

Aidan Saggers and Chiranjit Chakraborty

Investment in the Financial Technology (FinTech) industry has increased rapidly post crisis and globalisation is apparent with many investors funding companies far from their own physical locations.  From Crunchbase data we gathered all the venture capital investments in FinTech start-up firms from 2010 to 2014 and created network diagrams for each year.
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Filed under International Economics, Market Infrastructure, New Methodologies

Does domestic uncertainty really matter for the economy?

Ambrogio Cesa-Bianchi , Chris Redl,  Andrej Sokol and Gregory Thwaites

Volatile economic data or political events can lead to heightened uncertainty. This can then weigh on households’ and firms’ spending and investment decisions. We revisit the question of how uncertainty affects the UK economy, by constructing new measures of uncertainty and quantifying their effects on economic activity. We find that UK uncertainty depresses domestic activity only insofar as it is driven by developments overseas, and that other changes in uncertainty about the UK real economy have very little effect.

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Filed under Financial Markets, International Economics, Macroeconomics, New Methodologies