nep-ifn New Economics Papers
on International Finance
Issue of 2020‒06‒15
five papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Global Liquidity and Impairment of Local Monetary Policy By Fendoglu, Salih; Gulsen, Eda; Peydró, José-Luis
  2. Hedger of Last Resort: Evidence from Brazil on FX Interventions, Local Credit and Global Financial Cycles By Barbone Gonzalez, Rodrigo; Khametshin, Dmitry; Peydró, José-Luis; Polo, Andrea
  3. Global financial cycles since 1880 By Potjagailo, Galina; Wolters, Maik H
  4. Dynamic Spillovers between REITs and Stock Markets in Global Financial Markets By Gomez-Gonzalez, Jose Eduardo; Hirs-Garzon, Jorge
  5. Using mirror data to track international banking By Swapan-Kumar Pradhan; João Falcão Silva

  1. By: Fendoglu, Salih; Gulsen, Eda; Peydró, José-Luis
    Abstract: We show that global liquidity limits the effectiveness of local monetary policy on credit markets. The mechanism is via a bank carry trade in international markets when local monetary policy tightens. For identification, we exploit global (VIX, U.S. monetary policy) shocks and loan-level data —the credit and international interbank registers— from a large emerging market, Turkey. Softer global liquidity conditions attenuate the pass-through of local monetary policy tightening on loan rates, especially for banks with more access to international wholesale markets. Effects are also important for other credit margins and for risk-taking, e.g. riskier borrowers in FX loans or defaults.
    Keywords: global financial cycle,monetary policy,emerging markets,banks,carry trade
    JEL: G01 G15 G21 G28 F30
    Date: 2019
  2. By: Barbone Gonzalez, Rodrigo; Khametshin, Dmitry; Peydró, José-Luis; Polo, Andrea
    Abstract: We show that local central bank policies attenuate global financial cycle (GFC)’s spillovers. For identification, we exploit GFC shocks and Brazilian interventions in FX derivatives using three matched administrative registers: credit, foreign credit flows to banks, and employer-employee. After U.S. Federal Reserve Taper Tantrum (followed by strong Emerging Markets FX depreciation and volatility increase), Brazilian banks with larger ex-ante reliance on foreign debt strongly cut credit supply, thereby reducing firm-level employment. However, a large FX intervention program supplying derivatives against FX risks—hedger of last resort—halves the negative effects. Finally, a 2008-2015 panel exploiting GFC shocks and local related policies confirm these results.
    Keywords: foreign exchange,monetary policy,central bank,bank credit,hedging
    JEL: E5 F3 G01 G21 G28
    Date: 2019
  3. By: Potjagailo, Galina (Bank of England); Wolters, Maik H (University of Wuerzburg, Kiel Institute, and IMFS at Goethe University Frankfurt)
    Abstract: With the aim to provide a detailed understanding of global financial cycles and their relevance over time, we analyse co-movement in credit, house prices, equity prices, and interest rates across 17 advanced economies over 130 years. Using a time-varying dynamic factor model, we observe global co-movement across financial variables as well as variable-specific global cycles of different lengths and amplitudes. Global cycles have gained relevance over time. For equity prices, they now constitute the main driver of fluctuations in most countries. Global cycles in credit and housing have become much more pronounced and protracted since the 1980s, but their relevance increased for a sub-group of financially open and developed economies only. Panel regressions indicate that a country’s susceptibility to global financial cycles tends to increase with financial openness and financial integration, the extent of mortgage-related lending, and the efficiency of stock markets. Understanding the cross-country heterogeneity in financial market characteristics therefore matters for the design of appropriate financial stabilization policies across countries and sectors.
    Keywords: Financial cycles; financial crisis; global co-movement; dynamic factor models; time-varying parameters; macro-finance
    JEL: C32 C38 E44 F44 F65 G15 N10 N20
    Date: 2020–05–29
  4. By: Gomez-Gonzalez, Jose Eduardo; Hirs-Garzon, Jorge
    Abstract: We study spillovers between REITs and stock markets in a global context. We compute both directional and net spillover indexes in a global and dynamic setting. Our findings indicate that connectedness between these markets has increased importantly over time. On average stock markets are net transmitters and REITs markets are net receivers. Considerable time variation is observed. Spillovers are higher during crises and REITs were net spillover transmitters to stock markets during the Subprime Financial Crisis. Our results have important implications for global investors.
    Keywords: Spillovers; Market connectedness; REITs markets; Stock markets; LASSO methods
    JEL: G01 G15 C32
    Date: 2020–06
  5. By: Swapan-Kumar Pradhan; João Falcão Silva
    Abstract: Recent enhancements to the BIS international banking statistics have led to improvements in data quality and coverage, with more information available about the instrument type, counterparty country by bank nationality and counterparty sector of banks' international positions. This study uses mirror data techniques to examine those data elements that are common both within the various international banking datasets and between these datasets and other external financial statistics such as the Balance of Payments, International Investment Position, Coordinated Portfolio Investment Survey and the BIS International Debt Securities Statistics. We exploit the conceptual relationships between these data sources to check data validity at an aggregate level. The paper thus provides a road map for users to enhance their analyses using mirror data concepts.
    Keywords: Balance of payments, data collection and data estimation methodology, international banking, international financial data
    JEL: C82 C80 F42 F30
    Date: 2019–10

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