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Full-Text Articles in Finance and Financial Management
Adjusting To The Euro, Gabriel Fagan, Vitor Gaspar
Adjusting To The Euro, Gabriel Fagan, Vitor Gaspar
CRIF Seminar series
In this paper we argue that, for a group of converging economies of the European Union, participation in the euro area has been associated with easier access to financing by domestic economic agents. Easier access to financing was a significant impulse leading to a sharp increase in households' expenditures and a corresponding fall in the savings ratio. Increased expenditure was associated with current account deficits, a sharp fall in the net foreign asset position and an increase in the households' indebtedness. At the same time there was a sizeable increase in the real exchange rate. In this paper, we show …
Interest Rate Linkages And Capital Market Integration: Evidence From The Americas, Bharat Bhalla, Anand Shetty
Interest Rate Linkages And Capital Market Integration: Evidence From The Americas, Bharat Bhalla, Anand Shetty
CRIF Seminar series
In this paper, we study the long-run co-movement among the real interest rates of the U.S., Canada, and a select group of Latin American countries to assess the extent of financial market integration between these countries during a period of high capital mobility. The findings of the study support a long-run relationship between the short-term U.S. real interest rate and those of the Latin American countries, while it fails to support such a relationship between the U.S. and Canadian real interest rates.
Information Risk In The International Currency Markets: Evidence From The Violation Of Uirp, Bill B. Francis, Kimberly Gleason, Delroy M. Hunter, Charles A. Malgwi
Information Risk In The International Currency Markets: Evidence From The Violation Of Uirp, Bill B. Francis, Kimberly Gleason, Delroy M. Hunter, Charles A. Malgwi
CRIF Seminar series
Drawing on the theoretical and empirical evidence that private information risk is priced in the expected returns of equities, we hypothesize that information risk premium is an important component of the risk premium that leads to the violation of uncovered interest rate parity (UIRP). Using an asset pricing model in which the risk factors are a world currency factor, a world equity factor, and a world private information factor, we find that UIRP is violated for 28 single currencies plus the euro and that violation is due to the existence of a significant time-varying risk premium. The component of the …
Why Do Banks Promise To Pay Par On Demand?, Gerald P. Dwyer, Jr., Margarita Samartín
Why Do Banks Promise To Pay Par On Demand?, Gerald P. Dwyer, Jr., Margarita Samartín
CRIF Seminar series
We survey the theories on why banks promise to pay par on demand and examine evidence on the conditions under which banks have promised to pay the par value of deposits and banknotes on demand when holding only fractional reserves. The theoretical literature can be broadly divided into four strands: liquidity provision; asymmetric information; regulatory restrictions and a medium of exchange. One strand of the literature argues that banks offer to pay par on demand in order to provide liquidity insurance services to consumers who are uncertain about their future time preferences and who have investment opportunities inconsistent with some …
Can The Policy Trilemma Be Exposited In The Mundell-Fleming Framework?, Russell S. Boyer
Can The Policy Trilemma Be Exposited In The Mundell-Fleming Framework?, Russell S. Boyer
CRIF Seminar series
There is a general recognition that there are deficiencies in the Mundell-Fleming model. Nonetheless, Rose [2000] has stated that Mundell was the first to exposit the Policy Trilemma, which identifies an intrinsic incompatibility among: high capital mobility, fixed exchange rates, and monetary autonomy. We look for the source of Rose’s claim. All of Mundell’s formal modeling after 1964 assumes that capital mobility is zero, so we look to earlier work for verification. The paper in Kyklos states clearly that in comparing equilibrium positions, the impotence of monetary policy is independent of the degree of capital mobility. Two further claims deriving …
Purchasing Power Parity And Heterogeneous Mean Reversion, Kees G. Koedijk, Ben Tims, Mathijs A. Van Dijk
Purchasing Power Parity And Heterogeneous Mean Reversion, Kees G. Koedijk, Ben Tims, Mathijs A. Van Dijk
CRIF Seminar series
This paper analyzes the properties of multivariate tests of purchasing power parity (PPP) that fail to take heterogeneity in the speed of mean reversion across real exchange rates into account. We compare the performance of homogeneous and heterogeneous unit root testing methodologies. The recent literature has successfully contested several severe restrictions on the structure of the model, but the assumption of homogeneous mean reversion is still widely used and its consequences are virtually unexplored. Using Monte Carlo simulation, we uncover important adverse properties of the methodology that relies on homogeneous estimation and testing. More specifically, power functions are low and …