OECD Journal: Financial Market Trends

Frequency
Annual
ISSN: 
1995-2872 (online)
ISSN: 
1995-2864 (print)
http://dx.doi.org/10.1787/19952872
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The articles in Financial Market Trends focus on trends, structural issues and developments in financial markets and the financial sector.

 

Volume 2014, Issue 2 You do not have access to this content

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  22 Apr 2015
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    http://oecd.metastore.ingenta.com/content/2714021ec004.pdf
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  • http://www.keepeek.com/Digital-Asset-Management/oecd/finance-and-investment/why-implicit-bank-debt-guarantees-matter_fmt-2014-5js3bfznx6vj
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Why implicit bank debt guarantees matter
Oliver Denk, Sebastian Schich, Boris Cournède

What are the economic effects of implicit bank debt guarantees and who ultimately benefits from them? This paper finds that "financial excesses" – situations where bank credit reaches levels that reduce economic growth – have been stronger in OECD countries characterised by larger values of implicit guarantees and where bank creditors have not incurred losses in bank failure resolution cases. Also, implicit bank debt guarantees benefit financial sector employees and other high-income earners in two ways, increasing income inequality. First, implicit guarantees are likely to raise financial sector pay. This is consistent with the observation of "financial sector wage premia", or financial sector employees earning in excess of their profile in terms of age, education and other characteristics. Second, implicit guarantees are likely to result in more and cheaper bank lending. If so, well-off people tend to benefit relatively more since household credit is more unequally distributed than income.

JEL classification: D63, E43, G21, G28, O47
Keywords: Bank funding costs, implicit guarantees for bank debt, bank failure resolution, finance and growth, finance and income inequality

  22 Apr 2015
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    http://oecd.metastore.ingenta.com/content/2714021ec003.pdf
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  • http://www.keepeek.com/Digital-Asset-Management/oecd/finance-and-investment/unlocking-sme-finance-through-market-based-debt_fmt-2014-5js3bg1g53ln
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Unlocking SME finance through market-based debt
Iota Kaousar Nassr, Gert Wehinger

Small and medium-sized enterprises (SMEs) are key contributors to economic growth and job creation. The current economic and financial crisis has reduced bank lending and has affected SMEs in particular. Capital markets will have to play a bigger role in financing SMEs in order to make them more resilient to financial shocks. This article reviews the spectrum of alternative market-based debt instruments for SME financing. It focuses on securitisation and covered bonds and also addresses issues regarding small/mid-cap bonds and private placements. It reviews the current state of the market for these instruments and identifies associated risks; analyses the barriers for issuers and investors alike; and provides best practices and high level recommendations to help alleviate barriers without hampering the overall stability of the system.

JEL classification: G1, G2, G23, G28
Keywords: SME finance, SME securitisation, non-bank finance, (high-quality) securitisation, asset-backed securities (ABS), SME CLO (collateralised loan obligation), (covered) bonds, private placements, financial regulation, European DataWarehouse, Prime Collateralised Securities (PCS) initiative

  22 Apr 2015
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    http://oecd.metastore.ingenta.com/content/2714021ec002.pdf
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  • http://www.keepeek.com/Digital-Asset-Management/oecd/finance-and-investment/tracing-the-origins-of-the-financial-crisis_fmt-2014-5js3dqmsl4br
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Tracing the origins of the financial crisis
Paul Ramskogler

More than half a decade has passed since the most significant economic crisis of our lifetimes and a plethora of different interpretations has been offered about its origins. This paper consolidates the stylised facts put forward so far into a concise and coherent meta-narrative. The paper connects the dots between the arguments developed in the literature on macroeconomics and those laid out in the literature on financial economics. It focuses, in particular, on the interaction of monetary policy, international capital flows and the decisive impact of the rise of the shadow banking industry.

JEL classification: A10, F30, G01
Keywords: Financial crisis, international capital flows, shadow banking

  22 Apr 2015
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    http://oecd.metastore.ingenta.com/content/2714021ec001.pdf
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  • http://www.keepeek.com/Digital-Asset-Management/oecd/finance-and-investment/infrastructure-versus-other-investments-in-the-global-economy-and-stagnation-hypotheses_fmt-2014-5js4sbd025d6
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Infrastructure versus other investments in the global economy and stagnation hypotheses
Adrian Blundell-Wignall, Caroline Roulet

This paper uses data drawn from 10 000 global companies in 75 advanced and emerging countries to look at trends in infrastructure and other non-financial industries in light of the talk of stagnation. There appears to be a twin paradox in the global economy: some companies and industries are possibly over-investing, driving down returns on equity (ROEs) versus the cost of capital and creating margin pressure globally, while others carry out too little long-term investment in favour of buybacks and the accumulation of cash. This pattern is associated with a shift in the centre of gravity of world economic activity towards emerging markets. Most of the over-investment appears to be occurring in the extremely strong growth of emerging market sales and investment in non-infrastructure companies, much of which is being financed from rapidly growing debt since the financial crisis. Global value chains, emerging market policies of financial repression, low interest rates, taxation incentives, natural resource endowments and other factors determine where investment is stronger and where it is restrained. Potential problems of debt-financed over-investment in non-infrastructure industries in emerging markets and the incentives for buybacks are identified as major policy issues that need to be addressed if sustainable growth is to be achieved. Evidence on the role of causal factors (sales, GDP, the return on equity, the cost of equity and debt and a measure of financial openness) on corporate capital spending is presented. Finally some policy recommendations are made.

JEL classification: F21, G15, G18, G23
Keywords: Global economy, infrastructure, investment, listed companies

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