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on International Finance |
| By: | Lim, Jamus Jerome; Mohapatra, Sanket; Stocker, Marc |
| Abstract: | This paper examines gross financial inflows to developing countries between 2000 and 2013, with a particular focus on the potential effects of quantitative easing policies in the United States and other high-income countries. The paper finds evidence for potential transmission of quantitative easing along observable liquidity, portfolio balancing, and confidence channels. Moreover, quantitative easing had an additional effect over and above these observable channels, which the paper argues cannot be attributed to either market expectations or changes in the structural relationships between inflows and observable fundamentals. The baseline estimates place the lower bound of the effect of quantitative easing at around 5 percent of gross inflows (for the average developing economy), which suggests that of the 62 percent increase in inflows during 2009-13 related to changing global monetary conditions, at least 13 percent of this was attributable to quantitative easing. The paper also finds evidence of heterogeneity among different types of flows; portfolio (especially bond) flows tend to be more sensitive than foreign direct investment to our measured effects from quantitative easing. Finally, the paper performs simulations that explore the potential effects of the withdrawal of quantitative easing on financial flows to developing countries. |
| Keywords: | Debt Markets,Emerging Markets,Economic Theory&Research,Currencies and Exchange Rates,Mutual Funds |
| Date: | 2014–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6820&r=ifn |
| By: | Lo Duca, Marco; Nicoletti, Giulio; Vidal Martinez, Ariadna |
| Abstract: | The paper investigates the impact of US quantitative easing (QE) on global non-financial corporate bond issuance. It distinguishes between two QE instruments, MBS/GSE debt and Treasury bonds, and disentangles between two channels of transmission of QE to global bond markets, namely flow effects (purchases) and stock effects (holdings). We control for a number of domestic and global macro-financial factors. In particular, we control for weaknesses in crossborder and domestic banking which might have induced the corporate sector to issue more bonds. The results indicate that US QE had a large impact on corporate bond issuance, especially in emerging markets, and that flow effects (i.e. portfolio rebalancing) were the main transmission channel of QE. A counterfactual analysis shows that bond issuance in emerging markets since 2009 would have been halved without QE. JEL Classification: E52, E58, F42, G15 |
| Keywords: | bond issuance, crisis management, emerging markets, Federal Reserve, monetary policy, quantitative easing, spill-overs, United States |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20141649&r=ifn |
| By: | Decker, Ryan (University of Maryland); D'Erasmo, Pablo (Federal Reserve Bank of Philadelphia); Moscoso Boedo, Herman J. (University of Virginia) |
| Abstract: | First Draft: November 1, 2011 We propose a theory of endogenous firm-level volatility over the business cycle based on endogenous market exposure. Firms that reach a larger number of markets diversify market-specific demand risk at a cost. The model is driven only by total factor productivity shocks and captures the business cycle properties of firm-level volatility. Using a panel of U.S. firms (Compustat), we empirically document the countercyclical nature of firm-level volatility. We then match this panel to Compustat’s Segment data and the U.S. Census’s Longitudinal Business Database (LBD) to show that, consistent with our model, measures of market reach are procyclical, and the countercyclicality of firm-level volatility is driven mostly by those firms that adjust the number of markets to which they are exposed. This finding is explained by the negative elasticity between various measures of market exposure and firm-level idiosyncratic volatility we uncover using Compustat, the LBD, and the Kauffman Firm Survey. |
| Keywords: | Endogenous idiosyncratic risk; Business cycles; Market exposure; |
| JEL: | D21 D22 E32 L11 L25 |
| Date: | 2014–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:14-12&r=ifn |