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THE FORCE OF FINANCE: FROM GLOBAL TO REGIONAL AND LOCAL
FINANCIAL FLOWS
Fikret ČAUŠEVIĆThe School of Economics and Business,
University of SarajevoThe CBBiH – SEESOX, St Antony’s College
High Level WorkshopSarajevo, 6 June 2014
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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BEGINNINGS OF CREATING A LARGE GAP BETWEEN FINANCIAL AND REAL FLOWS:
THE CLINTON AND BUSH ADMINISTRATIONS
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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CHANGE IN THE US NOMINAL GDP AND NASDAQ INDEX: THE CLINTON ADMINISTRATION 1992-2000 (Base indices: 1992=100)
31.1
2'92
31.1
2.'9
3
31.1
2'94
31.1
2.'9
5
31.1
2.'9
6
31.1
2.'9
7
31.1
2.'9
8
31.1
2.'9
9
31.1
2.'0
0
NASDAQ
0
100
200
300
400
500
600
700
NASDAQ Nominal GDP
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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CHANGE IN THE US NOMINAL GDP AND NASDAQ INDEX: THE BUSH ADMINISTRATION 2001-2008 (Base indices: 2001=100)
31.1
2.'0
1
31.1
2.'0
2
31.1
2.'0
3
31.1
2.'0
4
31.1
2.'0
5
31.1
2.'0
6
31.1
2.'0
7
31.1
2.'0
8
NASDAQ0
20
40
60
80
100
120
140
NASDAQ Nominal GDP
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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CHANGE IN THE PRICE OF AVERAGE HOME IN THE UNITED STATES: 2000-2008
(Base indices; 2000=100)
119.3
147.1161.3
150.4133.6
121.8112.6105.9
100
0
20
40
60
80
100
120
140
160
180
2000 2001 2002 2003 2004 2005 2006 2007 2008
Housing price index
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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THE MINSKY CASE: FINANCIAL INSTABILITY HYPOTHESIS
STABILIZING AN UNSTABLE ECONOMY
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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NOTIONAL VALUE OF OTC TRADED CONTRACTS IN FINANCIAL DERIVATIVES AND WORLD GDP (in trillions of USD)
0
100
200
300
400
500
600
700
800
900
2000 2005 2006 2008 2009 2010 2012 2013
Financial derivatives World GDP
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
8
TOTAL CLAIMS OF INTERNATIONALLY ACTIVE BANKS
in trillions of USD
0
5
10
15
20
25
30
35
40
2000 2006 2008 2012
Banks' Claims
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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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.
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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• 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 ISSUESFOR ALL OF US
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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THE US PUBLIC DEBT AND GROSS DOMESTIC PRODUCT (in trillions of USD)
0
2.000
4.000
6.000
8.00010.000
12.000
14.000
16.000
18.000
1980 1990 2000 2010 2012
GDP PUBLIC DEBT
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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CHANGE IN PUBLIC DEBT OF EURO-ZONE COUNTRIES:2006-2013 (in % of GDP)
0
20
40
60
80
100
120
140
160
180
GER FRA IT BEL NED LUX ESP POR FIN GRE IRE AUS SLOV
Aver. 2006-08 June 2013
60 %GDP
60 %GDP
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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0
2000
4000
6000
8000
10000
12000
2000 2003 2005 2007 2009 2011 2013
Total Developed countries Developing countries
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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CHANGE IN ASSETS OF THE FEDERAL RESERVE SYSTEM
31 December 2007 = 100
0
50
100
150
200
250
300
350
400
450
500
31.12.'07 30.07.'08 17.09.'08 01.10.'08 31.12.'08 31.12.'10 31.12.'12 05.06.'13 31.12.'13
Fed-Assets
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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Rp = R* + [(Rm – R*) / Sm] x Sp
PORTFOLIO AND CAPITAL MARKET: THEORY AND PRACTICE – HOW TO DIVERSIFY
PORTFOLIO(s)?
