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on International Finance |
| By: | Fratzscher, Marcel; Lo Duca, Marco; Straub, Roland |
| Abstract: | The paper analyses the global spillovers of the Federal Reserve’s unconventional monetary policy measures. First, we find that Fed measures in the early phase of the crisis (QE1) were highly effective in lowering sovereign yields and raising equity markets, especially in the US relative to other countries. Fed measures since 2010 (QE2) boosted equities worldwide, while they had muted impact on yields across countries. Yet Fed policies functioned in a procyclical manner for capital flows to emerging markets (EMEs) and a counter-cyclical way for the US, triggering a portfolio rebalancing across countries out of EMEs into US equity and bond funds under QE1, and in the opposite direction under QE2. Second, the impact of Fed operations, such as Treasury and MBS purchases, on portfolio allocations and asset prices dwarfed those of Fed announcements, underlining the importance of the market repair and liquidity functions of Fed policies. Third, we find no evidence that FX or capital account policies helped countries shield themselves from these US policy spillovers, but rather that responses to Fed policies are related to country risk. The results thus illustrate how US unconventional measures have contributed to portfolio reallocation as well as a re-pricing of risk in global financial markets. JEL Classification: E52, E58, F32, F34, G11 |
| Keywords: | Capital flows, emerging markets, Federal Reserve, monetary policy, panel data, policy responses, Portfolio Choice, quantitative easing, United States |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20131557&r=ifn |
| By: | Martin Feldkircher (Oesterreichische Nationalbank); Roman Horvath; Marek Rusnak |
| Abstract: | In this paper, we examine whether pre-crisis leading indicators help explain pressures on the exchange rate (and its volatility) during the globalfinancial crisis. We use a unique data set that covers 149 countries and 58 indicators, and estimation techniques that are robust to model uncertainty. Our results are threefold: First and foremost, we find that price stability plays a pivotal role as a determinant of exchange rate pressures. More specifically, the currencies of countries that experienced higher inflation prior to the crisis tend to be more affected in times of stress. Second, we investigate potential effects that vary with the level of pre-crisis inflation. In this vein, our results reveal that domestic savings reduce the severity of pressures in countries that experienced a low-inflation environment prior to the crisis. Finally, we find evidence of the mitigating effects of international reserves on the volatility of exchange rate pressures. |
| Keywords: | Exchange market pressures, financial crisis |
| JEL: | F31 F37 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:ost:wpaper:332&r=ifn |
| By: | Lane, Philip R.; McQuade, Peter |
| Abstract: | Europe experienced substantial cross-country variation in domestic credit growth and cross border capital flows during the pre-crisis period. We investigate the inter-relations between domestic credit growth and international capital flows over 1993-2008, with a special focus on the 2003-2008 boom period. We establish that domestic credit growth in European countries is strongly related to net debt inflows but not to net equity inflows. This pattern also holds for an extended sample of 54 advanced and emerging economies. JEL Classification: E51, F32, G15 |
| Keywords: | financial globalisation, financial stability, macro-prudential regulation |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20131566&r=ifn |
| By: | Sergio Schmukler (World Bank); Tatiana Didier (World Bank) |
| Abstract: | We study the extent to which firms from China and India use capital markets to obtain financing and grow. Using a unique data set on domestic and international capital raising activity and performance, we find that the expansion of financial market activity since the 1990s has been much more limited than the aggregate figures suggest. Relatively few firms raise capital and even fewer firms capture the bulk the financing. Moreover, firms that issue equity or bonds are different and behave differently from other publicly listed firms. Among other things, firms that raise capital are on average larger and grow faster. The differences between users and non-users exist before capital raisings, are associated with the probability of raising capital, and become more accentuated afterwards. The distribution of issuing firms shifts more over time than the distribution of those that do not issue, suggesting little convergence in firm size among listed firms. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed013:98&r=ifn |