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on Open Economy Macroeconomics |
| By: | Agarwal, Isha (University of British Columbia); Chen, Wentong (Cornell University); Prasad, Eswar (Cornell University) |
| Abstract: | We provide the first empirical evidence on how media-driven narratives influence cross-border institutional investment flows. Applying natural language processing techniques to one-and-a-half million newspaper articles, we document substantial cross-country variation in sentiment and risk indices constructed from domestic media narratives about China in 15 countries. These narratives significantly affect portfolio flows, even after controlling for macroeconomic and financial fundamentals. This impact is smaller for investors with greater familiarity or private information about China and larger during periods of heightened uncertainty. Political and environmental narratives are as influential as economic narratives. Investors react more sharply to negative narratives than positive ones. |
| Keywords: | media narratives, cross-border flows, institutional investors, portfolio investment in China, textual analysis, natural language processing |
| JEL: | F30 G11 G15 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17442 |
| By: | Richard Frensch (OS Regensburg, University of Regens-burg, ZU Friedrichshafen); Michael Rindler (ZU Friedrichshafen, ifo Institute München) |
| Abstract: | We present a novel two-stage gravity specification with period-varying bilateral trade cost terms. We test our specification to confirm the benchmark result on declining international distance elasticities over time, using two new data sets. Analyzing period-varying bilateral trade cost derived from our specification offers additional insights: first, globalization has erased more than a third of the effect of distance on trade cost, mostly until the mid-nineties. Second, identifying period-varying bilateral trade cost separately for domestic vs. international trade offers a natural illustration to globalization – international trade cost are less persistent than domestic trade cost. Finally, reflecting the importance of general equilibrium adjustment, total bilateral trade cost – relating partial bilateral trade cost to multilateral resistances – are more appropriate to reflect globalization than partial bilateral trade cost. |
| Keywords: | Gravity, geography, panel models |
| JEL: | C23 F15 F40 O18 |
| Date: | 2023–06 |
| URL: | https://d.repec.org/n?u=RePEc:ost:wpaper:399 |
| By: | Moritz Pfeifer; Gunther Schnabl |
| Abstract: | This paper investigates the relationship between economic divergence and expansionary monetary policies within the eurozone based on a new divergence indicator. We study the dynamics between the economic divergence of member states and unconventional monetary policy in a Bayesian SVAR and find a strong positive response of the expansion of the ECB’s balance sheet to rising divergence. We find weaker evidence for unconventional monetary policies lowering divergence. We interpret these findings as evidence that expansionary monetary policy aims to absorb shocks leading to divergence. However, it may exacerbate divergence and inflationary pressures in the long-run. This research contributes to the literature on Optimum Currency Areas (OCAs) by highlighting the dynamics between economic disparities and unconventional monetary policy. |
| Keywords: | optimum currency areas, unconventional monetary policy shocks, statistical identification |
| JEL: | E52 E58 F15 F45 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11442 |