|
on International Finance |
| By: | Georgiadis, Georgios; Le Mezo, Helena; Mehl, Arnaud; Casas, Camila; Boz, Emine; Nguyen, Tra; Gopinath, Gita |
| Abstract: | This paper presents the most comprehensive and up-to-date panel data set of invoicing currencies in global trade. It provides data on the shares of exports and imports invoiced in US dollars, euros, and other currencies for more than 100 countries since 1990. The evidence from these data confirms findings from earlier research regarding the globally dominant role of the US dollar in invoicing – despite the comparatively smaller role of the US in global trade – and the overall stability of invoicing currency patterns. But the evidence also points to several novel stylised facts. First, both the US dollar and the euro have been increasingly used for invoicing even as the share of global trade accounted for by the US and the euro area has declined. Second, the euro is used as a vehicle currency in parts of Africa, and some European countries have seen significant shifts toward euro invoicing. And third, as suggested by the dominant currency paradigm, countries invoicing more in US dollars (euros) tend to experience greater US dollar (euro) exchange rate pass-through to their import prices; also, their trade volumes are more sensitive to fluctuations in these exchange rates. JEL Classification: F14, F31, F44 |
| Keywords: | dominant currency paradigm, exchange rate pass-through, invoicing currency of trade |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202456&r=all |
| By: | Kollmann, Robert |
| Abstract: | This paper studies fluctuations of interest rates, inflation and output in a two-country New Keynesian business cycle model with a zero lower bound (ZLB) constraint for nominal interest rates. The presence of the ZLB generates multiple equilibria driven by self-fulfilling changes in domestic and foreign inflation expectation. Each country randomly switches in and out of a liquidity trap. In a floating exchange rate regime, liquidity traps can either be synchronized or unsynchronized across countries. This is the case even if countries are perfectly financially integrated. By contrast, in a monetary union, self-fulfilling fluctuations in inflation expectations must be perfectly correlated across countries. |
| Keywords: | Zero lower bound, liquidity trap, global business cycles |
| JEL: | E3 E4 F2 F3 F4 |
| Date: | 2020–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102324&r=all |
| By: | Bekaert, Geert; De Santis, Roberto A. |
| Abstract: | Corporate bond returns in the major developed economies increase with risk, as measured by maturity and ratings. From a pricing perspective, we find little to no evidence against the World CAPM model, where the market consists out of equity, sovereign and corporate bonds. However, from a factor model perspective, local factors contribute substantially more to the variation of corporate bond returns than global factors. The factor exposures show intuitive patterns: as ratings worsen, equity betas show a hockey stick pattern, sovereign betas decline monotonically and corporate bond betas increase steeply. JEL Classification: G10, G11, G15 |
| Keywords: | asset class integration, bond ratings, CAPM, corporate bond markets, international market integration, return, risk |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202452&r=all |
| By: | Bobasu, Alina; Venditti, Fabrizio; Arrigoni, Simone |
| Abstract: | In this paper we assess the merits of financial condition indices constructed using simple averages versus a more sophisticated alternative that uses factor models with time varying parameters. Our analysis is based on data for 18 advanced and emerging economies at a monthly frequency covering about 70% of the world’s GDP. We use four criteria to assess the performance of these indicators, namely quantile regressions, Structural Vector Autoregressions, the ability of the indices to predict banking crises and their response to US monetary policy shocks. We find that averaging across the indicators of interest, using judgemental but intuitive weights, produces financial condition indices that are not inferior to, and actually perform better than, those constructed with more sophisticated statistical methods. JEL Classification: E32, E44, C11, C55 |
| Keywords: | banking crises, financial conditions, quantile regressions, spillovers, SVARs |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202451&r=all |