Pub Date : 2018-09-18DOI: 10.14784/MARUFACD.460693
Sinemis Zengin, Serhat Yüksel, M. Kartal
Increasing foreign direct investment amount is very significant especially for developing countries in order to improve economy. Because of this situation, defining the factors that affect foreign direct investment is essential. Within this context, the main purpose of this study is to identify the influencing factors of foreign direct investment in Turkey. Within this scope, annual data for the periods between 1988 and 2015 was analyzed in this study. In addition to this situation, Multivariate Adaptive Regression Splines (MARS) method was used so as to achieve this objective. According to the results of the analysis, it was determined that current account deficit problem of Turkey affects foreign direct invest negatively. It was identified that if the ratio of current account deficit to total GDP is higher than “3.57”, foreign direct investment goes down. This result shows that foreign investors do not prefer to make investment since current account deficit increases fragility in the economy and it is considered as the leading indicator of the economic crisis. While considering the results of this study, it was recommended that current account deficit problem should be minimized to attract foreign investors make investment in Turkey.
{"title":"Understanding The Factors That Affect Foreign Direct Investment in Turkey By Using MARS Method","authors":"Sinemis Zengin, Serhat Yüksel, M. Kartal","doi":"10.14784/MARUFACD.460693","DOIUrl":"https://doi.org/10.14784/MARUFACD.460693","url":null,"abstract":"Increasing foreign direct investment amount is very significant especially for developing countries in order to improve economy. Because of this situation, defining the factors that affect foreign direct investment is essential. Within this context, the main purpose of this study is to identify the influencing factors of foreign direct investment in Turkey. Within this scope, annual data for the periods between 1988 and 2015 was analyzed in this study. In addition to this situation, Multivariate Adaptive Regression Splines (MARS) method was used so as to achieve this objective. According to the results of the analysis, it was determined that current account deficit problem of Turkey affects foreign direct invest negatively. It was identified that if the ratio of current account deficit to total GDP is higher than “3.57”, foreign direct investment goes down. This result shows that foreign investors do not prefer to make investment since current account deficit increases fragility in the economy and it is considered as the leading indicator of the economic crisis. While considering the results of this study, it was recommended that current account deficit problem should be minimized to attract foreign investors make investment in Turkey.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132214883","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper computes the dollar-weighted returns (DWRs) on the aggregate corporate sector in each of 43 sample countries. The paper shows that the DWRs in U.S. dollars are similar across countries but the local-currency DWRs are not. Further analysis shows that the DWRs in local currency are higher in financially closed countries but their currencies lose value, thereby resulting in the parity of DWRs in U.S. dollars across countries. More generally, a country's DWR converges faster to the global benchmark, the more financially open the country is. Taken together, our results are consistent with the notion that capital flows in such a way that the return to investors is equalized across countries and any barriers to cross-border capital flows are overcome by currency value changes.
{"title":"Dollar-Weighted Return on Aggregate Corporate Sector: How is it Distributed Across Countries?","authors":"Lingxia Sun, Dong Wook Lee","doi":"10.2139/ssrn.3221424","DOIUrl":"https://doi.org/10.2139/ssrn.3221424","url":null,"abstract":"Abstract This paper computes the dollar-weighted returns (DWRs) on the aggregate corporate sector in each of 43 sample countries. The paper shows that the DWRs in U.S. dollars are similar across countries but the local-currency DWRs are not. Further analysis shows that the DWRs in local currency are higher in financially closed countries but their currencies lose value, thereby resulting in the parity of DWRs in U.S. dollars across countries. More generally, a country's DWR converges faster to the global benchmark, the more financially open the country is. Taken together, our results are consistent with the notion that capital flows in such a way that the return to investors is equalized across countries and any barriers to cross-border capital flows are overcome by currency value changes.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117240725","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper conducts a comprehensive empirical test of 20 prominent anomalies using the data from 32 countries/regions during the period 1999 to 2017. My results show that most of the anomalies become weaker or even diminish using data in recent years, both in the US and in other markets. This paper also compares five different information aggregation approaches to evaluate their performance of anomaly returns. The results show that although different aggregation methods may perform better in a specific country, on average the latent variable based approach and the Fama-MacBeth regression based approach outperform other approaches in capturing the return-related information. Moreover, results based on equal-weighted returns provide much more significant anomalies than those based on value-weighted returns.
