Download or read book Essays on International Trade Capital Flows and Financial Frictions written by Maria Margarita Lopez Forero and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two particular concerns in international economics motivate this research: I. How are real and financial activities related to each other in a globalized economy? II. What role do financial frictions play in this relationship ? Three essays look at these questions from different perspectives. The first chapter, in collaboration with Jean-Charles Bricongne and SebastianFranco-Bedoya, revises the old question on the relation between FDI and exports on French firms, where theory seems to be at odds with empirical findings. Most FDI and most trade take place between rich markets, where the horizontal investment type is expected to happen. In this sense, empirical studies have almost invariably found a complementarity relation while standard Horizontal FDI models predict substitutability between FDI and exports given the proximity-concentration trade-off. [...]The second chapter empirically examines how external financial needs measured at the sector level- and financial development at the country level interact to shape the aggregate marginal product of capital of a country (MPK) and its foreign direct investment inflows (FDI). First, using new available data we construct annual aggregate MPK for 50 developing and developed countries during 1995-2008; we use industry-level data to construct an annual country-level measure of external financial dependence and assess its effects on MPK conditional on the level of financial development. Our findings imply that financial development seems to be a necessary condition -and certainly not a sufficient one- in order for production in financially dependent sectors to positively affect aggregate MPK in developing countries. Second, using bilateral FDI inflows in developing countries between 2001 and 2010, we analyze how external financial dependence and financial development determine FDI in flows in developing countries. [...]The third chapter, joint research with Jean-Charles Bricongne and Fabrizio Coricelli, studies the transmission of global shocks during the Great Recession and its impact on French employment. Particularly, we explore the role of trade credit in the propagation of cross-border shocks. Using a sub-sample of importing enterprises that were active over 2004-2009,our findings imply that strong pre-crisis sourcing ties with countries that were more resilient to the global crisis, translated into better performance in terms of employment growth over 2008-2009. This effect dramatically varies with trade credit intensity. Strongly relying on trade credit made firms more vulnerable to unanticipated shocks, for which the adverse impact of the crisis was exacerbated. This effect intensified among firms with important sourcing ties with severely shocked countries. While the negative effect of the crisis was mitigated when sourcing relations with countries subject to milder shocks were stronger. Supporting, therefore, the hypothesis that trade credit was an alternative source of financing for enterprises during the crisis, where implicitly borrowing from suppliers helped importers overcoming financial constraints. Our contribution to the literature adds to the debate on the role of trade finance in explaining the real economic downturn across borders.

Download or read book Essays in Open Economy Macroeconomics with Borrowing Frictions written by Nelnan F. Koumtingue and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in International Finance and Macroeconomics written by Matteo Maggiori and published by . This book was released on 2012 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation explores the relationship between international financial markets, financial frictions, and the real economy. In particular, the dissertation focuses on the role of the United States of America (US) as the key country in the global financial architecture. The research presented here advances the study of international finance and macroeconomics by analyzing how the combination of two factors, the greater financial development of the US and financing frictions, leads to the special global roles of the US funding markets and the US dollar. In the first Chapter of the dissertation, I develop a model of financial intermediation in a closed economy, which is also the key building block of the open economy analysis in the second Chapter. In an economy with savers and financial intermediaries where financing frictions are present, the state of the financial sector becomes the key state variable. The financing frictions, modeled as the limited enforceability of deposit contracts, prevent capital from flowing freely from savers to the financial intermediaries that ultimately allocate capital to productive real assets. When financial intermediaries are well capitalized, their capital acts as a safety buffer for potential investment losses and, consequently, financing frictions are alleviated. In this state of the world, financial markets closely resemble those of the standard frictionless asset pricing framework. When, on the other hand, intermediaries are poorly capitalized, concerns for potential losses of capital disrupt the financing markets. In this state of the world, capital does not flow smoothly from savers into productive assets via financial intermediaries. In general, risky assets' prices fall and their volatility increases, thus replicating typical features of financial crises. Interestingly, these effects are highly non-linear. In the second Chapter, I provide a framework for understanding the global financial architecture as an equilibrium outcome of the risk sharing between countries with different levels of financial development. The country that has the most developed financial sector takes on a larger proportion of global fundamental and financial risk because its financial intermediaries are better able to deal with funding problems following negative shocks. This asymmetric risk sharing has real consequences. In good times, and in the long run, the more financially developed country consumes more, relative to other countries, and runs a trade deficit financed by the higher financial income that it earns as compensation for taking greater risk. During global crises, it suffers heavier capital losses than other countries, exacerbating its fall in consumption. This country's currency emerges as the world's reserve currency because it appreciates during crises and so provides a good hedge. The model is able to rationalize these facts, which characterize the role of the US as the key country in the global financial architecture. In the third Chapter, I provide empirical evidence on the role of the US dollar as a global safe asset. This empirical evidence provides one of the stylized facts analyzed in my theoretical work. I show that the US dollar earns a safety premium versus a basket of foreign currencies and that this premium is particularly high in times of global financial stress. These findings support the view that the dollar acts as the reserve currency for the international monetary system and that it is a natural safe haven in times of crisis, when a global flight to quality toward the reserve currency takes place. During such episodes, investors are willing to earn negative expected returns as compensation for holding safe dollars. I estimate the time varying dollar safety premium by using instrumental variable techniques to condition information down.

