Journal of International Money and Finance最新文献

We investigate the effect of trade liberalization on entrepreneurship. By using China’s World Trade Organization accession as an exogenous shock to conduct a difference-in-differences estimation, we find that trade liberalization has a sizeable positive effect on entrepreneurship. Our findings are robust to different specifications and endogeneity problems. We further discuss the plausible mechanisms driving our results: the trade induced competition, and input market channel. China’s WTO accession may lead to more entrepreneurship in areas with low levels of economic development, a high level of trust, and industries with a low level of external finance dependence.

We revisit the effects of globalisation over the past 50 years in a large sample of advanced and emerging countries. We use accessions to Globalisation Clubs (WTO, OECD, EU), financial liberalisation and an instrument for trade openness to study the trade-off between efficiency (proxied by real GDP per capita and TFP) and equity (proxied by the labour share of income and the Gini index of inequality). We find that (i) most of our episodes lead to an increase in trade openness (ii) the effects on GDP per capita are mostly positive with some interesting exceptions and (iii) there is little evidence that globalisation shocks lead to more inequality.

We find that the market dividend yield and earnings yield can positively predict future inflation internationally. The inflation predictability of price ratios could invert the standard asset pricing predictive results. For example, dividend yields do forecast real dividend growth but not nominal dividend growth. We extend the analysis to the earnings yield as a robust analysis and document a similar predictive pattern. Further term structure analysis suggests that the financial ratio variation decomposition also differs significantly in nominal and real terms. In nominal-term decomposition, discount rate news is found to be the primary contributor to variations in price ratios while in real-term decomposition, cash flow news plays a more significant role, with its importance increasing over longer investment horizons. Our study utilizes consistent inflation predictability evidence in advanced economies to re-evaluate the global relationship between price ratios and inflation. We confirm that inflation is an international state variable in post-1970s samples and that the correlation between inflation and price ratios can almost entirely be attributed to the relationship between expected inflation and future growth prospects. This finding offers an explanation for the previously puzzling correlation between the dividend-price ratio and future inflation.

Timely monitoring GDP-at-risk and tracing economic downside risk sources can help establish effective risk warning and prevention systems. This study constructs a probability distribution for China’s economic growth with skewness determined by a multidimensional predictor information set of macro fundamentals. Such a treatment allows us to identify changing drivers of economic downside risks during monitoring GDP-at-risk’s dynamic evolutionary path. We also employ a time-varying parameter vector autoregression model with random volatility to explore the heterogeneous impacts of different macroeconomic policy instruments on economic slowdowns. Our results provide empirical support for macroeconomic management and policy formulation in emerging markets. We reach three conclusions. First, the dynamics of GDP-at-risk exhibit significant event-driven characteristics, and economic downside risk increases significantly under the influence of extreme events. Moreover, the probability distribution of economic growth is asymmetric--as the downside risk of the economy increases, its upside potential increases disproportionately. Second, the time-varying risk trace of GDP-at-risk shows that the contribution of financial conditions and local government debt to economic downside risk declines. The importance of the risk-driving role of housing price growth gradually increases, suggesting that China’s property prices can provide more valuable early warning information about future growth risk, allowing time for precise preventive measures. Nevertheless, interest rates and inflation as risk divers have consistently minimal impacts. Third, the heterogeneity impulse response function of GDP-at-risk suggests that quantity-based monetary policy and fiscal policy can manage economic downside risks in the short run. In contrast, price-based monetary policy can curb economic overheating and reduce downside risks in the medium to long term. Therefore, the effect of price-based monetary policy is more sustainable in China.

We use a sample of 75 countries to conduct the first international study of national culture on bank financial structure similarity. We construct a novel and comprehensive measure of bank financial structure similarity using banks’ financial statement data. Our empirical results show that individualism is robustly and positively associated with bank financial structure similarity, holding bank-pair levels, bank levels, and country levels equal. We find that other cultural dimensions, such as power distance, uncertainty avoidance, masculinity, and long-term orientation, have little effect on similarity. Our work also shows that financial structure similarity is correlated with higher bank risk.

