nep-ifn New Economics Papers
on International Finance
Issue of 2014‒12‒19
three papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions By Eugenio Cerutti; Stijn Claessens
  2. Emerging Market Volatility: Lessons from The Taper Tantrum By Ratna Sahay; Vivek B. Arora; Athanasios V Arvanitis; Hamid Faruqee; Papa N'Diaye; Tommaso Mancini Griffoli
  3. Globalization and international business cycle dynamics: A conditional GVAR approach By Binder, Michael; Offermanns, Christian J.

  1. By: Eugenio Cerutti; Stijn Claessens
    Abstract: International banks greatly reduced their direct cross-border and local affiliates’ lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with banks’ financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates’ lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.
    Keywords: Cross-border banking;International banks;Loans;Credit;Supply and demand;Banking systems;Balance sheets;Financial statements;Global banks, Credit supply, Financial crisis, Deleveraging, International capital markets
    Date: 2014–09–25
  2. By: Ratna Sahay; Vivek B. Arora; Athanasios V Arvanitis; Hamid Faruqee; Papa N'Diaye; Tommaso Mancini Griffoli
    Abstract: Accommodative monetary policies in advanced economies have spurred increased capital inflows into emerging markets since the global financial crisis. Starting in May 2013, when the Federal Reserve publicly discussed its plans for tapering unconventional monetary policies, these emerging markets have experienced financial turbulence at the same that their domestic economic activity has slowed. This paper examines their experiences and policy responses and draws broad policy lessons. For emerging markets, good macroeconomic fundamentals matter, and early and decisive measures to strengthen macroeconomic policies and reduce vulnerabilities help dampen market reactions to external shocks. For advanced economies, clear and effective communication about the exit from unconventional monetary policy can and did help later to reduce the risk of excessive market volatility. And for the global community, enhanced global cooperation, including a strong global financial safety net, offers emerging markets effective protection against excessive volatility.
    Keywords: Emerging markets;International capital market volatility;Capital flows;Monetary policy;Macroprudential Policy;United States;Developed countries;Tapering, unconventional monetary policy, volatility, macroprudential, capital flow measures, foreign exchange intervention
    Date: 2014–10–02
  3. By: Binder, Michael; Offermanns, Christian J.
    Abstract: We examine the effects of increased international integration of both goods and financial markets on business cycle dynamics. To do so, we develop a new econometric framework for modelling cross-country spillovers in which the magnitude of these spillovers is an empirically determined function of the degree of a country's integration with international goods and financial markets. Our results suggest that the magnitude of cross-country spillovers for most country pairs has been increasing with strengthened goods and financial markets integration.
    Keywords: business cycle dynamics,international goods and financial market integration,dynamic panel data models,global VAR model
    JEL: E32 F41 C33
    Date: 2014

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