{"title":"Aggregate Information in Different Anomalies: International Evidence","authors":"Qingjie Du","doi":"10.2139/ssrn.3222682","DOIUrl":"https://doi.org/10.2139/ssrn.3222682","url":null,"abstract":"This paper conducts a comprehensive empirical test of 20 prominent anomalies using the data from 32 countries/regions during the period 1999 to 2017. My results show that most of the anomalies become weaker or even diminish using data in recent years, both in the US and in other markets. This paper also compares five different information aggregation approaches to evaluate their performance of anomaly returns. The results show that although different aggregation methods may perform better in a specific country, on average the latent variable based approach and the Fama-MacBeth regression based approach outperform other approaches in capturing the return-related information. Moreover, results based on equal-weighted returns provide much more significant anomalies than those based on value-weighted returns.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123549362","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Lending to corporates in foreign currencies can expose banks to substantial currency risk. Using global syndicated loan data, we find that a one-standard-deviation increase in exchange rate volatility increases loan spreads by approximately 20 basis points for loans made in a currency different from the lenders’. This implies excess interest of approximately USD 2.55 million for loans of average size and duration. We show that our finding is mostly attributed to credit constraints and deviations from perfect competition in international lending markets. Borrowers can lower the extra cost by forming strong lending relationships with their banks.
{"title":"Foreign Currency Lending","authors":"M. Delis, Panagiotis N. Politsidis, Lucio Sarno","doi":"10.2139/ssrn.3220260","DOIUrl":"https://doi.org/10.2139/ssrn.3220260","url":null,"abstract":"Lending to corporates in foreign currencies can expose banks to substantial currency risk. Using global syndicated loan data, we find that a one-standard-deviation increase in exchange rate volatility increases loan spreads by approximately 20 basis points for loans made in a currency different from the lenders’. This implies excess interest of approximately USD 2.55 million for loans of average size and duration. We show that our finding is mostly attributed to credit constraints and deviations from perfect competition in international lending markets. Borrowers can lower the extra cost by forming strong lending relationships with their banks.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122594452","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this JPMorgan Chase Institute report, we examined three recent events that had significant impacts on foreign exchange (FX) markets: the decision by the Swiss National Bank to end their minimum exchange rate policy on January 15, 2015, the Brexit referendum on June 23, 2016, and the US Presidential Election on November 8, 2016. All three events shared one important quality — they had unexpected outcomes that led to the largest one-day moves in the relevant exchange rates in the last 20 years — that made them ideal candidates for research aimed at building a better understanding of institutional investor trading behavior. With this research objective in mind, we examined institutional investor trades in FX markets in the days and hours leading up to, during, and after each event. First, we find that FX trading volumes for hedge funds, asset managers, and banks spiked during the three events. In contrast, volumes for the corporate, pension/insurance, and public/other investor sectors barely increased. Second, institutional investors traded significant amounts of FX risk during the events, but their net flows alone cannot explain the sharp exchange rate movements during the repricing periods. Third, only hedge funds consistently transferred risk immediately after news broke and as currencies repriced sharply. Other investors transferred risk but only after exchange rates stabilized. Fourth, the active investor sectors played different roles in each event: During the SNB event, they all bought CHF, trading in the direction of the prevailing move in exchange rates; during the Brexit event their net flows were mixed; and during the US Election event they bought MXN, trading against the prevailing move in exchange rates. Fifth, within each investor sector, there was considerable variation in trading behavior during each event. Finally, banks and hedge funds traded higher volumes outside of their normal business hours and outside of a currency’s local market; other investor sectors did not. Our results are informative for policy discussions along two dimensions: financial market stability and central bank communications. The report leverages a new data asset that includes nearly 400 million institutional investor transactions across all asset classes, sourced from the Markets division of J.P. Morgan’s Corporate & Investment Bank. The analysis in this report is based on 120,000 spot and forward FX transactions in Swiss Francs (CHF), the Pound sterling (GBP), or the Mexican Peso (MXN) that were executed in the hours before, during, and after news broke for each event.