Ri = R* + [(Rm – R*) (RimSi/Sm)]
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
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
0
2.000
4.000
6.000
8.000
10.000
12.000
30.6.'08 02.3.'09 30.6.'10 31.12.'10 30.6.'11 31.12.'11 30.6.'12 31.12.'12 30.6.'13 31.12.'130
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
18.000
DAX DJIA
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND DOW NIKKEI 225: 30 June 2008 – 31 December 2013
5.000
7.000
9.000
11.000
13.000
15.000
17.000
30.6.'08 02.3.'09 30.6.'10 31.12.'10 30.6.'11 31.12.'11 30.6.'12 31.12.'12 30.6.'13 31.12.'135.000
7.000
9.000
11.000
13.000
15.000
17.000
19.000
DOW-NIKKEI DJIA
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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CHANGE IN THE DOW JONES INDUSTRIAL AVERAGE AND THE SHANGHAI SHENZEN CSI
30 June 2008 – 31 December 2013
0
500
1.000
1.500
2.000
2.500
3.000
3.500
30.6.'08 02.3.'09 30.6.'10 31.12.'10 30.6'11 31.12.'11 30.6'12 31.12.'12 30.6.'13 31.12.'130
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
18.000
SSCSI DJIA
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 government 2.864 3.252 3.450
2. Credit to other euro-zone residents
13.058 13.498 12.722
2.1. Loans 10.757 11.215 10.561
2.2. Bonds 1.484 1.540 1.369
2.3. Shares and equities 818 743 792
3. Net external assets 584 922 1.204
4. Residual - 107 189 110
http://www.ecb.europa.eu/press/pr/stats/md/html/index.en.html
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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CREDIT ACTIVITY OF THE BANKING SECTOR IN BOSNIA AND HERZEGOVINA - milions of KM
YEARLoans to
enterprises Change
in %Loans to households
Change in %
Loans to governments
in BiH
Change in %
2010 7,715 --- 6,423 --- 466 ---
2011 7,936 2.9 6,769 5.4 905 94.2
March 2012 8,053 1.5 6,759 -0.2 945 4.4
June 2012 8,143 1.1 6,884 1.8 1,042 10.3
Sept. 2012 8,225 1.0 6,884 0.0 1,168 12.1
Dec. 2012 8,263 0.5 6,873 -0.2 1,236 5.8
July 2013 8,302 0.5 6,996 1.8 1,255 1.5
Decembar 2013
8,391 1.1 7,134 2.0 1,381 10.0
Source: The Central Bank of Bosnia and Herzegovina
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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STRUCTURING AND RESTRUCTURING PORTFOLIOS OF THE REGIONS SMALL
OPEN ECONOMIES’ FOREIGN EXCHANGE RESERVES HAS BECOME A RATHER
DIFFICULT TASK
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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EONIA: 2008-2012
2008 2010 2012
January 4.022 0.344 0.380
March 4.091 0.348 0.357
June 4.007 0.354 0.332
September 4.273 0.454 0.099
December 2.486 0.498 0.072
24
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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YIELDS ON TREASURY BILLS AND BONDS OF SELECTED EURO-ZONE COUNTRIES (in percents)
Maturity Germany France The Netherlands Belgium
17.05.’13 16.05.’14 17.05.’13 16.05.’14 17.05.’13 16.05.’14 17.05.’13 16.05.’14
3 mths - 0.055 0.007 - 0.018 0.134 - 0.021 0.100 0.004 0.121
6 mths - 0.049 0.076 - 0.012 0.117 - 0.024 0.110 0.024 0.110
1 year - 0.019 0.090 0.033 0.131 - 0.013 0.100 0.044 0.140
2 years - 0.034 0.094 0.072 0.234 0.023 0.148 0.068 0.199
3 years 0.024 0.129 0.237 0.269 0.163 0.244 0.236 0.322
4 years 0.170 0.260 0.451 0.485 0.400 0.374 0.578 0.526
5 years 0.367 0.454 0.629 0.701 0.614 0.573 0.826 0.732
6 years 0.551 0.627 0.856 0.874 0.815 0.880 0.961 1.075
7 years 0.749 1.313 1.103 1.104 1.018 1.097 1.318 1.302
25
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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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 loansin 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.htm
Fikret Čaušević - The CBBiH-SEESOX St Antony's Workshop
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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 debtto GDP ratio (in %)
Public debt to GDP ratio (in %)
A 121 59
B 113 52
C 107 66
D 83 61
E 67 33
F 62 46
G 46 64
H 27 9