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Full-Text Articles in Social and Behavioral Sciences
Financial Market Integration In Latin America, Obed Fernando Izaguirre Lozano
Financial Market Integration In Latin America, Obed Fernando Izaguirre Lozano
University of New Orleans Theses and Dissertations
This dissertation is entitled ’Financial Market Integration in Latin America" and consists of two empirical studies. The first chapter is called ’Financial Market Integration between Latin America and the US". This empirical analysis focuses on the comovement between the US and major Latin American countries around free trade agreements. The results show that comovement thus financial integration has increased after the trade agreements for all the countries except for Brazil. The studied sector indices show that countries that have a free trade agreement with the US showed an increase in integration among sectors. The second empirical study is called ’The …
Financial Integration In The West African Monetary Zone: Towards A Single Insurance Market, Emmanuel Ating Onwioduokit
Financial Integration In The West African Monetary Zone: Towards A Single Insurance Market, Emmanuel Ating Onwioduokit
Bullion
integration of financial markets is a process of unifying markets and enabling convergence of risk-adjusted returns on the assets of comparable maturity across the markets. The insurance markets of the WAMZ countries are relatively not efficient. Although, there are several small insurance companies competing for premiums, only one company within the entire WAMZ region has a gross premium base more than $100 million. The paper recommends that the insurance sector integration 'quick wins should focus on: taking action to make the brown card scheme a more resounding success; increasing the minimum capital requirement of insurance companies in some of the …
Trade Integration, Income Divergence, And Global Imbalances, Haiping Zhang
Trade Integration, Income Divergence, And Global Imbalances, Haiping Zhang
Research Collection School Of Economics
We embed financial frictions and sector-specific minimum investment requirements (MIR) in a two-factor, two-sector, overlapping-generation model and showthat whether trade integration leads to convergence of the income levels among member states depends on their level of financial development. It helps reconcilethe mixed empirical evidence on trade integration and income dynamics in differentgroups of countries from the institutional perspective. In the recent decades, trade globalization has allowed developed countries to specialize towards the high-MIR, high-return production stages and tasks through international fragmentation of production and global sourcing. In our model, the “sectors” can be interpreted broadly as production stages and tasks. …
Monetary Policy Spillovers And The Trilemma In The New Normal: Periphery Country Sensitivity To Core Country Conditions, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Monetary Policy Spillovers And The Trilemma In The New Normal: Periphery Country Sensitivity To Core Country Conditions, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
We investigate why and how the financial conditions of developing and emerging market countries (peripheral countries) can be affected by the movements in the center economies - the U.S., Japan, the Eurozone, and China. We apply a two-step approach. First, we estimate the sensitivity of countries’ financial variables to the center economies [policy interest rate, stock market prices, and the real effective exchange rates (REER)] while controlling for global and domestic factors. Next, we examine the association of the estimated sensitivity coefficients with the macroeconomic conditions, policies, real and financial linkages with the center economies, and the level of institutional …
Unemployment And Economic Integration For Developing Countries, Haiwen Zhou
Unemployment And Economic Integration For Developing Countries, Haiwen Zhou
Economics Faculty Publications
While financial or trade integration between countries may increase the size of the market and aid the adoption of more advanced technologies, will it also increase the level of urban unemployment for a developing country? In this model, there is unemployment in the urban sector. Manufacturing firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Financial firms provide capital to manufacturing firms and they also engage in oligopolistic competition. We show that an increase in the wage rate in the manufacturing sector changes neither the level of technology nor the level of employment in the manufacturing …
Current Account “Core-Periphery Dualism” In The Emu, Tatiana Cesaroni, Roberta De Santis
Current Account “Core-Periphery Dualism” In The Emu, Tatiana Cesaroni, Roberta De Santis
Roberta De Santis
Current account (CA) dispersion within European Union (EU) member states has been increasing progressively since the 1990s. Interestingly, the persistent deficits in many peripheral countries have not been accompanied by a significant growth process able to stimulate a log run rebalancing as neoclassical theory predicts. To shed light on the issue this paper investigates the determinants of Eurozone CA imbalances, focusing on the role played by financial integration. The analysis considers two samples of 22 OECD and 15 EU countries, three time horizons corresponding to various steps in European integration, different control variables and several panel econometric methods. The results …
