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on International Finance |
| By: | Linda S. Goldberg |
| Abstract: | International financial linkages, particularly through global bank flows, generate important questions about the consequences for economic and financial stability, including the ability of countries to conduct autonomous monetary policy. I address the monetary autonomy issue in the context of the international policy trilemma: Countries seek three typically desirable but jointly unattainable objectives—stable exchange rates, free international capital mobility, and monetary policy autonomy oriented toward, and effective at, achieving domestic goals. I argue that global banking entails some features that are distinct from the broad issues of capital market openness captured in existing studies. In principle, if global banks with affiliates in foreign markets can reduce frictions in international capital flows, then the macroeconomic policy trilemma could bind tighter and interest rates will exhibit more co-movement across countries. However, if the information content and stickiness of the claims and services provided are enhanced relative to a benchmark alternative, then global banks can weaken the trilemma rather than enhance it. The result is a prediction of heterogeneous effects on monetary autonomy, tied to the business models of the global banks and whether countries are investment or funding locations for those banks. Empirical tests of the trilemma support this view that global bank effects are heterogeneous and that the primary drivers of monetary autonomy are exchange rate regimes. |
| Keywords: | Monetary policy ; International economic integration ; Foreign exchange rates ; Capital movements ; Banks and banking, International ; Flow of funds |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:640&r=ifn |
| By: | Linda S. Goldberg; Christian Grisse |
| Abstract: | Although the effects of economic news announcements on asset prices are well established, these relationships are unlikely to be stable. This paper documents the time variation in the responses of yield curves and exchange rates using high frequency data from January 2000 through August 2011. Significant time variation in news effects is present for those announcements that have the largest effects on asset prices. The time variation in effects is explained by economic conditions, including the level of policy rates at the time of the release, and risk conditions: government bond yields increase in response to "good news", but less so when risk is elevated. Risk conditions matter since they can capture the effects of uncertainty on the information content of news announcements, the interaction of monetary policy and financial stability objectives of central banks, and the effect of news announcements on the risk premium. |
| JEL: | E43 E44 E52 F31 G12 G14 G15 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19523&r=ifn |
| By: | Otaviano Canuto; Matheus Cavallari |
| Keywords: | Finance and Financial Sector Development - Debt Markets Banks and Banking Reform Private Sector Development - Emerging Markets Finance and Financial Sector Development - Currencies and Exchange Rates Economic Theory and Research Macroeconomics and Economic Growth |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:16116&r=ifn |