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on International Finance |
| By: | Eugenio Cerutti; Stijn Claessens; Damien Puy |
| Abstract: | This paper analyzes the behavior of gross capital inflows across 34 emerging markets (EMs). We first confirm that aggregate inflows to EMs co-move considerably. We then report three findings: (i) the aggregate co-movement conceals significant heterogeneity across asset types as only bank-related and portfolio bond and equity inflows do co-move; (ii) while global push factors in advanced economies mostly explain the common dynamics, their relative importance varies by type of flow; and (iii) the sensitivity to common dynamics varies significantly across borrower countries, with market structure characteristics (especially the composition of the foreign investor base and the level of liquidity) rather than borrower country’s institutional fundamentals strongly affecting sensitivities. Countries relying more on international funds and global banks are found to be more sensitive to push factors. Our findings suggest that EMs need to closely monitor their lenders and investors to assess their inflow exposures to global push factors. |
| Keywords: | Cross country analysis;Capital inflows;Capital flows;Emerging markets;Sensitivity analysis;Mutual funds;International banks;International financial markets;Push factors, global banks, markets, portfolio, Financial Aspects of Economic Integration, Portfolio Choice, |
| Date: | 2015–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/127&r=ifn |
| By: | Matteo Maggiori; Emmanuel Farhi |
| Abstract: | We propose a simple model of the international monetary system. We study the world supply and demand for reserve assets denominated in different currencies under a variety of scenarios: under a Hegemon vs. a multi-polar world; when reserve assets are abundant vs. scarce; under a gold exchange standard vs. a floating rate system; away from or at the zero lower bound (ZLB). We rationalize the Triffin dilemma which posits the fundamental instability of the system, the common prediction regarding the natural and beneficial emergence of a multi-polar world, the Nurkse warning that a multi-polar world is more unstable than a Hegemon world, and the Keynesian argument that a scarcity of reserve assets under a gold exchange standard or at the ZLB is recessive. We show that competition among few countries in the issuance of reserve assets can have perverse effects on the total supply of reserve assets. Our analysis is both positive and normative. |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:qsh:wpaper:395921&r=ifn |
| By: | Islamaj, Ergys; Kose, Ayhan |
| Abstract: | This paper studies how the sensitivity of consumption to income has changed over time as the degree of financial integration has risen. In standard theory, greater financial integration facilitates international borrowing and lending, helping to reduce the sensitivity of consumption growth to fluctuations in income. We examine the empirical validity of this prediction using an array of indicators of financial integration for a large sample of advanced and developing countries over the period 1960-2011. We report two main results. First, the sensitivity of consumption to income has declined over time as the degree of financial integration has risen. The decline has been more pronounced in advanced economies than in developing ones. Second, our regression analysis indicates that a higher degree of financial integration is associated with a lower sensitivity of consumption to income. This finding is robust to the use of a wide range of empirical specifications, country-specific characteristics and other controls, such as interest rates and outcome-based measures of financial integration. We also discuss other potential sources of the temporal changes in the sensitivity of consumption to income. |
| Keywords: | Consumption Sensitivity; Financial Integration; Intertemporal Smoothing; Risk Sharing |
| JEL: | E21 F02 F4 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11241&r=ifn |
| By: | Nicola Cetorelli; Linda S. Goldberg |
| Abstract: | Banks have progressively evolved from being standalone institutions to being subsidiaries of increasingly complex financial conglomerates. We conjecture and provide evidence that the organizational complexity of the family of a bank is a fundamental driver of the business model of the bank itself, as reflected in the management of the bank’s own balance sheet. Using micro-data on global banks with branch operations in the United States, we show that branches of conglomerates in more complex families have a markedly lower lending sensitivity to funding shocks. The balance sheet management strategies of banks are very much determined by the structure of the organizations the banks belong to. The complexity of the conglomerate can change the scale of the lending channel for a large global bank by more than 30 percent. |
| JEL: | F3 G15 G21 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22169&r=ifn |