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on International Finance |
| By: | Xin Tian (University of Groningen); Jan P.A.M. Jacobs (CAMA, Canberra / CIRANO, Montréal / University of Groningen); Jakob de Haan (CESifo, Munich / University of Groningen) |
| Abstract: | We construct several measures for the global financial cycle using dynamic factor models and data for 25 advanced and emerging countries over 1980-2019. Our results suggest that global cycles in asset prices and capital flows are highly similar and synchronized, especially during crisis episodes. Our measures for asset-specific global cycles suggest that cycles in credit and house prices are less volatile and have a longer duration than cycles in equity and bond prices. Finally, we find significant co-movement of our global financial cycle measures and two measures as suggested in the literature that are based on top-down and bottom-up approaches. |
| Keywords: | Global financial cycle, National financial cycle, Dynamic factor analysis, Capital flows, Asset prices |
| JEL: | E44 F32 F36 |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:13015550&r= |
| By: | Yoshiyasu Koide (Bank of Japan); Yoshihiko Hogen (Bank of Japan); Nao Sudo (Bank of Japan) |
| Abstract: | While investment funds have grown rapidly in the global financial market, Japanese financial institutions have been increasing investments in foreign securities. This paper estimates the portfolio overlap - which we define as the correlation of changes in the market value of securities portfolios - between global investment funds and Japanese financial institutions in the last two decades and study the time series properties and the financial stability implications. There are three main findings. First, the number of financial institutions with a high portfolio overlap with investment funds has increased since before the Global Financial Crisis (GFC). The increase is particularly prominent for the portfolio overlap between bond funds and regional banks. Second, financial institutions with lower capital ratios, loan-to-deposit ratios, lending margins tend to have a higher degree of portfolio overlap with investment funds. Third, financial institutions with a higher degree of portfolio overlap with investment funds tend to see a larger decline in the market value of the securities portfolio in response to global market shocks such as redemption waves to investment funds, rises in U.S. interest rates, or disruptions in the U.S. bond market. Our results indicate that as secular changes in structural factors such as a decline in the potential growth rate of the home country weigh on the long-term profitability, Japanese financial institutions in particular regional banks have increased investment in foreign securities, making themselves susceptible to global market shocks that arise from the activities of global investment funds even without direct exposure to these funds. Moreover, an increase in the number of financial institutions with a higher portfolio overlap suggests that the impact of such a global market shock may extend over wide areas of the domestic financial system. |
| Keywords: | Global Investment Funds, Regional Banks, Securities Portfolio, DCC-GARCH |
| JEL: | G10 G11 G21 G23 |
| Date: | 2022–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp22e15&r= |
| By: | Roger J. A. Laeven; Emanuela Rosazza Gianin |
| Abstract: | This paper introduces and fully characterizes the novel class of quasi-logconvex measures of risk, to stand on equal footing with the rich class of quasi-convex measures of risk. Quasi-logconvex risk measures naturally generalize logconvex return risk measures, just like quasi-convex risk measures generalize convex monetary risk measures. We establish their dual representation and analyze their taxonomy in a few (sub)classification results. Furthermore, we characterize quasi-logconvex risk measures in terms of properties of families of acceptance sets and provide their law-invariant representation. Examples and applications to portfolio choice and capital allocation are also discussed. |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2208.07694&r= |
| By: | Bao-We-Wal BAMBE; Jean Louis COMBES; Kabinet KABA; Alexandru MINEA |
| Keywords: | , Inflation targeting , Manufacturing firm performance , Entropy balancing, Monetary policy credibility |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:leo:wpaper:2941&r= |
| By: | Thomas M. Eisenbach; Gregory Phelan |
| Abstract: | The market for U.S. Treasury securities experienced extreme stress in March 2020, when prices dropped precipitously (yields spiked) over a period of about two weeks. This was highly unusual, as Treasury prices typically increase during times of stress. Using a theoretical model, we show that markets for safe assets can be fragile due to strategic interactions among investors who hold Treasury securities for their liquidity characteristics. Worried about having to sell at potentially worse prices in the future, such investors may sell preemptively, leading to self-fulfilling “market runs” that are similar to traditional bank runs in some respects. |
| Keywords: | safe assets; liquidity shocks; global games; Treasury securities; COVID-19 |
| JEL: | G1 |
| Date: | 2022–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:94734&r= |