Financial Markets & Risks Essay Example | Topics and Well Written Essays - 4000 words

Financial Markets & Risks - Essay exercisingThen well make an assessment of the impact on the banking system if short-term interest points were to rise. And at last lets provide an explanation of the actions the ECB might take if the rumours of liquidity problems in otherwise institutions prove to be correct.Over the last few years, the euro area has witnessed a gradual recovery in economic activity. The recovery started in the second half of 2003 and has now led to ongoing trend fruit rates that seem to be close to our present estimates of the potential difference growth rate of the euro area economy.several(prenominal) factors are behind the relatively gradual pace of this recovery, including oil price increases, the restructuring and reshaping of the productive sector triggered by global competition, and a possible decline in potential output growth.First, taking a longer-term perspective, at that place is some evidence that, underlying the moderate growth rates over the las t few years, on that point may have been a decline in trend potential output growth in the euro area, particularly when comparisons are drawn with most of the 1980s and 1990s. The trend potential output growth rate seems to have moved closer to the lower bound of the previously estimated range of 2.0-2.5%. The sustained decline in euro area labour productivity growth has been identified as the main factor explaining lower potential output growth. Euro area labour productivity growth (measured per hour worked) was 2.4% in the euro area from 1981 to 1990. However, during the period 1996-2004, productivity fell to 1.3%. Decomposing trend labour productivity growth, in turn, shows that this decline reflects both lower growths in come factor productivity and less capital deepening.There is a wide consensus that the still significant geomorphologic rigidities in the euro area factor and product markets are likely to explain the lacklustre