nep-ifn New Economics Papers
on International Finance
Issue of 2024‒02‒12
ten papers chosen by
Jiachen Zhan, University of California,Irvine

  1. 21st Century Accelerated Dedollarization, Multipolarity and The Global South Beyond Modern Money Theory: Governance of a Complex Global Financial System in the Age of Global Instabilities By Khan, Haider
  2. Regulation, information asymmetries and the funding of new ventures By Matteo Aquilina; Giulio Cornelli; Marina Sanchez del Villar
  3. The World's First Global Safe Asset: British Public Debt, 1718-1913 By Patricia Gomez-Gonzalez; Gabriel Mathy
  4. The Effects of COVID-19 and the Russia-Ukraine War on Inward Foreign Direct Investment By MS Hosen; SM Hossain; MN Mia; MR Chowdhury
  5. Direct investment positions held by captive financial institutions in Luxembourg affiliated to investment funds focusing on private equity or real estate By Gabriele Di Filippo
  6. "The many forms of poverty: Analyses of deprivation interlinkages in the developing world" By Nicolai Suppa; Sabina Alkire; Ricardo Nogales
  7. Centralized vs decentralized markets: The role of connectivity By Simone Alfarano; Albert Banal-Estañol; Eva Camacho; Giulia Iori; Burcu Kapar; Rohit Rahi
  8. Neoclassical growth in an interdependent world By Kleinman, Benny; Liu, Ernest; Redding, Stephen J.; Yogo, Motohiro
  9. Common Trends and Country Specific Heterogeneities in Long-Run World Energy Consumption By Yoosoon Chang; Yongok Choi; Chang Sik Kim; J. Isaac Miller; Joon Y. Park
  10. Is there a size premium for nations? By Jo\v{z}e P. Damijan; Sandra Damijan; Osiris Jorge Parcero

  1. By: Khan, Haider
    Abstract: I argue that there is a need to create monetary sovereignty for the global south and generate adequate ex ante public investment for full employment. The governments should also be employers of the last resort. Since all existing accumulated evidence since the 2008-9 crisis indicates that we are not near the inflationary barrier, appropriate full employment generating government spending for public investment is a sensible functional finance option. For this to apply to the global south with any plausibility, first an appropriate global financial architecture must be created.This paper analyzes the problems of creating and expanding national macroeconomic policy space and economic governance for the global system which takes historical unevenness seriously and places both the developed and developing countries in the global system within a complex adaptive systems framework . With the recent developments towards the further expansion of BRICS-plus already achieved, accelerated dedollarization and assertion of sovereignty by many countries of the Global South, the creation of an alternative less asymmetric non-IMF based architecture for global financial governance has become a more realistic institutional possibility.
    Keywords: Multipolarity, The Global South, BRICS-plus, Accelerated Dedollarization, Modern Money Theory(MMT), Functional Finance in the Global South, dynamic complex adaptive economic systems, financial crises, global financial architecture, regional financial architectures, a hybrid GFA, regional cooperation, BASEL III reforms, the BIS proposals, Asia, BRICS Development Bank, BRICS financial facility, the IMF.
    JEL: E5 F5 F54
    Date: 2024–01–02
  2. By: Matteo Aquilina; Giulio Cornelli; Marina Sanchez del Villar
    Abstract: Can regulation ease problems of asymmetric information for young and innovative firms? The new and largely unregulated cryptocurrency ecosystem offers a unique setting to test this hypothesis. We construct a comprehensive measure of regulatory stringency at the state-month level for the United States and find that more stringent regulation is conducive to more private capital, but only in states with a more developed financial sector. Looking at granular deal-level data we trace the increase in access to capital triggered by a more stringent regulatory environment to a reduction in information asymmetries. Consistently with a reduction in information asymmetry, we find that younger firms with less tangible assets benefit more, and foreign investors, investors that are not specialised in the crypto sector and those with fewer investment professionals invest more capital.
