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on International Finance |
| By: | Elisabeth Kempf; Mancy Luo; Larissa Schäfer; Margarita Tsoutsoura |
| Abstract: | Does partisan perception shape the flow of international capital? We provide evidence from two settings, syndicated corporate loans and equity mutual funds, to show that ideological alignment with foreign governments affects the cross-border capital allocation by U.S. institutional investors. Moreover, we find that ideological alignment with foreign countries also affects investments of non-U.S. investors and can explain patterns in bilateral FDI flows. Our empirical strategy ensures that direct economic effects of foreign elections or bilateral ties between countries are not driving the result. Combined, our findings imply that partisan perception is a global phenomenon and its economic effects transcend national borders. |
| JEL: | G11 G15 G21 G23 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29280&r= |
| By: | Joshua Aizenman; Yin-Wong Cheung; Xingwang Qian |
| Abstract: | We examine the effects of active international reserve management (IRM) conducted by central banks of emerging market economies (EMEs) on firm investment in the presence of global financial shocks. Using firm level data from 46 EMEs from 2000 to 2018, we document four findings. First, active IRM positively affects firm investment - the effect strengthens with the magnitude of adverse external financial shocks. Second, financially constrained firms, compared with unconstrained ones, are less responsive to active IRM. Third, our results suggest that the country credit spread is a plausible causal channel of the positive IRM effect on firm investment. Fourth, the policies of capital controls and exchange rate managements are complementary to the IRM – it is beneficial to form a macro policy mix including active IRM to safeguard firm investment against global financial shocks. Further, our results indicate the IRM effect on firm investment is both statistical and economical significance and is relevant to the aggregate economy. |
| JEL: | F36 F42 F61 G31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29303&r= |
| By: | Georgia Bush; Carlos Iván Cañón Salazar; Daniel Gray |
| Abstract: | We exploit individual security holdings data for global mutual funds to distinguish between two reasons why a fund's holdings of emerging market economy (EME) bonds might change: (i) the amount invested in the fund changes and (ii) the fund manager changes portfolio allocations. We find that funds' responsiveness to global macroeconomic conditions, ''push factors'', is explained by investor flow decisions. Conversely, funds' responsiveness to local macroeconomic conditions, ''pull factors'', is explained by manager reallocation decisions. We also identify other institutional factors which impact reallocation decisions: their leverage, their benchmark, and risk appetite (funds reallocate towards safer EMEs when global risk increases). |
| JEL: | F32 G11 G15 G23 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2021-13&r= |
| By: | Alexandra M. Tabova; Francis E. Warnock |
| Abstract: | While foreigners are prominent in the Treasury market and in theoretical and empirical work, little is known about the nature of their Treasury portfolios. We provide novel evidence on foreigners' U.S. Treasury portfolios based on data not yet used by researchers: the security-level Treasury portfolios of foreigners and private U.S. investors. We find that private foreign investors earn above market returns and on a risk-adjusted basis both foreign private and foreign official investors outperform U.S. investors. Moreover, while foreign officials, with their broader objective functions, may well have inelastic demand, private foreign investors increase purchases of Treasuries and increase the duration of their Treasury portfolios when their sovereign yields are low or decrease relative to Treasury yields (that is, when CIP deviations decrease). Our results are so different from existing results that we close with a reconciliation exercise that provides a useful assessment of different sources of data on flows and holdings. |
| JEL: | F30 G11 G12 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29313&r= |
| By: | Andrew Metrick; Paul Schmelzing |
| Abstract: | We present a new database of banking-crisis interventions since the 13th century. The database includes 1886 interventions in 20 categories across 138 countries, covering interventions during all of the crises identified in the main banking-crisis chronologies, while also cataloguing a large number of interventions outside of those crises. The data show a gradual shift over the past centuries from the traditional interventions of a lender-of-last-resort, suspensions of convertibility, and bank holidays, towards a much more prominent role for capital injections and sweeping guarantees of bank liabilities. Furthermore, intervention frequencies and sizes suggest that the crisis problem in the financial sector has indeed reached an apex during the post-Bretton Woods era – but that such trends are part of a more deeply entrenched development that saw global intervention frequencies and sizes gradually rise since at least the late 17th century. |
| JEL: | G01 G28 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29281&r= |