nep-ifn New Economics Papers
on International Finance
Issue of 2016‒04‒04
six papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Monetary policy spillovers and currency networks in cross-border bank lending By Stefan Avdjiev; Elod Takats
  2. Geography and Realty Prices: Evidence from International Transaction-Level Data By Miyakawa, Daisuke; Shimizu, Chihiro; Uesugi, Iichiro
  3. Quantitative Easing and United States Investor Portfolio Rebalancing Towards Foreign Assets By João Barata Ribeiro Blanco Barroso
  4. Risk and Return Spillovers among the G10 Currencies By Matthew Greenwood-Nimmo; Viet Hoang Nguyen; Barry Rafferty
  5. Safe Asset Scarcity and Aggregate Demand By Caballero, Ricardo; Farhi, Emmanuel; Gourinchas, Pierre-Olivier
  6. International Comparative Household Finance By Cristian Badarinza; John Y. Campbell; Tarun Ramadorai

  1. By: Stefan Avdjiev; Elod Takats
    Abstract: We demonstrate that currency networks in cross-border bank lending have a significant impact on the size, distribution and direction of international monetary policy spillovers. Using the recently enhanced BIS international banking statistics, which simultaneously provide information on the lender, borrower and currency composition of cross-border bank claims, we map the major currency networks in international banking. Next, we show that during the 2013 Fed taper tantrum, exposure to dollar lending was associated with safe haven flows to the United States, virtually unchanged flow dynamics vis-à-vis other advanced economies, and strong outflows from emerging markets. Furthermore, this pattern was shaped by interbank lending rather than by lending to non-banks.
    Keywords: Currency networks, cross-border banking flows, international monetary policy spillovers
    Date: 2016–03
  2. By: Miyakawa, Daisuke; Shimizu, Chihiro; Uesugi, Iichiro
    Abstract: In this paper, we examine the role of the international flow of capital in real estate prices by quantifying the relation between investors' geographical locations and the prices they pay for their realty investments. Our data set contains more than 30,000 realty investment transactions in Australia, Canada, France, Hong Kong, Japan, Netherlands, the United Kingdom, and the United States. First, we find that foreign investors pay significantly higher prices than domestic investors do even after taking a wide variety of controls into account. Second, this overpricing becomes smaller as the buyers' exposure to realty investments in the host countries becomes higher. Third, in support of these results, the investment returns of foreign investors are systematically lower than that of domestic investors. This negative excess return becomes smaller as the buyers' exposure to the host countries becomes higher. These results indicate that the overpricing of foreign investors occurs when investors are less informed about the local property market and lessens with the accumulation of investment experience.
    Keywords: Realty Price, Transaction Data, Geographical Location, Fixed Effects
    JEL: D83 F21 G12 R30
    Date: 2016–03
  3. By: João Barata Ribeiro Blanco Barroso
    Abstract: We show robust evidence that quantitative easing policies by the Federal Reserve cause portfolio rebalancing by US investors towards foreign assets in emerging market economies. These effects are on top of any effects such polices might have through global or specific conditions of the recipient economies. To control for such conditions, we use capital flows from the rest of the world to the same recipient economy as a proxy variable. We gather a comprehensive dataset for Brazilian capital flows and a smaller dataset for other emerging market economies from completely independent sources. Both datasets show that more than 50% of US flows to the recipient economies in the period is accounted for by quantitative easing policies. We use the detailed datasets to break down this overall effect on the specific asset categories and sectors of the recipient economies.
    Date: 2016–03
  4. By: Matthew Greenwood-Nimmo (Department of Economics, The University of Melbourne); Viet Hoang Nguyen (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Barry Rafferty (Department of Economics, The University of Melbourne)
    Abstract: We study spillovers among daily returns and innovations in option-implied risk-neutral volatility and skewness of the G10 currencies. An empirical network model uncovers substantial time variation in the interaction of risk measures and returns, both within and between currencies. We find that aggregate spillover intensity is countercyclical with respect to the federal funds rate and increases in periods of financial stress. During these times, volatility spillovers and especially skewness spillovers between currencies increase, reflecting greater systematic risk. Likewise, linkages between returns and risk measures strengthen in times of stress, with returns becoming more sensitive to risk measures and vice versa. Classification-C58, F31, G01, G15
    Keywords: Foreign exchange markets, risk-neutral volatility, risk-neutral skewness, spillovers, coordinated crash risk
    Date: 2016–02
  5. By: Caballero, Ricardo; Farhi, Emmanuel; Gourinchas, Pierre-Olivier
    Abstract: We explore the consequences of safe asset scarcity on aggregate demand in a stylized IS-LM/Mundell Fleming environment. Acute safe asset scarcity forces the economy into a “safety trap†recession. In the open economy, safe asset scarcity spreads from one country to the other via capital flows, equalizing interest rates. Acute global safe asset scarcity forces the economy into a global safety trap. The exchange rate becomes indeterminate but plays a crucial role in both the distribution and the magnitude of output adjustment across countries. Policies that increase the net supply of safe assets somewhere are output enhancing everywhere.
    JEL: E0 F3 F4 G1
    Date: 2016–03
  6. By: Cristian Badarinza; John Y. Campbell; Tarun Ramadorai
    Abstract: This paper reviews the literature on international comparative household finance. The paper presents summary statistics on household balance sheets for 13 developed countries, and uses these statistics to discuss common features and contrasts across countries. The paper then discusses retirement savings, investments in risky assets, unsecured debt, and mortgages.
    JEL: D14 G11
    Date: 2016–03

This nep-ifn issue is ©2016 by Vimal Balasubramaniam. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.