nep-ifn New Economics Papers
on International Finance
Issue of 2020‒07‒13
four papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. The Global Transmission of U.S. Monetary Policy By Degasperi, Riccardo; Hong, Simon; Ricco, Giovanni
  2. Redrawing the Map of Global Capital Flows: The Role of Cross-Border Financing and Tax Havens By Coppola, Antonio; Maggiori, Matteo; Neiman, Brent; Schreger, Jesse
  3. Exchange Rates and Asset Prices in a Global Demand System By Ralph S. J. Koijen; Motohiro Yogo
  4. Tweeting on Monetary Policy and Market Sentiments: The Central Bank Surprise Index By Donato Masciandaro; Davide Romelli; Gaia Rubera

  1. By: Degasperi, Riccardo; Hong, Simon; Ricco, Giovanni
    Abstract: This paper studies the transmission of US monetary shocks across the globe by employing a high-frequency identification of policy shocks and large VAR techniques, in conjunction with a large macro-financial dataset of global and national indicators covering both advanced and emerging economies. Our identification controls for the information effects of monetary policy and allows for the separate analysis of tightenings and loosenings of the policy stance. First, we document that US policy shocks have large real and nominal spillover effects that affect both advanced economies and emerging markets. Policy actions cannot fully isolate national economies, even in the case of advanced economies with flexible exchange rates. Second, we investigate the channels of transmission and find that both trade and financial channels are activated and that there is an independent role for oil and commodity prices. Third, we show that effects are asymmetric and larger in the case of contractionary US monetary policy shocks. Finally, we contrast the transmission mechanisms of countries with different exchange rates, exposure to the dollar, and capital control regimes.
    Keywords: Exchange Rates; Foreign Spillovers; monetary policy; trilemma
    JEL: C3 E5 F3 F4
    Date: 2020–03
  2. By: Coppola, Antonio; Maggiori, Matteo; Neiman, Brent; Schreger, Jesse
    Abstract: Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their nationality in aggregate statistics. We associate the universe of traded securities with their issuer's ultimate parent and restate bilateral investment positions to better reflect the true financial linkages connecting countries around the world. We find that portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly \$600 billion, while China's official net creditor position to the rest of the world is overstated by about 50 percent. We additionally show how taking account of offshore issuance is important for our understanding of the currency composition of external portfolio liabilities, the nature of foreign direct investment, and the growth of financial globalization.
    Date: 2020–03
  3. By: Ralph S. J. Koijen; Motohiro Yogo
    Abstract: Using international holdings data, we estimate a demand system for financial assets across 36 countries. The demand system provides a unified framework for decomposing variation in exchange rates, long-term yields, and stock prices; interpreting major economic events such as the European sovereign debt crisis; and estimating the convenience yield on US assets. Macro variables and policy variables (i.e., short-term rates, debt quantities, and foreign exchange reserves) account for 55 percent of the variation in exchange rates, 57 percent of long-term yields, and 69 percent of stock prices. The average convenience yield is 2.15 percent on US long-term debt and 1.70 percent on US equity.
    JEL: E52 F31 G12
    Date: 2020–06
  4. By: Donato Masciandaro; Davide Romelli; Gaia Rubera
    Abstract: This paper explores the relationship between central bank communication and market sentiment, and proposes a new measure. Market sentiment is proxied using a Twitter-based metric: the Central Bank Surprise Index. The empirical study covers three cases: the Federal Reserve, the European Central Bank and the Bank of England.
    Keywords: monetary policy, central bank communication, financial market, social media, Twitter, Federal Reserve System, European Central Bank, Bank of England, Bank of Japan
    JEL: E44 E52 E58 G14 G15
    Date: 2020

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