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on International Finance |
| By: | Stefan Avdjiev; Leonardo Gambacorta; Linda Goldberg; Stefano Schiaffi |
| Abstract: | The post-crisis period has seen a considerable shift in the composition and drivers of international bank lending and international bond issuance, the two main components of global liquidity. The sensitivity of both types of flow to US monetary policy rose substantially in the immediate aftermath of the Global Financial Crisis, peaked around the time of the 2013 Fed "taper tantrum", and then partially reverted towards pre-crisis levels. Conversely, the responsiveness of international bank lending to global risk conditions declined considerably post-crisis and became similar to that of international debt securities. The increased sensitivity of international bank flows to US monetary policy has been driven mainly by post-crisis changes in the behaviour of national lending banking systems, especially those that ex ante had less well capitalized banks. By contrast, the post-crisis fall in the sensitivity of international bank lending to global risk was mainly due to a compositional effect, driven by increases in the lending market shares of better-capitalized national banking systems. The post-2013 reversal in the sensitivities to US monetary policy partially reflects the expected divergence of the monetary policy of the US and other advanced economies, highlighting the sensitivity of capital flows to the degree of commonality of cycles and the stance of policy. Moreover, global liquidity fluctuations have largely been driven by policy initiatives in creditor countries. Policies and prudential instruments that reinforced lending banks' capitalization and stable funding levels reduced the volatility of international lending flows. |
| Keywords: | Keywords: Global liquidity, international bank lending, international bond flows, capital flows |
| JEL: | G10 F34 G21 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:644&r=ifn |
| By: | Philip R. Lane; Gian M Milesi-Ferretti |
| Abstract: | This paper documents the evolution of international financial integration since the global financial crisis using an updated dataset on external assets and liabilities, covering over 210 economies for the period 1970-2015. It finds that the growth in cross-border positions in relation to world GDP has come to a halt. This reflects much weaker capital flows to and from advanced economies, with diminished cross-border banking activity, and an increase in the weight of emerging economies in global GDP, as these economies have lower external assets and liabilities than advanced economies. Cross-border FDI positions have continued to expand, unlike positions in portfolio instruments and other investment. This expansion reflects primarily positions vis-à-vis financial centers, suggesting that the complexity of the corporate structure of large multinational corporations is playing an important role. The paper also explores the cross-country drivers of foreign ownership of domestic debt securities, highlighting in particular the role of the euro debt crisis in explaining its evolution. |
| Keywords: | Foreign exchange;International financial integration, financial globalization |
| Date: | 2017–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:17/115&r=ifn |
| By: | Ansgar Belke; Irina Dubova |
| Abstract: | The paper empirically estimates the financial transmission between bond and equity markets within and across the four largest global financial markets - the United States, the Euro area, Japan, and the United Kingdom. We argue that international bond and equity markets are highly connected both within and across asset classes in a globalized world, where the complex transmission process across various financial assets is not restricted to just the domestic market. This paper employs identification through generalized forecast error variance decompositions to estimate spillovers across four systemic markets in a Vector Autoregression (VAR) framework. We find that asset prices react strongest to international shocks within the same asset class, but that there are also substantial international spillovers across asset classes. Rolling estimations analysis provides evidence that global asset markets have become more integrated and the bilateral relationships change over time. Our results are robust to specifications which take into account the monetary policy stance and include foreign exchange markets. |
| Keywords: | asset markets, financial transmission, financial market integration, rolling estimations, spillovers, Vector Autoregression |
| JEL: | E52 E58 F42 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:rmn:wpaper:201709&r=ifn |