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on International Finance |
| By: | Sameer Khatiwada (IHEID, Graduate Institute of International and Development Studies, Geneva and ILO Regional Office Bangkok) |
| Abstract: | By employing a novel dataset on international capital flows, this paper examines the impact of Fed’s quantitative easing (QE) policies on flows to emerging markets economies (EMEs) and the EU countries. Episodes of QE are examined separately, with the last episode divided between pre- and post-tapering. We find evidence that QE was associated with an increase in capital inflow, while tapering was associated with a period of retrenchment. The magnitude of the impact varied by different episodes of QE and the types of assets (bonds or equities). Our results show that the EU countries behaved differently than the EMEs. We also find support for the importance of “pull factors” and individual country characteristics for capital inflows. However, the paper shows that episodes of QE accounted for most of the variation in capital inflows during 2008-2014. G20 statements during the episodes of QE show that countries are increasingly cognizant of their inability to control flows and have thus called for better monetary policy coordination to avoid excessive volatility and negative spillovers. |
| Keywords: | Quantitative Easing (QE), spillovers, capital flows, emerging market economies (EMEs) |
| JEL: | E44 E52 E58 F32 F41 F42 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp02-2017&r=ifn |
| By: | Seung Jung Lee; Lucy Qian Liu; Viktors Stebunovs |
| Abstract: | We study how low interest rates in the United States affect risk taking in the market for cross-border corporate loans. Because banks tend to originate these loans with intent to sell to nonbank investors, we examine risk taking by the broad financial system. To the extent that actions of the Federal Reserve affect U.S. interest rates, our analysis provides evidence of cross-border spillover effects of U.S. monetary policy and highlights the global lending and risk-taking channels. We find that movements in the U.S. interest rates have an important effect on ex-ante credit risk of cross-border corporate loans, though the channels are different in the pre- and post-crisis periods. Before the crisis, banks made ex-ante riskier loans to non-U.S. borrowers in response to a decline in U.S. short-term interest rates, and, after it, banks and nonbanks originated such loans in response to a decline in U.S. longer- term interest rates. Economic uncertainty, risk appetite, and the U.S. dollar exchange rate appear to play a limited role in explaining ex-ante credit risk. Our results highlight the potential policy challenges faced by central banks in affecting credit risk cycles in their own jurisdictions. |
| Keywords: | Syndicated loans ; Risk taking ; Monetary policy ; International spillovers |
| JEL: | E44 E52 F30 F42 G15 G20 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1188&r=ifn |
| By: | Roger M. Gomis (Universitat Pompeu Fabra); Sameer Khatiwada (IHEID, Graduate Institute of International and Development Studies, Geneva and ILO Regional Office Bangkok) |
| Abstract: | This paper analyses the impact of recessions and booms on firm performance. We look at 70,000 firms in over 100 countries between 1986 and 2014 and document the trends in firm entry over the business cycle. Our paper confirms some standard facts about firm dynamics: employment growth is decreasing with size and age; entry rate is pro-cyclical while the exit rate is countercyclical. For example, in case of advanced economies, 97 per cent of employment creation is by firms between the ages of 0 and 5 years, while for developing and emerging economies, it is 86 per cent of all employment. Our main results are: first, we do see selection effects of recessions, particularly when we look at employment, sales and capital. Specifically, when a firm enters the market during good times, they tend to have lower employment and capital than firms that enter the market during bad times. Second, when we look at total factor productivity (TFP), we don’t see a clear “cleansing effect” of recessions – more productive firms entering the market while less productive leaving. Third, the effects of entering during a boom or a recession tend to persist for a long time, over 15 years. Fourth, we find notable differences between income groups – while recessions tend to create stronger firms in the advanced economies, booms tend to create stronger ones in case of the emerging economies. Lastly, the effects of recessions on firms tend to vary by sector. |
| Keywords: | business cycles, entry and exit, firm performance, total factor productivity |
| JEL: | D22 E32 L25 O4 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp03-2017&r=ifn |