{"id":1239,"date":"2013-11-06T09:38:20","date_gmt":"2013-11-06T08:38:20","guid":{"rendered":"http:\/\/blogg.lnu.se\/china-research\/?p=1239"},"modified":"2013-11-06T09:38:20","modified_gmt":"2013-11-06T08:38:20","slug":"this-time-you-better-listen-to-the-bis-3","status":"publish","type":"post","link":"https:\/\/blogg.lnu.se\/china-research\/?p=1239","title":{"rendered":"This Time, You Better Listen to the BIS!"},"content":{"rendered":"

This is just a brief note I write in the last minutes before the publication of this blog. I feel strongly to point at a paper that very recently has been published by two economists from the Bank of International Settlements (BIS, which is the central bank of the central banks). Contrary to what could be read in some articles in the press, the paper – written by Dong He and Robert N McCauley \u2013 is not an official statement by the BIS. (\u201cThe views expressed are those of the authors and not necessarily the views by the BIS\u201d).<\/p>\n

But I am sure that many experts within the BIS share the views and the warning of the two authors.\u00a0 Their concern is taking up the fact that some East Asian countries – or rather companies in these countries – more recently have been too strongly attracted by the U.S. dollar and the low-interest rate environment for private credits in USD. In other words: corporate (private) indebtedness in foreign currency (USD) has been increasing too rapidly in some Asian countries, particularly in China.<\/p>\n

I myself take the warnings from the BIS very seriously. The BIS has a good record of giving warning signals in time, mostly expressed in the kind of working papers quoted above. Economists like E P\u00a0 Davis or William White can serve as good examples.<\/p>\n

Even if you do not believe in the concerns that are expressed above, I would like to recommend reading the analysis mentioned above. You get at least better insight into the usually not very transparent Chinese (East Asian) financial markets.<\/p>\n

Dong He\/Robert N Cauley.\u00a0<\/strong>\u201cTransmitting global liquidity to East Asia: policy rates, bond yields, currencies and dollar credit\u201d. 2013.\u00a0<\/em>BIS Working Paper. No 431.
\n<\/span><\/p>\n

Furthermore, if you want to read more about the negative Swedish experience with private borrowing in foreign currency, you can look at an article of mine from last year published by the National Association for Business Economics (NABE). In this article, I also refer to the important impact of psychology on exaggerating financial markets. For this reason, I feel particularly glad that Robert Shiller this year is one of the three Nobel Prize Winners in economics. Behavioral finance can be very much applied to Chinese financial markets, too.<\/p>\n

Fromlet, Hubert. <\/strong>\u201cPredictibility of Financial Crises: Lessons from Sweden for Other Countries\u201d. 2012. <\/em>Business Economics. Vol 47. No 4, pp 262-273.<\/span><\/p>\n

\"\"<\/p>\n

Hubert Fromlet<\/em><\/strong>
\n<\/em>Visiting Professor of International Economics, Linnaeus University
\nEditorial board<\/a><\/p>\n

 <\/p>\n

Back to Start Page<\/a>
\n<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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