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on International Finance |
| By: | Andrés Fernández; Alessandro Rebucci; Martín Uribe |
| Abstract: | A growing recent theoretical literature advocates the use of prudential capital control policy, that is, the tightening of restrictions on cross-border capital flows during booms and the relaxation thereof during recessions. We examine the behavior of capital controls in a large number of countries over the period 1995-2011. We find that capital controls are remarkably acyclical. Boom-bust episodes in output, the current account, or the real exchange rate are associated with virtually no movements in capital controls. These results are robust to decomposing boom-bust episodes along a number of dimensions, including the level of development, the level of external indebtedness, or the exchange-rate regime. We also document a near complete acyclicality of capital controls during the Great Contraction of 2007-2009. |
| JEL: | E6 F3 F4 F5 G0 G1 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19671&r=all |
| By: | Farla, Kristine (UNU-MERIT / MGSoG) |
| Abstract: | This paper investigates micro and macro determinants of firms' investment behaviour using firm data from 101 developing and emerging economies. A substantial number of firms in our sample does not invest in fixed capital or invests little relative to sales revenue. Using a multilevel probit model we study what factors trigger investment and using a multilevel Heckman selection model we study what factors influence a firm's investment to sales ratio. Although we find that both micro and macro determinants explain investment behaviour, firms' investment behaviour is heterogeneous in nature and has little dependency on a country's macroeconomic setting. In addition, we find that, on average, firms which are completely foreign owned have a relatively lower investment to sales ratio. Finally, we find evidence which suggests that the probability of investing is higher for firms located in countries with more property rights protection and control of corruption and we find some evidence which suggests that foreign owned firms located in countries with `good' institutions invest relatively more. |
| Keywords: | Multilevel, Investment, Foreign ownership, Institutions |
| JEL: | E22 F20 O11 O12 O43 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2013055&r=all |
| By: | Dennis P. J. Botman; Irineu E. Carvalho Filho; Raphael W. Lam |
| Abstract: | During risk-off episodes, the yen is a safe haven currency and on average appreciates against the U.S. dollar. We investigate the proximate causes of yen risk-off appreciations. We find that neither capital inflows nor expectations of the future monetary policy stance can explain the yen’s safe haven behavior. In contrast, we find evidence that changes in market participants’ risk perceptions trigger derivatives trading, which in turn lead to changes in the spot exchange rate without capital flows. Specifically, we find that risk-off episodes coincide with forward hedging and reduced net short positions or a buildup of net long positions in yen. These empirical findings suggest that offshore and complex financial transactions should be part of spillover analyses and that the effectiveness of capital flow management measures or monetary policy coordination to address excessive exchange rate volatility might be limited in certain cases. |
| Keywords: | Currencies;Japan;Exchange rate appreciation;Capital flows;Monetary policy;Risk management;Safe Haven, Yen Volatility, Capital Flows, Derivatives |
| Date: | 2013–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/228&r=all |
| By: | Rui Albuquerque; Luis Brandao-Marques; Miguel A. Ferreira; Pedro Matos |
| Abstract: | We develop and test the hypothesis that foreign direct investment promotes corporate governance spillovers in the host country. Using firm-level data on cross-border mergers and acquisitions (M&A) and corporate governance in 22 countries, we find that cross-border M&As are associated with subsequent improvements in the governance, valuation, and productivity of the target firms’ local rivals. This positive spillover effect is stronger when the acquirer is from a country with stronger shareholder protection and if the target’s industry is more competitive. We conclude that the international market for corporate control promotes the adoption of better corporate governance practices around the world. |
| Keywords: | Foreign direct investment;Corporate governance;Spillovers;Competition;Foreign direct investment, Corporate governance, Cross border mergers and acquisitions, Spillovers |
| Date: | 2013–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:13/234&r=all |