-
-
Exploring the impact of oil security attention on oil volatility: A new perspective International Finance (IF 1.204) Pub Date : 2024-01-09 Lu Wang, Shan Li, Chao Liang
By constructing a novel index, the oil security attention index, this paper uses the heterogeneous autoregressi (HAR)-type and its extended models to study whether oil security attention can predict oil volatility. Based on the definition of the different dimensions of oil security and three-pass regression filter (TPRF) dimension reduction technology, combined with Google search volume data of 23
-
Capital inflows to emerging countries and their sensitivity to the global financial cycle International Finance (IF 1.204) Pub Date : 2023-11-28 Ines Buono, Flavia Corneli, Enrica Di Stefano
We studied how the effect of global and domestic factors on capital flows towards emerging market economies has changed in the last 25 years. We find that both the global financial crisis and the so-called “taper tantrum” (TT) event, defined as the point in time when investors perceived the end of the US Federal Reserve's unconventional monetary policy, triggered changes in the sensitivity of capital
-
What is the optimal capital ratio implying a stable European banking system? International Finance (IF 1.204) Pub Date : 2023-10-09 Petr Jakubik, Bogdan Gabriel Moinescu
This paper aims to determine the ‘new normal’ for banking stability in terms of capital adequacy, reviewing the incidence of banking stress episodes by lagged solvency ratios, based on the experience at the European level after the global financial crisis. We provide rating ladders for both risk-weighted solvency ratios and a simple gearing (leverage) ratio for time horizons of up to 3 years using
-
Determinants of market-assessed sovereign default risk: Macroeconomic fundamentals or global shocks? International Finance (IF 1.204) Pub Date : 2023-10-05 Dooyeon Cho, Dong-Eun Rhee
This paper investigates the macroeconomic fundamentals that international investors consider crucial when assessing a country's default risk. Using panel data for 41 countries over the period 2002–2019, we find that the macroeconomic determinants of a sovereign credit default swap (CDS) are heterogeneous across developed and developing economies after controlling for potential endogeneity. While international
-
Bubble detective: City-level analysis of house price cycles International Finance (IF 1.204) Pub Date : 2023-10-03 Serhan Cevik, Sadhna Naik
This paper investigates house price dynamics at high frequency using city-level observations during the period 1994–2022 in Lithuania. We employ multiple time series-based econometric procedures to examine whether real house prices and house price-to-rent ratios exhibit explosive behaviour. According to these recursive right-tailed test results, we reject the null hypothesis of no-bubble and find evidence
-
Financialization and sluggish recovery of firms' investment: Global evidence from the 2007–2008 financial crisis International Finance (IF 1.204) Pub Date : 2023-10-03 Mingjin Luo, Shenqguan Wang
After the financial crisis of 2007–2008, the global economy witnessed a trend of sluggish investment recovery and continuous deepening of financialization. Using data on nonfinancial firms from 108 countries over the period from 2000 to 2017, we examine the impact of financialization on firms' postcrisis investment recovery with a probit model. We find that firms' financialization inhibited postcrisis
-
Role of weather in the natural gas market: Insights from the STL-GARCH-W method International Finance (IF 1.204) Pub Date : 2023-08-25 Lijuan Peng, Zhenglan Xia, Yisu Huang, Zhigang Pan
Weather has been shown to affect natural gas markets, but there is limited research on the strength and manner in which weather affects predictions of natural gas volatility. In this study, six weather indicators are used as exogenous variables, and seasonal-trend decomposition-generalized autoregressive conditional heteroskedasticity-Weather (STL-GARCH-W) and STL-GJR-GARCH-W models are constructed
-
Government bond rates and interest expenditure of large euro area member states: A scenario analysis International Finance (IF 1.204) Pub Date : 2023-07-19 Veronika Grimm, Lukas Nöh, Volker Wieland
This paper assesses the possible development of government interest expenditures for Germany, France, Italy and Spain. Until 2021, governments could anticipate a substantial further reduction in interest expenditure. This outlook has changed drastically with the surge in inflation and government bond rates. Assuming that bond rates remain at the levels implied by yield curves from December 2022, interest
-
