Financial Volatility in an Age of Geopolitical Risks

.@NYU_Volatility conference on 'Financial Volatility in an Age of #Geopolitical Risks', Bennett Golub of @blackrock spoke on '#Geopolitical Risk Management: A Structured Approach'. The Blackrock Geopolitical Risk Dashboard uses subjective judgment to create hypothetical scenarios and then stress-tests portfolios against them. Blackrock South Asia Geopolitical Risk Index was at 1.33 on 18 April 2019 vs 1.37 on 18 Dec 2008 (~3 wks after 26/11). Highest (Impact, Likelihood) currently: Global TradeTensions v @MRVAssociates Cc: @pujamehra @IMateosylago

Inter-Country Economic Growth Correlations and Globalization

...for #AEs, the #DebtLimit increases till all debt is #GDP-linked, but 4 #EMs, the marginal effect on #DebtLimt begins to decline after ~60% debt is #GDP-linked...some caveats apply: #MoralHazard #RiskAppetite etc & the analysis may need 2 b modified 4 cntrys in a #CurrencyUnion

— Satyen Baindur (@Satyen_Baindur) March 29, 2018

.@jeanboivin @IMateosylago @blackrock look at #GDP #Growth 1978-2017 4 the 18 largest #AEs & #EMs, find – ~half of individual country variance in #GDP Growth rates (18 largest #AEs & #EMs) can b explained by a single common factor that is highly correlated w ‘business confidence’ pic.twitter.com/JVYR1T1nFV

— Satyen Baindur (@Satyen_Baindur) April 2, 2018

Growth 1998-2017 is more highly correlated than 1978-97. Impact of #GeoEconomic events eg #EUExpansion #ChinaAccession 2 #WTO, '97 #AsianCrisis, #NAFTA clearly seen. #Protectionism can harm future #Growth not just via the trade channel, but also through the #Confidence channel.

— Satyen Baindur (@Satyen_Baindur) April 2, 2018

Trade Openness and the 'Path to Riches'

.@blackrock @boijefd #Path2Riches Chart #Global Macro Outlook Feb 2018: Countries [#GDPperCapita as % of US] w #Trade openness: #TWN & #ROK #ExportLedGrowth clear; but 4 #CHN: initial trade opening stalls as #InvestmentLedGrowth takes over, hwvr, #GDPperCapita % US keeps rising! pic.twitter.com/AqgfjnEDim

— Satyen Baindur (@Satyen_Baindur) March 3, 2018

...More general lesson Trade is an important channel by which US #Stimulus cd 'spill over' internationally; why #Protectionism, by hampering the most efficient worldwide use of resources, discouraging #bestpractices adoption etc curbs both productivity growth & growth spillovers.

— Satyen Baindur (@Satyen_Baindur) March 3, 2018

Of course, keep in mind that even as their #GDPperCapita was rising as % of US, households in #China were saving about a fifth (~20%) of their income, a large fraction of which was channeled into #Investment, which, at its peak in 2011, was ~ 48% of #GDP! https://t.co/eSgzZZZBKQ

— Satyen Baindur (@Satyen_Baindur) March 4, 2018