nep-ifn New Economics Papers
on International Finance
Issue of 2017‒01‒08
three papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. The currency dimension of the bank lending channel in international monetary transmission By Elod Takats; Judit Temesvary
  2. Bank Secrecy in Offshore Centres and Capital Flows: Does Blacklisting Matter? By Olga Balakina; Angelo D’Andrea; Donato Masciandaro
  3. Asset Managers: Institutional Performance and Smart Betas By Joseph Gerakos; Juhani T. Linnainmaa; Adair Morse

  1. By: Elod Takats; Judit Temesvary
    Abstract: We investigate how the use of a currency transmits monetary policy shocks in the global banking system. We use newly available unique data on the bilateral crossborder lending flows of 27 BIS-reporting lending banking systems to over 50 borrowing countries, broken down by currency denomination (USD, EUR and JPY). We have three main findings. First, monetary shocks in a currency significantly affect cross-border lending flows in that currency, even when neither the lending banking system nor the borrowing country uses that currency as their own. Second, this transmission works mainly through lending to non-banks. Third, this currency dimension of the bank lending channel works similarly across the three currencies suggesting that the cross-border bank lending channel of liquidity shock transmission may not be unique to lending in USD.
    Keywords: Cross-border bank lending, bank lending channel, monetary transmission, currency denomination
    Date: 2016–12
  2. By: Olga Balakina; Angelo D’Andrea; Donato Masciandaro
    Abstract: This study analyses cross-border capital flows in order to verify the existence and direction of the effect of the soft regulation promoted by international organizations against banking secrecy which characterized the so called tax and financial heavens. This effect is called in the literature Stigma Effect but both the existence and the direction of the stigma effect are far from being obvious. The international capital flows can simply neglect the relevance of the blacklisting, or worst, the attractiveness of banking secrecy can produce a race to the bottom: the desire to elude more transparent regulation can sensibly influence the capital movements. We test whether being included and later excluded from the FATF blacklist is an effective measure that influences countries’ cross-border capital flows. Using annual panel data for the period 1996-2014, we apply our framework to 126 countries worldwide. We find evidence that in general the stigma effect does not exist.
    Keywords: bank secrecy, offshore centres, international capital flows, name and shame regulation, money laundering
    JEL: F21 K42
    Date: 2016
  3. By: Joseph Gerakos; Juhani T. Linnainmaa; Adair Morse
    Abstract: Using a dataset of $17 trillion of assets under management, we document that actively-managed institutional accounts outperformed strategy benchmarks by 86 (42) basis points gross (net) during 2000–2012. In return, asset managers collected $162 billion in fees per year for managing 29% of worldwide capital. Estimates from a Sharpe (1992) model imply that their outperformance comes from factor exposures ("smart beta"). If institutions had instead implemented mean-variance portfolios of institutional mutual funds, they would not have earned higher Sharpe ratios. Recent growth of the ETF market implies that asset managers are losing advantages held during our sample period.
    JEL: G11 G23
    Date: 2016–12

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