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on International Finance |
| By: | António Afonso; José Alves; João Jalles; Sofia Monteiro; João Tovar Jalles |
| Abstract: | This study examines the effects of geopolitical risk and global uncertainty on energy prices, conditioned by different exchange rate regimes, for 185 economies over the period 1980-2023. The central question is how uncertainty impacts energy prices and whether exchange rate flexibility mediates these effects. Using panel data techniques, including OLS and Panel VAR, we assess both demand and supply-side channels, exploring country-specific differences. Our key findings indicate that uncertainty shocks significantly raise energy prices, particularly in countries with flexible exchange rates, where currency depreciation amplifies global price fluctuations. Asymmetric results are found regarding emerging markets, with flexible exchange rates, which tend to have lower energy prices, while oil-exporting countries and OPEC members experience distinct pricing dynamics. These results underscore the importance of exchange rate policy choices in shaping energy market responses to global shocks. Policymakers may need to adopt complementary measures to manage the volatility arising from global uncertainty. |
| Keywords: | geopolitical risk, world uncertainty index, global energy markets, exchange rate regimes, asymmetric effects |
| JEL: | C23 E44 G32 H63 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11384 |
| By: | Yudai Hatayama (Bank of Japan); Yuto Iwasaki (Previously Bank of Japan); Kyoko Nakagami (Bank of Japan); Tatsuyoshi Okimoto (Bank of Japan and Keio University) |
| Abstract: | This paper quantitatively examines the effect of globalization on the natural rate of interest in developed economies, including Japan, the US, and the euro area. By incorporating into the model the variables that capture global economic and financial trends, such as demand and supply of safe assets and cross-border spillovers, with a smooth-transition framework, we account for the existence of non-linear regime change of their coefficients, driven by globalization. Our findings indicate that along with the progress of globalization, (i) the impact of global factors rapidly increased around 2000, and (ii) the commonly observed decline in the natural rate of interest can be largely attributed to these global factors. These findings underscore the importance of incorporating global factors such as demand and supply of safe assets and global spillovers, with their increasing impact, alongside the domestic factors such as productivity and demographics, when investigating developments in the natural rate of interest. |
| Keywords: | Natural Rate of Interest; Globalization; Smooth Transition Model |
| JEL: | E43 E52 F41 |
| Date: | 2024–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp24e13 |
| By: | Bhushan Praveen Jangam (School of Management and Entrepreneurship, Indian Institute of Technology Jodhpur, India); Badri Narayan Rath (Indian Institute of Technology Hyderabad, Kandi, Sangareddy, Telangana – 502 284, India) |
| Abstract: | This study examines the relationship between global value chain (GVC) integration and business cycle synchronisation in selected Association of Southeast Asian Nations (ASEAN) countries from 2007 to 2021. Using a panel fixed effects approach, we discover the following key findings: First, we find that GVC integration is associated with both output synchronisation and desynchronisation in ASEAN countries. Second, we notice that the outcomes differ depending on the type of GVC integration, such as forward integration, backward integration, or two-sided integration. Third, for a more in-depth understanding, we conduct an industry-specific analysis. We examine three major industry categories: manufacturing, services, and high-technology industries. The findings show mixed evidence of an association between GVC integration and BCS in these industries. The findings highlight the shock transmission associated with GVC integration. |
| Keywords: | Global value chains; Business cycle synchronisation; Fixed effects; Industries; ASEAN |
| JEL: | F1 C5 L6 L8 |
| Date: | 2024–02–16 |
| URL: | https://d.repec.org/n?u=RePEc:era:wpaper:dp-2023-28 |
| By: | Vassilios G. Papavassilioua (University College Dublin and UCD Geary Institute for Public Policy); Fan Dora Xiab (Bank for International Settlements (BIS)) |
| Abstract: | We study the liquidity of the euro-area sovereign bond market during the March 2020 dash for cash. We provide evidence that liquidity was signif- icantly impaired across the three core euro-area countries. We note that the liquidity deterioration was not as severe as that during the euro-area sovereign debt crisis. Spikes in illiquidity are reversed in the period imme- diately following the dash for cash episode. We also document strong com- monalities in liquidity that are reduced after the dash for cash. This result indicates that variation in liquidity exhibits a strong common component highlighting the systemic risk that comes as a result. |
| Keywords: | Liquidity, Sovereign bond markets, COVID-19 outbreak, Common factors |
| JEL: | C5 G01 G10 G15 |
| Date: | 2024–10–21 |
| URL: | https://d.repec.org/n?u=RePEc:ucd:wpaper:202406 |