nep-ifn New Economics Papers
on International Finance
Issue of 2016‒08‒07
three papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. International Banking and Cross-Border Effects of Regulation: Lessons from Canada By H. Evren Damar; Adi Mordel
  2. Global Macro Risks in Currency Excess Returns By Kimberly Berg; Nelson C. Mark
  3. The Holders and Issuers of International Portfolio Securities By Vahagn Galstyan; Philip R. Lane; Caroline Mehigan; Rogelio Mercado

  1. By: H. Evren Damar; Adi Mordel
    Abstract: We study how changes in prudential requirements affect cross-border lending of Canadian banks by utilizing an index that aggregates adjustments in key regulatory instruments across jurisdictions. We show that when a destination country tightens local prudential measures, Canadian banks lend more to that jurisdiction, and the effect is particularly significant when capital requirements are tightened and weaker if banks lend mainly via affiliates. Our evidence also suggests that Canadian banks adjust foreign lending in response to domestic regulatory changes. The results confirm the presence of heterogeneous spillover effects of foreign prudential requirements.
    Keywords: Financial Institutions, Financial stability, Financial system regulation and policies
    JEL: G01 F34 G21
    Date: 2016
  2. By: Kimberly Berg; Nelson C. Mark
    Abstract: We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk. The cross-country high-minuslow (HML) conditional skewness of the unemployment gap—our measure of global macroeconomic uncertainty—is a factor that is robustly priced in currency excess returns. A widening of the HML gap signifies increasing divergence, disparity and inequality of economic performance across countries.
    Keywords: Asset Pricing, Exchange rates, Interest rates
    JEL: E21 E43 F31 G12
    Date: 2016
  3. By: Vahagn Galstyan (Trinity College Dublin); Philip R. Lane (Central Bank of Ireland and Trinity College Dublin); Caroline Mehigan (OECD); Rogelio Mercado (Trinity College Dublin)
    Abstract: Research on the geographical distribution of international portfolios has mainly focused on data aggregated to the country level. We exploit newly-available data that disaggregates the holders and issuers of international securities along sectoral lines. We find that patterns evident in the aggregate data do not uniformly apply across the various holding and issuing sectors, such that a full understanding of cross-border portfolio positions requires granular-level analysis.
    Keywords: International portfolios, International capital flows, Gravity models
    JEL: F30 F41 G15
    Date: 2016–07

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