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on International Finance |
| By: | Buch, Claudia M. (Deutsche Bundesbank); Bussiere, Matthieu (Banque de France); Goldberg, Linda S. (Federal Reserve Bank of New York); Hills, Robert (Bank of England) |
| Abstract: | This paper presents the novel results from an internationally coordinated project by the International Banking Research Network (IBRN) on the cross-border transmission of conventional and unconventional monetary policy through banks. Teams from seventeen countries use confidential micro-banking data for the years 2000 through 2015 to explore the international transmission of monetary policies of the United States, the euro area, Japan, and the United Kingdom. Two other studies use international data with different degrees of granularity. International spillovers into lending to the private sector do occur, especially for U.S. policies, and bank-specific heterogeneity influences the magnitudes of transmission. The effects are supportive of the international bank lending channel and the portfolio channel of monetary policy transmission. They also show that the frictions that banks face matter; in particular, foreign currency funding and hedging considerations can be a key source of heterogeneity. The forms of bank balance sheet heterogeneity that differentiate spillovers across banks are not uniform across countries. International spillovers into lending can be large for some banks, even while the average international spillovers of policies into nonbank lending generally are not large. |
| Keywords: | monetary policy; international spillovers; cross-border transmission; global bank; global financial cycle |
| JEL: | E52 F3 F4 G15 G21 |
| Date: | 2018–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:845&r=ifn |
| By: | Patrick Blagrave; Giang Ho; Ksenia Koloskova; Esteban Vesperoni |
| Abstract: | Are fiscal spillovers today as large as they were during the global financial crisis? How do they depend on economic and policy conditions? This note informs the debate on the cross-border impact of fiscal policy on economic activity, shedding light on the magnitude and the factors affecting transmission, such as the fiscal instruments used, cyclical positions, monetary policy conditions, and exchange rate regimes. The note assesses spillovers from five major advanced economies (France, Germany, Japan, United Kingdom, United States) on 55 advanced and emerging market economies that represent 85 percent of global output, looking at government-spending and tax revenue shocks during expansion and consolidation episodes. It finds that fiscal spillovers are economically significant in the presence of slack and/or accommodative monetary policy—and considerably smaller otherwise, which suggests that spillovers are large when domestic multipliers are also large. It also finds that spillovers from government-spending shocks are larger and more persistent than those from tax shocks and that transmission may be stronger among countries with fixed exchange rates. The evidence suggests that although spillovers from fiscal policies in the current environment may not be as large as they were during the crisis, they may still be important under certain economic circumstances. |
| Keywords: | Spillovers;Fiscal policy;External shocks;Global financial crisis, 2008-2009;Monetary policy;Exchange rate regimes;Emerging markets;Government spending;Tax revenue;Economic expansion;Fiscal consolidation;Spillovers, fiscal policy, transmission, economic impact, cross-border impact |
| Date: | 2017–10–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfson:17/02&r=ifn |
| By: | Carriero, Andrea (Queen Mary University of London); Clark, Todd E. (Federal Reserve Bank of Cleveland); Marcellino, Massimiliano (Bocconi University, IGIER, and CEPR) |
| Abstract: | This paper uses a large vector autoregression (VAR) to measure international macroeconomic uncertainty and its effects on major economies, using two datasets, one with GDP growth rates for 19 industrialized countries and the other with a larger set of macroeconomic indicators for the U.S., euro area, and U.K. Using basic factor model diagnostics, we first provide evidence of significant commonality in international macroeconomic volatility, with one common factor accounting for strong comovement across economies and variables. We then turn to measuring uncertainty and its effects with a large VAR in which the error volatilities evolve over time according to a factor structure. The volatility of each variable in the system reflects time-varying common (global) components and idiosyncratic components. In this model, global uncertainty is allowed to contemporaneously affect the macroeconomies of the included nations—both the levels and volatilities of the included variables. In this setup, uncertainty and its effects are estimated in a single step within the same model. Our estimates yield new measures of international macroeconomic uncertainty, and indicate that uncertainty shocks (surprise increases) lower GDP and many of its components, adversely affect labor market conditions, lower stock prices, and in some economies lead to an easing of monetary policy. |
| Keywords: | Business cycle uncertainty; stochastic volatility; large datasets; |
| JEL: | C11 E32 F44 |
| Date: | 2018–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1803&r=ifn |
| By: | Zhiguo He; Arvind Krishnamurthy |
| Abstract: | "Intermediary asset pricing'' understands asset prices and risk premia through the lens of frictions in financial intermediation. Perhaps motivated by phenomena in the financial crisis, intermediary asset pricing has been one of the fastest growing areas of research in finance. This article explains the theory behind intermediary asset pricing and in particular how it is different from other approaches to asset pricing. The article also covers selective empirical evidence in favor of intermediary asset pricing. |
| JEL: | E44 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24415&r=ifn |