International Finance最新文献

The paper uses the most up-to-date data from US banks to investigate the impact of economic policy uncertainty (EPU) on bank stability. The results reveal that elevated uncertainty makes banks more fragile and prone to crash events through profitability erosion, capital buffer, and exacerbating return volatility. This negative impact of EPU is more pronounced for highly risky and large-size banks. The risk-increasing-effect of policy uncertainty was amplified during the global financial crisis. We provide insights into the uncertainty-bank fragility nexus under different circumstances related to the option-to-wait strategy, the pressure of the markets, and the dividend policy. The paper also highlights the bright side of diversification and transparency during the time of high policy turbulence. The study has implications for policy makers, regulators, and investors.

What were the policies that created one of the world's largest financial and economic crisis (as a percent of GDP) in Lebanon in the early 2020s? An artificially strong currency peg created a consumption boom financed by government debt and international capital flows/remittances, exposing both the public and private sector to classic currency mismatch vulnerabilities. Moreover, a volatile deposit growth through international remittances created banking risks that both a government and a central bank needed to manage. High deposit growth resulted in large banks that invested in high interest-bearing USD deposits at the central bank. The central bank financed government debt, exposing the banking sector to sovereign debt. A worsening international economic environment and political fractionalization in a geopolitically sensitive region exacerbated the classic delays arising from taking difficult burden-sharing, distributional decisions to address the financial crisis.

We study euro area investors' portfolio adjustment since the Brexit referendum in terms of securities issued in the UK or denominated in pound sterling, in the context of heightened policy uncertainty surrounding the exit process of the UK from the EU. Our sector-level analysis ‘looks-through’ holdings of investment fund shares to gauge euro area sectors' full exposures. Our key finding is the absence of a negative ‘Brexit-effect’, rendering UK-issued and pound-denominated securities less attractive. Instead, we observe that all euro area sectors increased their absolute and relative exposures to UK-issued and pound-denominated debt securities since the Brexit referendum, as well as to listed shares issued by UK nonfinancial corporations, while the exposures to shares issued by UK banks declined. These findings should be seen against the backdrop of low yields on euro area debt securities and a strong recovery in UK share prices since the Brexit referendum.

Using data on Chinese cross-border mergers and acquisitions (M&As) from 2002 to 2022, this paper considers the effects of institutional differences and state ownership on the financing decisions of Chinese cross-border M&As. We find that cultural differences and formal institutional differences have significantly positive effects on internal financing and equity financing. These findings indicate that under the influence of institutional differences, internal financing is the type of financing most favoured by Chinese enterprises engaged in cross-border M&As, followed by equity financing and, finally, debt financing. We document that the financing decision most favoured by Chinese state-owned enterprises is debt financing, whereas the least favoured decision is equity financing. In addition, we find a prominent mediating effect of information asymmetry, which implies that information asymmetry serves as a potential channel through which institutional differences impact the financing decisions of Chinese cross-border M&As.

This study shows that monetary policy transmission in the United States has evolved considerably over the postwar period. Since the mid-1980s, the effects of monetary policy on credit and housing markets have become much stronger relative to the impact on gross domestic product, while the effects on inflation have become weaker. We show that these changes in the relative effects of monetary policy can be explained by several important changes in the monetary transmission mechanism and in the composition of credit aggregates. Most notably, the increasing impact of monetary policy on credit was predominantly driven by an extraordinarily higher responsiveness of mortgage credit and a larger share of mortgages in total credit. These findings imply important changes over time in short-term monetary policy trade-offs between inflation and output stability on the one hand and between financial and macroeconomic stability on the other.

Monetary policy can directly impact corporate R&D investment, and it can also be achieved through loan term structure indirectly. This study examines the relationship between macro-level monetary policy and micro-level corporate R&D investment from the perspective of loan term structure using data from A-share listed companies in China from 2007 to 2018. The study has three major findings: (i) There is a positive correlation between monetary policy easing and corporate R&D investment. (ii) From the perspective of the loan term structure, when monetary policy tightens, changes in the loan term structure may discourage corporate R&D activities, which is more pronounced for non-state-owned, high-tech and growth-stage companies. The effect of unconventional monetary policy is greater than that of conventional monetary policy in the period of severe economic shock, and monetary policy has a clear asymmetric effect that is greater when it is tight than when it is accommodative. (iii) Through survival analysis, it is found that tight monetary policy is not conducive to prolonging the duration of enterprises' R&D investment. Based on these findings, the study presents recommendations that provide a reference for the government to implement macro-control.