{"title":"FX Markets Move on Surprise News Institutional Investor Trading Behavior Around Brexit, the US Election, and the Swiss Franc Floor","authors":"Kanav Bhagat, Diana Farrell","doi":"10.2139/ssrn.3198368","DOIUrl":"https://doi.org/10.2139/ssrn.3198368","url":null,"abstract":"In this JPMorgan Chase Institute report, we examined three recent events that had significant impacts on foreign exchange (FX) markets: the decision by the Swiss National Bank to end their minimum exchange rate policy on January 15, 2015, the Brexit referendum on June 23, 2016, and the US Presidential Election on November 8, 2016. All three events shared one important quality — they had unexpected outcomes that led to the largest one-day moves in the relevant exchange rates in the last 20 years — that made them ideal candidates for research aimed at building a better understanding of institutional investor trading behavior. With this research objective in mind, we examined institutional investor trades in FX markets in the days and hours leading up to, during, and after each event. First, we find that FX trading volumes for hedge funds, asset managers, and banks spiked during the three events. In contrast, volumes for the corporate, pension/insurance, and public/other investor sectors barely increased. Second, institutional investors traded significant amounts of FX risk during the events, but their net flows alone cannot explain the sharp exchange rate movements during the repricing periods. Third, only hedge funds consistently transferred risk immediately after news broke and as currencies repriced sharply. Other investors transferred risk but only after exchange rates stabilized. Fourth, the active investor sectors played different roles in each event: During the SNB event, they all bought CHF, trading in the direction of the prevailing move in exchange rates; during the Brexit event their net flows were mixed; and during the US Election event they bought MXN, trading against the prevailing move in exchange rates. Fifth, within each investor sector, there was considerable variation in trading behavior during each event. Finally, banks and hedge funds traded higher volumes outside of their normal business hours and outside of a currency’s local market; other investor sectors did not. Our results are informative for policy discussions along two dimensions: financial market stability and central bank communications. The report leverages a new data asset that includes nearly 400 million institutional investor transactions across all asset classes, sourced from the Markets division of J.P. Morgan’s Corporate & Investment Bank. The analysis in this report is based on 120,000 spot and forward FX transactions in Swiss Francs (CHF), the Pound sterling (GBP), or the Mexican Peso (MXN) that were executed in the hours before, during, and after news broke for each event.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"147 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116623694","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-06-01DOI: 10.5089/9781484361634.001
Z. Kóczán, F. Loyola
The poverty-reducing effects of remittances have been well-documented, however, their effects on inequality are less clear. This paper examines the impact of remittances on inequality in Mexico using household-level information on the receiving side. It hopes to speak to their insurance role by examining how remittances are affected by domestic and external crises: the 1994 Mexican Peso crisis and the Global Financial Crisis. We find that remittances lower inequality, and that they become more pro-poor over time as migration opportunities become more widespread. This also strengthens their insurance effects, mitigating some of the negative impact of shocks on the poorest.
{"title":"How Do Migration and Remittances Affect Inequality? A Case Study of Mexico","authors":"Z. Kóczán, F. Loyola","doi":"10.5089/9781484361634.001","DOIUrl":"https://doi.org/10.5089/9781484361634.001","url":null,"abstract":"The poverty-reducing effects of remittances have been well-documented, however, their effects on inequality are less clear. This paper examines the impact of remittances on inequality in Mexico using household-level information on the receiving side. It hopes to speak to their insurance role by examining how remittances are affected by domestic and external crises: the 1994 Mexican Peso crisis and the Global Financial Crisis. We find that remittances lower inequality, and that they become more pro-poor over time as migration opportunities become more widespread. This also strengthens their insurance effects, mitigating some of the negative impact of shocks on the poorest.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133965222","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-05-22DOI: 10.1016/J.JIMONFIN.2020.102168
Michele Ca’ Zorzi, Michał Rubaszek
{"title":"Exchange Rate Forecasting on a Napkin","authors":"Michele Ca’ Zorzi, Michał Rubaszek","doi":"10.1016/J.JIMONFIN.2020.102168","DOIUrl":"https://doi.org/10.1016/J.JIMONFIN.2020.102168","url":null,"abstract":"","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"749 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"119542105","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We find that heightened cross-border bank flows are associated with lower systemic risk in a target country’s banking system. The reductions in systemic risk are stronger for flows coming from source countries with stronger regulatory oversight than the target country. Such cross-border bank flows linked to regulatory arbitrage are also associated with improvements in target banking sector profitability, asset quality, and efficiency. We assess several alternative channels of influence for cross-border bank flows but interpret the evidence on these flows as mostly consistent with a benign form of regulatory arbitrage.