Download or read book Essays on Macroeconomic Effects of International Trade Barriers written by Soo Kyung Woo and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This dissertation is comprised of three essays regarding the role of trade barriers for international capital flows and prices. The study aims to understand the effect of changes in trade costs at various aspects: cross-country differentials, global integration, and within-country distributional effects. The first chapter studies the drivers of the US real exchange rate (RER), with a particular focus on its comovement with net trade flows. We consider the entire spectrum of frequencies, as the low-frequency movements account for 83% of the RER's unconditional variance. We introduce a model with heterogeneous firms facing sunk costs of exporting, financial shocks, and trade shocks. The model can fully capture the comovement of the RER and net trade flows at all frequencies, without compromising other major moments at the business cycle frequency. While financial shocks are necessary to capture the RER movements at higher frequencies, trade shocks are essential for lower frequency variation. The second chapter studies the factors accounting for the large, coincident increases in international borrowing and lending and international trade from 1970 to the present. We focus on the rise in annual changes in borrowing and lending across countries as summarized by the rise in the dispersion of the trade balance as a share of GDP. We show that these two salient features - a rise in net and gross international trade - are largely a consequence of a reduction in intratemporal trade barriers rather than a substantial reduction in the frictions on intertemporal trade or greater asymmetries in business cycles. Beyond explaining changes in the distribution of gross and net trade, the fall in frictions on intratemporal trade are consistent with the reduction in dispersion in other key macro time series such as the real exchange rate, terms of trade, and export-import ratio. The third chapter studies the dynamic effect of trade liberalization on wages and consumption, exploiting cross-region variation in the United States at the state level after the U.S.-Korea Free Trade Agreement. A key feature is a theoretically sound measurement of a regional exposure that takes into account the elasticity of substitution and covers all potential channels of tariff impacts. Using the measures for the Local Projection Method, I find that less protection at home is associated with a persistent negative impact: by the 8th quarter, a state at the upper quartile of the barrier cut experienced a decline in wage and consumption that is 1.56 and 1.04 percentage points larger, respectively, than a state at the lower quartile. However, cheaper access to imported inputs has a positive but temporary impact: by the 8th quarter, an upper quartile state experienced an increase in wage and consumption that is 1.62 and 1.45 percentage points larger, respectively. More opportunities to export have little effect."--Pages viii-ix.

