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on International Finance |
| By: | Qianying Chen (International Monetary Fund); Andrew Filardo (Bank for International Settlements); Dong He (Hong Kong Monetary Authority and Hong Kong Institute for Monetary Research); Feng Zhu (Bank for International Settlements) |
| Abstract: | This paper studies the effects of unconventional monetary policies in the major advanced economies. We first examine the cross-border financial market impact of central bank announcements of asset purchase programmes based on event studies. We find marked effects, as expansionary balance sheet policies influence the prices of a broad range of emerging market assets, raising equity prices, lowering government and corporate bond yields and compressing CDS spreads. We then study the economic impact of US quantitative easing on both emerging and advanced economies, based on an estimated global vector error-correcting macroeconomic (VECM) model, which takes into account trade and financial linkages. We focus on the effects of reductions in US term and corporate spreads, and in US market volatility. The estimated effects are sizeable and differ across economies. First, US QE measures which help to lower market volatility and reduce corporate spreads appear to have had far greater impact than lowering term spreads, as Blinder (2012) suggested. Second, such measures have prevented a prolonged recession and severe deflation in the advanced economies. Third, the impact on emerging economies has varied but is generally stronger than in the US and other advanced economies. US QE measures contributed to overheating in Brazil, China and other emerging economies in 2010 and 2011, but supported recovery in 2009 and 2012. The sign and size of QE effects differ across economies, implying that their costs and benefits are unevenly distributed. |
| Keywords: | Announcement Effects, Emerging Economies, Financial Markets, Global VECM, International Spillovers, Quantitative Easing, Unconventional Monetary Policy |
| JEL: | E43 E44 E52 E65 F42 F47 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:232014&r=ifn |
| By: | Martin Evans (Department of Economics, Georgetown University) |
| Abstract: | This paper describes a new analytical framework for the quantitative assessment of international external positions. The framework links each country's current net foreign asset position to its current trade flows, forecasts of future trade flows, and expectations concerning future returns on foreign assets and liabilities in an environment where countries cannot run Ponzi schemes or exploit arbitrage opportunities in world financial markets. It provides guidance on how external positions should be measured in the data, and on how the sustainability of a country's current position can be assessed. To illustrate its usefulness, I study the external positions of 12 countries (Australia, Canada, China, France, Germany, India, Italy, Japan, South Korea, Thailand, The United States and The United Kingdom) between 1970 and 2011. In particular, I examine how changes in the perceived risk associated with future returns across world financial markets contributed to evolution of external positions before the 2008 financial crisis, and during the ensuing Great Recession. |
| Keywords: | Global Imbalances, Foreign Asset Positions, Current Accounts, International Debt, International Solvency, Great Recession |
| JEL: | F31 F32 F34 |
| Date: | 2013–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~13-13-07&r=ifn |
| By: | Robin Boudias |
| Abstract: | This paper investigates the impact of the exchange rate regime (ERR) on the cycle of capital fl ows, the private credit growth rate and the level of dollarization in emerging market economies. We consider two different panels including 12 and 22 countries over the periods 1980-2010 and 1994-2008, respectively. We estimate a Panel Smooth Transition Regression (PSTR) model in order to assess whether the impact of ERR on credit dynamics is affected by the cyclical component of capital fl ows. Our fi ndings are threefold. First, the ERR has no impact on the cyclical component of capital fl ows. Second, credit expansion is procyclical in economies with pegged curencies. Third, during capital infl ows or low outfl ows periods, economies with fi xed exchange rate regimes show a higher level of dollarization. When outfl ows are sizeable, ERR no longer impacts the level of dollarization. These results suggest that ERR should be an important variable in conceiving the policy mix to cope with domestic credit expansions and liability dollarization. |
| Keywords: | Emerging market economies;capital flows;domestic credit;dollarization;PSTR |
| JEL: | C33 E42 F31 O16 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2014-17&r=ifn |