{"title":"Cross-Border Bank Flows and Systemic Risk","authors":"G. Karolyi, John Sedunov, Alvaro G. Taboada","doi":"10.2139/ssrn.2938544","DOIUrl":"https://doi.org/10.2139/ssrn.2938544","url":null,"abstract":"\u0000 We find that heightened cross-border bank flows are associated with lower systemic risk in a target country’s banking system. The reductions in systemic risk are stronger for flows coming from source countries with stronger regulatory oversight than the target country. Such cross-border bank flows linked to regulatory arbitrage are also associated with improvements in target banking sector profitability, asset quality, and efficiency. We assess several alternative channels of influence for cross-border bank flows but interpret the evidence on these flows as mostly consistent with a benign form of regulatory arbitrage.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"155 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124333176","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines whether changes in CAMEL variables matter in explaining bank closure. Using a unique set of monthly bank-specific balance sheet data from Russia, we estimate determinants of bank license withdrawals during 2013m7-2017m7. We make two key findings. First, changes in CAMEL indicators are always significantly correlated with probability of bank closure, and the magnitude of parameter estimates decreases with the lag length. Second, while the one-month lagged levels of capital, earnings, and liquidity are significantly associated with the probability of bank closure in the subsequent month, the level of liquidity is the only significant indicator for longer lags. Our key contribution that changes in CAMEL variables matter more than levels is robust to various robustness checks.
{"title":"Determinants of Bank Closures: Do Changes of Camel Variables Matter?","authors":"M. Mäkinen, L. Solanko","doi":"10.2139/ssrn.3062513","DOIUrl":"https://doi.org/10.2139/ssrn.3062513","url":null,"abstract":"This study examines whether changes in CAMEL variables matter in explaining bank closure. Using a unique set of monthly bank-specific balance sheet data from Russia, we estimate determinants of bank license withdrawals during 2013m7-2017m7. We make two key findings. First, changes in CAMEL indicators are always significantly correlated with probability of bank closure, and the magnitude of parameter estimates decreases with the lag length. Second, while the one-month lagged levels of capital, earnings, and liquidity are significantly associated with the probability of bank closure in the subsequent month, the level of liquidity is the only significant indicator for longer lags. Our key contribution that changes in CAMEL variables matter more than levels is robust to various robustness checks.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126769805","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Dyhrberg (2016) analyzes the relationship between Bitcoin, gold and the US dollar within a GARCH framework and states that Bitcoin can be classified as something in between gold and the US dollar. This paper uses the same sample and econometric models to replicate the findings and demonstrates that exact replication is not possible and that alternative statistical methods including a descriptive analysis provide more reliable, yet very different results. The findings based on the original sample and an extended sample period show that Bitcoin returns exhibit characteristics that are neither "in between" nor anywhere near gold and the US dollar.
{"title":"Bitcoin, Gold and the Dollar - A Replication and Extension","authors":"D. Baur, T. Dimpfl, Konstantin Kuck","doi":"10.2139/ssrn.3024377","DOIUrl":"https://doi.org/10.2139/ssrn.3024377","url":null,"abstract":"Dyhrberg (2016) analyzes the relationship between Bitcoin, gold and the US dollar within a GARCH framework and states that Bitcoin can be classified as something in between gold and the US dollar. This paper uses the same sample and econometric models to replicate the findings and demonstrates that exact replication is not possible and that alternative statistical methods including a descriptive analysis provide more reliable, yet very different results. The findings based on the original sample and an extended sample period show that Bitcoin returns exhibit characteristics that are neither \"in between\" nor anywhere near gold and the US dollar.","PeriodicalId":381709,"journal":{"name":"ERN: International Finance (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129647844","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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