nep-ifn New Economics Papers
on International Finance
Issue of 2023‒04‒17
five papers chosen by
Jiachen Zhan
University of California,Irvine

  1. Nonbank lenders as global shock absorbers: evidence from US monetary policy spillovers By Elliott, David; Meisenzah, Ralf R; Peydró, José-Luis
  2. Uncovering CIP Deviations in Emerging Markets: Distinctions, Determinants and Disconnect By Mr. Eugenio M Cerutti; Haonan Zhou
  3. Tracing the International Transmission of a Crisis Through Multinational Firms By Marcus Biermann; Kilian Huber
  4. Foreign Investment Bulletin, October-December 2022: Trends in Foreign Deals and Greenfield Investments in the EU By BIANCARDI Daniele; BONNET Paolo; MARTINEZ CILLERO Maria; NARDO Michela
  5. Financing global policies: but why? By Jean-Michel Severino; Sylviane Guillaumont Jeanneney

  1. By: Elliott, David (Bank of England); Meisenzah, Ralf R (Federal Reserve Bank of Chicago); Peydró, José-Luis (Imperial College London, ICREA-Universitat Pompeu Fabra-CREI-Barcelona GSE, and CEPR)
    Abstract: We show that nonbank lenders act as global shock absorbers from US monetary policy spillovers. For identification, we exploit loan‑level data from the global syndicated lending market and US monetary policy surprises. We find that when US monetary policy tightens, nonbanks increase dollar credit supply to non‑US corporate borrowers, relative to banks. This partially mitigates the total reduction in dollar lending. The substitution is stronger for emerging market borrowers, riskier borrowers, and borrowers in countries subject to stronger capital inflow restrictions. Results suggest that our findings are not driven by borrower‑lender matching, zombie lending, or destabilising lending. Moreover, the credit substitution has real effects, as firms with existing relationships with nonbank lenders increase total debt, investment, and employment relative to firms without such relationships. Our findings suggest that having more diversified funding providers (nonbanks in addition to banks) reduces the volatility in capital flows and economic activity associated with the global financial cycle.
    Keywords: Nonbank lending; international monetary policy spillovers; global financial cycle; banks; US dollar funding for non-US firms
    JEL: E50 F34 F42 G21 G23
    Date: 2023–01–13
  2. By: Mr. Eugenio M Cerutti; Haonan Zhou
    Abstract: We provide a systematic empirical treatment of short-term Covered Interest Parity (CIP) deviations for a large set of emerging market (EM) currencies. EM CIP deviations have much larger volatilities than most G10 currencies and move in an opposite direction during global risk-off episodes. While off-shore EM CIP deviations are sensitive to changes in FX dealers’ risk-bearing capacities and global risk aversion, on-shore EM CIP deviations are largely unresponsive in segmented FX markets. Moreover, the sensitivity of offshore EM CIP deviations to global risk factors for currencies with segmented FX markets is stronger compared to their counterparts with integrated FX markets. We find weak evidence of country default risk affecting EM CIP deviations after accounting for global factors.
    Keywords: Covered interest parity; Interest rate differentials; Forward foreign exchange market; Financial market arbitrage; Emerging markets; CIP deviation; FX Market development; short-term Covered Interest Parity; country default risk; segmented FX markets; Interest rate parity; Currencies; Currency markets; Emerging and frontier financial markets; Forward exchange rates; Global
    Date: 2023–02–10
  3. By: Marcus Biermann; Kilian Huber
    Abstract: We show that multinational firms transmit shocks across countries through their internal capital markets. We study a credit supply shock to parent firms in Germany. International affiliates outside Germany supported their parents through internal lending, became financially constrained themselves, and experienced lower real growth. We find that managers were "Darwinist" with respect to international affiliates but "Socialist" in the home country, that internal capital markets transmitted the credit shock more strongly than a non-financial shock, and that access to developed credit markets attenuated the real effects. The total real impact of shock transmission through multinationals on foreign economies was large.
    JEL: E4 F2 F3 G01 G2 G3
    Date: 2023–03
  4. By: BIANCARDI Daniele (European Commission - JRC); BONNET Paolo (European Commission - JRC); MARTINEZ CILLERO Maria (European Commission - JRC); NARDO Michela (European Commission - JRC)
    Abstract: This note presents the latest trends in the investment behaviour of multinational enterprises focusing on non-EU (foreign) investors . It looks at merger and acquisition (M&A) deals and other equity investments of at least 10% of capital of the target company in the EU, as well as at greenfield projects.
    Keywords: FDI investments, Cross-border investment, Greenfields, Merger and Acquisitions
    Date: 2023–03
  5. By: Jean-Michel Severino (I&P - Investisseurs et Partenaires); Sylviane Guillaumont Jeanneney (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)
    Abstract: Public financial flows to developing countries serve a multitude of purposes, the growing number of which has led over time to an incoherent institutional landscape of international financing. Institutional fragmentation has profound consequences for the effectiveness of policies. Starting from the achievements of official development assistance, our reflection seeks to clarify the aims of planetary collective action, by distinguishing three main objectives: ensuring the convergence of income between developing countries and industrialized countries; ensuring a foundation of global solidarity; fight against global public evils. This mapping allows us to present a first sketch of what could be an inventory of international financial flows according to a new nomenclature that would be collectively accepted by donors and recipients of flows. But since there are overlaps between the objectives, it is not possible to rigorously separate the objectives of growth, redistribution and the management of global public goods. We offer slightly more complex but still manageable procedures for tracking international flows. Accurate mapping of financial flows could avoid two main pitfalls of the current system, an excessively compassionate vision of the needs of low-income countries at the expense of the requirement to catch up on their economies, and in the face of the climate emergency, priority given to climate change mitigation projects at the expense of those specifically aimed at adaptation in low-income countries or more generally to their development.
    Abstract: Les flux financiers publics à destination des pays en développement répondent à une multitude de finalités, dont le nombre croissant a entraîné avec le temps, un paysage institutionnel du financement international peu cohérent. Le morcellement institutionnel a de profondes conséquences sur l'efficacité des politiques. Partant de l'acquis de l'aide publique au développement, notre réflexion s'attache à clarifier les finalités de l'action collective planétaire, en distinguant trois grands objectifs : assurer la convergence des revenus entre les pays en développement et les pays industrialisés ; assurer un socle de solidarité mondial ; lutter contre les maux publics globaux. Cette cartographie nous permet de présenter une première esquisse de ce que pourrait être un recensement des flux financiers internationaux selon une nouvelle nomenclature qui serait collectivement acceptée par les bailleurs et les destinataires des flux. Mais comme il existe des chevauchements entre les objectifs, il n'est pas possible de rigoureusement séparer les objectifs de croissance, de redistribution et de gestion des biens publics mondiaux. Nous proposons des procédures un peu plus complexes mais néanmoins gérables de suivi des flux internationaux. La cartographie précise des flux financiers pourrait éviter deux principaux écueils du système actuel, une vision excessivement compassionnelle des besoins des pays à faible revenu aux dépens de l'exigence de rattrapage de leurs économies, et face à l'urgence climatique une priorité donnée aux projets d'atténuation du réchauffement climatique aux dépens de ceux spécifiquement destinés l'adaptation des pays à faible revenu, ou plus généralement à leur développement.
    Date: 2023–03–03

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