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on International Finance |
| By: | Saroj Bhattarai; Arpita Chatterjee; Woong Yong Park |
| Abstract: | Spillover effects of US uncertainty shocks are studied in a panel VAR of ?fteen emerging market economies (EMEs). A US uncertainty shock negatively affects EME stock prices and exchange rates, raises EME country spreads, and decreases capital inflows into them. It decreases EME output and consumer prices while increasing net exports. Negative effects on output and asset prices are weaker, but effects on external balance stronger, for Latin American EMEs. We attribute such heterogeneity to di?erential EME monetary policy response to US uncertainty shocks. Analysis of central bank minutes shows Latin American EMEs pay less attention to smoothing capital ?ows. |
| Keywords: | US Uncertainty; Panel VAR; Emerging Market Economies; Monetary Policy Response; Emerging Market Monetary Policy Minutes |
| JEL: | C11 C33 E44 E52 E58 F32 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:snu:ioerwp:no107&r=all |
| By: | Antonio David; Carlos Eduardo Gonçalves |
| Abstract: | This paper investigates what factors affect the duration of sudden stops in capital flows using quarterly data for a large panel of countries. We find that countries with floating exchange rate regimes tend to experience shorter sudden stop episodes and that fixed exchange rate regimes are associated with longer periods of low output growth following sudden stops. These effects are quantitatively large: having a flexible exchange rate regime increases the probability of exiting the sudden stop state by between 50 to 80 percent. Flexible exchange rate regimes significantly shorten the duration of output decelerations following sudden stops by over 30 percent. Positive variations in terms of trade also abbreviate the duration of sudden stops. In terms of policies, identification is trickier, but the evidence suggests that monetary policy tightening shortens the duration of sudden stops. Changes in capital account restrictions do not seem to matter. |
| Date: | 2019–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/230&r=all |
| By: | Silvia Albrizio (Banco de España); Sangyup Choi (Yonsei University); Davide Furceri (IMF); Chansik Yoon (Princeton University) |
| Abstract: | How does domestic monetary policy in systemic countries spillover to the rest of the world? This paper examines the transmission channel of domestic monetary policy in the cross-border context. We use exogenous shocks to monetary policy in systemically important economies, including the U.S., and local projections to estimate the dynamic effect of monetary policy shocks on bilateral cross-border bank lending. We find robust evidence that an increase in funding costs following an exogenous monetary tightening leads to a statistically and economically significant decline in cross-border bank lending. The effect is weakened during periods of high uncertainty. In contrast, the effect is found to not vary according to the degree of borrower country riskiness, further weakening support for the international portfolio rebalancing channel. |
| Keywords: | monetary policy spillovers, international bank lending channel, cross-border banking flows, global financial cycles, local projections |
| JEL: | E52 F21 F32 F42 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1938&r=all |
| By: | Josh Davis; Alan M. Taylor |
| Abstract: | Research finds strong links between credit booms and macroeconomic outcomes like financial crises and output growth. Are impacts also seen in financial asset prices? We document this robust and significant connection for the first time using a large sample of historical data for many countries. Credit boom periods tend to be followed by unusually low returns to equities, in absolute terms and relative to bonds. Return predictability due to this leverage factor is distinct from that of established factors like momentum and value and generates trading strategies with meaningful excess profits out-of-sample. These findings pose a challenge to conventional macro-finance theories. |
| JEL: | E17 E20 E21 E32 E44 G01 G11 G12 G17 G21 N10 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26435&r=all |