Are overconfident CEOs better able to transform innovation into firm value?—Evidence from the United States International Finance (IF 1.204) Pub Date : 2023-06-06 Mike Eom, Mookwon Jung, Jung Chul Park
We use innovation premium (IP), proposed by Forbes, as a proxy for firm innovation to present evidence that firm value is positively associated with IP. The positive impact of the IP on firm value is amplified by overconfident CEOs, particularly in the high-tech and biotech industries with a high proportion of intellectual capital and intangible assets. In a series of tests, we confirm that the results
-
Income elasticity of demand and stock market beta International Finance (IF 1.204) Pub Date : 2023-05-28 Madhusmita Bhadra, Doyeon Kim
Systematic risk, or beta, measures stock price variability in the overall stock market. A considerable body of literature focuses on estimating beta. To the best of our knowledge, there is, however, a lack of definitive research on the impact of income elasticity of demand on stock market beta. This study is the first to examine this relationship using 659 publicly traded firms from 47 industries in
-
International heterogeneity of nominal wages and optimal monetary policy International Finance (IF 1.204) Pub Date : 2023-02-01 Daisuke Ida, Mitsuhiro Okano
This paper examines optimal monetary policy in a two-country model with staggered nominal prices and wages. We show that given home nominal wage stickiness, changes in the degree of foreign nominal wage stickiness substantially impact the worldwide welfare losses and gains from commitment policy. Specifically, the welfare gains from a commitment policy are greatest when nominal wages in both countries
-
Progressive taxation and optimal monetary policy in a two-country new Keynesian model International Finance (IF 1.204) Pub Date : 2023-01-23 Daisuke Ida, Kenichi Kaminoyama
This paper examines the effect of tax progressivity on optimal monetary policy in a two-country new Keynesian model. We first address the issue that coefficients in both structural equations and the central bank's loss function are crucially affected by a change in tax progressivity in both countries. Second, we show that a change in tax progressivity significantly affects the properties of international
-
Hysteresis in unemployment: Evidence from OECD estimates of the natural rate International Finance (IF 1.204) Pub Date : 2022-11-30 Laurence Ball, Joern Onken
This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the Organization for Economic Cooperation and Development. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our baseline specification, a one-percentage-point deviation
-
A relative answer to the growth–saving puzzle International Finance (IF 1.204) Pub Date : 2022-11-17 Noam Gruber
Prolonged rapid growth, that is, the ‘catching-up’ process through which countries close the gap to the development frontier, is known to be accompanied by high rates of household saving. This phenomenon is central in explaining the direction of international capital flows and trade imbalances in the past several decades, yet it is very much in contradiction to prevailing macroeconomic theory. This
-
Capital-flow volatility in emerging markets: A panel GARCH approach International Finance (IF 1.204) Pub Date : 2022-11-13 Ahmet Ihsan Kaya, Lutfi Erden
This study analyzes the role of push–pull factors on the level, volatility and comovement of capital flows in emerging markets (EMs). Taking the commonality of capital flows into account, we employ the panel Generalized Autoregressive Conditional Heteroscedasticity model developed by Cermeño and Grier for 16 EMs. This method not only accounts for country-specific heterogeneity and cross-section dependence
-
When does FDI make a difference for growth? A comparative analysis of resource-rich and resource-scarce African economies International Finance (IF 1.204) Pub Date : 2022-11-03 Addis Yimer
This study revisits the foreign direct investment (FDI)–growth nexus in Africa, categorizing countries as resource-rich or resource-scarce for the period 2000–2017 in an attempt to capture the impact that cross-country natural resource endowment differences may have on the FDI–growth relationship. Thus, the study is an attempt to answer the question: Does being a natural resource-abundant or resource-scarce
-
Risk and return in the foreign exchange market: Measurement without VARs International Finance (IF 1.204) Pub Date : 2022-09-16 Shaowen Luo
This paper offers a detailed investigation of the foreign-exchange risk premium using a structural relationship in the inflation-index bond market, first introduced by Clarida. Unlike the conventional vector autoregressive (VAR) approach, this approach estimates risk premium through the non-arbitrage relationship between investing in inflation-indexed bonds from two countries and works in the market