Download or read book Essays in International Finance and Macroeconomics written by Galip K. Ozhan and published by . This book was released on 2016 with total page 125 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of essays in the intersection of international finance, macroeconomics, and monetary economics. The first essay studies the role of the financial sector in affecting domestic resource allocation and cross-border capital flows. I develop a quantitative, two-country, macroeconomic model in which banks face endogenous and occasionally binding leverage constraints. Banks lend funds to be invested in tradable or non-tradable sector capital and there is international financial integration in the market for bank liabilities. I focus on news about economic fundamentals as the key source of fluctuations. Specifically, in the case of positive news on the valuation of non-traded sector capital that turn out to be incorrect at a later date, the model generates an asymmetric, belief-driven boom-bust cycle that reproduces key features of the recent Eurozone crisis. Bank balance sheets amplify and propagate fluctuations through three channels when leverage constraints bind: First, amplified wealth effects induce jumps in import-demand (demand channel). Second, changes in the value of non-tradable sector assets alter bank lending to tradable sector firms (intra-national spillover channel). Third, domestic and foreign households re-adjust their savings in domestic banks, and capital flows further amplify fluctuations (international spillover channel). A common central bank’s unconventional policies of private asset purchases and liquidity facilities in response to unfulfilled expectations are successful at ameliorating the economic downturn. In the second essay, co-authored with Professor Ghironi, we study the implications of using the volatility of domestic interest rate as a policy instrument in a small open economy. We develop an international macroeconomic model of the interaction between an emerging market economy (EME) and global investors. EME central banker uses time-varying domestic interest rate volatility as a policy tool, and global investors have the opportunity to sell productive capital to the EME producers (FDI), in addition to having the opportunity to invest in one-period international and EME securities. We assess the effectiveness of using domestic interest rate volatility as a policy tool in distinguishing short-term security flows from long-term FDI flows, and identify the trade-offs that are faced in navigating financial strength and price stability. We find that an increase in interest rate volatility can attract FDI inflows while discouraging short-term security inflows, if the economy is subject to low- degree of pricing frictions. However, if prices are highly sticky, there is a co-movement of long-run FDI and short-run security outflows. Moreover, an increase in policy uncertainty induces higher price volatility.

Download or read book International Capital Flows and Credit Market Imperfections written by and published by . This book was released on 2010 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial crisis of 2007-08 has underscored the importance of adverse selection in financial markets. This friction has been mostly neglected by macroeconomic models of financial frictions, however, which have focused almost exclusively on the effects of limited pledgeability. In this paper, we fill this gap by developing a standard growth model with adverse selection. Our main results are that, by fostering unproductive investment, adverse selection: (i) leads to an increase in the economy's equilibrium interest rate, and; (ii) it enerates a negative wedge between the marginal return to investment and the equilibrium interest rate. Under financial integration, we show how this translates into excessive capital inflows and endogenous cycles. We also explore how these results change when limited pledgeability is added to the model. We conclude that both frictions complement one another and argue that limited pledgeability exacerbates the effects of adverse selection.

Download or read book Capital Flows Bazookas and Unconventional Monetary Policy written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book International Capital Flows written by Martin Feldstein and published by University of Chicago Press. This book was released on 2007-12-01 with total page 500 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.

Download or read book The Great Trade Collapse Causes Consequences and Prospects written by Richard E. Baldwin and published by CEPR. This book was released on 2009 with total page 246 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Managing Capital Flows written by Masahiro Kawai and published by Edward Elgar Publishing. This book was released on 2010-01-01 with total page 465 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managing Capital Flows provides analyses that can help policymakers develop a framework for managing capital flows that is consistent with prudent macroeconomic and financial sector stability. While capital inflows can provide emerging market economies with invaluable benefits in pursuing economic development and growth, they can also pose serious policy challenges for macroeconomic management and financial sector supervision. The expert contributors cover a wide range of issues related to managing capital flows and analyze the experience of emerging Asian economies in dealing with surges in capital inflows. They also discuss possible policy measures to manage capital flows while remaining consistent with the goals of macroeconomic and financial sector stability. Building on this analysis, the book presents options for workable national policies and regional policy cooperation, particularly in exchange rate management. Containing chapters that bring in international experiences relevant to Asia and other emerging market economies, this insightful book will appeal to policymakers in governments and financial institutions, as well as public and private finance experts. It will also be of great interest to advanced students and academic researchers in finance.

Download or read book Globalization and Poverty written by Ann Harrison and published by University of Chicago Press. This book was released on 2007-11-01 with total page 674 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past two decades, the percentage of the world’s population living on less than a dollar a day has been cut in half. How much of that improvement is because of—or in spite of—globalization? While anti-globalization activists mount loud critiques and the media report breathlessly on globalization’s perils and promises, economists have largely remained silent, in part because of an entrenched institutional divide between those who study poverty and those who study trade and finance. Globalization and Poverty bridges that gap, bringing together experts on both international trade and poverty to provide a detailed view of the effects of globalization on the poor in developing nations, answering such questions as: Do lower import tariffs improve the lives of the poor? Has increased financial integration led to more or less poverty? How have the poor fared during various currency crises? Does food aid hurt or help the poor? Poverty, the contributors show here, has been used as a popular and convenient catchphrase by parties on both sides of the globalization debate to further their respective arguments. Globalization and Poverty provides the more nuanced understanding necessary to move that debate beyond the slogans.

