nep-opm New Economics Papers
on Open MacroEconomics
Issue of 2011‒05‒07
five papers chosen by
Martin Berka
Massey University, Albany

  1. Organizational Capital and the International Co-movement of Investment By Alok Johri; Marc-Andre Letendre; Daqing Luo
  2. Capital Controls: A Meta-analysis Approach By Magud, Nicolas; Reinhart, Carmen; Rogoff, Kenneth
  3. Gross capital flows: dynamics and crises By Fernando Broner; Tatiana Didier; Aitor Erce; Sergio L. Schmukler
  4. Rebalancing Growth in China: An International Perspective By Agnes Benassy-Quere; Benjamin Carton; Ludovic Gauvin
  5. Portfolio holdings in the euro area - home bias and the role of international, domestic and sector-specific factors By Jochem, Axel; Volz, Ute

  1. By: Alok Johri; Marc-Andre Letendre; Daqing Luo
    Abstract: A recent literature explores the macroeconomic implications of organizational capital (OC) and especially its ability to resolve discrepancies between existing models and data. This paper contributes to the OC literature by studying the effect of OC on international investment flows in the context of a two-country real business cycle model. The presence of OC introduces novel considerations into agents' investment decisions since current investment and future productivity levels are positively linked. These new considerations help bring the model closer to the data. In response to a productivity shock in one country, investment increases in both countries, producing positive international co-movement in investment, a feature of the data that several IRBC models fail to produce.
    Keywords: international RBC, learning by doing, organizational capital, cross-country correlations, investment.
    JEL: F41 F21 E32
    Date: 2011–04
  2. By: Magud, Nicolas; Reinhart, Carmen; Rogoff, Kenneth
    Abstract: In this note we summarize our recent paper, where we delved into the details of this apple-to-oranges problem with the aim of defining a minimum common ground. We begin our analysis by explicitly documenting the kinds of measures that are construed as capital controls. Along the way, we describe the more drastic differences across countries/episodes and between controls on inflows and outflows as well a more subtle differences in types of inflow or outflow controls. Given that success is measured differently across studies, we standardize (to some degree) the results across studies. Inasmuch as possible, we highlight episodes that are less well known than the heavily analyzed cases of Chile and Malaysia. Our results are based on a meta-analysis of 37 empirical studies.
    Keywords: capital controls; capital inflows; exchange rate; monetary policy
    JEL: F32 F30 E50 F33
    Date: 2011–03
  3. By: Fernando Broner (CREI and Universitat Pompeu Fabra); Tatiana Didier (World Bank); Aitor Erce (Banco de España); Sergio L. Schmukler (World Bank)
    Abstract: This paper analyzes the joint behavior of international capital flows by foreigners and domestic agents over the business cycle and during financial crises. We show that gross capital flows by foreigners and domestic agents are very large and volatile relative to net capital flows. Namely, when foreigners invest in a country domestic agents tend to invest abroad, and vice versa. Gross capital flows are also pro-cyclical. During expansions, foreigners tend to bring in more capital and domestic agents tend to invest more abroad. During crises, especially during severe ones, there is retrenchment, i.e. a reduction in capital inflows by foreigners and an increase in capital inflows by domestic agents. This evidence sheds light on the nature of the shocks driving international capital flows and discriminates among existing theories. Our findings are consistent with shocks that affect foreigners and domestic agents asymmetrically - e.g. sovereign risk and asymmetric information - over productivity shocks.
    Keywords: Gross capital flows, net capital flows, domestic investors, foreign investors, crises
    JEL: F21 F32
    Date: 2011–04
  4. By: Agnes Benassy-Quere; Benjamin Carton; Ludovic Gauvin
    Abstract: Based on simulations of an original DGE model of the US, Chinese and Euro area economies with financial frictions and various monetary regimes, the paper shows that the contribution of China in global rebalancing should primarily rely on structural policies aiming at reducing aggregate savings in China. The role of the exchange-rate regime would be minor under standard monetary policies, although more important if monetary policies in advanced countries are constrained, as they are today. Finally, relying only on a change in China’s monetary regime (without structural reforms) could end up in delaying rather than accelerating the rebalancing, depending on China’s policy regarding accumulated reserves.
    Keywords: Global imbalances; exchange rate regimes; capital controls; China
    JEL: F32 F42 F47
    Date: 2011–03
  5. By: Jochem, Axel; Volz, Ute
    Abstract: This paper aims to identify the determinants of portfolio restructuring in EMU member states since the introduction of the euro and especially during the financial turbulence of the past years. We find that, besides exchange rate volatility and traditional indicators of information and transaction costs, the perception of sovereign risk has become more important as a determinant of portfolio allocation. The shares of financial corporations have been affected disproportionately by this development. At the same time, banks substantially reduced their international investment, possibly the result of a deleveraging process. --
    Keywords: Financial Integration,Home Bias,Institutional Sectors,Financial Crisis
    JEL: F30 F32 F36 G11
    Date: 2011

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