    Keywords: corporate finance, venture capital, asymmetric information, cryptocurrency
    JEL: D82 G24 G28 O1
    Date: 2024–01
  3. By: Patricia Gomez-Gonzalez (Fordham University, Department of Economics); Gabriel Mathy (American University)
    Abstract: This paper assesses whether the British public debt featured a convenience yield during the Classical Gold Standard (1718-1913), as the US does in modern times. Our em- pirical results support this thesis. Increases in the British debt-to-GDP ratio decrease British public debt’s convenience yield between 8 and 20 basis points, qualitatively sim- ilar to the behavior of US public debt yields post-1926. Interestingly, the relationship between US yields and US public debt during the Classical Gold Standard counters previous findings for modern US times. International public debt yield spreads between other Gold Standard core countries and Britain were consistently positive and averaged 55 basis points, even though currency and sovereign risk were negligible at that time for the countries chosen.
    Keywords: Convenience yield, Safe asset, Liquidity, Gold Standard, Core countries
    JEL: E42 G12 G15 H63 N21 N23
    Date: 2024
  4. By: MS Hosen; SM Hossain; MN Mia; MR Chowdhury
    Abstract: Inward Foreign Direct Investment (IFDI) into Europe and Asian developing countries like Bangladesh is experimentally examined in this study. IFDI in emerging markets has been boosted by global investment and inflow influenced by resource availability and public policy. The economic policy uncertainty on IFDI in 13 countries is explored at a time when the crisis between Russia and Ukraine war is having a global impact. Microeconomic factors affected Gross Domestic Product (GDP) growth, inflation, interest rates, and the currency rate fluctuated with IFDI, which mostly shocked during COVID-19 and the Russia-Ukraine war. With data from the World Bank and the United Nations Conference on Trade and Development (UNCTAD) database, we compile a panel dataset covering 2018-2022. The researchers used a mixture of panel and linear regression analysis using a random effect model. Our findings show that the impact of global rates hurts IFDI in 13 selected countries. There is a correlation between a country's ability to enforce contracts and the amount of Inward FDI it receives. Using the top 13 hosts of incoming FDI flows COVID-19 and Russia-Ukraine wartime series analysis gives valuable information for policymakers in the remaining countries chosen to attract IFDI inflows.
    Date: 2024–01
  5. By: Gabriele Di Filippo
    Abstract: This paper presents a new database of direct investment positions held through captive financial institutions (CFIs) in Luxembourg that are owned by (resident and non-resident) investment funds focusing on private equity or real estate. Compared to Di Filippo (2023), the new database is more comprehensive as it includes smaller CFIs with less than 500 million euros in total assets. Over 2011-2021, intra-Luxembourg investment positions were larger than foreign direct investment (FDI) positions (both inward and outward). Most of these intra-Luxembourg investment positions arise because investment funds use Luxembourg CFIs to structure their holdings and acquisitions across the globe. In 2021, only about 1% of the inward FDI position held through these CFIs is ultimately invested in targets located in Luxembourg. The outward FDI position held through these CFIs is invested in private companies (65%) or real estate assets (35%). While most investment fund sponsors are headquartered in the United States or in the United Kingdom, investment targets are mostly in Western Europe, with a focus on the euro area. Outward FDI in private equity targets companies that are quite dispersed across economic activities. In 2021, "Information, telecommunications and computer services" have the largest share (17%), followed by "Electricity, gas, water supply, recycling" (12%) and "Chemicals and non-metallic mineral products" (10%). Outward FDI in real estate is more concentrated by property type, with 45% in commercial buildings (office and retail properties), 24% in industrial buildings (in particular logistics properties) and 15% in residential properties. Targets in Luxembourg are mostly companies operating in finance and insurance activities (private equity) or office properties (real estate).
    Keywords: Foreign direct investment, Captive financial institutions and money lenders, Sector S127, Investment funds, Private equity, Real estate
    JEL: C80 C81 F23 F30 G23 G32
    Date: 2024–01
  6. By: Nicolai Suppa (University of Barcelona (GiM-IREA) and Oxford Poverty and Human Development Initiative (OPHI), University of Oxford.); Sabina Alkire (Oxford Poverty and Human Development Initiative (OPHI), University of Oxford.); Ricardo Nogales (Universidad Privada Bolivana and Oxford Poverty and Human Development Initiative (OPHI), University Oxford.)
