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on International Finance |
| By: | Naoki Matsuda (Bank of Japan); Juri Oyama (Bank of Japan); Rie Yamaoka (Bank of Japan); Hidemi Bessho (Bank of Japan) |
| Abstract: | Foreign exchange (FX) margin trading by Japanese retail investors hit a record high in 2022, unprecedentedly exceeding 10 quadrillion yen. While outlining the mechanism of retail FX margin trading, this paper summarizes factors behind the recent surge in retail FX margin trading and changes in investment patterns of Japanese retail investors. In addition, an analysis is conducted on how retail FX margin trading impacts the global and Japan's FX markets. Continued monitoring of investment patterns of retail FX margin traders is integral to better understanding the developments in FX markets. |
| Keywords: | Foreign Exchange Margin Trading |
| JEL: | F31 G12 G15 |
| Date: | 2023–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojrev:rev23e07&r=ifn |
| By: | Gregory W. Brown; Celine Yue Fei; David T. Robinson |
| Abstract: | General Partners (GPs) in private equity face a trade-off between focusing their skills and effort on fewer investments to earn higher returns, or investing more broadly to reduce risk through diversification. Using a novel, deal-level dataset of 5, 925 global investments from 1999 to 2016, we show that these portfolio considerations are important for understanding fund-level private equity returns. The largest investments in PE funds typically have the lowest returns on average, but are also the least risky. Returns and risk are both increasing in industry or geographic concentration. And while GP-specific return variation (e.g., skill) only accounts for 4%-6% of the total return variation of a typical investment, it accounts for around 40% of the return variation at the fund level. These findings show that GPs use portfolio construction, and not just deal selection, to seek risk-adjusted fund-level returns. |
| JEL: | G10 G11 G2 G20 G24 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31664&r=ifn |
| By: | Laura Alfaro; Davin Chor |
| Abstract: | Global supply chains have come under unprecedented stress as a result of US-China trade tensions, the Covid-19 pandemic, and geopolitical shocks. We document shifts in the pattern of US participation in global value chains over the last four decades, in terms of partner countries, products, and modes, with a focus on the last five years (2017-2022). The available data point to a looming “great reallocation” in supply chain activity: Direct US sourcing from China has decreased, with low-wage locations (principally: Vietnam) and nearshoring/friendshoring alternatives (notably: Mexico) gaining in import share. The production line positioning of the US’ imports has also become more upstream, which is indicative of some reshoring of production stages. We sound several cautionary notes over the policies that have set this reallocation in motion: It is unclear if these measures will reduce US dependence on supply chains linked to China, and there are moreover already signs that prices of imports from Vietnam and Mexico are on the rise. |
| JEL: | F0 F1 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31661&r=ifn |
| By: | Kaaresvirta, Juuso; Kerola, Eeva; Nuutilainen, Riikka |
| Abstract: | This paper utilizes available aggregate country-level data, as well as bilateral trade and investment data, to identify signs of fragmentation in trade and investment patterns among ten major trading countries or regional trading blocks. We compare the trade and investment trends in the years during the US-China trade war and increase in geopolitical tensions (2018-2021) against the years preceding the trade war (2014-2017). Our analysis generally corroborates findings in the existing literature. Bilateral flows between the US and China have been damaged, but there is little evidence of wider fragmentation or that the world is splitting into competing spheres. Even focusing on technologyintensive manufactures that are increasingly subject to trade restrictions, we find no evidence of broad fragmentation. Our analysis does reveal, however, shifts in global trade and FDI, particularly towards Central and Eastern Europe (CEE) and ASEAN countries. This may reflect a partial reshuffling of global value chains that is a natural outcome of favorable developments in these regions, as well as rising production costs in China. Such shifts do not necessarily reflect global fragmentation driven by geoeconomics factors. |
| Keywords: | Global trade, foreign direct investments, fragmentation |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bofitb:122023&r=ifn |
| By: | Santino Del Fava (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Christian Pierdzioch (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany); Lavinia Rognone (University of Edinburgh Business School, 29 Buccleuch Place, Edinburgh, EH8 9JS, United Kingdom) |
| Abstract: | We study the predictive value of climate risks for subsequent financial stress in a sample of daily data running from October 2006 to December 2022 of thirteen countries, which include China, ten European Union (EU) countries, the United Kingdom (UK), and the United States (US). The climate risk indicators are the result of a text-based approach which combines the term frequency-inverse document frequency and the cosine-similarity techniques. Given the persistence of financial stress as well as the importance of spillover effects of financial stress from other countries, we use random forests, a machine-learning technique tailored to handle many predictors, to estimate our forecasting models. Our findings show that climate risks tend to have a moderate impact, albeit in several cases statistically significant, on predictive accuracy, which tends to be stronger, in our cross-section of countries, on a daily than at a weekly or monthly forecast horizon of financial stress. Furthermore, the predictive value of climate risks for financial stress is heterogeneous across the countries in our sample, implying that a univariate forecasting model appears to be better suited than a corresponding multivariate one. Finally, the predictive value of climate risks for financial stress appears to be stronger in several countries at the lower conditional quantiles of financial stress. |
| Keywords: | Financial stress, Climate risks, Random forests, Forecasting |
| JEL: | C22 C32 C53 G15 Q54 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202329&r=ifn |
| By: | Hâle Utar; Alfonso Cebreros Zurita; Luis Bernardo Torres Ruiz; Hale Utar |
| Abstract: | Did the 2018/19 US-China trade war trigger adjustment of Global Value Chains (GVCs) and nearshoring to Mexico? We address this question with confidential longitudinal firm-level trade data from Mexico that covers the universe of international trade transactions over 2015-2021. By merging the firm-level customs data with a registry of GVC firms and constructing firm-level measures of trade policy exposures based on firms’ pre-shock trade at the level of HS 6-digit products-destination pairs, we show that increased Chinese import protection in the US has a significant positive impact on Mexican firms’ trade with the US, and this positive impact is entirely driven by GVC firms, and especially those in skill-intensive manufacturing industries. The nature of the impact of the heightened Chinese import tariffs on GVC firms’ sourcing suggests a rise in GVC activities in Mexico with linkages to Asian and US-based GVCs. Our analysis also reveals increased net exports and product offerings of Mexican GVC firms in response to the heightened Chinese import protection in the US, suggesting increased domestic activities in Mexico. However, we also document a negative impact of the retaliatory tariffs of China, primarily affecting export services and a counterbalancing negative effect of the US tariffs via GVC firms’ inputs from China, highlighting the complex dynamics at play. Overall, our findings show a reorganization of GVCs towards Mexico as a consequence of the trade war and provide evidence for the role of trade policy in reshaping GVCs. |
| Keywords: | trade war, GVCs, nearshoring, Mexico, US, China |
| JEL: | F13 F14 F23 F61 F68 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10638&r=ifn |