nep-ifn New Economics Papers
on International Finance
Issue of 2023‒04‒10
four papers chosen by
Jiachen Zhan
University of California,Irvine

  1. International Sanctions and Dollar Dominance By Javier Bianchi; César Sosa-Padilla
  2. Exportweltmeister- Germany's Foreign Investment Returns in International Comparison By Franziska Hunnekes; Maximilian Konradt; Moritz Schularick; Christoph Trebesch; Julian Wingenbach
  3. The Internationalization of China’s Equity Markets By Mr. Maria Soledad Martinez Peria; Mr. Sergio L. Schmukler; Jasmine Xiao; Juan J. Cortina
  4. Globalization, Productivity Growth, and Labor Compensation By Dreger, Christian; Fourné, Marius; Holtemöller, Oliver

  1. By: Javier Bianchi; César Sosa-Padilla
    Abstract: This paper investigates the implications of international financial sanctions for the reserve currency status of the US dollar. We propose a simple model of a reserve currency, demonstrate how the anticipation of financial sanctions can weaken the dollar’s status, and evaluate the welfare implications.
    JEL: E42 F31 F32 F34 F41 P48
    Date: 2023–03
  2. By: Franziska Hunnekes; Maximilian Konradt (IHEID, Graduate Institute of International and Development Studies, Geneva); Moritz Schularick; Christoph Trebesch; Julian Wingenbach
    Abstract: In the past decade, Germany has been the world champion in exporting capital ("Exportweltmeister"). No other country invested larger amounts of savings outside its borders. However, we find that Germany plays in the third division when it comes to investment performance. To show this, we construct a comprehensive new database on the returns on foreign investment for 13 advanced economies back to the 1970s. The data reveal that Germany's annual returns on foreign assets were 2 to 5 percentage points lower than those of comparable countries. Germany ranks last among the G7 countries and earns significantly lower foreign returns within asset classes, especially for equity and foreign direct investments. These aggregate results are confirmed with micro data on equity returns by 50, 000 mutual funds worldwide. German funds perform worse across all sectors and destination countries of investment. They also seem to do a worse job in timing the market.
    Keywords: International Capital Flows; Foreign Assets; Investment Returns
    JEL: F21 F30 F31 F36 G15
    Date: 2023–03–13
  3. By: Mr. Maria Soledad Martinez Peria; Mr. Sergio L. Schmukler; Jasmine Xiao; Juan J. Cortina
    Abstract: China’s equity markets internationalization process started in the early 2000s but accelerated after 2012, when Chinese firms’ shares listed in Shanghai and Shenzhen gradually became available to international investors. This paper studies the effects of the post-2012 internationalization events by comparing the evolution of equity financing and investment activities for: (i) domestic listed firms relative to firms that already had access to international investors and (ii) domestic listed firms that were directly connected to international markets relative to those that were not. The paper finds large increases in financial and investment activities for domestic listed and for connected firms, with significant aggregate effects. The evidence also suggests the rise in firms’ equity issuances was primarily and initially financed by domestic investors. International investors’ portfolio holdings in Chinese equity markets and ownership in firms increased markedly only once Chinese firms’ locally issued shares became part of the MSCI Emerging Markets Index.
    Keywords: equity financing; equity market liberalization; firm investment; foreign investors; international investors; issuance activity; Stock Connect; portfolio holding; internationalization process; unconnected firm; China's equity markets; Stock markets; Stocks; Foreign corporations; Emerging and frontier financial markets; Market capitalization; Global
    Date: 2023–02–10
  4. By: Dreger, Christian (DIW Berlin); Fourné, Marius (IWH Halle); Holtemöller, Oliver (IWH Halle)
    Abstract: We analyse how changes in international trade integration affect productivity and the functional income distribution. To account for endogeneity, we construct a leave-out measure for international trade integration for country-industry pairs using international input-output tables. First, we corroborate on the country-industry level that international trade integration increases productivity. Second, we show that international trade integration is associated with higher labour shares in advanced countries but with lower labour shares in manufacturing industries in emerging markets. Finally, we briefly discuss the implications of our results for a possible throwback in international trade integration due to experiences from recent crises.
    Keywords: global value chains, income distribution, globalization, labor share, productivity
    JEL: F4 F6 J3
    Date: 2023–03

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