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on International Finance |
| By: | Drelichman, Mauricio; Voth, Hans-Joachim |
| Abstract: | Lending to early modern monarchs could be very profitable, yet highly risky. International financiers unlocked the excess returns in sovereign debt markets by parceling out the risk and transferring it to downstream investors in exchange for financial intermediation fees. We link two sovereign loans to Philip II of Spain to a downstream Genoese partnership. After examining the performance of the loans through the 1596 bankruptcy and its ensuing settlement, we conclude that the risk diversification scheme used by international bankers worked. Shares in sovereign loans were held within highly diversified portfolios, enhancing their returns in normal times and not posing excessive risks when caught in a default. |
| Keywords: | sovereing debt, syndication, diversification, Spain, Genoa |
| Date: | 2011–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:ubc:bricol:mauricio_drelichman-2011-15&r=ifn |
| By: | Balasubramaniam, Vimal (National Institute of Public Finance and Policy); Patnaik, Ila (National Institute of Public Finance and Policy); Shah, Ajay (National Institute of Public Finance and Policy) |
| Abstract: | The rise of China in the world economy and in international trade has raised the possibility of a rise of the Yuan as an international currency, particularly after the Chinese authorities have undertaken policy initiatives such as Yuan settlement and Yuan swap lines. In this paper, we measure one dimension of Yuan internationalisation: the role of the Yuan in the exchange rate arrangements of other economies. While the magnitudes are small, our findings show that as many as 34 currencies in the world have been sensitive to movements in the Yuan. This suggests that the Yuan potentially has a significant role to play in global exchange rate arrangements. Contrary to popular belief, however, we find a limited role of the Yuan among Asian. economies. |
| Keywords: | Renminbi ; Yuan ; Exchange rate regime ; Internationalisation ; East Asia |
| JEL: | F31 F33 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:11/89&r=ifn |
| By: | Herzer, Dierk |
| Abstract: | This paper examines the long-run relationship between outward foreign direct investment (FDI) and total factor productivity for a sample of 33 developing countries over the period 1980-2005. Using panel cointegration techniques, we find that: (i) outward FDI has, on average, a positive long-run effect on total factor productivity in developing countries, (ii) increased factor productivity is both consequence and a cause of increased outward FDI, and (iii) there are large differences in the long-run effects of outward FDI on total factor productivity across countries. Cross-sectional regressions indicate that these cross-country differences in the productivity effects of outward FDI are significantly negatively related to cross-country differences in labor market regulation, whereas there is no statistically significant association between the productivity effects of outward FDI and the level of human capital, the level of financial development, or the degree of trade openness in the home country. -- |
| Keywords: | outward FDI,total factor productivity,developing countries,panel cointegration |
| JEL: | F21 O11 F23 C23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gdec11:41&r=ifn |
| By: | Bicaba, Zorobabel T. |
| Abstract: | As economic reforms are mutually interdependent, a liberal policy package needs internal coherence. How can a coherent reform strategy be achieved for a well-balanced and functional economic system? In this paper, we analyze the relationship between financial reforms coherence and international capital inflows (foreign direct investments (FDI) and portfolio investments). We consider a package of eight financial reforms, comprising interest rate deregulation, credit ceiling and directed-credit programs liberalization, elimination of banking sector entry barriers, privatization of state owed banks, development of security markets and banking sector supervision measures. Complementarity is measured through the reciprocal of the Herfindahl-Hirschman concentration index. The results suggest that the manner with which financial reforms are implemented matters. Particularly, complementarity increases FDI inflows by 0.10%. Moreover, this effect depends on the location of the countries on the distribution of financial reforms level. Indeed, the countries located above the median value of financial reform level experience larger FDI and portfolio investment inflows than others. Finally, when privatization of state owned banks and the adoption of a capital adequacy ratio based on the Basle I standard occur after other preliminary financial reforms, the returns to complementarity are higher. In others words, a developed and relatively safe domestic financial system attracts more FDI and portfolio investments than a developed but unsafe financial system. -- |
| JEL: | C23 E61 F32 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gdec11:12&r=ifn |
| By: | Joshua Aizenman; Vladyslav Sushko |
| Abstract: | We examine the differential impact of portfolio debt, portfolio equity, and FDI inflows on 37 manufacturing industries, 99 countries, 1991-2007, extending Rajan-Zingales (1998). We utilize external finance dependence measures in a series of cross-sectional regressions of manufacturing industries’ growth rates covering 17 years. Net portfolio debt inflows are negatively associated with growth during the mid 1990s. The magnitudes of the negative effect of surges in portfolio debt inflows on growth are substantial in the late 1990s for a number of countries. The effect of debt inflows on growth in the 2000s is rather muted. Surges in portfolio equity inflows also exhibit a negative association with aggregate growth in the manufacturing sector. For instance, the inflow surge during the financial liberalization period, 1993-1994, is associated with a sharp decline in aggregate manufacturing sector growth, but a rise in the growth of relatively more financially constrained industries. Equity inflows exhibited economically significant positive impact on the growth of financially constrained industries, unlike their negative impact on the average manufacturing growth rate. FDI inflows exhibit a positive association with aggregate manufacturing growth during most of the sample period, both at the aggregate level and specifically for the industries in need of external financing. |
| JEL: | F15 F21 F36 F43 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17228&r=ifn |
| By: | TANAKA Ayumu |
| Abstract: | Using Japanese firm-level data, I investigate multinational enterprises (MNEs) in the services and manufacturing sectors. I examine whether MNEs are more productive than non-MNEs in the services sector as they are in the manufacturing sector. I employ the Kolmogorov-Smirnov (KS) test to compare the overall distribution of productivity by internationalized status, after estimating the productivity premia of MNEs. The results indicate that MNEs are more productive than non-MNEs in the services sector as they are in the manufacturing sector and suggest that the standard firm heterogeneity model can well explain foreign direct investment (FDI) by firms in the services sector. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:11059&r=ifn |