nep-ifn New Economics Papers
on International Finance
Issue of 2023‒09‒04
four papers chosen by
Jiachen Zhan, University of California,Irvine

  1. Measuring Financial Integration: More Data, More Countries, More Expectations By Menzie D. Chinn; Hiro Ito
  2. FX intervention and domestic credit in a partially dollarized economy: Evidence using microdata from Peru. By Marcos Ceron; Rafael Nivin; Diego Yamunaque
  3. The words have power: the impact of news on exchange rates By Teona Shugliashvili
  4. Towards a New Global Financial Architecture for the Global South By Khan, Haider

  1. By: Menzie D. Chinn; Hiro Ito
    Abstract: We assess market mediated financial integration over the last fifty years. We first systematically lay out several definitions of financial integration, and then review the evidence regarding whether covered interest parity, uncovered interest parity, and real interest parity hold across industrial and non-industrial countries. Finally we examine what the determinants of real interest differentials are.
    JEL: F30 F40
    Date: 2023–07
  2. By: Marcos Ceron (Central Reserve Bank of Peru); Rafael Nivin (Central Reserve Bank of Peru); Diego Yamunaque (Central Reserve Bank of Peru)
    Abstract: In this work we study the impact of FX interventions on Credit growth in Peru. Using Panel data at the firm-bank level from the Peruvian Credit Registry we find that purchases of dollars by the Central Bank are associated with reductions on the stock of credit held by Medium, Big and Corporate Firms in the Peruvian economy. We also found that the impact is stronger for firms with a higher level of debt dollarization. These results suggest that FX interventions can be seen as an additional tool for Financial stability, especially in times of large inflows of capital.
    Keywords: FX intervention; Credit registry; Emerging markets; Credit growth
    JEL: E58 F31 F33 G20
    Date: 2023–08–13
  3. By: Teona Shugliashvili
    Abstract: Using the big data of news texts and a novel, news extended exchange rate model, we investigate the impact of media news on major exchange rates. To present the impact of the U.S. Dollar related news on EUR/USD and GBP/USD, we first use a machine learning model and detect which news topics relate to U.S. Dollar. Next, we calculate the attention to the U.S. Dollar related news topics over time. Eventually, we visualize how Exchange rates react to shocks in the attention to the U.S. Dollar related news topics. The impulse response functions of U.S. Dollar bilateral rates show that exchange rates respond to the U.S. Dollar related news and to the economic uncertainty news shocks with statistical significance in several periods after the shock. Forecast error decomposition documents that 25-27% of exchange rate variation in the long run comes from the news. The results reveal, that news add valuable information to macroeconomic fundamentals for identifying exchange rates, and exchange rates are better identified when both, macroeconomic and news information are used together. These findings are important for exchange rate modeling.
    Keywords: Foreign Exchange, News, Taylor rules, Text mining, LDA, Natural Language Processing (NLP)
    JEL: C55 D80 D84 F31 G14
    Date: 2023–06–02
  4. By: Khan, Haider
    Abstract: Abstract: The main argument is that a historical nodal point has arisen with the advent of the tragic war in Ukraine and the US hostilities towards China. THE sanctions regimes of the US-led Global North have compounded the instabilities in the existing system. As the world system moves towards multipolarity, an opportunity exists for the Global South to construct through partial delinking from the post WW2 financial architecture under US hegemony. Construction of an expanded BRICS-led supra regional financial architecture along with regional financial architectures will be a good step forward. Within two decades dedollarization will become a reality. Finally, a new non-aligned movement and construction of genuinely pro-people development programs can also become a reality.
    Keywords: Ukraine, multi[polarity, BRICS, expanded BRICS, China, The Global South
    JEL: F33 F34 F38
    Date: 2023–06–01

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