-
Bilateral capital flows: Gravity, push and pull International Finance (IF 1.204) Pub Date : 2022-09-16 Rogelio V. Mercado
Using bilateral capital-flow data from 10 advanced reporting economies, with over 186 bilateral country pairs, from 2000 to 2016, this paper provides evidence of the significance of gravity factors, such as information asymmetries and economic ties, in explaining cross-border bilateral financial-asset flows. In addition, this study offers new evidence of regional contagion, with bilateral capital flows
-
Non-standard monetary policy measures in non-normal times International Finance (IF 1.204) Pub Date : 2022-09-15 Anna Bartocci, Alessandro Notarpietro, Massimiliano Pisani
We evaluate the macroeconomic effects of long-term sovereign-bond purchases by the central bank in an economy that is likely to be characterized by a low equilibrium real interest rate and a non-negligible probability of hitting the zero lower bound (ZLB) on the monetary-policy rate. Our analysis is based on simulations of a dynamic general equilibrium model for the euro area. The main results are
-
Stock market integration in Africa: Further evidence from an information-theoretic framework International Finance (IF 1.204) Pub Date : 2022-08-23 Kingstone Nyakurukwa, Yudhvir Seetharam
This study revisits stock market integration in Africa using an information-theoretic framework that quantifies the flow of information between exchanges. We use daily return data for seven MSCI-classified African stock exchanges between 2011 and 2021. As Bitcoin has become an important asset class on the African continent, we also explore whether this cryptocurrency confers any diversification benefits
-
The way digitalization is impacting international financial markets: Stock price synchronicity International Finance (IF 1.204) Pub Date : 2022-06-26 Chen Chen, M. Mahdi Moeini Gharagozloo, Layla Darougar, Lei Shi
This paper investigates whether and how the development level of a country's digital economy affects stock price synchronicity. The results indicate that countries with high levels of digital economy development exhibit low stock price synchronicity. Additionally, by decomposing stock price synchronicity into systematic and firm-specific stock return variations, we find that systematic (firm-specific)
-
The financial US uncertainty spillover multiplier: Evidence from a GVAR model International Finance (IF 1.204) Pub Date : 2022-06-02 Afees A. Salisu, Rangan Gupta, Riza Demirer
This study examines the role of the global financial cycle (GFCy) in the propagation of uncertainty shocks from the United States to other national economies using a large-scale global vector autoregressive model of 33 countries. Although the dominant role of US uncertainty over global economic dynamics is established, the findings highlight the moderating role of the GFCy in the spillover effects
-
Corporate investment and the exchange rate: The financial channel International Finance (IF 1.204) Pub Date : 2022-06-01 Ryan Banerjee, Boris Hofmann, Aaron Mehrotra
Currency depreciation dampens corporate investment through a financial channel. Using firm-level data for 16 major economies, we find that depreciation reduces investment by interacting with firm leverage. The finding is consistent with predictions from a stylized model of credit risk in which the exchange rate affects credit supply and investment when firms borrow in foreign currency, or in local
-
Global financial crisis versus COVID-19: Evidence from sentiment analysis International Finance (IF 1.204) Pub Date : 2022-04-19 Aktham Maghyereh, Hussein Abdoh
This study examines the relationship between sentiment and the realized volatility of returns for different asset classes (stocks, bonds, foreign currency, and commodities). Specifically, we aim to answer two key questions: first, how does sentiment relate to volatility during crises (mainly during the global financial crisis [GFC] and the COVID-19 pandemic)? Second, can sentiment be used to forecast
-
Doubly heterogeneous monetary spillovers International Finance (IF 1.204) Pub Date : 2022-03-30 Nihar Shah
Monetary spillovers are heterogeneous in two ways: how central banks generate them and how countries receive them. First, the Fed is mostly unique in its ability to affect other countries' financial markets, among ten developed central banks. This is noteworthy given the lack of data on other central banks' spillovers. This paper makes public a novel data set of these ten central banks' monetary shocks
-
Does the monetary policy regime matter in the effect of credit on growth? International Finance (IF 1.204) Pub Date : 2022-03-25 Amaia Altuzarra, Ricardo Bustillo, Carlos Rodríguez
