nep-ifn New Economics Papers
on International Finance
Issue of 2022‒09‒19
five papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Policy Rules and Large Crises in Emerging Markets By Emilio Espino; Julian Kozlowski; Fernando M. Martin; Juan M. Sanchez
  2. Common ownership: Europe vs. the US By Nuria Boot; Jo Seldeslachts; Albert Banal Estañol
  3. BoC–BoE Sovereign Default Database: What’s new in 2022? By David Beers; Elliot Jones; Karim McDaniels; Zacharie Quiviger
  4. Pass-Through of Wages and Import Prices Has Increased in the Post-COVID Period By Mary Amiti; Sebastian Heise; Fatih Karahan; Aysegul Sahin
  5. Revisiting The Determinants Of Sovereign Bond Yield Volatility. By Carlos Alberto Piscarreta Pinto Ferreira

  1. By: Emilio Espino; Julian Kozlowski; Fernando M. Martin; Juan M. Sanchez
    Abstract: In response to the COVID-19 pandemic, Latin American countries temporarily suspended rules limiting debt, fiscal and monetary policies. Despite this increase in flexibility, the crisis implied a substantial deterioration of macroeconomic variables (e.g., real GDP declined by 9.5%) and high welfare costs (which we estimate as equivalent to a 13% one-time reduction in non-tradable consumption). This paper studies a sovereign default model with fiscal and monetary policies to assess the policy response and evaluate the gains from flexibility in times of severe distress.
    Keywords: COVID-19; crises; default; Sovereign debt; Exchange rate; inflation; fiscal policy; emerging markets; Markov equilibrium
    JEL: E52 E62 F34 F41 G15
    Date: 2022–08–31
  2. By: Nuria Boot; Jo Seldeslachts; Albert Banal Estañol
    Abstract: Common ownership - when an investor holds shares in two or more companies - has recently attracted signi cant attention from policy-makers and researchers, studying mainly US rms. European rms, however, are di erent as top investors with large stakes, like governments, founding families and foundations are much more prevalent. This paper takes a well-known common ownership with micro-economic foundations, lambda, capturing managerial incentives, and compares its implications for S&P Europe 350 rms to those of the S&P 500 for the period 2004-2015 by looking at within, across and global lambda patterns of the European and US S&P companies. We nd that US companies have a higher lambda, but European rms' lambda become both faster connected within Europe and across with their US counterpart where the latter is even more pronounced. Both patterns can be traced back to US investment managers' increasing global reach.
    Date: 2022–08–19
  3. By: David Beers; Elliot Jones; Karim McDaniels; Zacharie Quiviger
    Abstract: The BoC–BoE database of sovereign debt defaults, published and updated annually by the Bank of Canada and the Bank of England, provides comprehensive estimates of stocks of government obligations in default.
    Keywords: Debt management; Development economics; Financial stability; International financial markets
    JEL: F3 F34 G1 G10 G14 G15
    Date: 2022–08
  4. By: Mary Amiti; Sebastian Heise; Fatih Karahan; Aysegul Sahin
    Abstract: Annual CPI inflation reached 9.1 percent in June 2022, the highest reading since November 1981. The broad-based nature of the recent inflation readings has increased concerns that inflation may run above the Federal Reserve’s target for a longer period than anticipated. In this post we use detailed industry-level data to examine two prominent cost-push-based explanations for high inflation: rising import prices and higher labor costs. We find that the pass-through of wages and input prices to the U.S. Producer Price Index has grown during the pandemic. Both the large changes in these costs and a higher pass-through into domestic prices have contributed toward higher inflation.
    Keywords: wages; import prices; inflation; Pass-through
    JEL: E31 F00
    Date: 2022–08–23
  5. By: Carlos Alberto Piscarreta Pinto Ferreira
    Abstract: Although there is an extensive literature regarding volatility in the financial markets, to our knowledge, few empirical studies specifically focus on the drivers of volatility of sovereign bond yields. This empirical paper aims to fill part of this gap and to provide more up to date empirical insights. We add to previous work by examining the issue simultaneously in a broad number of advanced economies. Our analysis shows that sovereign bond unconditional volatility exhibits mean-reversion and persistence. Bond yield volatility responds to proximate market movements and global risk. However, that response is found to be uneven across geographies, asymmetric in some cases and possibly time-varying. Macro and policy uncertainty impact depends on the specific uncertainty measures used and rarely is very meaningful.
    Keywords: Volatility, Bond Market, Public Debt, Sovereign Risk, Panel Data, Fixed Effects
    JEL: C23 E44 G11 G15 H63
    Date: 2022–07

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