This paper examines the stabilization role of flexible exchange rates for emerging economies within the Latin America and Asia regions. Based on a structural VAR model, we utilize zero, sign and exchange rate pass-through restrictions to identify structural macroeconomic shocks. Overall, we find that exogenous exchange rate shocks drive around half of total exchange rate fluctuations in emerging economies. Despite this predominant role, we find evidence that exchange rates do not act as a source of shocks to the real economy, but they instead absorb and reduce output growth and inflation volatilities. Based on counterfactual analyses, we further find that this shock-insulation property is highly shock-dependent, where the benefits of flexible exchange rates are sizable for demand and global monetary policy shocks, but are overall small in the face of supply shocks. Results also differ across time horizons, where the shock stabilization benefits are mainly limited to the short run for output, but also extend to the medium term for inflation. We also find that the net benefits of flexible exchange rates as a shock absorber are in general larger for emerging economies in Latin America than in Asia, particularly during crises periods. Finally, while we find that the stabilization role of exchange rates hinges upon the nature of underlying structural shocks, there is also a positive association with structural determinants such as a country's degree of exchange rate flexibility and trade openness.

The Eurosystem purchased €178 billion of corporate bonds between June 2016 and December 2018 under the Corporate Sector Purchase Programme (CSPP). Did these purchases lead to a deterioration of liquidity conditions in the corporate bond market, thus raising concerns about unintended consequences of large-scale asset purchases? To answer this question, we combine the Bundesbank's detailed CSPP purchase records with a range of liquidity indicators. We find that while the flow of purchases initially supported secondary market liquidity by providing a predictable source of demand, liquidity conditions deteriorated in the long-run as the Bundesbank reduced the stock of corporate bonds available for trading in the secondary market.

We characterise the probability distributions of various types of gross capital flows conditional on information contained in financial asset prices in a panel of emerging market economies, with a focus on ‘tail’ events. Our framework, based on the quantile regression methodology, allows for a separate role of push- and pull-type factors. We find that both push and pull factors have heterogeneous effects across the distributions of gross capital flows, which are most marked in the left tails. We then explore the role of the pre-existing stance of macroprudential and capital flow management policy in shaping probability distributions of capital flows. Macroprudential and capital flow management measures can both be stabilising, leading to less volatile flows and in particular to lower chances of large portfolio outflows. A tighter macroprudential stance can also reduce the sensitivity of portfolio flows to global financial shocks.

We investigate preferential trade agreement (PTA) formation when risk averse countries face demand uncertainty and, hence, have an insurance motive for pursuing trade integration. In this environment, when deciding which type of PTA − if any − they wish to form, countries seek to maximise their net welfare; that is, their expected utility less a risk premium. The desire for insurance influences, not just whether a particular PTA forms, but also the preferred depth of integration. We analyze the insurance implications of free trade agreements (FTAs), customs unions (CUs), and countries choosing to stand alone. We further distinguish between shallow CUs and deep CUs; in the former, members maximise the sum of their individual net welfares, while in the latter they maximise the net value of the sum of their individual expected welfares. We show that differences in country risk attitudes and the levels of risk they face, as well as the degree to which these risks are correlated with each other, each, and together, influence the formation and design of TAs. When countries’ demands are uncorrelated, they form a deep CU if their levels of risk aversion are sufficiently different. If, however, their risk attitudes are similar, countries opt for shallower trade integration − either a shallow CU or a FTA − if they face low levels of uncertainty, and choose to stand alone if one country faces a sufficiently high level of uncertainty. When countries’ demands are correlated, they tend to form a deep CU if their demands are strongly negatively correlated, a FTA if their demands are strongly positively correlated and a shallow CU when their demands are weakly correlated. Intuitively, differences in country risk attitudes (i.e., their degree of risk aversion) act as an additional source of comparative advantage. Deeper integration − particularly via a CU − permits less risk averse members to essentially export their relative partiality for risk to more risk averse partners, thereby effectively providing the latter with insurance.

This paper constructs a global anomaly index based on the long-short portfolio returns of 153 anomalies across 33 stock markets. We find that global anomaly index is a strong negative predictor of aggregate stock returns in international markets, both in-sample and out-of-sample. The index delivers considerable economic value for a mean–variance investor. Moreover, it captures global common changes in overpricing, and is not subsumed by extant return predictors. Its predictive power arises from global asymmetric mispricing correction persistence, and partly from the ability to forecast sentiment-changes. Furthermore, we demonstrate significant transfer learning from the U.S. market to other markets in terms of time series predictions.