This study sheds light on the finance–growth link by (i) carefully taking into account the lessons learned from the empirical literature, (ii) extending the period of analysis to include the years following the global financial crisis (GFC), (iii) adding the monetary-policy regime as a concomitant factor in this relation, and (iv) running different specifications and following a robust econometric
-
Foreign-funded credit: Funding the credit cycle? International Finance (IF 1.204) Pub Date : 2022-03-22 Patty Duijm
This study investigates what drives the credit cycle, focusing on the role of foreign-funded bank credit (FFC). Considering credit cycles in 41 countries over the period 1985–2015, this study finds that credit booms are associated with an increase in the share of FFC in an economy. This especially holds for emerging economies and for credit provided to nonfinancial corporations. The increased credit
-
Output fluctuations and portfolio flows to emerging economies: The role of monetary uncertainty International Finance (IF 1.204) Pub Date : 2022-03-21 Nguyen Ba Trung
This paper examines the role of monetary-policy uncertainty (MPU) in driving business cycles in emerging economies. We employ a Bayesian vector autoregression model with stochastic volatility as the mean for different emerging economies. We find that MPU works as a crucial driver of business cycles in emerging economies. First, we show that an MPU shock can trigger instability in emerging economies
-
Time-varying impacts of expectations on housing markets across hot and cold phases International Finance (IF 1.204) Pub Date : 2022-03-20 MeiChi Huang
This study investigates time-varying roles of people's expectations in driving the US housing price and quantity dynamics using a Threshold Vector Autoregressive model. The expectation measure, a good-time-to-buy (GTTB) index, works as the threshold indicator to classify pessimism and optimism phases, and represents the model-based measure of uncertainty. There is strong evidence for regime switches
-
Inflation convergence over time: Sector-level evidence within Europe International Finance (IF 1.204) Pub Date : 2022-03-08 Hakan Yilmazkuday
This paper investigates inflation convergence among European countries by using sector-level data for the period between 1997:M1 and 2019:M12. Panel unit root tests at the country-sector level are conducted by using moving windows, which are useful for analyzing changes in inflation convergence and the corresponding speed of convergence over time. The results suggest that there is evidence for inflation
-
Financial structure convergence International Finance (IF 1.204) Pub Date : 2022-02-23 Can Sever
Financial structure, the degree to which a country's financial system is market- or bank-based, matters for economic outcomes. Hence, it is important to understand the drivers of financial structure. This paper sheds light on this issue and explores a specific mechanism in the evolution of financial structure, namely convergence. Financial structure is shown to converge across countries over time.
-
Do credit rating agencies reward fiscal prudence? International Finance (IF 1.204) Pub Date : 2022-02-20 João T. Jalles
Governments are responsible for economic policy implementation, and their actions affect financial and capital market outcomes. Specifically, the way fiscal policy is conducted matters when credit agencies have to decide on how to rate a sovereign. This paper empirically assesses the effect of a new time-varying measure of fiscal counter-cyclicality on the sovereign credit ratings of the main agencies:
-
The nonlinear causal relationship between short- and long-term interest rates: An empirical assessment of the United States, the United Kingdom, and Japan International Finance (IF 1.204) Pub Date : 2021-12-27 Huiqing Li, Yang Su
In this paper, we apply a rolling-window strategy using data from the United States (US), the United Kingdom (UK), and Japan to determine the dynamic linear and nonlinear Granger causality relationship between short- and long-term interest rates over time and visualize the results. Our findings from US data show an asymmetrical relationship between short- and long-term interest rates. We find that
-
The behaviour of real interest rates: New evidence from a 'suprasecular' perspective International Finance (IF 1.204) Pub Date : 2022-01-18 Giorgio Canarella, Luis A. Gil-Alana, Rangan Gupta, Stephen M. Miller
We examine the temporal dynamics of the historical series of real interest rates for France, Germany, Italy, Japan, the Netherlands, Spain pre-1730 and post-1800, the United Kingdom, and the United States stretching back to the 14th century. We use the Robinson approach to determine the fractional order of integration and examine both linear deterministic trends and multiple smooth breaks. In the latter
