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THE FORCE OF FINANCE: FROM GLOBAL TO REGIONAL AND LOCAL FINANCIAL FLOWS Fikret ČAUŠEVIĆ The School of Economics and Business, University of Sarajevo The.

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Presentation on theme: "THE FORCE OF FINANCE: FROM GLOBAL TO REGIONAL AND LOCAL FINANCIAL FLOWS Fikret ČAUŠEVIĆ The School of Economics and Business, University of Sarajevo The."— Presentation transcript:

1 THE FORCE OF FINANCE: FROM GLOBAL TO REGIONAL AND LOCAL FINANCIAL FLOWS Fikret ČAUŠEVIĆ The School of Economics and Business, University of Sarajevo The CBBiH – SEESOX, St Antony’s College High Level Workshop Sarajevo, 6 June 2014

2 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 2 BEGINNINGS OF CREATING A LARGE GAP BETWEEN FINANCIAL AND REAL FLOWS: THE CLINTON AND BUSH ADMINISTRATIONS

3 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 3 CHANGE IN THE US NOMINAL GDP AND NASDAQ INDEX: THE CLINTON ADMINISTRATION 1992-2000 (Base indices: 1992=100)

4 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 4 CHANGE IN THE US NOMINAL GDP AND NASDAQ INDEX: THE BUSH ADMINISTRATION 2001-2008 (Base indices: 2001=100)

5 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 5 CHANGE IN THE PRICE OF AVERAGE HOME IN THE UNITED STATES: 2000-2008 (Base indices; 2000=100)

6 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 6 THE MINSKY CASE: FINANCIAL INSTABILITY HYPOTHESIS STABILIZING AN UNSTABLE ECONOMY

7 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 7 NOTIONAL VALUE OF OTC TRADED CONTRACTS IN FINANCIAL DERIVATIVES AND WORLD GDP (in trillions of USD)

8 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 8 TOTAL CLAIMS OF INTERNATIONALLY ACTIVE BANKS in trillions of USD

9 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 9 THE “NEW” FINANCIAL TRILEMMA The financial trilemma arises from the impossibility of satisfying simultaneously the three following goals: -Financial stability -The development of international banking -National systems of supervision and oversight of banking operations.

10 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 10 BASEL III IMPLEMENTATION EU BANK RECOVERY AND RESOLUTION DIRECTIVE (BRRD) FROM BAILING OUT TO BAILING IN WHAT IS HQLA IN THE WORLD OF TODAYS INTERNATIONAL FINANCE? VERY IMPORTANT ISSUES FOR ALL OF US

11 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 11 THE US PUBLIC DEBT AND GROSS DOMESTIC PRODUCT ( in trillions of USD )

12 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 12 CHANGE IN PUBLIC DEBT OF EURO-ZONE COUNTRIES: 2006-2013 (in % of GDP) 60 % GDP 60 % GDP

13 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 13

14 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 14 MONEY – WHENCE IT CAME, WHERE IT WENT

15 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 15 CHANGE IN ASSETS OF THE FEDERAL RESERVE SYSTEM 31 December 2007 = 100

16 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 16 Rp = R* + [(R m – R*) / S m ] x S p PORTFOLIO AND CAPITAL MARKET: THEORY AND PRACTICE – HOW TO DIVERSIFY PORTFOLIO(s)? Ri = R* + [(R m – R*) (R im S i /S m )]

17 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 17 CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND FINANCIAL TIMES STOCK EXCHANGE 30 June 2008 – 31 March 2013

18 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 18 CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND DEUTSCHE AKTIEN INDEX (DAX) 30 June 2008 – 31 December 2013

19 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 19 CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND DOW NIKKEI 225: 30 June 2008 – 31 December 2013

20 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 20 CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND THE SHANGHAI SHENZEN CSI 30 June 2008 – 31 December 2013

21 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 21 ASSETS OF THE EUROZONE MONETARY FINANCIAL INSTITUTIONS A S S E T S January 2010 (billions of EUR) January 2012 (billions of EUR) January 2014 (billions of EUR) 1. Credit to general government2.8643.2523.450 2. Credit to other euro-zone residents 13.05813.49812.722 2.1. Loans10.75711.21510.561 2.2. Bonds1.4841.5401.369 2.3. Shares and equities818743792 3. Net external assets5849221.204 4. Residual- 107189110 http://www.ecb.europa.eu/press/pr/stats/md/html/index.en.html

22 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 22 CREDIT ACTIVITY OF THE BANKING SECTOR IN BOSNIA AND HERZEGOVINA - milions of KM YEAR Loans to enterprises Change in % Loans to households Change in % Loans to governments in BiH Change in % 2010 7,715---6,423---466--- 2011 7,9362.96,7695.490594.2 March 2012 8,0531.56,759-0.29454.4 June 2012 8,1431.16,8841.81,04210.3 Sept. 2012 8,2251.06,8840.01,16812.1 Dec. 2012 8,2630.56,873-0.21,2365.8 July 2013 8,3020.56,996 1.81,2551.5 Decembar 2013 8,3911.17,134 2.01,38110.0 Source: The Central Bank of Bosnia and Herzegovina

23 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 23 STRUCTURING AND RESTRUCTURING PORTFOLIOS OF THE REGIONS SMALL OPEN ECONOMIES’ FOREIGN EXCHANGE RESERVES HAS BECOME A RATHER DIFFICULT TASK

24 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 24 EONIA: 2008-2012 200820102012 January 4.0220.3440.380 March 4.0910.3480.357 June 4.0070.3540.332 September 4.2730.4540.099 December 2.4860.4980.072 24

25 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 25 YIELDS ON TREASURY BILLS AND BONDS OF SELECTED EURO-ZONE COUNTRIES (in percents) Maturity GermanyFranceThe NetherlandsBelgium 17.05.’1316.05.’1417.05.’1316.05.’1417.05.’1316.05.’1417.05.’1316.05.’14 3 mths - 0.0550.007- 0.0180.134- 0.0210.1000.0040.121 6 mths - 0.0490.076- 0.0120.117- 0.0240.1100.0240.110 1 year - 0.0190.0900.0330.131- 0.0130.1000.0440.140 2 years - 0.0340.0940.0720.2340.0230.1480.0680.199 3 years 0.0240.1290.2370.2690.1630.2440.2360.322 4 years 0.1700.2600.4510.4850.4000.3740.5780.526 5 years 0.3670.4540.6290.7010.6140.5730.8260.732 6 years 0.5510.6270.8560.8740.8150.8800.9611.075 7 years 0.7491.3131.1031.1041.0181.0971.3181.302 25

26 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 26 OUTSTANDING LOANS OF SELECTED COUNTRIES IN EURO-ZONE AND THE WESTERN BALKANS WITH THE IMF – December 2013 Country’s quota in millions of SDR Outstanding loans in percents of the quota Greece 1,101.80 2,192 Portugal 1,029.70 1,913 Ireland 1,257.60 1,502 Bosnia and Herzegovina 169.10 240 Macedonia, FYR 68.90 286 Serbia 467.70 163 Source: The International Monetary Fund - http://www.imf.org/external/country/index.htmhttp://www.imf.org/external/country/index.htm

27 Fikret Čaušević - The CBBiH- SEESOX St Antony's Workshop 27 EXTERNAL DEBT AND PUBLIC DEBT TO GDP RATIOS OF THE FORMER YUGOSLAV COUNTRIES AND ALBANIA – December 2013 C O U N T R Y External debt to GDP ratio (in %) Public debt to GDP ratio (in %) A 12159 B 11352 C 10766 D 8361 E 6733 F 6246 G 64 H 279

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