nep-ifn New Economics Papers
on International Finance
Issue of 2020‒10‒12
two papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. The Currency Composition of International Portfolio Assets By Vahagn Galstyan; Caroline Mehigan; Rogelio V. Mercado, Jr.
  2. Sectoral Capital Flows: Covariates, Co-movements, and Controls By Etienne Lepers; Rogelio Mercado, Jr.

  1. By: Vahagn Galstyan (Trinity College Dublin); Caroline Mehigan (Organisation for Economic Co-Operation and Development); Rogelio V. Mercado, Jr. (The SEACEN Centre)
    Abstract: In this paper, we empirically assess the importance of gravity-type variables and measures of macroeconomic and financial volatilities in explaining portfolio holdings denominated across the main global currencies: US dollar (USD), euro (EUR), Pound sterling (GBP), Japanese yen (JPY) and Swiss franc (CHF). Our findings underscore the importance of trade ties and membership of the euro area. We also find that international positions co-move with the level of macroeconomic and financial uncertainty. Importantly, we identify heterogeneous patterns at a currency level.
    Keywords: Currency Composition, International Portfolio Assets, Trade, Volatility
    JEL: F31 F36 F41 G15
    Date: 2019–01
  2. By: Etienne Lepers (Organisation for Economic Co-operation and Development (OECD)); Rogelio Mercado, Jr. (The SEACEN Centre)
    Abstract: This paper assembles a comprehensive sectoral capital flows dataset for 64 advanced and emerging economies, from 2000-18, including direct, portfolio, and other investment to and from five sectors: namely, central banks (CB), general government (GG), banks (BKs), non-financial corporates (NFCs) and other financial corporates (OFCs). Using such data, this paper highlights the usefulness of a sectoral approach in assessing capital flow covariates, co-movements, and the effectiveness of capital controls. We show that 1) sectoral flows have varying sensitivities to measures of the global financial cycle and different cyclicality with respect to output growth; 2) co-movements in intra-sectoral resident and non-resident and co-movements with OFC sectoral flows explain a large part of the observed positive correlation between gross inflows and outflows; and, 3) sector-specific tightening capital control measures appear effective in reducing the volume of flows to NFCs and OFCs.
    Keywords: sectoral capital flows, capital flows correlations, capital controls
    Date: 2020–05

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