Derivatives and the real economy The paper describes the development of the derivatives market and compares it with the development of the real economy. Based on official data the paper describes how the derivatives market has significantly increased its volume of trading, mainly after the abolishment of the Glass-Steagal Act. The growing volume of the derivatives market also significantly contributed to the global financial crisis. This paper also compares the growth of the global nominal and real gross domestic product with (...) the pace of growth of the overall derivatives market, but mainly the over-the-counter market. Based on preliminary findings, the paper came to the conclusion that it is critical to implement all the requisite measures in order to eliminate non-transparent transactions with certain derivatives products in order to put the global economy on a sustainable, solid and balanced economic growth path. (shrink)

The paper describes the main features of financial stability and the preparation of the reform of the global financial system. The mortgage crisis in the USA brought about the global financial crisis. This crisis was the result of the failure of financial regulation, including supervision, and the failure of the management of the banking industry. Therefore, the international community, including Group 20, urged the appropriate institutions to introduce a comprehensive reform of the financial sector. To avoid a potential financial crisis, (...) the creation of the framework for financial stability would be needed. In line with this, the paper examines the interaction between both monetary and fiscal policies, including micro-and macroprudential policies and their instruments. Although still is going on discussion on definition of macroprudential policy, there is a generally accepted opinion that macroprudential policy should limit systemic risk. In addition, this policy should focus on interaction between the financial system and the real economy. Furthermore, micro- andmacroprudential policy should use appropriate instruments in dealing with the systemic risk. In this regard, the article undescores that put in a place the frameworkfor financial stability will create favorable conditions for decision-makers how they should to respond to financial imbalances. The paper also pointed out some potential economic costs related to the implementation of the overall international reform of the financial sector. Based on comprehensive literature study, the author came to the conclusion that despite the fact that there will be some economic costs related to implementing the overall regulatory reform of the financial sector, the main benefit from the long-term perspective will be avoiding the potential financial crisis in the future. To fulfill all the requirements for global financial reform, international cooperation will be needed. (shrink)

Purpose of the article The aim of the paper is to analyze the global economic imbalances and factors that contributed to their deterioration in developed and emerging countries, primarily in the United States and China. The article assesses the main inevitable factors of the global economic imbalances that have driven the recent evolution of current account balances. In addition, the paper describes the theoretical framework of global imbalances and the relevant fundamental theories for better understanding in theoretical aspect of international (...) economics and finance. Furthermore, provides overview of the fundamental causes and drivers of global imbalances, namely current account. Methodology/methods In relation to the subject and purpose of this paper have been used the logical methods of examination which mainly include analysis, correlation and regression analysis, abstraction, synthesis, induction and deduction, the methods of descriptive and mathematical statistics, comparative and empirical methods and the selected forecasting methods. Scientific aim The global imbalances are considered as the most disputable and well known of the global current economic problem, which possibly explain the causes of the global financial crisis. The global financial imbalances were quite massive even before the outbreak of the global financial crisis in 2008. Therefore, the main scientific goal of this paper to analyse what is behind the current account imbalances in both countries, e.i. the USA and China. Findings The persistent current account imbalances reflected the imbalances in the world investment and savings ratios. Whereas the U.S. national savings rate kept falling, the Chinese savings rate rose. Current account imbalances will keep on growing due to a problem of insufficient global saving. Conclusions The size of global imbalances has become narrow compared to the prior crisis’s level, but it did not vanish due to the implementation of global rebalancing process. Putting the current account imbalance to cooperation of all participating countries is strongly necessary. The policy response will need to involve many more countries, even G20 process, and coordinating this response will require considerable efforts of every party members. (shrink)

Reasons for the rapid appearance and growth of SWFs is contributed by increase in oil prices and the accumulation of large balance-of-payments surpluses. Purpose of the article is to investigate size of observed Sovereign Wealth Funds in 2013. Moreover, to describe what explain differences in the size of SWFs, on the other hand what determines the amount of foreign exchange reserves. Is the size of observed funds closely related to rate of growth of the countries? Is return of observed funds (...) is closely related to fund value bn USD, GDP growth and inflation rate of the country? Methodology/methods deployed in this paper has been done illustrations by using available data from official websites of funds, Sovereign Wealth Fund Institute, International Monetary Fund, CIA The World Factbook and author’s calculations due the fact that most of funds do not provide data to the public. In addition to this, we present the estimations by using regression analysis, transferring observed data using the least squares method, The two-sample t-test for mean value, ANOVA, TINV. Scientific aim is to examine whether AUM of SWFs, moreover the size of 14 observed funds is closely related to rate of growth of the countries at 90 percent of probability. Second, if return of 14 observed funds is closely related to fund value bn USD, GDP growth and inflation rate of the country at 95 percent of probability. Third, if there are significant differences between return in 2010 and 2013. Findings indicates that paper came to the conclusion that the return of 14 observed funds is closely related to fund value bn USD, GDP growth and inflation rate of the country at 95 percent of probability. Furthermore, there are significant differences between return in 2010 and 2013. Conclusions pointed out that the influence of SWFs has become undeniable, with total assets topping 6,585tn USD in June 2014, these investors have reached a size comparable to that of the entire alternative assets industry. (shrink)