Download or read book Financial Crises Explanations Types and Implications written by Mr.Stijn Claessens and published by International Monetary Fund. This book was released on 2013-01-30 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

Download or read book External Adjustment written by Maurice Obstfeld and published by . This book was released on 2004 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Gross stocks of foreign assets have increased rapidly relative to national outputs since 1990, and the short-run capital gains and losses on those assets can amount to significant fractions of GDP. These fluctuations in asset values render the national income and product account measure of the current account balance increasingly inadequate as a summary of the change in a country's net foreign assets. Nonetheless, unusually large current account imbalances, especially deficits, should remain high on policymakers' list of concerns, even for the richer and less credit-constrained countries. Extreme imbalances signal the need for large and perhaps abrupt real exchange rate changes in the future, changes that might have undesired political and financial consequences given the incompleteness of domestic and international asset markets. Furthermore, of the two sources of the change in net foreign assets -- the current account and the capital gain on the net foreign asset position -- the former is better understood and more amenable to policy influence. Systematic government attempts to manipulate international asset values in order to change the net foreign asset position could have a destabilizing effect on market expectations"--NBER website

Download or read book The Economics of World War I written by Stephen Broadberry and published by Cambridge University Press. This book was released on 2005-09-29 with total page 363 pages. Available in PDF, EPUB and Kindle. Book excerpt: This unique volume offers a definitive new history of European economies at war from 1914 to 1918. It studies how European economies mobilised for war, how existing economic institutions stood up under the strain, how economic development influenced outcomes and how wartime experience influenced post-war economic growth. Leading international experts provide the first systematic comparison of economies at war between 1914 and 1918 based on the best available data for Britain, Germany, France, Russia, the USA, Italy, Turkey, Austria-Hungary and the Netherlands. The editors' overview draws some stark lessons about the role of economic development, the importance of markets and the damage done by nationalism and protectionism. A companion volume to the acclaimed The Economics of World War II, this is a major contribution to our understanding of total war.

Download or read book Global Waves of Debt written by M. Ayhan Kose and published by World Bank Publications. This book was released on 2021-03-03 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.

Download or read book Emerging Capital Markets and Globalization written by Augusto de la Torre and published by World Bank Publications. This book was released on 2006-10-20 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: Back in the early 1990s, economists and policy makers had high expectations about the prospects for domestic capital market development in emerging economies, particularly in Latin America. Unfortunately, they are now faced with disheartening results. Stock and bond markets remain illiquid and segmented. Debt is concentrated at the short end of the maturity spectrum and denominated in foreign currency, exposing countries to maturity and currency risk. Capital markets in Latin America look particularly underdeveloped when considering the many efforts undertaken to improve the macroeconomic environment and to reform the institutions believed to foster capital market development. The disappointing performance has made conventional policy recommendations questionable, at best. 'Emerging Capital Markets and Globalization' analyzes where we stand and where we are heading on capital market development. First, it takes stock of the state and evolution of Latin American capital markets and related reforms over time and relative to other countries. Second, it analyzes the factors related to the development of capital markets, with particular interest on measuring the impact of reforms. And third, in light of this analysis, it discusses the prospects for capital market development in Latin America and emerging economies and the implications for the reform agenda.

Download or read book Macroeconomics and the Financial System written by N. Gregory Mankiw and published by Macmillan. This book was released on 2011 with total page 642 pages. Available in PDF, EPUB and Kindle. Book excerpt: Watch this video interview with Greg Mankiw and Larry Ball discussing the future of the intermediate macroeconomics course and their new text. Check out preview content for Macroeconomics and the Financial System here. The financial crisis and subsequent economic downturn of 2008 and 2009 was a dramatic reminder of what economists have long understood: developments in the overall economy and developments in the financial system are inextricably intertwined. Derived and updated from two widely acclaimed textbooks (Greg Mankiw’s Macroeconomics, Seventh Edition and Larry Ball’s Money, Banking, and the Financial System), this groundbreaking text is the first and only intermediate macroeconomics text that provides substantial coverage of the financial system.