-
The risk-taking channel of currency appreciation: A structural VAR investigation of Asian emerging market economies International Finance (IF 1.204) Pub Date : 2021-08-17 Hyeon-seung Huh, David Kim
In this study, we analyze the impact of currency appreciation on sovereign spread and economic activities in Asian emerging market economies (EMEs) using a structural vector autoregression model. The key issue under scrutiny is the presence of a risk-taking financial channel and its strength against the conventional trade channel. The underlying structural shocks are identified by a mix of sign, size
-
Expectations, unemployment and inflation: An empirical investigation International Finance (IF 1.204) Pub Date : 2021-07-04 Vahagn Galstyan
This paper analyses the empirical relation between inflation and unemployment over the past 25 years by using a panel state-space model. After controlling for the global factor, I find that the domestic rate of unemployment explains 11% in the variation of headline inflation, suggesting a significant power that domestic slack has in influencing medium-term core inflation. The global factor, in turn
-
Reserve accumulation, inflation, and moral hazard: Evidence from a natural experiment International Finance (IF 1.204) Pub Date : 2021-04-30 Livia Chițu
This study tests whether international reserve accumulation is inflationary because of moral hazard and incentive effects. We use the 2009 allocation of Special Drawing Rights (SDR) as a natural experiment to trace the effect of an exogenous nonmonetary shock on International Monetary Fund members' reserve holdings. In countries that received large SDR allocations, inflation was about half a percentage
-
Why central banks announcing liquidity injections is more effective than forward guidance International Finance (IF 1.204) Pub Date : 2021-04-07 Martin Baumgärtner, Jens Klose
We distinguish the announcement effects of conventional and unconventional monetary policy measures on macroeconomic variables using a high-frequency data set that measures the impact of the European Central Bank's monetary policy decisions. For the period 2002 to 2019, we show that conventional and unconventional monetary policy measures differ considerably in their impact on inflation. While conventional
-
Public debt, sovereign spreads and the unpleasant arithmetic of fiscal consolidations International Finance (IF 1.204) Pub Date : 2021-04-01 Marco Di Pietro, Luigi Marattin, Raoul Minetti
In response to severe fiscal consolidation policies implemented after the Great Recession and the euro area sovereign debt crisis, many have questioned the effectiveness of fiscal consolidations in reducing the burden of public debt. This paper revisits this fundamental policy debate qualitatively and quantitatively, studying conditions under which primary budget balance changes can successfully reduce
-
Japanese firms' overpayments for cross-border acquisitions International Finance (IF 1.204) Pub Date : 2021-01-28 Ralf Bebenroth, Kashif Ahmed
U.S. and European research suggests that firms tend to overpay when acquiring cross-border targets. Our research focuses on an Asian setting. We find that Japanese acquirers pay significantly higher premiums for cross-border targets than for domestic ones. We also find that, in the case of acquisitions of domestic firms, acquirers that are laden with debt or that have higher market-to-book ratios (which
-
Revisiting the relationship between cross-border capital flows and credit International Finance (IF 1.204) Pub Date : 2021-01-11 Daniel Carvalho
A broad perspective on the sectoral composition of the domestic borrower and recipients of capital flows is needed to deepen the understanding of the mechanisms through which cross-border capital flows interact with credit provision. Exploring this detail reveals stark differences across (i) credit measures that include only lending by banks and those that encompass all lenders (ii) the sum of all
-
Welfare costs of bilateral currency crises: The role of international trade International Finance (IF 1.204) Pub Date : 2020-12-28 Hakan Yilmazkuday
This paper shows that bilateral currency crises reduce bilateral trade up to 50% after controlling for the depreciation rate. Using a trade model, these reductions are connected to the welfare costs of currency crises. The results show that a single currency crisis can result in welfare reductions through changes in international trade corresponding to more than 10% (and up to 41%) of the costs of
-
Steady‐state growth International Finance (IF 1.204) Pub Date : 2020-12-27 Emanuel Kohlscheen, Jouchi Nakajima
