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on International Finance |
| By: | Torsten Ehlers (Bank for International Settlements (BIS)); Mathias Hoffmann (University of Zurich (UZH)); Alexander Raabe (IHEID, Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | US net capital inows drive the international synchronization of house price growth. An increase (decrease) in US net capital inows improves (tightens) US dollar funding conditions for non-US global banks, leading them to increase (decrease) foreign lending to third-party borrowing countries. This induces a synchronization of lending across borrowing countries, which translates into an international synchronization of mortgage credit growth and, ultimately, house price growth. Importantly, this synchronization is driven by non-US global banks’ common but heterogenous exposure to US dollar funding conditions, not by the common exposure of borrowing countries to non-US global banks. Our results identify a novel channel of international transmission of US dollar funding conditions: As these conditions vary over time, borrowing country pairs whose non-US global creditor banks are more dependent on US dollar funding exhibit higher house price synchronization. |
| Keywords: | house price synchronization, US dollar funding, global US dollar cycle, global imbalances, capital inows, global banks, global banking network |
| JEL: | F34 F36 G15 G21 |
| Date: | 2020–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp18-2020&r=all |
| By: | Eichengreen Barry; Naef Alain |
| Abstract: | Using newly assembled data on foreign exchange market intervention, we construct a daily index of exchange market pressure during the 1992-3 crisis in the European Monetary System. Using this index, we pinpoint when and where the crisis was most severe. Our analysis focuses on a neglected factor in the crisis: the role of the weak dollar in intra-EMS tensions. We provide new evidence of the contribution of a falling dollar-Deutschmark exchange rate to pressure on EMS currencies. |
| Keywords: | European Monetary System, exchange rates, foreign exchange intervention, currency crisis. |
| JEL: | F31 E5 N14 N24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:793&r=all |
| By: | Adolfo Barajas; Andrea Deghi; Claudio Raddatz; Dulani Seneviratne; Peichu Xie; Yizhi Xu |
| Abstract: | Leading up to the global financial crisis, US dollar activity by global banks headquartered outside the United States played a crucial role in transmitting shocks originating in funding markets. Although post-crisis regulation has improved banking systems’ resilience, US dollar funding remains a global vulnerability, as evidenced by strains that reemerged in March 2020 in the midst of the COVID-19 crisis. We show that shocks to US dollar funding costs lead to financial stress in the home economies of these global non-US banks, and to spillovers to borrowers, especially emerging economies. US dollar funding vulnerability amplifies these negative effects, while some policy-related factors act as mitigators, such as swap line arrangements between central banks and international reserve holdings. Thus, these vulnerabilities should be monitored and, to the extent possible, controlled. |
| Keywords: | Banking;Commercial banks;Currencies;Liquidity requirements;Liquidity indicators;WP,dollar,return on assets,USD lending |
| Date: | 2020–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/113&r=all |
| By: | Katharina Bergant; Francesco Grigoli; Niels-Jakob H Hansen; Damiano Sandri |
| Abstract: | We show that macroprudential regulation can considerably dampen the impact of global financial shocks on emerging markets. More specifically, a tighter level of regulation reduces the sensitivity of GDP growth to VIX movements and capital flow shocks. A broad set of macroprudential tools contribute to this result, including measures targeting bank capital and liquidity, foreign currency mismatches, and risky forms of credit. We also find that tighter macroprudential regulation allows monetary policy to respond more countercyclically to global financial shocks. This could be an important channel through which macroprudential regulation enhances macroeconomic stability. These findings on the benefits of macroprudential regulation are particularly notable since we do not find evidence that stricter capital controls provide similar gains. |
| Keywords: | Capital controls;Central bank policy rate;Emerging and frontier financial markets;Capital outflows;Capital flows;WP,capital control,real GDP,net capital,output gap |
| Date: | 2020–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/106&r=all |