Download or read book Risk off Shocks and Spillovers in Safe Havens written by John Beirne and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines real and financial spillovers to safe haven financial flow destinations due to risk-off shocks in global financial markets. Using country-specific structural vector autoregression (VAR) models over the period 1990 to 2021, we show that dynamics for Japan appear to be different to those of Switzerland and the US in four main ways. First, in response to risk-off episodes over the estimation period, the yen real effective exchange rate (REER) appreciates sharply and significantly, with the effect persisting over time. Second, no significant effects on portfolio flows to Japan are found, in spite of the exchange rate effects, suggesting a rapid adjustment of financial markets to shifts in equilibrium exchange rates. Third, negative real spillovers from risk-off shocks appear to only apply to Japan with exchange rate appreciation exacerbating declines in GDP growth. Fourth, risk-off shocks do not have a statistically significant effect on domestic economic policy uncertainty in Japan, which may be related to the strong expectations priced in of overseas portfolio holdings repatriated back to Japan. Our findings have important implications for policymakers in safe haven destinations in managing domestic financial vulnerabilities associated with risk-off episodes.
Download or read book Investor Sentiment and Crash Risk in Safe Havens written by Adnen Ben Nasr and published by . This book was released on 2018 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the relationship between investor sentiment and intraday return dynamics for safe haven assets, with particular focus on crash risk in these assets. Examining intraday returns for a wide range of safe havens proposed in the literature, we find that shocks to investor sentiment have a significant effect on most safe havens, while the sentiment is heterogeneous both in terms of its size and direction. While the strongest effects of sentiment shocks are observed in the case of Gold, Swiss Francs and Japanese Yen, interestingly, we find that oil stands out from the rest of the pack, responding negatively to sentiment shocks, suggesting that positive shocks to sentiment (i.e. high fear) increase crash risk for this asset. Our findings also point to intra-safe haven spillover effects, with oil exhibiting a markedly different pattern. Investment and hedging implications are discussed next.
Download or read book 2013 Spillover Report Analytical Underpinnings and Other Background written by International Monetary Fund. Asia and Pacific Dept and published by International Monetary Fund. This book was released on 2013-07-03 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: High uncertainty in general, and high policy uncertainty more specifically, can have important impact on global investment and output growth. Much of the recent policy uncertainty emanated from the United States and Europe—the world’s two largest economies. Spillovers from policy uncertainty can occur through several channels. Trade can be affected if increased policy uncertainty adversely affects economic activity and import demand in the United States and Europe. Policy uncertainty could also raise global risk aversion, resulting in sharp corrections in financial markets and capital outflows from emerging markets. This background note attempts to quantify the impact of U.S. and European policy uncertainty on other regions. Specifically, it addresses the following questions: What do we mean by policy uncertainty? How well can we measure it? How has policy uncertainty in the United States and Europe evolved during the past several decades? And how large are the spillovers to economic activity in other regions? The analysis suggests that sharp increases in U.S. and European policy uncertainty in the past have temporarily lowered investment and output in other regions to varying degrees. It also suggests that a marked decrease in policy uncertainty in the United States and Europe in the near term could help boost global investment and output.
Download or read book Safe Havens Feedback Loops and Shock Propagation in Global Asset Prices written by Ms.Franziska Ohnsorge and published by International Monetary Fund. This book was released on 2014-05-09 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We create a network of bilateral correlations of changes in sovereign bond yields and individual bank equity price changes since 2000. We extract some stylized facts from this network of asset price correlations and document the clear differences in asset price correlations between safe havens and non-safe havens: safe havens, as commonly defined, have higher sovereign-sovereign, bank-bank, and bank-sovereign correlations than nonsafe havens. In a simple shock propagation model, we illustrate how these higher correlations may turn safe havens into shock propagators. While we discuss safe havens as a group, we document how the US is in a category of its own, differing significantly from the other countries including Switzerland or Japan. Separately, we find that feedback loops amplify shocks, and those emanating from bank stress more than those emanating from sovereign stress.
Download or read book The Curious Case of the Yen as a Safe Haven Currency written by Mr.Dennis P. J. Botman and published by International Monetary Fund. This book was released on 2013-11-06 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: During risk-off episodes, the yen is a safe haven currency and on average appreciates against the U.S. dollar. We investigate the proximate causes of yen risk-off appreciations. We find that neither capital inflows nor expectations of the future monetary policy stance can explain the yen’s safe haven behavior. In contrast, we find evidence that changes in market participants’ risk perceptions trigger derivatives trading, which in turn lead to changes in the spot exchange rate without capital flows. Specifically, we find that risk-off episodes coincide with forward hedging and reduced net short positions or a buildup of net long positions in yen. These empirical findings suggest that offshore and complex financial transactions should be part of spillover analyses and that the effectiveness of capital flow management measures or monetary policy coordination to address excessive exchange rate volatility might be limited in certain cases.
