nep-ifn New Economics Papers
on International Finance
Issue of 2020‒10‒05
three papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Cross-Border Banking in EMDEs : Trends, Scale, and Policy Implications By Feyen,Erik H.B.; Fiess,Norbert Matthias; Bertay,Ata Can; Zuccardi Huertas,Igor Esteban
  2. The Effectiveness of FX Interventions: A Meta-Analysis By Lucía Arango-Lozano; Lukas Menkhoff; Daniela Rodríguez-Novoa; Mauricio Villamizar-Villegas
  3. SRISKv2 - A Note By Alexander Jiron; Marco Migueis

  1. By: Feyen,Erik H.B.; Fiess,Norbert Matthias; Bertay,Ata Can; Zuccardi Huertas,Igor Esteban
    Abstract: Cross-border banking in emerging markets and developing economies has expanded across most World Bank regions and has become large relative to some home and host economies. This paper analyzes recent trends of bank activities of financial groups headquartered in 46 emerging markets and developing economies, as well as the ownership structure of 51 prominent financial groups from emerging markets and developing economies. The data suggest that cross-border groups in most regions have grown in size, geographical reach, range of activities, and group complexity. The increasing relevance and complexity of cross-border banking pose challenges for policy makers in home and host jurisdictions as well as for the groups themselves to maximize the benefits of international financial integration while mitigating the risks. This balance calls for stronger consolidated supervision, more regional coordination and harmonization, and better group-wide corporate governance and controls. However, key challenges include institutional capacity constraints and political factors.
    Keywords: Financial Sector Policy,International Trade and Trade Rules,Macroeconomic Management,Capital Markets and Capital Flows,Multinational&Corporate Governance,Corporate Governance,Civic Participation and Corporate Governance,Capital Flows
    Date: 2020–09–09
  2. By: Lucía Arango-Lozano (Banco de la República de Colombia); Lukas Menkhoff; Daniela Rodríguez-Novoa (Banco de la República de Colombia); Mauricio Villamizar-Villegas (Banco de la República de Colombia)
    Abstract: There is ample empirical literature centering on the effectiveness of foreign exchange intervention (FXI). Given the mix of objectives and country-heterogeneity, the general lack of consensus thus far is no surprise. We shed light on this debate by conducting the first comprehensive meta-analysis in the FXI literature, with 279 reported effects that stem from 74 distinct empirical studies. We cover estimations conducted in 19 countries across five decades. Overall, our meta-survey reports an average depreciation of domestic currency of 1% and a reduction of exchange rate volatility of 0.6%, in response to a $1 billion US dollar purchase. Results are qualitatively confirmed but smaller in size under fixed and random-effect estimations. When narrowing in on different economic factors, we find that effects are magnified for cases consistent with the monetary trilemma (greater if financial openness and monetary independence are low). Effects are also larger in emerging than advanced economies, when banking crises remain mild, and when interventions are large in size and are announced. **** RESUMEN: Existe una amplia literatura empírica sobre la efectividad de la intervención cambiaria (FXI). Sin embargo, dados los diferentes objetivos y la heterogeneidad de los países con respecto a las condiciones del mercado, es de esperarse que a la fecha no haya un consenso. Este trabajo es el más grande jamás realizado en la literatura de FXI, con un total de 279 efectos reportados, provenientes de 74 estudios empíricos. Cubre estimaciones realizadas en 19 países y durante 5 décadas. En general, nuestro meta-análisis encuentra una depreciación promedio de la moneda local del 1,0% y una reducción de la volatilidad de la tasa de cambio del 0,6%, en respuesta a una compra neta de mil millones de dólares. Sin embargo, los resultados son más pequeños bajo efectos fijos y aleatorios. Al considerar diferentes factores económicos, encontramos que los efectos se magnifican para los casos consistentes con el trilema de la política monetaria (mayor efecto si la apertura financiera y la independencia monetaria son bajas). Los efectos también son mayores en países emergentes, cuando las crisis cambiarias y bancarias son menores, cuando aumenta el tamaño de la intervención y cuando las intervenciones son anunciadas.
    Keywords: foreign exchange intervention, exchange rate, meta-analysis, Intervención cambiaria, tasa de cambio, meta-análisis
    JEL: C83 E58 F31
    Date: 2020–09
  3. By: Alexander Jiron; Marco Migueis
    Abstract: SRISK is a very influential metric of the systemic risk posed by financial firms. However, SRISK suffers from a conceptual flaw in its capital shortfall calculation. This note proposes a modified version of this metric, SRISKv2, which corrects this flaw and provides a more sensible metric of the systemic risk posed by financial firms.
    Date: 2020–09–18

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