Theme 2: Macroeconomic balance sheets

Theme 2: Macroeconomic balance sheets #

This collection of Jupyter notebooks introduces quantamental indicators of the states of various balance sheets that are of importance for the economy.

Macroeconomic balance sheets here refer to daily information states of important macro accounts typically in the form of standard ratios. These accounts include high-level balance sheet positions of the government, the banking sector, the central bank, and international investment relations. Common examples include general government debt and deficits ratios to GDP, current account balances as % of GDP, and FX reserves as a ratio of international liabilities.

Balance sheet ratios typically change only slowly and are often disregarded in day-to-day investment decisions. However, at critical levels or in crisis times they can wield great influence on market dynamics. Also, they are often important as a “qualifier” for the importance of economic trends. For example, a currency with a wide current account deficit and a negative international investment position is naturally more vulnerable to changes in trade and capital flows.

Indicators are organized in categories, i.e. panels of one type of indicator over as many currency areas or markets as are available. Then the categories are grouped by similarity and each group is presented in a notebook.

The notebooks define and document the categories, describe their panels of time series, and provide some examples to illustrate their relevance for trading and algorithmic strategies. Most importantly, the notebooks are downloadable and can be used as a basis for exploring the respective categories interactively and relating them to generic financial returns with a few lines of Python code. All notebooks use the Macrosynergy Python package of standard functions for downloading, plotting, and analyzing data in standard JPMaQS format.