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on International Finance |
|
Issue of 2012‒06‒13
two papers chosen by Vimal Balasubramaniam National Institute of Public Finance and Policy |
| By: | Alexander Chudik; Marcel Fratzscher |
| Abstract: | The paper analyses the transmission of liquidity shocks and risk shocks to global financial markets. Using a Global VAR methodology, the findings reveal fundamental differences in the transmission strength and pattern between the 2007–08 financial crisis and the 2010–11 sovereign debt crisis. Unlike in the former crisis, emerging market economies have become much more resilient to adverse shocks in 2010–11. Moreover, a fight-to-safety phenomenon across asset classes has become particularly strong during the 2010–11 sovereign debt crisis, with risk shocks driving down bond yields in key advanced economies. The paper relates this evolving transmission pattern to portfolio choice decisions by investors and finds that countries' sovereign rating, quality of institutions and their financial exposure are determinants of cross-country differences in the transmission. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:107&r=ifn |
| By: | Rasmus Fatum; Yohei Yamamoto |
| Abstract: | We investigate whether foreign exchange intervention volume matters for the exchange rate effects of intervention. Our investigation employs daily data on Japanese interventions from April 1991 to April 2012 and time-series estimations, nontemporal threshold analysis, as well as binary choice models. We find that intervention volume matters for the effects of intervention, but only to the extent that the exchange rate effect per intervention unit is magnified in a linear sense by the larger intervention amount. This is a policy-relevant finding that also adds to our understanding of how intervention works. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:115&r=ifn |