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on International Finance |
| By: | Valentina Bruno (American University); Hyun Song Shin (Princeton University) |
| Abstract: | We investigate global factors associated with cross-border capital flows. We formulate a model of gross capital flows through the international banking system and derive a closed form solution that highlights the leverage cycle of global banks as being a prime determinant of the transmission of financial conditions across borders. We then test the predictions of our model in a panel study of 46 countries and find that global factors dominate local factors as determinants of banking sector capital flows. |
| Keywords: | cross-border banking flows, bank leverage, global banks |
| JEL: | F32 F33 F34 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:237a%20shin&r=ifn |
| By: | Valentina Bruno (American University); Hyun Song Shin (Princeton University) |
| Abstract: | We study the dynamics linking monetary policy with bank leverage and show that adjustments in leverage act as the linchpin in the monetary transmission mechanism that works through fluctuations in risk-taking. Motivated by the evidence, we formulate a model of the risk-taking channel of monetary policy in the international context that rests on the feedback loop between increased leverage of global banks and capital flows amid currency appreciation for capital recipient economies. |
| Keywords: | Bank leverage, monetary policy, capital flows, risk-taking channel |
| JEL: | F32 F33 F34 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:237b%20shin&r=ifn |
| By: | Valentina Bruno (American University); Hyun Song Shin (Princeton University) |
| Abstract: | This paper develops methods for assessing the sensitivity of capital flows to global financial conditions, and applies the methods in assessing the impact of macroprudential policies introduced by Korea in 2010. Relative to a comparison group of countries, we find that the sensitivity of capital flows into Korea to global conditions decreased in the period following the introduction of macroprudential policies. |
| Keywords: | capital flows, credit booms, macroprudential policy |
| JEL: | F32 F33 F34 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:237c%20shin&r=ifn |
| By: | Valentina Bruno (American University); Hyun Song Shin (Princeton University) |
| Abstract: | It is a cliché that the world has become more connected, but the financial crisis and the boom that preceded it have focused attention on the global factors behind credit growth and capital flows. Calvo, Leiderman and Reinhart (1993, 1996) famously distinguished the global "push" factors for capital flows from the country?specific "pull" factors, and the BIS report on global liquidity (the Landau report) has highlighted the role of cross?border banking in the transmission of financial conditions (BIS (2011)). |
| Keywords: | credit growth, boom, financial crisis, capital flows |
| JEL: | D02 D21 E32 E50 F30 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:237shin&r=ifn |
| By: | Barbara Fritz; Daniela Prates |
| Abstract: | Besides the management of capital flows, some emerging economies have been facing policy dilemmas related to foreign (nonresident) and domestic (residents) operations of Foreign Currency (FX) derivatives in the post-global crisis setting. In a context of abundant liquidity and historical low interest rates in the advanced economies, searching for yield foreign investors as well as domestic agents generally obtain huge profits, through these markets, from the interest rate differentials between advanced and emerging economies. Yet, the regulation of FX derivatives in the emerging economies has not received due attention both in the academic literature and in the international financial institutions, even though these could be crucial for the emerging economies with high degree of financial openness and liquid as well as deep FX derivatives markets, such as Brazil and South Korea. The paper aims at analyzing the Brazilian and Korean approach for FX derivatives regulation after the global financial crisis. Therefore, it seeks to contribute to the debate on financial regulation brought about by the global crisis. The two cases show the relevance of the institutional featuresof FX derivatives market for the drawing of the financial regulatory toolkit. In the case of Brazil we found that a thirdtype of financial regulation, which we have labeled as FX derivative regulation, was needed to curb the currency appreciation trend, along with capital controls and traditional prudential financial regulations. |
| Keywords: | working paper, daadpartnership, finance-and-trade |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:mtf:wpaper:1307&r=ifn |