    Abstract: It is widely acknowledged that for efficient progress towards the Sustainable Development Goals (SDGs), their interlinkages have to be taken into account. The global Multidimensional Poverty Index is based on ten deprivations indicators each of which is aligned with specific SDGs, and the overlap of these deprivations already figures prominently in the way poverty is measured by this index, i.e. as multiple deprivation. In this paper we complement previous analyses with a novel account to explore how deprivations are interlinked and how these interconnections vary across the developing world. More specifically, we suggest to analyse deprivations within our measurement framework using profiles, bundles, and co-deprivations which each illuminate particular aspects of the joint distribution of deprivations. Additionally, we apply latent class analysis to corroborate our findings and to uncover additional insights. We use data for 111 countries representing 6.1 billion people to document key patterns at the global level and selected findings for world regions and countries, which may serve as a useful benchmark for more in-depth analyses. We also discuss how our approach may be adopted to different settings and how it can inform multi-sectoral policy programmes.
    Keywords: Multidimensional poverty; Global MPI; Joint distribution of deprivations. JEL classification: I32.
    Date: 2023–12
  7. By: Simone Alfarano; Albert Banal-Estañol; Eva Camacho; Giulia Iori; Burcu Kapar; Rohit Rahi
    Abstract: We consider a setting in which privately informed agents are located in a network and trade a risky asset with other agents with whom they are directly connected. We compare the performance, both theoretically and experimentally, of a complete network (centralized market) to incomplete networks with differing levels of connectivity (decentralized markets). We show that decentralized markets can deliver higher informational efficiency, with prices closer to fundamentals, as well as higher welfare for mean-variance investors.
    Keywords: Networks, heuristic learning, informational efficiency, experimental asset markets
    JEL: C92 D82 G14
    Date: 2024–01
  8. By: Kleinman, Benny; Liu, Ernest; Redding, Stephen J.; Yogo, Motohiro
    Abstract: We generalize the closed-economy neoclassical growth model (CNGM) to allow for costly goods trade and capital flows with imperfect substitutability between countries. We develop a tractable, multi-country, quantitative model that matches key features of the observed data (e.g., gravity equations for trade and capital holdings) and is well suited for analyzing counterfactual policies that affect both goods and capital market integration (e.g., U.S.-China decoupling). We show that goods and capital market integration interact in non-trivial ways to shape impulse responses to counterfactual changes in productivity and goods and capital market frictions and the speed of convergence to steady-state.
    Keywords: economic growth; international trade; capital flows
    JEL: F10 F21
    Date: 2023–12–05
  9. By: Yoosoon Chang; Yongok Choi; Chang Sik Kim; J. Isaac Miller; Joon Y. Park
    Abstract: We employ a semiparametric functional coefficient panel approach to allow an economic relationship of interest to have both country-specific heterogeneity and a common component that may be nonlinear in the covariate and may vary over time. Surfaces of the common component of coefficients and partial derivatives (elasticities) are estimated and then decomposed by functional principal components, and we introduce a bootstrap-based procedure for inference on the loadings of the functional principal components. Applying this approach to national energy-GDP elasticities, we find that elasticities are driven by common components that are distinct across two groups of countries yet have leading functional principal components that share similarities. The groups roughly correspond to OECD and non-OECD countries, but we utilize a novel methodology to regroup countries based on common energy consumption patterns to minimize root mean squared error within groups. The common component of the group containing more developed countries has an additional functional principal component that decreases the elasticity of the wealthiest countries in recent decades.
    Keywords: energy consumption, energy-GDP elasticity, partially linear semiparametric panel model, functional coefficient panel model
    JEL: C14 C23 C51 Q43
    Date: 2024–01
  10. By: Jo\v{z}e P. Damijan; Sandra Damijan; Osiris Jorge Parcero
    Abstract: This paper examines whether there is a premium in country size. We study whether there are significant gains from being a small or a large country in terms of certain socioeconomic indicators and how large this premium is. Using panel data for 200 countries over 50 years, we estimate premia for various sizes of nations across a variety of key economic and socioeconomic performance indicators. We find that smaller countries are richer, have larger governments, and are more prudent in terms of fiscal policies than larger ones. On the other hand, smaller countries seem to be subject to higher absolute and per capita costs for the provision of essential public goods, which may lower their socioeconomic performance in terms of health and education. In terms of economic performance, small countries seem to do better than large countries, compensating for smallness by relying on foreign trade and foreign direct investment. The latter comes at the cost of higher vulnerability to external shocks, resulting in higher volatility of growth rates. This paper's findings offer essential guidance to policymakers, international organizations, and business researchers, especially those assessing a country's economic or socioeconomic performance or potential. The study implies that comparisons with medium-sized or large countries may be of little utility in predicting the performance of small countries.
    Date: 2024–01

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