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on International Finance |
| By: | Miguel Fuentes; Pablo Pincheira; Juan Manuel Julio; Hernán Rincón |
| Abstract: | This paper analyses the effects of sterilised, intraday foreign exchange market operations (non-discretionary and discretionary) on foreign exchange returns and volatility in four inflation targeting economies in Latin America. The distribution of exchange rates during intervention and non-intervention days are first compared, and then event study regressions are used to estimate the impact of intervention (and macro surprises) on exchange rate returns and exchange rate volatility as well as on foreign exchange market turnover (in Colombia). In general, the results suggest that the impact of both non-discretionary and discretionary operations is at times significant but transitory. However, an analysis of Chile’s experience suggests that the announcement effects of even non-discretionary programmes may be significant and persistent. |
| Keywords: | Exchange rate, central bank intervention, microstructure. |
| JEL: | E58 F31 G14 |
| Date: | 2014–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012258&r=ifn |
| By: | Uluc Asyun (University of Central Florida); Ralf Hepp (Fordham University) |
| Abstract: | This paper finds that factors determined outside of a country are more closely related to the global bank loans she receives. These loans are more stable when global banks are less competitive and have a higher presence in the recipient country. We obtain our results by using data on the bilateral loans positions of 15 countries and a unique methodology to identify and compare the independent effects of external and internal factors. We find support for our empirical results and draw more detailed inferences for competition and global bank presence by solving a simple model of global banking. |
| Keywords: | Cross-country loans, global banks, competition, overlapping generations model. |
| JEL: | E44 F34 G15 G21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:frd:wpaper:dp2014-08&r=ifn |
| By: | Devereux, Michael B. (Unniversity of British Columbia); Yu, Changhua (University of International Business and Economics) |
| Abstract: | International financial integration helps to diversify risk but also may increase the transmission of crises across countries. We provide a quantitative analysis of this trade-off in a two-country general equilibrium model with endogenous portfolio choice and collateral constraints. Collateral constraints bind occasionally, depending upon the state of the economy and levels of inherited debt. The analysis allows for different degrees of financial integration, moving from financial autarky to bond market integration and equity market integration. Financial integration leads to a significant increase in global leverage, doubles the probability of balance sheet crises for any one country, and dramatically increases the degree of ‘contagion’ across countries. Outside of crises, the impact of financial integration on macro aggregates is relatively small. But the impact of a crisis with integrated international financial markets is much less severe than that under financial market autarky. Thus, a tradeoff emerges between the probability of crises and the severity of crises. Financial integration can raise or lower welfare, depending on the scale of macroeconomic risk. In particular, in a low risk environment, the increased leverage resulting from financial integration can reduce welfare of investors. |
| JEL: | D52 F36 F44 G11 G15 |
| Date: | 2014–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:197&r=ifn |