Download or read book China s Growing Influence on Asian Financial Markets written by Mr.Serkan Arslanalp and published by International Monetary Fund. This book was released on 2016-08-20 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper finds that financial spillovers from China to regional markets are on the rise. The main transmission channel appears to be trade linkages, although direct financial linkages are playing an increasing role. Without an impact on global risk premiums, China’s influence on regional markets is not yet to the level of the United States, but comparable to that of Japan. If China-related shocks are coupled with a rise in global risk premiums, as in August 2015 and January 2016, spillovers to the region could be significantly larger. Over the medium term, China’s financial spillovers could rise further with tighter financial linkages with the region, including through the ongoing internationalization of the renminbi and China’s capital account liberalization.
Download or read book Spillovers from China written by MissNkunde Mwase and published by International Monetary Fund. This book was released on 2016-09-27 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although China’s much-needed transition to a new growth path is proceeding broadly as expected, the transition is still fraught with uncertainty, including regarding the Chinese authorities’ ability to achieve a smooth rebalancing of growth and the extent of the attendant slowdown in activity. Thus, in the short run, the transition process is likely to entail significant spillovers through trade and commodities, and possibly financial channels. This note sheds some light on the size and nature of financial spillovers from China by looking at the impact of developments in China on global financial markets, with a particular emphasis on differentiation across asset classes and markets. The note shows that economic and financial developments in China have a significant impact on global financial markets, but these effects reflect primarily the central role the country plays in goods trade and commodity markets, rather than China’s financial integration in global markets and the direct financial linkages it has with other countries.
Download or read book 2013 Spillover Report written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2013-07-02 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Five years after the global financial crisis, the severe tensions and risks rooted last year in some of the “Systemic five” (S5)—China, euro area, Japan, United Kingdom, United States––have abated but all five are still operating below potential, i.e., they are not contributing to global activity as much as they might: if they could somehow close their output gaps, global output would be closer to potential by 3 percentage points. Meanwhile, many parts of the rest of the world have been at or near potential. Most recently though, there have been signs of accelerated recovery in the United States and slowdown in emerging markets. This continued divergence in cyclical positions poses a global challenge, namely to find policies that help the S5 close their output gap without over-stimulating or over-tightening, through spillovers, economies that do not need it.
Download or read book 2012 Spillover Report written by International Monetary Fund and published by International Monetary Fund. This book was released on 2012-09-07 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Spillover reports examine the external effects of domestic policies in five systemic economies (S5), comprising China, the Euro Area, Japan, the United Kingdom, and the United States. The report aims to provide an added perspective to the policy line developed in the Article IV discussions with these entities and an input into the Fund’s broader multilateral surveillance. Topics for this report were chosen based on consultations with officials from the S5 and selected emerging markets (Brazil, the Czech Republic, India, Korea, Mexico, Poland, Russia, Saudi Arabia, Singapore, South Africa, and Turkey). Each participant was asked about policy concerns and spillovers from the S5. To facilitate candor, the report does not attribute views regarding partner countries. Rather than try to capture the full range of spillovers, this report builds on last year’s findings, focusing on the forward-looking issues raised by partners and on S5 officials’ reactions.
Download or read book Advances in Pacific Basin Business Economics and Finance written by Cheng-Few Lee and published by Emerald Group Publishing. This book was released on 2024-04-04 with total page 299 pages. Available in PDF, EPUB and Kindle. Book excerpt: Advances in Pacific Basin Business, Economics and Finance (APBBEF) is a peer-reviewed series designed to focus on interdisciplinary research in finance, economics, and management among Pacific Rim countries.
Download or read book Floating Exchange Rates at Fifty written by MAURICE OBSTFELD and published by Peterson Institute for International Economics. This book was released on 2024-04-15 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: Fifty years ago, in March 1973, the major industrial economies abandoned fixed exchange rates, conclusively ending the post–World War II Bretton Woods arrangements. Proponents believed their action would strengthen countries' ability to reconcile domestic macroeconomic policies with the balance of payments. But opponents feared it would initiate a new era of instability and financial shocks. Since 1973, much of the world has moved away from fixed exchange rates to a variety of regimes based on considerable exchange rate flexibility. But international trade conflicts and unstable capital flows, along with a rise in financial crises around the world, have nonetheless accompanied the global shift away from exchange rate pegs. How has the international monetary system performed over the past half century? What have we learned from the experience of more flexible exchange rates? What has been the impact on macroeconomic and financial stability in the years since? This book derives from papers delivered at a conference that brought together leading economists and policymakers to debate and discuss these questions, as well as to assess the evolution of the international monetary system, the dominance of the US dollar, and the role of exchange rate regimes in shaping the world economy.
