session14 - Session 14 Repair & Reform Session Overview...

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Session 14 Repair & Reform
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2 Session Overview Exit strategies Longer term reform Systemic risk procyclicality spillovers Macroprudential policy objectives instruments issues
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3 Near-Term Disengagement interest rates liquidity packages Central banks rescue packages general fiscal stimulus Governments
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0 1 2 3 4 5 6 7 00 02 04 06 08 10 US Eurozone UK Japan 4 Normalising Interest Rates Official policy rates %
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5 Rate Prospects Source: CME, Euronext 3mth interbank rates, end-April 2010 data. Interest rate outlook derived from futures prices for relevant 3mth interest rate products 0 1 2 3 4 5 Current Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 US EMU UK Japan
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6 Adjust interest rate rules to include asset price bubbles? Some bubbles best left Dotcom vs telecom booms Excessive interest rate hikes Misaligned business & credit cycles De-anchoring inflation expectations Too many objectives. .. not enough instruments
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7 Unwinding Liquidity Long-Term Assets market appetite impaired assets fiscal co-ordination Short-Term Assets natural unwinding reserves ratio? reserves interest rate?
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8 Comparing Liquidity Packages Source: IMF (Oct 2009), Global Financial Stability Report, box 3.3, p144 Central Bank Liquidity Provision, 2007-09 Crisis 0 2 4 6 8 10 12 UK US Japan Eurozone % of GDP
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session14 - Session 14 Repair & Reform Session Overview...

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