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on International Finance |
| By: | Martin Evans (Department of Economics, Georgetown University) |
| Abstract: | This paper presents a new model for studying international capital flows and debt dynamics. The model emphasizes the role of expectations concerning future trade flows and returns as the determinants of a country’s foreign asset and liability positions, and how revisions in these expectations drive gross and net capital flows. I use the model to estimate the drivers of the U.S. external position and capital flows between 1973 and 2008. The estimates show that most of the secular rise in U.S. international indebtedness is attributable to growing optimism about future returns on U.S. holdings of foreign equity and FDI assets. Expectations concerning future returns are also the most important determinant of net capital flows, but the flows themselves are not important drivers of the U.S. external position. My estimates also show that the transformation of world savings into risky assets by the U.S. had little effect on its external position, but the expected real depreciation of the dollar allowed the U.S. to sustain a much higher level of international debt after the 1990s. |
| Keywords: | Capital Flows, External Imbalances, International Debt, International Solvency, Exorbitant Privilege JEL Codes: F31, F32, F34 |
| Date: | 2012–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~12-12-04&r=ifn |
| By: | Guonan Ma; Robert N McCauley |
| Abstract: | Measures of de facto capital account openness for China and India raise the question whether the Chinn-Ito measure of de jure capital account openness is useful and whether the Lane-Milesi-Ferretti measure of de facto openness ranks the two countries correctly. We examine eight dimensions of de facto capital account openness. Four measures based on onshore and offshore prices test the law of one price. Among the four quantity measures, we introduce two new ones into the debate: the openness of consolidated banking systems and the internationalisation of currencies. Generally, the measures show both economies becoming more financially open over time. In six of the eight dimensions, the Indian economy appears to be more open financially. Nevertheless, policy continues to segment onshore and offshore markets in both and policymakers face challenges in further financial integration. |
| Keywords: | Capital account openness, financial integration, law of one price, foreign exchange market, currency internationalisation, Chinn-Ito, Lane-Milesi-Ferretti |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:410&r=ifn |
| By: | Ojo, Marianne |
| Abstract: | Why are some global financial crises more difficult to recover from and overcome than others? What steps are necessary in ensuring that financial stability and recovery is facilitated? What kind of environment has the previous financial environment evolved to and what kind of financial products have also contributed to greater vulnerability in the triggering of systemic risks? These are amongst some of the questions which this book attempts to address. In highlighting the role and importance of various actors in post crises reforms and the huge impacts certain factors and products have contributed in exacerbating the magnitude and speed of transmission of financial contagion, it also provides an insight into why global financial crises have become more complicated to address than was previously the case. As well as considering and highlighting why matters related to pro cyclicality and capital measures should not constitute the sole focus of attention of the G20's initiatives, the book is aimed at identifying other important issues such as liquidity risks and requirements which have constituted, to a large extent, the focus of international standard setters and regulators. It also aims to direct regulators, central bank officials and supervisors, academics, business and legal professionals and other relevant interested parties in the field to current and previously ignored issues such as the "cartelisation" of capital markets. The need and concern for increased regulation of bond, equity markets, as well as other complex financial instruments which can be traded in OTC (Over-the-Counter) derivatives markets is evidenced by Basel III's focus. "Cartelisation" and organised activities relating to rate rigging in global capital markets have been evidenced recently by sophisticated EURIBOR and LIBOR rate rigging practices and occurences. The aims and objectives of the book would not be complete by merely identifying and highlighting the general root causes of global financial crises, and current issues to be focussed on. Hence each chapter will also recommend (as well as highlight) measures which should be (and have been) put forward in order to address the issues and factors which contribute to the magnitude and severity of global financial crises. |
| Keywords: | Financial stability; pro cyclicality; supervisors; systemic risks; counter party risks |
| JEL: | E51 E52 E58 K2 M4 M41 |
| Date: | 2013–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46609&r=ifn |
| By: | Joshua Aizenman; Brian Pinto; Vladyslav Sushko |
| Abstract: | We examine how financial expansion and contraction cycles affect the broader economy through their impact on real economic sectors in a panel of countries over 1960-2005. Periods of accelerated growth of the financial sector are more likely to be followed by abrupt financial contractions than are periods of slower financial sector growth. Sharp fluctuations in the financial sector have strongly asymmetric effects, with the majority of real sectors adversely affected by contractions, but not helped by expansions. The adverse effects of financial contractions are transmitted almost exclusively through the financial openness channel, with precautionary foreign exchange reserve holdings serving as a key buffer. |
| Keywords: | financial cycles, financial and trade openness, real transmission of financial shocks, foreign exchange reserves |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:411&r=ifn |
| By: | Filomena Pietrovito (University of Molise); Alberto Franco Pozzolo (University of Molise, Centro Studi Luca d’Agliano, MoFiR and CASMEF); Luca Salvatici (Roma Tre University) |
| Abstract: | Trade theory traces back different patterns of internationalization to heterogeneity between firms, measured both through differences in productivity levels and size. In this paper we analyze the link-between heterogeneity within sectors and internationalization choices, namely trade and foreign di-rect investments (FDI) for a large sample of countries and industries between 1994 and 2004. The focus of our paper is on the role played by average productivity level and the distribution of firms by size in explaining differences across sectors and countries in the extensive margin of internatio-nalization (i.e., the number of foreign nations where firms from a given sector and country have ex-panded abroad). By performing an ordered probit analysis, and controlling for other factors affect-ing the patterns of internationalization, we confirm that industries with higher productivity levels and with a distribution of firms shifted toward large firms are more prone to internationalize in for-eign markets through both trade and FDI. Moreover, the relative impact of average productivity and firm size on FDI is larger than that on trade. These results are robust to different measures of prod-uctivity and the distribution of firms. |
| Keywords: | exports, FDI, mergers and acquisitions, productivity, distribution of firms, ordered probit |
| JEL: | D24 F10 F14 F20 F23 |
| Date: | 2013–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:349&r=ifn |
| By: | Minoas Koukouritakis (Department of Economics, University of Crete, Greece); Athanasios Papadopoulos (Department of Economics, University of Crete, Greece); Andreas Yannopoulos (Department of Economics, University of Crete) |
| Abstract: | In the present paper we assess the impact of the Eurozone�s economic policies on specific South-Eastern European countries, namely Bulgaria, Croatia, Cyprus, Greece, Romania, Slovenia and Turkey. Since these countries are connected to the EU or the Eurozone and the economic interdependence among them is evolving, we implemented the Global VAR model. Our results indicate that all sample countries, except Turkey, react in a similar manner to changes (a) in the macroeconomic policies of the Eurozone, and (b) in the nominal exchange rate of the euro against the US dollar. There is evidence of linkages among the EU or Eurozone members of the region, and between each of them and the Eurozone. |
| Keywords: | Monetary Transmission, Global VAR Model, Weak Exogeneity, Impact Elasticities, Generalised Impulse Responses. |
| JEL: | E43 F15 F42 |
| Date: | 2013–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:crt:wpaper:1304&r=ifn |