nep-ifn New Economics Papers
on International Finance
Issue of 2017‒01‒15
six 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. The Globalization Risk Premium By Barrot, Jean-Noël; Loualiche, Erik; Sauvagnat, Julien
  3. Testing the Global Banking Glut Hypothesis By Punzi, Maria Teresa; Kauko, Karlo
  4. The Effects of Monetary Policy Shocks on Inequality By Davide Furceri; Prakash Loungani; Aleksandra Zdzienicka
  5. Spillovers of the United States’ Unconventional Monetary Policy to Emerging Asia: The Bank Lending Channel By Xu, Ying; La, Hai Anh
  6. Currency Wars? Unconventional Monetary Policy Does Not Stimulate Exports By Rose, Andrew K

  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 cross-border 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: Bank lending channel ; Cross-border bank lending ; Currency denomination ; Monetary transmission
    JEL: E5 F42 G21
    Date: 2016–12
  2. By: Barrot, Jean-Noël; Loualiche, Erik; Sauvagnat, Julien
    Abstract: We investigate how globalization is reflected in asset prices. We use shipping costs to measure firms' exposure to globalization. Firms in low shipping cost industries carry a 8 percent risk premium, suggesting that their cash-flows covary negatively with investors' marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consumption is dear for investors. We discuss conditions under which a standard model of trade with asset prices can rationalize this puzzle.
    JEL: F11 F4 G14
    Date: 2016–12
  3. By: Punzi, Maria Teresa; Kauko, Karlo
    Abstract: This paper presents VAR results on the recent economic history of the U.S and focuses on the dependence of U.S. macrofinancial variables on international capital flows. Both gross and net flows are included in the analysis. The results indicate that cross-border funding has affected the build-up in the U.S. housing market irrespective of how these flows are defined and measured. Both the savings glut hypothesis and the banking glut hypothesis are supported by these findings. However, net banking flows appear to explain the higher volatility in the increase in house prices as well as the mortgage loan boom. (authors' abstract)
    Keywords: Global Banking Glut; Global Savings Glut; Cross-Border Banking Transactions; House Prices; Mortgage Loans; VAR model; USA; Internationale Kapitalbewegung; Kreditgeschäft; Grenzüberschreitende Verflechtung; Immobilienmarkt; Preisentwicklung; Hypothekenkredit
    Date: 2015–03
  4. By: Davide Furceri; Prakash Loungani; Aleksandra Zdzienicka
    Abstract: This paper provides new evidence of the effect of monetary policy shocks on income inequality. Using a measure of unanticipated changes in policy rates for a panel of 32 advanced and emerging market countries over the period 1990-2013, the paper finds that contractionary (expansionary) monetary actions increase (reduce) income inequality. The effect, however, varies over time, depending on the type of the shocks (tightening versus expansionary monetary policy) and the state of the business cycle, and across countries depending on the share of labor income and redistribution policies. In particular, we find that the effect is larger for positive monetary policy shocks, especially during expansions. Looking across countries, we find that the effect is larger in countries with higher labor share of income and smaller redistribution policies. Finally, while an unexpected increase in policy rates increases inequality, changes in policy rates driven by an increase in growth are associated with lower inequality.
    Keywords: Monetary policy;Income inequality;Developed countries;Emerging markets;Panel analysis;Time series;monetary policy; monetary policy shocks; income inequality.
    Date: 2016–12–22
  5. By: Xu, Ying (Asian Development Bank Institute); La, Hai Anh (Asian Development Bank Institute)
    Abstract: This paper assesses the spillover effects of the United States’ unconventional monetary policy (i.e., quantitative easing programs adopted during 2008–2014) on the Asian credit market. With a focus on cross-border bank lending, we employed firm-level loan data with regard to the syndicated loan market and measured the international bank lending channel through changes in United States dollar-denominated loans extended to Asian borrowers. We found that the growth of dollar credit in Asia increased substantially in response to quantitative easing in the United States financial market. The results of this study confirm the existence of the bank lending channel in Asia and emphasize the role of credit flows in transmitting financial conditions. The paper also provides new evidence of cross-border liquidity spillover in the syndicated loan market. We found that the overall spillover effect was large but differed significantly in Asia by types of borrowing firms, financing purposes, and loan terms at different stages of the quantitative easing programs. The paper concludes with a discussion of relevant policy implications for the region.
    Keywords: Spillovers; unconventional monetary policy; UMP; United States; Asian credit market; credit flows; spillover effects; cross-border liquidity; bank lending channel
    JEL: F21 F36 G01 G21 G28
    Date: 2016–12–31
  6. By: Rose, Andrew K
    Abstract: I investigate whether countries that use unconventional monetary policy (UMP) experience export booms. I use a popular gravity model of trade which requires neither the exogeneity of UMP, nor instrumental variables for UMP. In practice, countries that engage in UMP experience a drop in exports vis-à -vis countries that are not engaged in such policies, holding other things constant. Quantitative easing is associated with exports that are about 10% lower to countries not engaged in UMP; this amount is significantly different from zero and similar to the effect of negative nominal interest rates. Thus there is no evidence that countries have gained export markets through unconventional monetary policy; any currency wars launched have been lost.
    Keywords: bilateral; data; easing; empirical; Gravity; interest; negative; nominal; quantitative; Trade
    JEL: E58 F14
    Date: 2017–01

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