Download or read book Japan written by International Monetary Fund. Asia and Pacific Dept and published by International Monetary Fund. This book was released on 2020-02-10 with total page 119 pages. Available in PDF, EPUB and Kindle. Book excerpt: This 2019 Article IV Consultation with Japan highlights that the rapid aging and shrinking of Japan’s population has become central to macroeconomic policies and outcomes. The consultation centered on the macroeconomic effects of Japan’s demographics. Mutually reinforcing policies are needed to lift current and expected inflation, stabilize public debt, and raise potential growth. Underlying growth is expected to remain resilient but will be increasingly challenged by slowing external demand and intensifying demographic headwinds. Growth in domestic demand is being eroded by the weaker external environment. Frontloading of private consumption ahead of the October 2019 consumption tax rate increase appears to have been smaller than in 2014.
Download or read book The Curious Case of the Yen as a Safe Haven Currency written by Mr.Dennis P. J. Botman and published by International Monetary Fund. This book was released on 2013-11-06 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: During risk-off episodes, the yen is a safe haven currency and on average appreciates against the U.S. dollar. We investigate the proximate causes of yen risk-off appreciations. We find that neither capital inflows nor expectations of the future monetary policy stance can explain the yen’s safe haven behavior. In contrast, we find evidence that changes in market participants’ risk perceptions trigger derivatives trading, which in turn lead to changes in the spot exchange rate without capital flows. Specifically, we find that risk-off episodes coincide with forward hedging and reduced net short positions or a buildup of net long positions in yen. These empirical findings suggest that offshore and complex financial transactions should be part of spillover analyses and that the effectiveness of capital flow management measures or monetary policy coordination to address excessive exchange rate volatility might be limited in certain cases.
Download or read book Big Players Out of Synch written by Carolina Osorio Buitron and published by International Monetary Fund. This book was released on 2015-09-30 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Given the prospects of asynchronous monetary conditions in the United States and the euro area, this paper analyzes spillovers among these two economies, as well as the implications of asynchronicity for spillovers to other advanced economies and emerging markets. Through a structural vector autoregression analysis, country-specific shocks to economic activity and monetary conditions since the early 1990s are identified, and are used to draw implications about spillovers. The empirical findings suggest that real and monetary conditions in the United States and the euro area have oftentimes been asynchronous. The results also point to significant spillovers among them, in particular since early 2014—with spillovers from the euro area to the United States being particularly large. Against the backdrop of asynchronous conditions in these two economies, spillovers from real and money shocks to emerging markets and non-systemic advanced economies could be dampened.
Download or read book Colombia written by International Monetary Fund. Western Hemisphere Dept. and published by International Monetary Fund. This book was released on 2016-06-15 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on recent economic developments as well as the role of the flexible credit line (FCL) arrangement. Despite a large external shock, Colombia’s economy showed remarkable resilience in 2015. The current account deficit reached a record level in 2015, but reserves remained stable. The banking system and corporate sector remained in good financial health. Growth will be subdued in the near future but is projected to gradually return toward potential. The FCL has served Colombia well. The previous FCL arrangements have been instrumental to cope with heightened external risks in recent years, complementing the authorities’ policy response to economic shocks.
Download or read book International Capital Flow Pressures written by Ms.Linda S. Goldberg and published by International Monetary Fund. This book was released on 2018-02-16 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a new measure of capital flow pressures in the form of a recast Exchange Market Pressure index. The measure captures pressures that materialize in actual international capital flows as well as pressures that result in exchange rate adjustments. The formulation is theory-based, relying on balance of payments equilibrium conditions and international asset portfolio considerations. Based on the modified exchange market pressure index, the paper also proposes the Global Risk Response Index, which reflects the country-specific sensitivity of capital flow pressures to measures of global risk aversion. For a large sample of countries over time, we demonstrate time variation in the effects of global risk on exchange market pressures, the evolving importance of the global factor across types of countries, and the changing risk-on or risk-off status of currencies.
Download or read book Switzerland written by International Monetary Fund. European Dept. and published by International Monetary Fund. This book was released on 2023-06-07 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Switzerland: Selected Issues
