Journal of International Money and Finance最新文献

The paper analyzes the growth impact of public and private investment shocks based on a large sample of emerging and developing countries over the period 1980–2021 with a particular focus on the Asian region. We develop new measures of investment shocks based on cyclically adjusted investment data. Estimations using local projections suggest that public investment shocks play a much greater role in boosting economic growth in comparison with private investment shocks. In EMDEs (including in Asia) the growth response to investment shocks is positive and much stronger in recessions (relative to economic expansions) and in countries with more fiscal space. Finally, public investment shocks in EMDE and Asian samples crowd-in private investment and private consumption.

Using a new set of trilemma indexes for exchange rate stability, financial market openness, and monetary policy independence, this paper first locates more than one hundred economies in the trilemma triangle over time. Second, the paper depicts individual economies’ trilemma regimes, defined by combinations of the three indexes, in the global map. Third, the paper tests econometrically the impact of monetary and fiscal policies on key macroeconomic variables (i.e., the real GDP growth rate gap, inflation, and their variability/volatility) under alternative trilemma regimes. Fourth, it examines the roles of trilemma regimes in influencing the macroeconomic variables. Econometric analysis uses a sample of 61 emerging market & developing economies over the period 1971–2020. The two-stage least squares estimation results largely support the Mundell-Fleming predictions made for three “corner” regimes. Monetary policy is effective in raising the real GDP growth rate gap and its variability under the “flexible exchange rate” corner regime, but not under the “financially open fixed rate” regime. Monetary policy is most effective in stimulating inflation and inflation volatility under the “flexible rate” regime. Fiscal policy has a positive impact on the GDP growth rate gap under the “flexible rate” regime and positive impacts on inflation and variability/volatility measures under the “financially closed fixed rate” regime, while it has no such impact under the “financially open fixed rate” regime, a somewhat surprising finding. The “financially open fixed rate” regime has a role of achieving price stability in a financially open economy.

This study explores the impact of adverse financial shocks on Chinese firms through the bank lending channel and the firm borrowing channel. Using new data linking Chinese firms to their bank(s) and three measures of exposure to international markets, we find that banks with greater exposure to the international markets cut lending more during the financial and sovereign debt crises or when there is a negative shock to OECD GDP growth. Furthermore, state-owned bank loans are more pro-cyclical than private bank loans, and would have been even more pro-cyclical if state-owned banks had not assumed any responsibility for stimulus policies. With regard to the firm borrowing channel, we find that firms with higher weighted aggregate exposure to the international markets through banks have lower net debt, cash, employment, and capital investment during crises or when there is a negative shock to OECD GDP growth. Our results have significant implications for how global financial shocks are transmitted in a regulated financial market such as China.

This study focuses on two of the most liquid assets—currencies and international equity futures indices—and investigates whether cross-momentum enhances momentum portfolios. We uncover that a combination of equity futures and currency portfolios sorted by cross-momentum outperforms a combination of those sorted by normal-momentum. The change in the Sharpe ratio is 0.32 and the economic gain based on the performance fee measure differs by 4.11% per annum. Moreover, we observe that the cross-momentum strategy is more strongly associated with commodity exporting countries. This stems from the positive relationship between equity futures and macroeconomic conditions for commodity exporting countries.

Fiscal policy is an important tool for business cycle stabilization and has significant spillover through real and financial channels. This paper estimates the spillover of US fiscal policy shock in emerging economies which is distinct from US monetary policy spillover. We find that - similar to its effect in advanced economies as documented in the literature - the shock lowers both the nominal and real policy rates in emerging economies. Results suggest a disconnect between long-term and policy rates that leads to the steepening of the yield curve in emerging economies in the medium term due to the shock. Most of these effects of US government expenditure shock on the policy rate and the yield curve in emerging economies are direct effects (financial channel) and not indirectly driven by the effect of this shock on GDP growth and inflation (real channel). Contrary to its effect in the US, we find that this shock leads to a prolonged appreciation of real effective exchange rates in emerging economies, hurts their external competitiveness, and leads to a contraction in output in emerging economies. As expected, countries having higher exports and trade-to-GDP ratio experience a bigger decline in output.

Heterogeneity in Phillips Curve slopes among members of a monetary union can lead to biased to estimates of the union-wide ‘average’ slope in reduced form regressions. The intuition is that in a monetary union with heterogeneous regional Phillips curve slopes, the central bank, aiming at stabilizing demand shocks, will react stronger to shocks in regions with steep slopes compared to shocks in regions with flat slopes. Using a simple New-Keynesian model of a monetary union we show that when failing to account for this heterogeneity in the estimation, reduced form estimates of the union-wide ‘average’ slope suffer from a sizable bias. Empirically, we show that a similar bias exists in EMU data and slope estimates that adequately control for slope heterogeneity are steeper than those from reduced form OLS regressions.

We show that the international credit channel is an important channel through which US financial uncertainty spills over internationally. Moreover, we find the asymmetric responses of domestic and international credit conditions to US financial uncertainty shocks, contingent upon market participants' expectations. During periods of pessimism regarding future economic conditions, the impact of US financial uncertainty on both domestic and international credit conditions intensifies significantly, leading to a severe global economic slowdown. Elevated US financial uncertainty disproportionately affects the left tails of the distribution more than the right tails, heightening the likelihood of negative global output growth. Conversely, in times of optimism, heightened US financial uncertainty exerts modest effects on international credit conditions and global economic conditions. Yet it stretches the conditional distribution substantially, signaling an increasingly uncertain future.

This paper examines the informativeness and drivers of the tone used by FOMC members to gain insights into the decision-making process of the FOMC. We use a bag-of-words approach to measure the tone of transcripts at the speaker-meeting-round level from 1992-2009 and find persistent differences in tone among FOMC members. We also document how Presidents of regional Federal Reserve Banks use a more volatile and positive tone than the Federal Reserve Bank Board of Governors members. Next, we investigate whether the tone used during FOMC deliberations is associated with future monetary policy decisions and study the drivers of differences in tone among FOMC members. Our results suggest that tone is useful in predicting future policy decisions and that differences in tone are mainly associated with the differences in the individual inflation projections of FOMC members.

This paper investigates the drivers explaining the heterogeneous responses of foreign portfolio investors across 43 emerging markets and developing economies (EMDEs) during low-flow episodes. Our investigations reveal several findings: (a) During low-flow episodes, EMDEs with stronger macroeconomic/institutional fundamentals—e.g., larger foreign reserves, less public indebtedness, and better institutional quality—suffer fewer reductions in foreign inflows. (b) EMDEs with more open/developed financial markets attract more portfolio inflows during surges but suffer larger declines during stops. Hence, we provide evidence supporting the foreign investor differentiation (according to fundamentals) and the mixed blessing of financial sectors hypothesis.

This paper empirically examines the impact of public debt shocks on output and inflation in 34 emerging market economies (EMEs), using panel local projections over the period 2000 to 2022. The estimated results show that real GDP falls significantly after an unanticipated increase in public debt while inflation rises. We also examine whether fundamental characteristics across EMEs could affect the impact of public debt shocks. The results also suggest nonlinearities in the dynamics, where higher initial debt levels, tighter domestic financial conditions, and lower income levels amplify the negative responses of real GDP, while tighter global financial conditions dampen the negative impacts of debt shocks. For inflation, the responses vary depending on economic-specific characteristics.