Journal of International Financial Markets Institutions & Money最新文献

We present the first empirical study of the impact of corporate green bond issuance announcements on issuer credit risk, as measured by their CDS spreads. We use a broad international sample of 1,048 green bonds issued between 2013 and 2022 by 200 entities from 26 countries. Our analysis reveals a significant, though not uniform, reaction in the CDSs. The sector of activity emerges as a critical determinant, particularly with respect to environmental exposure. While sectors highly exposed to environmental risk exhibit a reduction in issuer credit risk, all others, especially financial entities, react in the opposite direction. Our study highlights that the impact on credit risk is influenced by several other factors, including the issuer’s overall ESG score, its E score, and various country-level metrics such as development level, environmental performance and political rights. We also identify other factors that affect credit risk, such as green bond ratings and operating cash flow.

Using a unique hand-collected sample of professional connections between finance ministers and the top executives of the three largest credit rating agencies (CRAs) for 38 European sovereigns between January 2000 and November 2017, we show that professional connections result in higher sovereign ratings. This finding is attributed to ‘favoritism’, which stems from the conflict-of-interest problem in the CRA business model. We also find that the subjective component of ratings, captured by professional connections, has a more pronounced role for developing than developed countries. Our study offers new empirical evidence that unsolicited sovereign ratings are significantly lower than solicited ratings. Our results survive battery of robustness checks including propensity score matching (PSM), two-way fixed-effects, system GMM and various definitions of connection. Our findings offer wide-ranging implications for regulators, governments, market participants and CRAs.

This paper investigates the international crash risk and the cross-section of stock index returns. We use the ex-ante model-free negative skewness measured by country-specific index options, proposed in Bakshi et al. (2003), as a proxy of the crash risk. We find that a country’s stock index with a high crash risk relates to a higher stock return as a risk premium across countries. The international crash risk premium exists robustly after controlling for volatility risk, macroeconomic variables, sensitivities to the international risk factors, and realized return moments. In contrast, other international risk premiums do not exist based on the exposure of such control variables. Based on the crash risk premium, we construct international stock trading strategies by sorting option-implied skewness across countries that outperform benchmark strategies by sorting the above control variables.

Identifying factors to explain cryptocurrency returns is challenging given the lack of fundamental information, however there exists a plethora of data from public blockchains. We use these on-chain data with the recent methodology of Harvey and Liu (2021) and show that a parsimonious two-factor model comprised of the value-weighted cryptocurrency market factor and the network distribution factor can explain the cross-section of individual cryptocurrency returns.

This paper conducts a comparative analysis of housing finance markets in the United States, United Kingdom, and Germany, focusing on their responses to market changes and significant external shocks like the Global Financial Crisis (GFC) and the COVID-19 pandemic. It aims to clarify the complex relationship between market dynamics and housing finance structures, as well as the impact of major market shocks on these systems. The study uncovers subtle differences in responses, underscored by governmental interventions, levels of securitisation, and diverse funding models of mortgage originators. It also highlights how regulatory interventions influence variations across markets in specific circumstances such as the GFC and the pandemic. This research contributes valuable insights into the adaptability and resilience of housing finance systems against external shocks, enhancing our understanding of their strengths and vulnerabilities.

This study examines Bitcoin price movements from an infectious disease perspective. The author compares the outbreak of the COVID-19 pandemic with the Bitcoin price explosion and adopts the SIR epidemiological model. The SIR model operates by categorizing the population of individuals into susceptible (S), infected (I), and removed (R). In the case of Bitcoin, open wallets represent the susceptible population, and the infection starts with a single individual. After conducting four estimation trials, the model that uses the recovery rate derived from the Bitcoin price downtrend and the infection rate from the upward trend has the highest accuracy. The estimation deviates from the Bitcoin price explosions by only three days. Previous studies commonly use faster-than-exponential growth or stationarity tests to identify bubble formations. This paper introduces a novel approach that employs epidemiological models to analyze Bitcoin’s explosive price behavior.

This study examines individual expressions of confidence in the World Bank and the International Monetary Fund using the World Values Survey-Wave 7 data to determine whether alignment of individual beliefs with institutional policies supports confidence and whether national borrowing from these institutions with attendant conditionalities erodes confidence. The main hypothesis tested is that confidence in each organization is positively associated with alignment of survey respondents’ economic beliefs and the policies of the organizations. Results indicate that closer alignment of beliefs with organization policies is positively associated with greater confidence but greater national borrowing from either organization erodes confidence. Conditionalities for assistance are resented by citizens in recipient countries.

Financial technology, also known as fintech, is transforming daily lives and revolutionising the financial industry. However, there is currently no consensus regarding the effect of fintech on the green bond market. Using novel Chinese data, this study provides robust evidence that fintech development can significantly boost green bond issuance. Further analysis suggests that this promotional effect occurs by empowering intermediary institutions and increasing social environmental awareness. Additionally, we investigate the heterogeneous effect and find that the positive relationship is more pronounced for bonds without high ratings and whose proceeds are not used for refinancing. This effect is also stronger for non-state-owned issuers and in cities connected with High-Speed Railway networks or located in the eastern region of China. These results call for attention from policymakers and security managers to take further notice of fintech utilisation in green finance products.

This paper discusses the resurgence of the Feldstein–Horioka puzzle after the global financial crisis within the European space. Revisiting the theory of intertemporal choice, this paper suggests that the deterioration of macroeconomic fundamentals that favor capital flows from richer to poorer economies can lead investment and savings to correlate across countries even without frictions to capital mobility. I test this hypothesis against a data set of 12 European economies spanning since the inception of the Maastricht treaty and ending immediately before the start of the Covid-19 pandemic. I find that the investment-savings correlation is generally low both across and within open economies, aligning with the theoretical stylized fact. However, this can be jeopardized when low-income economies accumulate large net stocks of foreign liabilities coupled with sluggish prospects for productivity growth. Ultimately, if investment and savings are not managed in line with macro fundamentals, foreign investors eventually impose a premium on new liabilities, raising the cost of financing investment with foreign funds and leading the correlation between investment and savings to rise both across and within countries.

Many central banks pursue some kind of exchange rate objective. We derive what variables the central bank should look at when setting the interest rate to implement a given objective. Exchange market pressure (EMP), the tendency of the exchange rate to change, emerges as the key variable. This yields a policy rule for the interest rate where EMP is added to, say, a Taylor rule. The coefficient for EMP depends on two structural parameters, namely the effectiveness of the interest rate to ward off depreciation, and the degree of exchange rate management. The rule can implement many regimes, from floating to intermediate to fixed rates. It can be applied to many models, and we illustrate it in a New Keynesian model for a small open economy.