International Finance最新文献

This paper investigates international monetary spillovers to stock prices in Bangladesh, a frontier market that has been excluded from prior studies in the literature. Using daily stock price data for over 300 publicly traded firms in a high-frequency event study framework, we find that contractionary monetary shocks originating from the US, euro area, and China lower stock prices, with Chinese monetary shocks having the largest impact. Contractionary shocks originating from India, on the other hand, lead to a statistically significant increase in stock returns. The positive response is driven by a small number of policy decisions. When these outlier decisions are removed from the sample, contractionary Indian monetary shocks lead to a decline in stock prices in line with spillovers from the other countries.

By constructing a novel index, the oil security attention index, this paper uses the  heterogeneous autoregressi (HAR)-type and its extended models to study whether oil security attention can predict oil volatility. Based on the definition of the different dimensions of oil security and three-pass regression filter (TPRF) dimension reduction technology, combined with Google search volume data of 23 keywords related to oil security, the oil security attention index is constructed. Considering the potential nonlinear relationship between attention and oil volatility, we incorporate asymmetric effects in the new extended HAR-type models. The research findings show that the oil security attention index we propose can capture the volatility of West Texas Intermediate. The out-of-sample results indicate that the extended models have better predictive power, which confirms the asymmetric relationship between oil security attention and oil volatility. In the robustness analysis, we compare TPRF with traditional principal component analysis (PCA) and partial least squares (PLS), and show that the oil security attention index constructed using TPRF has more favourable information than PCA and PLS to capture the oil security attention of the public.

We studied how the effect of global and domestic factors on capital flows towards emerging market economies has changed in the last 25 years. We find that both the global financial crisis and the so-called “taper tantrum” (TT) event, defined as the point in time when investors perceived the end of the US Federal Reserve's unconventional monetary policy, triggered changes in the sensitivity of capital inflows to their main drivers. In particular, we provide evidence that international investors devoted growing attention to global factors. Moreover, we show that the TT marked the beginning of a new phase, characterized by increased sensitivity to both global conditions and government borrowing by recipient countries.

This paper aims to determine the ‘new normal’ for banking stability in terms of capital adequacy, reviewing the incidence of banking stress episodes by lagged solvency ratios, based on the experience at the European level after the global financial crisis. We provide rating ladders for both risk-weighted solvency ratios and a simple gearing (leverage) ratio for time horizons of up to 3 years using well-known credit risk scoring procedures. Our findings empirically confirm that the recent dual metric structure of the capital adequacy framework is conducive to enhancing the accuracy of banking stability assessment. Specifically, our empirical analysis suggests that both tier 1 capital ratio and leverage ratio generally remain statistically significant in multivariate combinations for crisis probability measurement purposes. Robustness checks with well-established macrofinancial indicators as control variables suggest that this tandem is hardly replaceable in multivariate early warning systems by combinations of macroimbalance and financial soundness indicators traditionally employed as leading factors of banking crises. Moreover, the pandemic period provides meaningful evidence that robust capital positions, in line with our estimate, have so far been ‘part of the solution’ for dealing with systemic events.

This paper investigates the macroeconomic fundamentals that international investors consider crucial when assessing a country's default risk. Using panel data for 41 countries over the period 2002–2019, we find that the macroeconomic determinants of a sovereign credit default swap (CDS) are heterogeneous across developed and developing economies after controlling for potential endogeneity. While international investors consider government budget balance and inflation as crucial elements in the evaluation of the CDS of developed economies, more stress is placed on economic growth and foreign reserves in the assessment of the creditworthiness of developing economies. Furthermore, we document that better institutional quality reduces the sovereign default risk in both developed and developing economies. However, global shocks appear to have a strong impact in developing economies. The results remain robust to various specifications.

This paper investigates house price dynamics at high frequency using city-level observations during the period 1994–2022 in Lithuania. We employ multiple time series-based econometric procedures to examine whether real house prices and house price-to-rent ratios exhibit explosive behaviour. According to these recursive right-tailed test results, we reject the null hypothesis of no-bubble and find evidence for long and multiple periods of explosive behaviour in the housing market in all major cities during the sample period. While the size of bubbles varies across cities, especially when we use the house price-to-rent ratio, there is clearly a similar boom-bust pattern in Lithuania. Large house price corrections can in turn have adverse effects on economic performance and financial stability, as experienced during the global financial crisis and other episodes in history.

After the financial crisis of 2007–2008, the global economy witnessed a trend of sluggish investment recovery and continuous deepening of financialization. Using data on nonfinancial firms from 108 countries over the period from 2000 to 2017, we examine the impact of financialization on firms' postcrisis investment recovery with a probit model. We find that firms' financialization inhibited postcrisis investment recovery, and this finding remains stable under a series of robustness checks. Further discussion shows the hindering impact of financialization on investment recovery is especially dominant among firms with severe financial constraints and firms from advanced economies. Higher financial market yield also exacerbates the restraint effect of financialization on investment recovery.

Weather has been shown to affect natural gas markets, but there is limited research on the strength and manner in which weather affects predictions of natural gas volatility. In this study, six weather indicators are used as exogenous variables, and seasonal-trend decomposition-generalized autoregressive conditional heteroskedasticity-Weather (STL-GARCH-W) and STL-GJR-GARCH-W models are constructed to explore the effect of weather on global natural gas market. The empirical findings indicate that temperature and precipitation have a notable positive effect on natural gas, while solar radiation has a prominent negative effect. Furthermore, the STL-GARCH-W model outperform the STL-GJR-GARCH-W model and the benchmark STL-GARCH model when temperature, precipitation, and solar radiation are considered. In addition, the January effect has been shown to significantly influence natural gas price volatility. Finally, most parameters in both models are of statistical significance, demonstrating that both models accurately forecast natural gas volatility and emphasizing the importance of weather indicators for modelling natural gas price volatility. Our study provides new insights for energy market investors and policy makers.