nep-ifn New Economics Papers
on International Finance
Issue of 2023‒06‒19
four papers chosen by
Jiachen Zhan
University of California,Irvine

  1. Cross-border Spillovers: How US Financial Conditions affect M&As Around the World By Katharina Bergant; Prachi Mishra; Raghuram Rajan
  2. Developments in and Characteristics of Japan's FX Market: An Analysis Based on the 2022 BIS Triennial Central Bank Survey By Kota Watanabe; Kyosuke Hari; Natsu Sawada; Hidemi Bessho
  3. ECB Euro Liquidity Lines By Silvia Albrizio; Iván Kataryniuk; Luis Molina; Jan Schäfer
  4. Freeze! Financial Sanctions and Bank Responses By Efing, Matthias; Goldbach, Stefan; Nitsch, Volker

  1. By: Katharina Bergant; Prachi Mishra; Raghuram Rajan
    Abstract: We find that financial conditions in the core have significant spillover effects on cross-border mergers and acquisitions (M&As). On average, a 1 percentage point easing of the IMF US Financial Conditions Index is associated with approximately a 10% higher volume of cross-border M&As. The spillovers are stronger for countries with more liabilities denominated in foreign currency (or in US dollars). We find that the spillovers are driven by changes in US financial conditions, rather than changes in Euro Area conditions. Deals that happen when financial conditions in the US are tighter (and therefore acquisitions fewer) add more value for the acquirers, as reflected in higher acquirer excess stock returns around the announcement.
    JEL: G1
    Date: 2023–05
  2. By: Kota Watanabe (Bank of Japan); Kyosuke Hari (Bank of Japan); Natsu Sawada (Bank of Japan); Hidemi Bessho (Bank of Japan)
    Abstract: In 2022, foreign exchange (FX) markets saw a rapid and significant depreciation of the Japanese yen (JPY) against the U.S. dollar (USD). Based on the results of the Triennial Central Bank Survey conducted by the Bank for International Settlements (BIS) in April 2022, this paper explores FX turnover in Japan -- which reached a historical high since the start of the survey -- by currency, type of instrument, and counterparty. It then examines the impact of the increase in FX turnover on the USD/JPY exchange rate. In addition, it explains the background of the long-term downtrend in the share of Japan in the global FX market through a comparison with global survey results, mainly by analyzing turnover by currency.
    Keywords: Foreign exchange; Turnover; Market structure
    JEL: F31 G12 G15
    Date: 2023–05–30
  3. By: Silvia Albrizio; Iván Kataryniuk; Luis Molina; Jan Schäfer
    Abstract: Central bank liquidity lines have gained momentum since the global financial crisis as a crosscurrency liquidity management tool. We provide a complete timeline of the ECB liquidity line announcements and study their signalling and spillback effects. The announcement of an ECB euro liquidity line decreases the premium paid by foreign agents to borrow euros in FX markets relative to currencies not covered by these facilities by 51 basis points. Consistent with a stylized model, bank equity prices increase by around 1.75% in euro area countries highly exposed via banking linkages to countries whose currencies are targeted by liquidity lines.
    Keywords: liquidity facilities; central bank swap and repo lines; spillbacks.
    Date: 2023–05–05
  4. By: Efing, Matthias; Goldbach, Stefan; Nitsch, Volker
    Abstract: Using regulatory data, we study German bank lending in countries targeted by financial sanctions. We find that domestic banks in Germany reduce lending in sanctioned countries, whereas their foreign bank affiliates outside Germany increase lending. In some cases, this is because the bank affiliates’ host countries have not imposed sanctions themselves. However, even German bank affiliates in host countries that enact sanctions like Germany increase lending if these host countries lack strong institutions and anticrime policies. These findings suggest that even universally adopted sanctions distort bank capital flows and competition if the level of their enforcement varies across bank locations.
    Date: 2023

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