NYU Stern Professor Nouriel Roubini Argues that the US is Keeping the Global Economy Afloat

The following is an excerpt from an op-ed titled “The Single-Engine Global Economy” by NYU Stern Professor Nouriel Roubini on Project Syndicate:

roubiniThe global economy is like a jetliner that needs all of its engines operational to take off and steer clear of clouds and storms. Unfortunately, only one of its four engines is functioning properly: the Anglosphere (the United States and its close cousin, the United Kingdom).

The second engine – the eurozone – has now stalled after an anemic post-2008 restart. Indeed, Europe is one shock away from outright deflation and another bout of recession. Likewise, the third engine, Japan, is running out of fuel after a year of fiscal and monetary stimulus. And emerging markets (the fourth engine) are slowing sharply as decade-long global tailwinds – rapid Chinese growth, zero policy rates and quantitative easing by the US Federal Reserve, and a commodity super-cycle – become headwinds.

So the question is whether and for how long the global economy can remain aloft on a single engine. Weakness in the rest of the world implies a stronger dollar, which will invariably weaken US growth. The deeper the slowdown in other countries and the higher the dollar rises, the less the US will be able to decouple from the funk everywhere else, even if domestic demand seems robust.

Read the entire article here.

Additional coverage appeared on The Guardian and Livemint.

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Professor Viral Acharya’s Research on Eurozone Stress Testing is Highlighted

The following is an excerpt from the Financial Times:

Viral Acharya, NYU SternLast week, 25 banks failed the asset quality review (AQR) conducted by the European Central Bank for 130 of the eurozone’s largest banks. In the stress test performed by the European Banking Authority on 123 of the EU’s largest banks, 24 failed.

These latter had a capital shortfall under the adverse macroeconomic scenario amounting to €24.6bn – 0.09 per cent of assets worth €28tn, 70 per cent of the EU total. After allowing for capital raised or converted since the beginning of 2014, 14 banks remained short by €9.5bn – about 0.03 per cent of assets, according to the stress test.

On October 27, Professors Viral Acharya and Sascha Steffen published an alternative estimate, using a different methodology, for 39 publicly listed eurozone banks with a combined balance sheet of €12.5tn (a subset of the banks in the EBA stress test and the ECB’s AQR). They calculated a shortfall of €450bn at the end of 2013 – about 3.6 per cent of assets.

Both capital shortfall numbers are point estimates. Both are therefore bound to be wrong. Which one is likely to be closer to the true figure? I put greater faith in the estimate of Profs Acharya and Steffen. The EBA has a long record of stress tests that grotesquely underestimate the capital holes in EU banks. Both the AQR and the stress test relied heavily on national regulators and supervisors – the very entities on whose watch the excesses that led to the financial crisis were allowed to fester and compound.

Read the full article on the Financial Times here.

More information on Professor Acharya’s research was also highlighted this week in the Financial Times.

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MSRM Alumna to Speak at Business Insurance’s Annual “Women to Watch”

yvette connorBusiness Insurance’s annual Women to Watch identifies and recognizes individuals doing exceptional work in risk management, benefits management, commercial insurance and related fields.

The insurance industry traditionally has been a male-dominated sector, especially at the executive levels. But as we have seen from the women we have profiled in this annual feature throughout the past five years, there is a growing number of talented and dynamic female executives holding key positions within the sector.

As a result, as the years go by, it gets tougher for the panel of BI editors involved in the selection process to narrow down the field of candidates and select only a few honorees from the numerous nominations we receive.

We think you’ll agree, though, that the nominees selected have outstanding credentials and are exceptional leaders in their fields.

This year’s workshop and awards ceremony will be held on December 8-9, 2014 at Marriott Marquis, in New York City.”

MSRM Class of 2013 student, Yvette Connor, was named one of twenty five “Women to Watch” by Business Insurance Magazine in 2013. Yvette Connor is managing director of risk management advisory and insurance services at New York-based international consultant Alvarez & Marsal, a position she assumed in November 2013. This year, she will serve as the moderator for The Business Case for Gender Diversity: Why the Insurance Industry Needs More Women Leaders panel discussion.

Read more about the upcoming event here.

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Nobel Laureate and Professor Robert Engle Discusses Recent Market Volatility

The following is an excerpt from Fox Business:

Robert Engle NYU Stern“We’ve had about two weeks of spectacularly high volatility. However, when you think about it, it’s only high relative to the last two years. We haven’t seen this for two years. Before that, we had the financial crisis, which makes this small… There’s uncertainty about the future. And then, a news event comes along and it moves the markets… The thing that I thought was the new piece of information was that Europe looked worse than it had. Germany was slowing down and Angela Merkel said that we better tighten our belts, which I think the markets thought was just the wrong answer.”

Watch the video on Fox Business here.

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NYU Stern’s TRIUM Program is Ranked #1 by the Financial Times

The following is an excerpt from the Financial Times:

logoTRIUM_color_hi_res.LIFor the first time in six years, a new challenger has topped the FT’s ranking of executive MBA programmes.

The 2014 ranking of 100 programmes for working senior executives is headed by Trium, run by HEC Paris, the London School of Economics and Stern School of Business at New York University. The top five places continue to be dominated by intercontinental EMBAs.

Trium jumped three places to overtake the joint programme taught by Kellogg School of Management near Chicago and Hong Kong University of Science and Technology, which had been top of the ranking for five years. It is the first time Trium has headed the ranking and it is only the fourth programme to do so in 14 years.