| By: | Charles Yuji Horioka (School of Economics, University of the Philippines; National Bureau of Economic Research; and Institute of Social and Economic Research, Osaka University); Takaaki Nomoto (Office of Regional and Economic Integration, Asian Development Bank); Akiko Terada-Hagiwara (Economic and Research Department, Asian Development Bank) |
| Abstract: | In this paper, we present data on trends over time in government debt financing in Japan since 2010 with emphasis on the importance of foreign holders and speculate about the determinants of those trends. We find that Japanese government securities were held primarily by domestic holders until recently because robust domestic saving (combined with strong home bias) made it possible for domestic investors to absorb most of the government debt but that foreign holdings of Japanese government securities have increased sharply in recent years, especially in the case of short-term government securities. We show that trends in foreign holdings of Japanese government securities can be explained by conventional economic factors such returns and risks and that the recent surge in foreign holdings of short-term Japanese government securities is attributable to foreign investors in search of a safe haven for their funds in the face of the Global Financial Crisis of 2008-09 precipitated by the Lehman crisis. Our analysis suggests that the surge in foreign holdings of Japanese government securities will subside (in fact, it already has), and this, combined with the projected decline in domestic saving (especially household saving) caused by population aging, will make it necessary for Japan to get its fiscal house in order. Thus, Japan’s massive government debt has not wreaked havoc in the past because of robust domestic saving and a temporary inflow of foreign capital caused by the Global Financial Crisis, but it may wreak havoc in the future as both of these factors become less applicable unless the government debt can be brought under control. |
| Keywords: | Government debt, government securities, government bonds, government bills, government notes, sovereign debt, debt securities, debt financing, government debt financing, debt holdings, government debt holdings, foreign debt, foreign debt holdings, foreign debt investments, foreign investors, capital flows, international capital flows, short-term capital movements, cross-border portfolio investments, safe haven, capital flight, flight to safety, debt rollover, home bias, sovereign debt crisis, eurozone crisis, eurozone, Japan |
| JEL: | E21 F32 F34 G15 H63 O53 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:phs:dpaper:201310&r=ifn |
| By: | A. FERRANDO; K. MULIER |
| Abstract: | This paper uses a non parametric matching procedure to match survey replies to balance sheet information. It draws on the SAFE survey on access to finance for a sample of 11886 firms in the euro area which are matched with their nearest neighbour in an extended dataset with balance sheet information on 2.3 million firms. We investigate the role of firm characteristics with respect to the experience of facing financing obstacles in the period 2009-2011. We distinguish between firms' perceived financing constraints and actual financing constraints. We find that more profitable firms are less likely to face actual financing constraints. Also firms with more working capital and lower leverage ratios are less likely to be actually financially constrained, however profitability measures seem to be more robust. Firms are more likely to perceive access to finance problematic when they have more debt with short term maturity. Finally, firm age, but not size, is important in explaining both the perceived and the actual financial constraints. |
| Keywords: | SMEs, financial constraints, survey data, statistical matching of data |
| JEL: | E22 G30 G10 O16 K40 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:13/844&r=ifn |
| By: | Andreas Hoefele (School of Business and Economics, Loughborough University, UK); Tim Schmidt-Eisenlohr (University of Illinois, Urbana-Champaign, USA); Zihong Yu (Nottingham University School of Economics, UK) |
| Abstract: | When trading across borders, firms choose between dierent payment contracts. Theoretically, this should allow firms to trade-off differences in financing costs and enforcement across countries. This paper provides evidence for this hypothesis from a large number of countries. As predicted, the use of Open Account decreases in financing costs and contract enforcement in the source country. We extend the theory and show that the more complex an industry is, the more important is contract enforcement and the less important are financing costs for the contract choice. We also find evidence that suggests that international enforcement problems can explain trade intermediation. |
| Keywords: | trade finance, payment contracts, industry complexity, developing countries, trade intermediation |
| JEL: | F12 F3 G21 G32 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2013_11&r=ifn |