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on International Finance |
| By: | Anusha Chari; Karlye Dilts Stedman; Christian Lundblad |
| Abstract: | This paper provides a novel perspective on the impact of U.S. unconventional monetary policy (UMP) on emerging market capital flows and asset prices. Using high-frequency Treasury futures data to identify U.S. monetary policy shocks, we find, through the lens of an affine term structure model, that these shocks represent revisions to both the expected path of short-term interest rates and required risk compensation. The risk compensation component is especially important during the UMP periods. Further, we find that these high-frequency policy shocks do exhibit sizable effects on U.S. holdings of emerging market assets and their valuations. We also document that the relative effects of U.S. monetary policy shocks are larger for emerging asset returns relative to physical capital flows, and they are largest for emerging equity markets relative to fixed income markets. Last, these effects are largest when the Federal Reserve is engaged in “tapering” its large-scale asset purchase program. |
| JEL: | E5 E52 E58 E65 F3 F32 F42 G11 G12 G13 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23474&r=ifn |
| By: | Kyritsis, Evangelos (Dept. of Business and Management Science, Norwegian School of Economics); Serletis, Apostolos (Dept. of Economics, University of Calgary) |
| Abstract: | This paper investigates mean and volatility spillovers between the crude oil market and three financial markets, namely the debt, stock, and foreign exchange markets, while providing international evidence from each of the seven major advanced economies (G7), and the small open oil-exporting economy of Norway. Using monthly data for the period from May 1987 to March 2016, and a four-variable VARMA-GARCH model with a BEKK variance specification, we find significant spillovers and interactions among the markets, but also absence of a hierarchy of influence from one specific market to the others. We further incorporate a structural break to examine the possible effects of the prolonged episode of zero lower bound in the aftermath of the global financial crisis, and provide evidence of strengthened linkages from all the eight international economies. |
| Keywords: | Crude oil; Financial markets; Mean and volatility spillovers; Structural breaks; VARMA-BEKK model |
| JEL: | C32 E32 E52 G15 |
| Date: | 2017–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2017_007&r=ifn |
| By: | Cerutti, Eugenio; Claessens, Stijn; Rose, Andrew K |
| Abstract: | This study quantifies the importance of a Global Financial Cycle (GFCy) for capital flows. We use a panel of capital flow data dis-aggregated by direction and type between 1990Q1 and 2015Q5 for 85 countries, and conventional techniques, models and metrics. Since the GFCy is an unobservable concept, we use two methods to represent it: directly observable variables in center economies often linked to it such as the VIX; and indirect manifestations, proxied by common dynamic factors extracted from actual capital flows. Our evidence seems inconsistent with a significant and conspicuous GFCy; both methods combined rarely explain more than a quarter of the variation in capital flows. Succinctly, most variation in capital flows does not seem to be the result of common shocks or stem from observables in a central country like the United States. |
| Keywords: | bonds; center; country; data; empirical; equity; FDI; fit; panel; VIX |
| JEL: | F32 F36 F65 G15 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12075&r=ifn |