Trium is ranked first for the work experience of its alumni before the programme, second for aims achieved and third for international course experience. The programme is second for average salary ($307,003) of alumni three years after graduation, just behind the Kellogg/HKUST programme.

Read the full article here.

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Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans By Professor Viral Acharya

Viral Acharya, NYU Stern

This paper shows that the sovereign debt crisis and the resulting credit crunch in the periphery of the Eurozone lead to negative real effects for borrowing firms. Using a hand matched sample of loan information from Dealscan and accounting information from Amadeus, we show that firms with a higher exposure to banks affected by the sovereign debt crisis become financially constrained during the crisis. As a result, these firms have significantly lower employment growth, capital expenditures, and sales growth rates. We show that our results are not driven by country or industry-specific macroeconomic shocks or a change in the demand for credit of borrowing firms. Thus, the high interdependence of bank and sovereign health and the resulting credit crunch is one important contributor to the severe economic downturn in the southern European countries during the sovereign debt crisis.

Read the full paper here.

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Restoring Confidence in Reference Rates By William C. Dudley, President and CEO of the Federal Reserve Bank of New York

Dudley_articleThe NYU Stern Salomon Center for the Study of Financial Institutions welcomed William Dudley, president and CEO of the Federal Reserve Bank of New York, to speak with students, alumni, press and guests on October 2, as part of Stern’s Financial Policy Platform Speaker Series.

The following is an excerpt from Mr. Dudley’s speech:

“Over a period of just a few decades, reference rates grew greatly in terms of their role and importance in financial markets.  For example, the use of one of the best known reference rates—the London Interbank Offered Rate, or LIBOR—has soared, so that it is now referenced by approximately $300 trillion dollars of financial contracts.  Reference rates have become a ubiquitous but largely hidden fiber in the fabric of financial markets.  They play a critical role in making financial markets more efficient by reducing information frictions, lowering transactions costs and mitigating the moral hazard.

At the same time, as recent enforcement actions and criminal investigations have made all too clear, some of these reference rates have been systematically manipulated by individuals at key financial institutions.  The assumption that the design in how these rates are constructed would be resistant to attempts at manipulation has turned out to be wrong, and the belief in the integrity of these rates has turned out to be misplaced.


It is a sad state of affairs if unethical behavior is socialized among new traders with the explanation that this is business as usual, and, if compliance and risk management are inadequate as a counterweight to prevent or identify wrong-doing.”

Ready the entire speech on the Federal Reserve Bank of New York’s website here.

Additional coverage from the Wall Street Journal.

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Will Modi Reset India’s Emerging Market Economy? By Professors Roy C. Smith and Ingo Walter

The following is an excerpt from an op-ed published in The BRICS Post by NYU Stern Professors Roy C. Smith and Ingo Walter:

Smith-and-Walter_articleThe forthcoming visit to Washington by Narendra Modi, his first since becoming India’s Prime Minister last April, is likely to have little impact.

Yes, it will attract the usual ceremonies and displays of goodwill, but it comes at a time of disillusionment with the BRICS, and suspicion about Mr. Modi’s real political objectives. So it is not likely to change much of anything.

For the past 15 years, the BRICS have been seen as the world’s best hope for sustainable growth. These five countries, representing 40 per cent of the world’s population and 25 per cent of its GDP in 2013, recorded growth rates 4 to 5 times greater than those of the US, Europe and Japan, and threatened to displace them as the world’s most important economic powers in another 20 years or so.


Mr. Modi has political capital to spend in India, and he ought to use some of it to winnow government subsidies, reduce protection of certain economic sectors, and to do all he can to increase basic competition in goods and services. Infrastructure and education are important too, but these take a long time to improve. The most immediate need is to get the growth rate back to a 9-10 per cent level.

Read full article as published in The BRICS Post.

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Professor Ed Altman’s Z-Score is Featured

The following is an excerpt from USA Today:

ealtmanDoes it seem you’re the last to know when a company is in serious financial trouble and end up holding the worthless stock? There’s an early warning system all investors need to know about — the Altman Z-Score — that’s is calling out six companies for being in a tough spot.

The Z-Score — a financial indicator that predicts when companies are careening toward serious financial distress — is commonly used by investment professionals. And there’s no reason why individuals can’t use it, too.


“There’s an early warning system all investors need to know about — the Altman Z-Score — that’s is calling out six companies for being in a tough spot. The Z-Score — a financial indicator that predicts when companies are careening toward serious financial distress — is commonly used by investment professionals. And there’s no reason why individuals can’t use it, too.”

Read the entire article here.

Additional coverage in The Domains.

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MSRM Class of 2014 Alumnus Leads a Research Project on Risk Management in the Aid and Development Sector

Disparte, Dante pictureA recent research project titled “Fleet Risk Management” led by MSRM Class of 2014 Alumnus and Managing Director at Clements Worldwide, Dante Disparte, focused on risk management in the aid and development sector.

Some large fleet operators choose self-insured models to cover fleet-related risks, such as physical damage, breakdown and liability claims.  While this move may produce certain advantages, most self-insured firms find themselves laboring under the burden of professionalizing the claims administration process.

With more than 65 years of insuring assets all over the world and as the largest insurer of the aid and development fleet, Clements Worldwide’s Partner Solutions offers a unique Fleet Risk Management solution.  World class claims management is as much art as it is science and can help firms proactively mitigate losses by identifying the causes at a granular level and recommending corrective actions.

More information on the research findings can be found here.

Dante will also be speaking as a panelist at the ASP Conference: Africa – Promoting Investment and Extending America’s Security on October 2, 2014 in Washington DC.


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