Integration Of Central And Eastern European And The Euro-Area Financial Markets: Repercussions From The Global Financial Crisis, Lucjan T. Orlowski, Anna Tsibulina
Integration Of Central And Eastern European And The Euro-Area Financial Markets: Repercussions From The Global Financial Crisis, Lucjan T. Orlowski, Anna Tsibulina
WCBT Faculty Publications
We examine integration of financial markets and banking sectors in Central and Eastern Europe and the euro area. We study co-movements between government bond and equity markets of Germany and those of Poland, Czech Republic, Hungary, as well as Slovenia and Slovakia (the two recent euro members). We assume that financial integration is essential for subsequent monetary convergence, as it will enable the euro candidates to mitigate systemic risk and avert potentially destabilizing shocks. Government bond yields of the Czech Republic and Poland show high correlation with German yields, in contrast to those of the remaining countries. Equity returns of …
Trade And Financial Integration, Extensive Margin, And Income Divergence, Haiping Zhang
Trade And Financial Integration, Extensive Margin, And Income Divergence, Haiping Zhang
Research Collection School Of Economics
We revisit the classical question on economic integration and income convergence in a two-sector OLG model with financial frictions and sectoral heterogeneity in minimum investment requirements (MIR, hereafter). The extensive margin of investment is a critical channel through which aggregate income may become a determinant of comparative advantage. Free trade allows the rich (poor) country to specialize partially or completely in the high-MIR (low-MIR) sector which has a high (low) return endogenously. The specialization effect interacts with the neoclassical effect, which may lead to income divergence among inherently identical countries. Similarly, financial integration may also lead to income divergence through …
A Forensic Analysis Of Global Imbalances, Menzie David Chinn, Barry Eichengreen, Hiro Ito
A Forensic Analysis Of Global Imbalances, Menzie David Chinn, Barry Eichengreen, Hiro Ito
Economics Faculty Publications and Presentations
We examine whether the behavior of current account balances changed in the years preceding the global crisis of 2008-09, and assess the prospects for global imbalances in the post-crisis period. Changes in the budget balance are an important factor affecting current account balances for deficit countries such as the U.S. and the U.K. The effect of the “saving glut variables” on current account balances has been relatively stable for emerging market countries, suggesting that those factors cannot explain the bulk of their recent current account movements. We also find the 2006-08 period to constitute a structural break for emerging market …
Financial Exchange Rates And International Currency Exposures, Philip R. Lane, Jay C. Shambaugh
Financial Exchange Rates And International Currency Exposures, Philip R. Lane, Jay C. Shambaugh
Dartmouth Scholarship
In order to gain a better empirical understanding of the international financial implications of currency movements, we construct a database of international currency exposures for a large panel of countries over 1990-2004. We show that trade-weighted exchange rate indices are insufficient to understand the financial impact of currency movements and that our currency measures have high explanatory power for the valuation term in net foreign asset dynamics. Exchange rate valuation shocks are sizable, not quickly reversed, and may entail substantial wealth redistributions. Further, we show that many developing countries have substantially reduced their negative foreign currency positions over the last …
What Makes Developing Asia Resilient In A Financially Globalized World?, Hiro Ito, Juthathip Jongwanich, Akiko Terada-Hagiwara
What Makes Developing Asia Resilient In A Financially Globalized World?, Hiro Ito, Juthathip Jongwanich, Akiko Terada-Hagiwara
Economics Faculty Publications and Presentations
The pullbacks of capital inflows to developing Asia following the onset of the global financial crisis in 2008 have brought renewed attention to the role and benefits of financial globalization. A number of notable distinctions between the current global crisis and the Asian financial crisis have become evident. Solid domestic institutions, especially in the financial sector; swift policy responses; and a sound macroeconomic environment with adequate reserves have helped the region to manage well the adverse impacts of the global crisis. Empirical analysis examining the link between capital account openness and output volatility reveals that a developing country with a …
Financial Stability, Trade Openness And The Structure Of Banks’ Shareholders, Claudiu T. Albulescu
Financial Stability, Trade Openness And The Structure Of Banks’ Shareholders, Claudiu T. Albulescu
