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on International Finance |
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Issue of 2023‒03‒06
five papers chosen by Rajeswari Sengupta Indira Gandhi Institute of Development Research |
| By: | Carlos Giraldo (Latin American Reserve Fund.); Iader Giraldo (Latin American Reserve Fund.); Jose E. Gomez-Gonzalez (Lehman College, City University of New York.); Jorge M. Uribe (Universitat Oberta de Catalunya.) |
| Abstract: | The extant literature has examined the impact of United States’ uncertainty shocks on developed and large emerging market economies. However, this research has not accounted for global cycles in production, credit, and prices, which can influence the estimates of the effects of US uncertainty on the rest of the world. The effects of uncertainty in highly indebted emerging open economies, which depend heavily on US financial and real conditions, have not been studied. We analyze the effects of uncertainty shocks on 14 Latin American countries (LACs) of various sizes and various levels of dependence on US financial and real flows. Latin America is a highly indebted and heterogeneous region that is sensitive to US economic and financial conditions, particularly uncertainty, in its various dimensions: real, financial, and policy related (including monetary policy). Our results show that the effects of real and financial uncertainty are more significant and long lasting than the effects of economic and monetary policy uncertainty, as measured by the use of uncertainty-related key words. All forms of uncertainty have a larger and more persistent impact on the gross domestic product of countries than the impact on credit and prices. In general, uncertainty in the US depresses economic activity in Latin America, although there is significant heterogeneity in the effects, which warrants detailed analysis of individual countries when considering policy implementation and portfolio diversification. |
| Keywords: | Macroeconomic uncertainty, Financial uncertainty, Policy uncertainty, Global business cycles, Latin America. JEL classification: D80, E44, F21, F44, G15, O54. |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:202302&r=ifn |
| By: | Linda S. Goldberg; Signe Krogstrup |
| Abstract: | The risk sensitivity of international capital flow pressures is explored using a new Exchange Market Pressure index that combines pressures observed in exchange rate adjustments with model-based estimates of incipient pressures that are masked by foreign exchange interventions and policy rate adjustments. The sensitivity of capital flow pressures to risk sentiment, including for so-called safe-haven currencies, evolves over time, varies significantly across countries, and differs between normal times and extreme stress events. Across countries, risk sensitivities and safe-haven status are associated with self-fulfilling exchange rate expectations and carry trade funding currencies. In contrast, association with more traditional macroeconomic country characteristics is weak. |
| Keywords: | exchange market pressure; risk aversion; safe haven; capital flows; exchange rates; foreign exchange interventions; global financial cycle |
| JEL: | F32 G11 G20 |
| Date: | 2023–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:95595&r=ifn |
| By: | Lennon Zaninovic, Carolina Bernardita; Schneebaum, Alyssa |
| Abstract: | Global firms have a higher share of female employees than domestic non-exporters. To explain this fact, this paper tests whether international trade and FDI are channels through which norms regarding gender (in)equality are transmitted from customers and investors to firms. We employ pooled cross-sectional data from 2007 - 2016 for around 28, 000 firms in 104 different countries. We compare global versus non-global firms in the same market to study the infuence of firms' exposure to gender norms in commercial partner countries. The results show a race to the top for low- and mid-level jobs and the opposite for top managerial positions. |
| Keywords: | globalization, international trade, FDI, gender, transmission of social norms |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wus005:35831893&r=ifn |
| By: | Maximilian Konradt (IHEID, Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | This paper investigates the financial risk-taking behavior of pension funds since 2000. I assemble a new database containing portfolio holdings of more than 100 pension funds from 14 advanced economies. The study reveals three key findings. First, I show that pension fund portfolios have become riskier over that period, with an average increase in risky asset weights of 4 percentage points since 2008. European pension funds tend to invest more in public equities while North American and Asian funds focus on alternative assets. Second, I find evidence that declining domestic risk-free rates play a significant role in driving the trend, with pension funds increasing their risky asset exposure in response to falling short-term interest rates. Third, I demonstrate that less underfunded pension funds with fewer risky assets tend to reach for yield more aggressively, which is exacerbated during periods of low risk-free rates. This is most pronounced for European pension funds, particularly after the global financial crisis. |
| Keywords: | Low interest rates; Pension funds; Risk-taking; Reach for yield |
| JEL: | E43 F21 G11 G23 |
| Date: | 2023–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp01-2023&r=ifn |
| By: | Chadha, J. S.; Lennard, J.; Solomou, S.; Thomas, R. |
| Abstract: | This paper investigates the degree of pass-through from import prices and tariffs to wholesale prices in interwar Britain using a new high-frequency micro data set. The main results are: (i) Pass-through from import prices and tariffs to wholesale prices was economically and statistically significant. (ii) Despite devaluation, import prices exacerbated deflation in the early 1930s because of the global slump in export prices. (iii) Rising protection, however, was a mild stimulus to prices during the shift to inflation. |
| Keywords: | Exchange rates, interwar, pass-through, prices, tariffs, United Kingdom |
| JEL: | E31 F13 N14 |
| Date: | 2023–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2319&r=ifn |