We compute steady‐state economic growth—defined as the rate of growth that the economy would converge to in the absence of new shocks. As we show, this rate can be computed in real‐time by means of a parsimonious time‐varying parameter (TVP) vector autoregression model. Our procedure offers a relatively agnostic estimation of benchmark equilibrium growth rates. Estimates show that the steady‐state
-
Identifying oil price shocks and their consequences: The role of expectations in the crude oil market International Finance (IF 1.204) Pub Date : 2020-11-17 Takuji Fueki, Jouchi Nakajima, Shinsuke Ohyama, Yoichiro Tamanyu
This paper proposes a simple but comprehensive structural vector autoregressive model to examine the underlying factors of oil price dynamics. The distinguishing feature is to explicitly assess the role of expectations about future aggregate demand and oil supply in addition to the traditional realized aggregate demand and supply factors. Our empirical analysis shows that identified future demand and
-
Dirty money: Does the risk of infectious disease lower demand for cash? International Finance (IF 1.204) Pub Date : 2020-11-06 Serhan Cevik
The COVID‐19 pandemic is a global crisis like no other in modern times, and there is a growing apprehension about handling potentially contaminated cash. This paper is the first empirical attempt in the literature to investigate whether the risk of infectious diseases affects demand for physical cash. Since the intensity of cash use may influence the spread of infectious diseases, this paper utilizes
-
Corporate debt overhang and investment in emerging economies: Firm‐level evidence International Finance (IF 1.204) Pub Date : 2020-10-28 Eduardo Borensztein, Lei Sandy Ye
This paper investigates empirically the linkages between corporate debt overhang and investment activity at the firm level for a cross section of large‐sized emerging market and developing economies. It analyzes the extent to which investment may be discouraged by high levels of debt that put at risk future profits, as well as firm dimensions that may sharpen the debt‐investment link. Using balance
-
Covered bonds, loan growth and bank funding: The Swiss experience since 1932 International Finance (IF 1.204) Pub Date : 2020-10-13 Jonas Meuli, Thomas Nellen, Thomas Nitschka
The global financial crisis triggered discussions about what factors constitute a stable mortgage finance system. This paper contributes to these discussions by empirically analysing the Swiss mortgage finance system from a macroeconomic and banking sector balance sheet perspective. Our analysis is based on a novel and near‐comprehensive data set of mortgage bond (Swiss Pfandbrief) issuances over the
-
A Phillips curve for the euro area International Finance (IF 1.204) Pub Date : 2020-10-12 Laurence Ball, Sandeep Mazumder
This paper asks whether a textbook Phillips curve can explain the behavior of core inflation in the euro area. A critical feature of the analysis is that we measure core inflation with the weighted median of industry inflation rates, which is less volatile than the common measure of inflation excluding food and energy prices. We find that fluctuations in core inflation since the creation of the euro
-
International risk sharing in emerging economies International Finance (IF 1.204) Pub Date : 2020-08-19 Carlos A. Yépez
This study investigates the apparent lack of insurance against country‐specific risk observed internationally. Using a sample of 21 emerging and 21 advanced economies over the period 1980–2014, I document new evidence from international co‐movements of prices and quantities suggesting that risk sharing is worse in emerging economies than in advanced economies. I then extend a standard international
-
Contagion risk in african sovereign debt markets: A spatial econometrics approach International Finance (IF 1.204) Pub Date : 2020-08-04 J. W. Muteba Mwamba, Mathias Manguzvane
This study applies the spatial Durbin model to analyse the extent to which international trade and geographical proximity affect the stability of African sovereign‐debt markets. Using sovereign credit default swap spreads, our empirical findings show that it is not only a country's macroeconomic fundamentals that influence its likelihood of default but also contagion from other countries. Trade linkages
-
Fiscal procyclicality in emerging markets: The role of institutions and economic conditions International Finance (IF 1.204) Pub Date : 2020-08-03 U. Michael Bergman, Michael Hutchison
Procyclicality of fiscal policy is a common feature in emerging markets, by contrast with high‐income economies, and leads to greater business‐cycle amplitudes. We investigate potential causes of fiscal procyclicality, including a host of economic and institutional variables of especial import in emerging markets. We employ dynamic panel methods in a large sample of countries to investigate what factors