Claudiu T Albulescu
The adverse effect of financial crises upon the world’s economies represented the background for the development of a wide economic literature on financial stability. The assessment of this phenomenon stands for a complex exercise, as many techniques can be used for this purpose. Such a technique is the construction of an aggregate financial stability index which allows for a comparison between financial systems stability. Based on an aggregate index and on a panel of data, we show that, for several Eastern European Countries, the financial stability is largely influenced by the trade openness and by the quality of banks’ shareholders. …
East Asia And Global Imbalances: Saving, Investment, And Financial Development, Hiro Ito, Menzie David Chinn
East Asia And Global Imbalances: Saving, Investment, And Financial Development, Hiro Ito, Menzie David Chinn
Economics Faculty Publications and Presentations
We investigate the role of budget balances, financial development and openness, in the evolution of global imbalances. Financial development – or the lack thereof – has received considerable attention as a possible contributing factor to the development of persistent and expanding current account imbalances. Several observers have argued that the depth and sophistication of US capital markets have caused capital to flow from relatively underdeveloped East Asian financial markets. In this paper, we extend our previous work by examining the effect of different types and aspects of financial development. Our cross-country analysis, encompassing a sample of 19 industrialized countries and …
Domestic Bonds, Credit Derivatives, And The Next Transformation Of Sovereign Debt, Anna Gelpern
Domestic Bonds, Credit Derivatives, And The Next Transformation Of Sovereign Debt, Anna Gelpern
Georgetown Law Faculty Publications and Other Works
Not long ago, financial markets in most poor and middle-income countries were shallow to nonexistent, and closed to foreigners. Governments often had to rely on risky borrowing abroad; the private sector had even fewer options. But between 1995 and 2005, domestic debt in the emerging markets grew from $1 trillion to $4 trillion. In Mexico, domestic debt went from just over 20% of the total government debt stock in 1995 to nearly 80% in 2007. Foreign and local investors are buying. Over the same period, derivative contracts to transfer emerging market credit risk surpassed the market capitalization of the benchmark …
Global Current Account Imbalances: American Fiscal Policy Versus East Asian Savings, Menzie David Chinn, Hiro Ito
Global Current Account Imbalances: American Fiscal Policy Versus East Asian Savings, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
We consider the origins of global current account imbalances. We first discuss how the expansion of the US current account deficit and the decrease in global real interest rates can be reconciled with the widespread view that American expansionary fiscal policy is partly the source of current trends. We then investigate empirically the medium-term determinants of the current account using a model that controls for factors related to institutional development. In addition to the conventional macroeconomic factors, we examine a series of environmental factors, including the degree of financial openness and the extent of legal development. We find that for …
Current Account Balances, Financial Development And Institutions: Assaying The World “Saving Glut”, Menzie David Chinn, Hiro Ito
Current Account Balances, Financial Development And Institutions: Assaying The World “Saving Glut”, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
We critically assess several of the key assertions underlying the global saving glut hypothesis. First, we investigate whether the behavior of the U.S. current account behavior is anomalous in light of previous industrial country experience. Second, we determine whether East Asian current account balances are predictable using standard macroeconomic variables, augmented with institutional factors. Finally, we investigate whether higher levels of financial development in key East Asian economies would result in smaller current account surpluses. We find that a one percentage-point increase in the budget balance would increase the current account balance by 0.10 to 0.49 percentage-points for industrialized countries, …
Financial Integration, Liquidity And Exchange Rates, Vittorio Grilli, Nouriel Roubini
Financial Integration, Liquidity And Exchange Rates, Vittorio Grilli, Nouriel Roubini
Cowles Foundation Discussion Papers
We present a two-country extension of Lucas’ (1988) work on how cash-in-advance constraints in asset markets affect the pricing of financial assets. In the model, there is some degree of separation between the goods markets and the assets markets, and money is used for transactions in both markets. The main results of the paper are the following. First, the equilibrium level of the exchange rate depends on the share of money used for asset transactions; a greater share corresponds to a more appreciated currency. Second, under uncertainty the liquidity effects deriving from stochastic shocks to bond creation lead to an …