nep-ifn New Economics Papers
on International Finance
Issue of 2018‒03‒12
two papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Global Spillover Effects of US Uncertainty By Saroj Bhattarai; Arpita Chatterjee; Woong Yong Park
  2. Global Financial Cycles and the Exchange Rate Regime: A Perspective from Emerging Markets By Obstfeld, Maurice; Ostry, Jonathan D.; Qureshi, Mahvash S.

  1. By: Saroj Bhattarai (University of Texas at Austin); Arpita Chatterjee (UNSW Business School, UNSW); Woong Yong Park (Seoul National University)
    Abstract: We study spillover effects of US uncertainty fluctuations using panel data from fifteen emerging market economies (EMEs). A US uncertainty shock negatively affects EME stock prices and exchange rates, raises EME country spreads, and leads to capital outflows from them. Moreover, it decreases EME output, while increasing their consumer prices and net exports. The negative effects on output, exchange rates, and stock prices are weaker, but the effects on capital and trade flows stronger, for South American countries compared to other EMEs. We present a model of a small open economy that faces an external shock to interpret our findings.
    Keywords: US Uncertainty, Emerging Market Economies, Small Open Economy Model, Capital Flows, Country Spread
    JEL: C33 E44 E52 E58 F32 F41
    Date: 2017–11
  2. By: Obstfeld, Maurice; Ostry, Jonathan D.; Qureshi, Mahvash S.
    Abstract: This paper examines the relevance of exchange rate regimes in the transmission of global financial shocks to domestic financial and macroeconomic conditions. Our findings suggest that even in today's highly financially integrated world, the nominal exchange rate regime does matter-at least for emerging market economies. The transmission of global financial shocks to domestic variables is magnified under fixed exchange rate regimes relative to more flexible regimes. For advanced economies, however, the jury is still out, as the recent paucity of truly fixed regimes among these economies poses a challenge for estimating the effect of exchange rate flexibility.
    Keywords: emerging market economies; global financial cycle; trilemma
    JEL: F31 F36 F41
    Date: 2018–02

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