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on International Finance |
| By: | Colacito, Riccardo; Croce, Mariano Massimiliano; Ho, Steven; Howard, Philip |
| Abstract: | We study the response of international investment flows to short- and long-run growth news. Among developed G7 countries, positive long-run news for domestic productivity induces a net outflow of investments, in contrast to the effects of short-run growth shocks. We document that a standard Backus, Kehoe, and Kydland (1994) (BKK) model fails to reproduce this novel empirical evidence. We augment this model with Epstein and Zin (1989) preferences (EZ-BKK) and characterize the resulting recursive risk-sharing scheme. The response of international capital flows in the EZ-BKK model is consistent with the data. |
| JEL: | C62 F31 G12 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12783&r=ifn |
| By: | Ahnert, Toni; Forbes, Kristin; Friedrich, Christian; Reinhardt, Dennis |
| Abstract: | Can macroprudential foreign exchange (FX) regulations on banks reduce the financial and macroeconomic vulnerabilities created by borrowing in foreign currency? To evaluate the effectiveness and unintended consequences of macroprudential FX regulation, we develop a parsimonious model of bank and market lending in domestic and foreign currency and derive four predictions. We confirm these predictions using a rich dataset of macroprudential FX regulations. These empirical tests show that FX regulations: (1) are effective in terms of reducing borrowing in foreign currency by banks; (2) have the unintended consequence of simultaneously causing firms to increase FX debt issuance; (3) reduce the sensitivity of banks to exchange rate movements, but (4) are less effective at reducing the sensitivity of corporates and the broader financial market to exchange rate movements. As a result, FX regulations on banks appear to be successful in mitigating the vulnerability of banks to exchange rate movements and the global financial cycle, but partially shift the snowbank of FX vulnerability to other sectors. |
| Keywords: | Banking flows; FX regulations; International debt issuance; macroprudential policies |
| JEL: | F32 F34 G15 G21 G28 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12766&r=ifn |
| By: | Pandey, Radhika (National Institute of Public Finance and Policy); Patnaik, Ila (National Institute of Public Finance and Policy); Shah, Ajay (National Institute of Public Finance and Policy) |
| Abstract: | This paper presents the business cycle chronology for the Indian economy. Two distinct phases are analysed. The pre-1991 period when the cycles were mainly driven by monsoon shocks. The post 1991 phase where we see the emergence of conventional business cycles driven by investment-inventory fluctuations. The paper sheds light on the economic conditions that shaped the nature of cycles in the two phases. The concluding section of the paper presents an overview of the economic conditions post 2012. |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:18/221&r=ifn |