nep-ifn New Economics Papers
on International Finance
Issue of 2021‒12‒13
four papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Is Higher Financial Stress Lurking around the Corner for China? By Jan J. J. Groen; Adam I. Noble
  2. Emerging Market Securities Access to Global Plumbing By Gongpil Choi; Federico Ortega; Mr. Manmohan Singh
  3. Covid-19 and capital flows: The responses of investors to the responses of governments By Goldbach, Stefan; Nitsch, Volker
  4. Reshaping Global Trade: The Immediate and Long-Run Effects of Bank Failures By Xu, Chenzi

  1. By: Jan J. J. Groen; Adam I. Noble
    Abstract: Despite China’s tighter financial policies and the Evergrande troubles, Chinese financial stress measures have been remarkably stable around average levels. Chinese financial conditions, though, are affected by global markets, making it likely that low foreign financial stress conditions are blurring the state of Chinese financial markets. In this post, we parse out the domestic component of a Chinese financial stress measure to evaluate the downside risk to future economic activity.
    Keywords: financial conditions; growth-at-risk; China
    JEL: E2 G1
    Date: 2021–11–23
  2. By: Gongpil Choi; Federico Ortega; Mr. Manmohan Singh
    Abstract: What are the constraints that have stalled EMs efforts to reuse their securities in international financial centers? We discuss the economics of collateral re-use and the present institutional structure in Asian and Latin American countries. Our empirical investigation suggests pledgeability enhances financial stability and reduces dollar funding risk. We also explain the Eurozone collateral pool to incentivize EMs, and why many securities (e.g., BTPs, Italy) are acceptable in London but not EM securities. Looking forward, EMs liaison with International Central Securities Depositories (ICSDs), and global banks’ balance sheet capacity to intermediate cross-border collateral will be crucial for this market to develop.
    Keywords: EM securities; global plumbing; collateral markets; Asia; Latin America; Eurozone; emerging market securities access; EMs effort; collateral market; finance market; Collateral; Securities; Financial statements; Financial sector stability; Securities markets; Global; Asia and Pacific; Europe; Caribbean
    Date: 2021–03–26
  3. By: Goldbach, Stefan; Nitsch, Volker
    Abstract: This paper examines the effect of national government response measures to Covid-19 on German international capital flows. Analyzing highly disaggregated monthly data from the German balance of payments statistics over the period from January 2019 through January 2021, we find that bilateral financial interactions are negatively affected by stricter containment and closure policies as well as health system policies of a partner country, while German capital flows benefit from a partner's economic support policies. Moreover, to the extent that public interventions to fight the pandemic affect financial interactions, the adjustment mainly takes place along the intensive margin.
    Keywords: coronavirus,pandemic
    JEL: F36 F60 I18
    Date: 2021
  4. By: Xu, Chenzi (Stanford University)
    Abstract: I show that a disruption to the financial sector can reshape the patterns of global
    Abstract: trade for decades. I study the first modern global banking crisis originating in London in 1866 and collect archival loan records that link multinational banks headquartered there to their exports financing abroad. Countries exposed to bank failures in London immediately exported significantly less and did not recover to pre-crisis trend levels. Their market shares within each destination were significantly lower for four decades. Decomposing the persistent losses shows that they primarily stem from lack of extensive margin growth relative to unexposed countries, as importers sourced more from new and unexposed trade partners. Exporters producing more substitutable goods, those with little access to alternative forms of credit, and those trading with more distant partners experienced more persistent losses, consistent with the existence of sunk costs and the importance of finance for intermediating trade.
    JEL: F14 G01 G21 N20
    Date: 2021–10

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