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on International Finance |
| By: | Bolton, Patrick; Oehmke, Martin |
| Abstract: | We study the resolution of global banks by national regulators. Single-point-of-entry (SPOE) resolution, where loss-absorbing capital is shared across jurisdictions, is efficient but faces implementation constraints. First, when expected transfers across jurisdictions are too asymmetric, national regulators fail to set up SPOE resolution ex ante. Second, when required ex-post transfers are too large, national regulators ring-fence assets instead of cooperating in SPOE resolution. In this case, a multiple-point-of- entry (MPOE) resolution, where loss-absorbing capital is pre-assigned, is more robust. Our analysis highlights a fundamental link between efficient bank resolution, the operational structures, risks, and incentives of global banks. |
| JEL: | F3 G3 |
| Date: | 2018–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:90056&r=all |
| By: | Alexander Raabe (IHEID, Graduate Institute of International and Development Studies, Geneva); Christiane Kneer (Bank of England) |
| Abstract: | This paper examines how UK banks channel capital inflows to the individual sectors of the domestic economy and to overseas residents. Information on the source country of foreign capital deposited with UK banks allows us to construct a novel Bartik instrument for capital inflows. Our results suggest that foreign funds boost bank lending to the domestic economy. This result is due to the positive effect of capital inflows on bank lending to non-financial firms and to other domestic financial institutions. Banks do not channel capital inflows directly to households or the public sector. Much of the foreign capital is also channeled back abroad, reflecting the role of the UK as a global financial center. |
| Keywords: | capital flows, bank lending, credit allocation, international finance, instrumental variables, international financial linkages |
| JEL: | F21 F30 F32 F34 G00 G21 |
| Date: | 2019–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp10-2019&r=all |
| By: | Joshua Aizenman; Yin-Wong Cheung; Xingwang Qian |
| Abstract: | This paper examines determinants of the international reserves (IR) currency composition before and after the Global Financial Crisis (GFC). Applying the annual data of 58 countries, we confirm that countries that trade more with the US, euro zone, UK, and Japan, and issue more debt denominated in the big four currencies (US dollar, euro, pound, yen) hoard more IR in these currencies. We find scale effects in which countries tend to diversify from the big four currencies as they increase their IR/GDP and that a growing shortage of global safe assets (GSAs) induces countries to hold more big four currencies. Countries hold less big four currencies as IR after the 2008 GFC, while they hold more of such currencies since the tapering of the Fed’s quantitative easing. The 2008 GFC and QE tapering weakened and sometimes reversed the effect of several economic factors. We also find that TARGET2 balances matter for the currency composition in the euro zone; commodity-exporting countries tend to diversify their IR from the big four currencies when their terms of trade improve; and that the valuation effects induced by Euro/USD exchange rate changes diminish the significance of the GFC in explaining the currency composition of IR. |
| JEL: | F15 F3 F31 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25934&r=all |
| By: | Simon Gilchrist; Vivian Yue; Egon Zakrajšek |
| Abstract: | This paper uses high-frequency financial data to analyze the effects of US monetary policy—during the conventional and unconventional policy regimes—on international bonds markets. We focus on yields of dollar-denominated sovereign bonds issued by more than 90 countries since the early 1990s, which allows us to abstract from the policy-induced movements in exchange rates that otherwise confound the response of yields on foreign bonds denominated in local currencies. Our results show that yields on dollar-denominated sovereign debt are highly responsive to unanticipated changes in the stance of US monetary policy during both the conventional and unconventional policy regimes, and that the passthrough of unconventional policy actions to foreign bond yields is, on balance, comparable to that of conventional policy actions. In addition, a conventional US monetary easing leads to a significant narrowing of credit spreads on sovereign bonds issued by countries with a speculative-grade credit rating. During the unconventional policy regime, however, yields on speculative-grade sovereign debt move one-to-one with policy-induced fluctuations in yields on comparable US Treasuries. We also examine whether the response of sovereign credit spreads to US monetary policy differs between policy easings and policy tightenings and find no evidence of such asymmetry. This finding casts doubt on the notion that US monetary easings induce excessive risk-taking in international bond markets. |
| JEL: | E4 E5 F3 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26012&r=all |