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on International Finance |
| By: | Zelal Aktas; Yasemin Erduman; Neslihan Kaya Eksi |
| Abstract: | We analyze how changes in market expectations about the Federal Reserve’s future monetary policy stance affect an emerging country’s share in total portfolio flows to emerging markets. We estimate a seemingly unrelated regression model for a panel of 19 emerging countries, using monthly data from January 2010 to October 2017. Our findings suggest that the effect of Fed’s policy expectations on the country share is asymmetric. The expectations of Fed’s monetary policy is found to reduce an emerging country’s share in total emerging market portfolio flows when expectations imply a policy tightening, while easing expectations do not have a significant effect on the share. A country with stronger financial conditions and safer business environment for international investors tend to downsize the negative effect of Fed’s policy tightening on its share in total portfolio flows, with respect to its counterparts. |
| Keywords: | Fed expectations, Capital flows, Emerging markets, Panel regression |
| JEL: | E43 F32 F41 G11 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:1809&r=all |
| By: | Halil Ibrahim Korkmaz; Yigit Onay |
| Abstract: | [EN] This note explores the variations in currency risk premium among emerging market countries. In this respect, firstly the local currency bond yields are decomposed into its risk-free rate, default risk premium and currency risk premium components. The graphical illustrations show that the currency risk premium tends to vary across emerging market countries. Pooled ordinary least square method is conducted in order to explain the variation in currency risk premium among sample countries for years between 2007 and 2016. Estimation results indicate that country-specific macroeconomic variables (foreign exchange reserves, public sector debt stock, net international investment position) and uncertainty indicators (inflation and growth volatilities) play a great role on the variation in currency risk premium for emerging market countries. These findings provide significant implications for both monetary and fiscal policy domain. Accordingly, it can be concluded that countries’ borrowing costs in local currency can be reduced notably and the effectiveness of the monetary policy can be enhanced if the policies are oriented towards structurally imbalanced areas. [TR] Bu notta gelismekte olan ulkelerin kur riski primlerindeki degisimlerin aciklanmasi amaclanmistir. Bu kapsamda, ilk olarak yerel para birimi cinsinden ihrac edilen hazine tahvil getirileri; risksiz getiri orani, kredi temerrut riski primi ve kur riski primi olarak bilesenlerine ayrilmistir. Grafiksel gosterimler kur riski priminin gelismekte olan ulkeler arasinda onemli farkliliklar sergiledigine isaret etmektedir. Ulkeler arasinda ortaya cikan farkliliklari analiz etmek amaciyla 2007-2016 yillari arasi veriler ile havuzlanmis regresyon metodu kullanilmistir. Tahmin sonuclari, ulkelere ozgu degiskenlerin (doviz rezervleri, kamu borc stoku, net uluslararasi yatirim pozisyonu ile belirsizlik gostergeleri olarak kullanilan buyume orani ve enflasyon oynakliklari) gelismekte olan ulkelerin kur riski primlerindeki degisimlerde buyuk rol oynadiklarini gostermektedir. Calisma sonuclari para politikasi ile maliye politikasi alanlarina iliskin onemli cikarimlar sunmaktadir. Bu dogrultuda, politikalarin ekonomideki yapisal dengesizlikleri gidermeye yonelik olmasi durumunda gelismekte olan ulkelerdeki yerel para birimi cinsi borclanma maliyetlerinin dusebilecegi ve para politikasinin etkinliginin artabilecegi degerlendirilmektedir. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:econot:1806&r=all |
| By: | Jose L. Fillat (Federal Reserve Bank of Boston); Stefania Garetto (Boston University, CEPR, and NBER); Arthur V. Smith (Boston University) |
| Abstract: | The global financial crisis of 2008 was followed by a wave of regulatory reforms that affected large banks, especially those with a global presence. These reforms were reactive to the crisis. In this paper we propose a structural model of global banking that can be used proactively to perform counterfactual analysis on the effects of alternative regulatory policies. The structure of the model mimics the US regulatory framework and highlights the organizational choices that banks face when entering a foreign market: branching versus subsidiarization. When calibrated to match moments from a sample of European banks, the model is able to replicate the response of the US banking sector to the European sovereign debt crisis. Our counterfactual analysis suggests that pervasive subsidiarization, higher capital requirements, or ad hoc monetary policy interventions would have mitigated the effects of the crisis on US lending. |
| Keywords: | global banks, banking regulation, shock transmission. |
| JEL: | F12 F23 F36 G21 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:bos:wpaper:wp2019-001&r=all |