Globalisation and central bank policies Lucas Papademos European Central Bank Bridge Forum Dialogue 22 January 28, Luxembourg 1
Chart 1: Oil and other commodity prices Brent crude oil price (USD per barrel) 1 Oil price (Brent) 9 45 Precious metal prices (Indices, Jan 1999 = 1) 8 7 6 5 4 3 4 35 3 25 2 15 1 gold silver platinum 2 1 1999 2 21 22 23 24 25 26 27 28 5 1999 2 21 22 23 24 25 26 27 28 Source: Bloomberg Note: Last observation refers to 21 January 28 Source: Bloomberg 2
Chart 2: China s net oil imports and Brent oil price 14. 1 12. China: net oil imports Brent oil price 9 8 1. 7 8. 6 5 6. 4 4. 3 2 2. 1. Oct-97 Jul-98 Apr-99 Jan- Oct- Jul-1 Apr-2 Jan-3 Oct-3 Jul-4 Apr-5 Jan-6 Oct-6 Jul-7 Note: China's net oil imports left-hand scale, monthly data, millions of tons. Brent oil price: right-hand scale, US dollars per barrel.monthly averages. Latest observation December 27. Source: CEIC 3
Chart 3: Consumer prices and import prices in the euro area: dynamics and trends 17 Euro Area import unit value indices (Monthly data; Indices 23=1) 15 13 Energy commodities Non-energy commodities Manufacturing HICP Overall 11 9 7 Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Source: Eurostat, OECD Note: Latest observation refers to October 27 4
Chart 4: Euro area HICP inflation and components (Annual Percentage change) Energy 14 9 4 HICP excluding energy, food, and tobacco HICP -1-6 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 Source: Eurostat Note: Latest observation refers to October 27 5
Chart 5: Sum of foreign assets and liabilities as a percentage of GDP 35% Industrial countries 3% Developing countries and emerging markets 25% 2% 15% 1% 5% % 197 1975 198 1985 199 1995 2 Source: Lane P. and Milesi-Ferretti G., 26, The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 197-24, CEPR Discussion Paper, No. 5644 6
Chart 6: Sum of external assets and liabilities as a percentage of sum of exports and imports 1% Industrial countries 8% Developing countries and emerging markets 6% 4% 2% % 197 1975 198 1985 199 1995 2 Source: Lane P. and Milesi-Ferretti G., 26, The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 197-24, CEPR Discussion Paper, No. 5644 7
Chart 7: International Bank claims (USD billion) 25 2 15 External Assets (ex. off shore centers) External Liabilities (ex. off shore centers) External Assets External Liabilities 1 5 198 1985 199 1995 2 25 Source: Bank for International Settlements (BIS) 8
Chart 8: Size of Capital Markets as a percentage of GDP 3% 25% Size Linear trend fitted on size 2% 15% 1% 5% % 199 1992 1994 1996 1998 2 22 24 Source: Ferguson et al., 27, p..2 Data Sources: BIS, IMF, World Federation of Exchanges, ECB, Datastream 9
Chart 9: Securitisation in the US and Europe Outstanding Volume of US Agency MBS (USD billion) 45 4 35 3 25 2 15 1 5 198 1983 1986 1989 1992 1995 1998 21 24 Source: Securities Industry and Financial Markets Association (SIFMA) Securitisation issuance in the US (USD billion) Securitisation issuance in Europe (Euro billion) 4 35 3 ABS MBS 6 5 ABS MBS (Including Pfandbriefe) 25 4 2 3 15 2 1 5 1 1996 1997 1998 1999 2 21 22 23 24 25 26 Source: Securities Industry and Financial Markets Association (SIFMA) 2 21 22 23 24 25 Source: European Securitisation Forum 1
Chart 1: Global Credit Default Swaps and Collateralised Debt Obligations Nominal Value of global CDS (USD trillion) Global issuance of CDOs (USD billion) Credit Default Swaps 6 12% Share of Credit Default Swaps in % of total derivatives (left-hand scale) 4 5 Funded CDOs 1% 35 3 4 8% 25 3 6% 2 4% 15 2 1 2% 5 1 % 21 22 23 24 25 26 24 25 26 27 Source: Ferguson et al., 27, p. 111 Data Source: ISDA Data Source: Securities Industry and Financial Markets Association (SIFMA) 11
Chart 11: Market volatility indicators Average daily change over last month 6 Dow Jones EURO STOXX 5 Euro high yield bond, yield to maturity 5 4 3 2 1 21 22 23 24 25 26 27 Source: ECB Financial Stability Review (December 27) 12
Chart 12: Risk aversion indicator 7. 6. 5. 4. 3. 2. 1.. -1. 1999 2 21 22 23 24 25 26 27 28 Source: ECB Financial Stability Review (December 27) 13
Chart 13: Corporate bond yield spreads Spreads of euro area high-yield corporate bonds JP Morgan euro high yield 5 year government bonds Spread comparison US and euro area 18 16 14 7 6 euro area US 12 1 8 5 4 6 4 3 2 1999 2 21 22 23 24 25 26 27 28 2 24 25 26 27 28 Source: ECB Financial Stability Review (December 27) 14
Chart 14: Financial market liquidity indicators up to June 7 1..8 euro area UK.6.4.2..2.4.6.8 1. 1999 2 21 22 23 24 25 26 27 Source: ECB Financial Stability Review (June 27) and Bank of England Financial Stability Report (27) 15
Chart 15: Value indices of asset-backed securities or mortgage-backed securities (different vintages and ratings) 1 9 8 7 6 5 4 3 2 26-2 AAA 27-1 AAA 27-1 AA 26-2 BBB- 27-1 BBB- 1 Jan-7 Mar-7 May-7 Jul-7 Sep-7 Nov-7 Jan-8 Source: ECB Financial Stability Review (December 27) 16
Chart 16: Collapse of market liquidity: euro area liquidity indicator as of July 27.6.4.2. -.2 -.4 -.6 Jul 27 Sep 27 Nov 27 Jan 28 Source: ECB 17
Chart 17: Money market spreads 3-Month Spreads EUR, GBP and USD up to and including 21 January 28 12 1 8 6 4 2 3-Month deposit-ois spreads (bps) EUR GBP USD 21Jul 21Aug 21Sep 21Oct 21Nov 21Dec 21Jan 5. 4.76 4.52 4.28 3-Month Euribor-Eonia swap spread (bps) 1 8 6 4 4.4 2 3.8 s pread EUR Euribor Eonia s wap 21Jul 21Aug 21Sep 21Oct 21Nov 21Dec 21Jan Source: ECB 18
Thank you. 19