nep-ifn New Economics Papers
on International Finance
Issue of 2019‒06‒24
two papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Boom-Bust Capital Flow Cycles By Graciela L. Kaminsky
  2. How Does Unconventional Monetary Policy Affect the Global Financial Markets?: Evaluating Policy Effects by Global VAR Models By INOUE Tomoo; OKIMOTO Tatsuyoshi

  1. By: Graciela L. Kaminsky
    Abstract: This paper examines the new trends in research on capital flows fueled by the 2007-2009 Global Crisis. Previous studies on capital flows focused on current-account imbalances and net capital flows. The Global Crisis changed that. The onset of this crisis was preceded by a dramatic increase in gross financial flows while net capital flows remained mostly subdued. The attention in academia zoomed in on gross inflows and outflows with special attention to cross border banking flows before the crisis erupted and the shift towards corporate bond issuance in its aftermath. The boom and bust in capital flows around the Global Crisis also stimulated a new area of research: capturing the “global factor.” This research adopts two different approaches. The traditional literature on the push-pull factors, which before the crisis was mostly focused on monetary policy in the financial center as the “push factor,” started to explore what other factors contribute to the comovement of capital flows as well as to amplify the role of monetary policy in the financial center on capital flows to the periphery. This new research focuses on global banks’ leverage, risk appetite, and global uncertainty. Since the “global factor” is not known, a second branch of the literature has captured this factor indirectly using dynamic common factors extracted from actual capital flows or movements in asset prices.
    JEL: F3 F34
    Date: 2019–05
  2. By: INOUE Tomoo; OKIMOTO Tatsuyoshi
    Abstract: This paper examines the effects of unconventional monetary policies (UMPs) by the Bank of Japan (BOJ) and the Federal Reserve (Fed) on the financial markets, taking international spillovers and a possible regime change into account. To this end, we apply the smooth-transition global VAR model to a set of major financial variables for 10 countries and one Euro zone. Our results suggest that the BOJ and the Fed's expansionary UMPs have had significant positive effects on domestic financial markets, particularly in more recent years. Our results also indicate that the BOJ's UMPs have rather limited effects on international financial markets and that the effect of the Fed's UMPs is approximately ten times larger.
    Date: 2019–04

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