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on International Finance |
| By: | Paulo Rodelio Halili (Asian Development Bank); Rogelio V. Mercado, Jr. (South East Asian Central Banks (SEACEN) Research and Training Centre) |
| Abstract: | This paper examines the importance of trade ties, macro-financial volatilities, and US dollar trade invoicing in explaining Asia’s international investment assets and liabilities denominated in world currencies, including the US dollar (USD), euro (EUR), pound sterling (GBP), Japanese yen (JPY) and Chinese yuan (CNY). The results show heterogeneous patterns of relevant covariates across different currencies. More importantly, the estimates offer evidence that the region hedges its currency risk by investing in US dollar denominated assets as greater US dollar trade invoicing significantly covaries with greater debt asset holdings denominated in US dollar. |
| Keywords: | currency composition, international investment assets and liabilities, trade invoicing, bilateral trade, macro-financial volatilities |
| JEL: | F31 F36 F41 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:sea:wpaper:wp49&r=ifn |
| By: | Anusha Chari; Karlye Dilts Stedman; Christian Lundblad |
| Abstract: | Global risk and risk aversion shocks have distinct distributional impacts on emerging market capital flows and returns. In particular, we find salient consequences of these different global shocks for tail risk in emerging markets. Open-end mutual fund trading provides a key mechanism linking shocks facing global investors to extreme capital flow and return realizations. The effects are heterogeneous across asset classes and fund types. The limited discretion and higher conformity of passive fund investments linked to benchmarking amplify pass-through effects that engender abnormal co-movements in emerging market flows and returns. |
| JEL: | F3 F32 G11 G15 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30577&r=ifn |
| By: | Julien Bengui; Louphou Coulibaly |
| Abstract: | Are unregulated capital flows excessive during a stagflation episode? We argue that they likely are, owing to a macroeconomic externality operating through the economy’s supply side. Inflows raise domestic wages through a wealth effect on labor supply and cause unwelcome upward pressure on marginal costs in countries where monetary policy is trying to drive down costs to stabilize inflation. Yet market forces are likely to generate such inflows. Optimal capital flow management instead requires net outflows, suggesting topsy-turvy capital flows following markup shocks. |
| Keywords: | Inflation and prices; International financial markets; International topics; Monetary policy |
| JEL: | D62 E52 F38 F41 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:22-46&r=ifn |
| By: | Julian di Giovanni; John H. Rogers |
| Abstract: | This paper uses cross-country firm-level data to explore the impact of U.S. monetary policy shocks on firms’ sales, investment, and employment. We estimate a sizable impact of U.S. monetary policy on the average foreign firm, while controlling for other macroeconomic and financial variables like the VIX and exchange rate fluctuations that accompany U.S. monetary policy changes. We then quantify the role of international trade exposure and financial constraints in transmitting monetary policy shocks to firms, allowing for a better identification of the importance of external demand effects and the interest rate channel. We first exploit cross-country sector-level data on intermediate and final goods trade to show that greater global production linkages amplify the impact of U.S. monetary policy at the firm level. We then show that the impact varies along the firm-level distribution of proxies for firms’ financial constraints (for example, size and net worth), with the impact being significantly attenuated for less constrained firms. |
| Keywords: | U.S. monetary policy spillovers; Foreign firms; production linkages; financial constraints |
| JEL: | E52 F40 |
| Date: | 2022–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:95087&r=ifn |