-
The COVID‐19 crisis: A Hamilton moment for the European Union? International Finance (IF 1.204) Pub Date : 2020-07-28 Otmar Issing
1 INTRODUCTION According to Jean Monnet, one of the founding fathers of the European integration after World War II, Europe always needs a crisis to make progress in integration. The COVID‐19 crisis seems to deliver a perfect case to go forward. The pandemic represents an exogenous shock for all EU member countries. But the impact is asymmetric. Countries with already high public debt before the crisis
-
Nonlinear transmission of U.S. monetary policy shocks to international financial markets International Finance (IF 1.204) Pub Date : 2020-03-26 Jongrim Ha
Using local projection and event studies, this paper investigates the nonlinear effects of U.S. monetary policy shocks on financial‐asset prices in 10 advanced economies from 1990 to 2014. The international asset prices show evidence of the asymmetric or state‐dependent propagation of U.S. monetary shocks. Moreover, the results indicate that the nature of the nonlinearity in the propagation of the
-
On risk factors of the stock–bond correlation International Finance (IF 1.204) Pub Date : 2020-03-18 Marcello Pericoli
The correlation between stock and bond returns, which went from positive in the 1980–1990s to negative in the 2000–2010s, is analysed with a model that simultaneously determines the price of stocks and bonds as dependent on the real interest rate, economic growth and inflation. The analysis finds that the structural reversal of the correlation in the United States and Germany largely depends on the
-
Clamoring for greenbacks: Explaining the resurgence of the U.S. dollar in international debt International Finance (IF 1.204) Pub Date : 2020-03-15 Hiro Ito, Cesar M. Rodriguez
This paper characterizes trends of the shares of the U.S. dollar, the euro, and total foreign currencies in international debt denomination over the last two decades. We find that countries with a high output growth trend, greater financial development, better fiscal conditions, and more investment opportunities tend to decrease the extent of their reliance on the dollar, but increase that on the euro
-
The impact of exchange rate volatility on inflation targeting monetary policy in emerging and advanced economies International Finance (IF 1.204) Pub Date : 2020-02-26 Helena Glebocki Keefe
Exchange rate volatility is a stated concern for policymakers in many emerging market economies. This paper investigates whether exchange rate volatility impacts the commitment to inflation targeting monetary policy by analyzing thirteen emerging market economies and nine advanced economies from 2000 to 2016. Using a dynamic panel threshold regression model, the response of the domestic target interest
-
Predicting banking crises based on credit, housing and capital booms International Finance (IF 1.204) Pub Date : 2020-01-13 Chung‐Hua Shen, Yen‐Hsien Lee, Hao Fang
This study examines how excessive growth in credit, housing and international capital flows, referred to as credit, housing and capital booms, can serve as an early warning signal (EWS) for an impending banking crisis. We examine 56 sample countries that comprise 32 advanced countries and 24 emerging countries. We have two novel results. The first supports the “more booms, stronger warning signal”
-
Institutional characteristics, investment sensitivity to cash flow and Tobin's q: Evidence from the Middle East and North Africa region International Finance (IF 1.204) Pub Date : 2020-01-03 Abed Al‐Nasser Abdallah, Wissam Abdallah, Mohsen Saad
We examine the sensitivity of corporate investment to stock‐market valuations (measured by Tobin's q) and internal funds (measured by cash flow) in a setting that captures the unique country institutional characteristics of the Middle East and North Africa region. We report a higher sensitivity of investments to cash flow than Tobin's q. However, both sensitivities are unaffected by the country institutional
-
Less competitive bank markets: Conventional and unconventional monetary policies through bank‐lending channels International Finance (IF 1.204) Pub Date : 2019-12-25 Yasuhiro Yamamoto
Bank competition in Japan is weakening. This study theoretically analyzes the supply side of the bank loan market to examine how this weak banking competition influences the effectiveness of monetary policies. In a Cournot game, there are efficient banks, and inefficient banks that must pay a risk premium in the call market. Less competitive banks either go out of business or merge with efficient banks