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Home > News and Publications > Summary of Quarterly Bulletin 2006 Q3

Summary of Quarterly Bulletin 2006 Q3

25 September 2006


Each article is available as a separate pdf file; click on the appropriate title to access the relevant file. Alternatively you may download the complete issue (4.6mb).

Markets and operations (1.6 mb)
This article reviews developments since the Summer Quarterly Bulletin in global financial markets. It summarises asset price movements in conjunction with market intelligence gathered from market contacts, and evaluates these in the context of the Bank's core purposes. The article also outlines changes in market structure and reviews the Bank's official operations.

Research and analysis

Research work published by the Bank is intended to contribute to debate, and does not necessarily reflect the views of the Bank or of MPC members.

The UK international investment position (598k)
(By Simon Whitaker of the Bank's Structural Economic Analysis Division). This article looks at how the United Kingdom can, surprisingly, generate net investment income from net debt. The article explores the possible linkages between the improvement in net investment income and the stability of the sterling effective exchange rate index in the face of persistent trade deficits. It identifies some risks to net investment income from shifts in relative yields and a rise in global interest rates. With the rapid increase in cross-border asset trade, particularly in financial centres such as the United Kingdom, fluctuations in asset prices have become more powerful influences on our net debt position than in the past. Capital gains can stabilise a net external debt position even in the face of ongoing trade deficits, potentially reducing the extent of any adjustment to the exchange rate.

Costs of sovereign default (506k)
(By Bianca De Paoli of the Bank's Monetary Instruments and Markets Division, Glenn Hoggarth of the Bank's International Finance Division and Victoria Saporta of the Bank's Systemic Risk Reduction Division). Over the past quarter of a century, emerging market economies (EMEs) have defaulted on their sovereign debts frequently. This article assesses the size and types of costs that have been associated with these defaults. It emphasises that costs, measured by the fall in output, are particularly large when default is combined with banking and/or currency crises. Output losses also seem to increase the longer that countries stay in arrears or take to restructure their debts. The paper concludes with a number of policy suggestions to improve debt crisis prevention and management and the role played by the IMF.

UK export performance by industry (757k)
(By Ana Buisán of Banco de España and David Learmonth and María Sebastiá-Barriel of the Bank of England's Monetary Analysis Division). The United Kingdom's export market share has declined steadily for a number of years, both in aggregate and in many industries within the manufacturing sector. A major determinant of demand for an industry's exports is the price of those exports relative to the prices of international competitors. This article shows that UK export prices tend to follow the prices set by foreign competitors quite closely, when expressed in a common currency. So, for many exporters, a dominant depressing influence on market share over the past decade was the significant appreciation of the sterling exchange rate in the late 1990s. But other factors also played a role. In particular, a number of high-tech UK industries have been able to increase their market shares, perhaps reflecting a greater ability to differentiate their products from those of their competitors.

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