|
on International Finance |
| By: | Yusuf Soner Baskaya; Julian di Giovanni; Sebnem Kalemli-Ozcan; Mehmet Fatih Ulu |
| Abstract: | We show that capital inflows are important drivers of domestic credit cycles using a firm-bank-loan level dataset for a representative emerging market. Instrumenting inflows by changes in global risk appetite (VIX), we find that a fall in VIX leads to a large decline in real borrowing rates and an expansion in credit supply. Estimates explain 40% of observed cyclical corporate credit growth. The OLS-elasticity of interest rates vis-á-vis capital inflows is smaller than the IV-elasticity. Banks with higher noncore funding offer relatively lower rates to low net worth firms, but do not extend more credit to them given collateral constraints |
| JEL: | E0 F2 F3 F4 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23149&r=ifn |
| By: | John D. Burger; Francis E. Warnock; Veronica Cacdac Warnock |
| Abstract: | Currency denomination is a prominent feature in the analysis of the structure of international bond markets, but is largely absent from analyses of cross-border investment in debt securities. This omission owes in part to the limitations of widely used datasets such as the IMF’s CPIS data (on positions) and its BOP data (on flows): Neither identifies the currency denomination of the underlying bonds and both combine in a single data point bonds of various currencies. In this paper we show that bonds denominated in the investor’s currency are special. We show this indirectly in a global dataset of bilateral bond holdings—indirectly because the global dataset does not differentiate by currency denomination—and then more directly in datasets of US holdings of foreign bonds that do differentiate by currency. We find strong evidence that factors associated with greater (or less) cross-border investment in bonds differ by currency denomination. And one phenomenon of international portfolios—the ever-present home bias—in some cases actually disappears when bonds are denominated in the investor’s currency, suggesting that the home bias is to some extent a home currency bias. |
| JEL: | F3 G1 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23175&r=ifn |
| By: | Martin Eichenbaum; Benjamin K. Johannsen; Sergio Rebelo |
| Abstract: | This paper documents two facts about the behavior of floating exchange rates in countries where monetary policy follows a Taylor-type rule. First, the current real exchange rate is highly negatively correlated with future changes in the nominal exchange rate at horizons greater than two years. This negative correlation is stronger the longer is the horizon. Second, for most countries, the real exchange rate is virtually uncorrelated with future inflation rates both in the short and in the long run. We develop a class of models that can account for these and other key observations about real and nominal exchange rates. |
| JEL: | E52 F31 F41 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23158&r=ifn |