the incremental information content of investor fear gauge for volatility forecasting in the crude oil futures market abstract this paper aims to investigate whether investor fear gauge ifg contains incremental information content for forecasting the volatility of crude oil futures for this purpose we use oil volatility index ovx to measure the ifg adding the ifg to existing heterogeneous autoregressive har models we develop many har models with ifg subsequently we employ these har models to predict the volatility of crude oil futures the results from the parameter estimation and out of sample forecasting show that the in sample and out of sample performances of har models with ifg are significantly better than their corresponding har models without ifg the results are robust in different ways thus the har models with ifg are more beneficial to the decision making of all participants including financial traders manufacturers and policymakers in the crude oil futures market more importantly the results suggest that the investor fear gauge has a significant positive effect on volatility forecasting and can help improve the performances of almost all the existing har models

capital flow controls international asset pricing and investors welfare a multi country framework this paper investigates the impact of capital flow restrictions on the pricing of securities on the optimal portfolio composition for investors of different nationalities and on their welfare under capital flow controls the equilibrium price of a security is determined jointly by its international and national risk premiums and investors acquire nationality specific portfolios along with a market wide proxy for the world market portfolio removal of investment barriers generally leads to an increase in the aggregate market value of the affected securities and all investors favor a move toward market integration introduction of different types of index funds in the world market generally increases world market integration and investor welfare in recent years the international capital markets have undergone numerous important changes that have increased the international linkage of national markets these changes include the creation of national index funds e g mexico korea taiwan india france and scandinavia and selective liberalization e g brazil india korea sweden and japan despite their potential impact on the national economies and global finance it is not clear what consequences these integrating changes entail for example is welfare increased by allowing cross border investment that is restricted to purchasing the entire national portfolio of which the national index fund is a class unfortunately with the exception of subrahmanyam 1975a who studies the pricing and welfare effects of fully integrating heretofore completely segmented markets other international asset pricing models that incorporate capital flow restrictions for instance black 1974 stulz 1981b lessard et al 1983 errunza and losq 1985 cooper and kaplanis 1986 and eun and janakiramanan 1986 analyze the pricing but not the welfare effects of investment barriers to analyze systematically the welfare implications of various structural changes in the current market environment this paper follows the lead of subrahmanyam and recasts the analysis in two important respects

answering the skeptics yes standard volatility models do provide accurate forecasts a voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using arch and stochastic volatility models while most of these studies have documented highly significant in sample parameter estimates and pronounced intertemporal volatility persistence traditional ex post forecast evaluation criteria suggest that the models provide seemingly poor volatility forecasts contrary to this contention we show that volatility models produce strikingly accurate interdaily forecasts for the latent volatility factor that would be of interest in most financial applications new methods for improved ex post interdaily volatility measurements based on high frequency intradaily data are also discussed

financial integration and business cycles in a small open economy abstract the purpose of this study is to examine a dynamic stochastic general equilibrium framework with financial and informational frictions and foreign borrowing in the case of money growth and technology shocks for a small open economy and to analyze the implications of varying degrees of financial integration for aggregate fluctuations and propagation mechanisms in the economy the existence of informational asymmetries among the agents in the model necessitates financial intermediation in the economy moreover there is uncertainty involved in the production process which leads to collateralized borrowing by firms and therefore has to be taken into account in the design of the loan contracts between firms and financial intermediaries it is shown that increasing financial integration amplifies the effect of a positive temporary monetary shock on output consumption investment labor demand and loans whereas it has barely any implication for the impact of a positive temporary technology shock on the economy

financial integration credit market imperfections and consumption smoothing abstract contrary to standard theoretical reasoning recent empirical research shows that financial integration is associated with higher consumption volatility in developing countries this paper illustrates how domestic credit market imperfections can alter the standard predictions about the consumption smoothing possibilities under financial autarky and international financial integration i use a two country international real business cycle model where the non traded sector in the small country faces borrowing constraints due to contract enforceability problems if the international risk sharing opportunities are non existent households can secure themselves against the shocks in the non traded sector only by adjusting their labor effort which leads to changes in sectorial output and terms of trade the deterioration of the terms of trade acts as a dampening effect on consumption causing it to be less volatile under financial autarky relative to financial integration under financial integration international financial assets provide the insurance against domestic productivity shocks without affecting the relative prices hence allowing the consumption to react more

price rigidity the mark up and the dynamics of the current account the degree of competition affects the current account response to nominal shocks the mechanism hinges on the relationship between the mark up and the degree of real rigidity of prices in a model with intermediate goods the degree of real rigidity increases in the mark up a weaker response of prices to nominal shocks strengthens the expenditure switching effect of the devaluation to the benefit of the current account we analyse the relationship between the mark up and the real rigidity in a simple closed economy model and show numerically how the mark up can affect the response of the current account to monetary shocks in an open economy jel classification f32 e32 rigidite des prix marges beneficiaires et la dynamique du compte courant ce memoire montre que le degre de concurrence affecte la reaction du compte courant aux chocs nominaux le mecanisme depend de la relation entre la marge beneficiaire et le degre de rigidite reelle des prix dans un modele qui prend en compte les biens intermediaires le degre de rigidite reelle des prix s accroit avec la marge beneficiaire une reponse plus faible des prix aux chocs nominaux renforce l effet de deplacement de la depense de la devaluation au benefice du compte courant on analyse d abord la relation entre la marge beneficiaire et la rigidite reelle des prix dans un modele simple d economie fermee on montre ensuite en chiffres comment la marge beneficiaire peut affecter la reaction du compte courant aux chocs monetaires

liquidity effects and the monetary transmission mechanism several recent papers provide strong empirical support for the view that an expansionary monetary policy disturbance generates a persistent decrease in interest rates and a persistent increase in output and employment existing quantitative general equilibrium models which allow for capital accumulation are inconsistent with this view there does exist a recently developed class of general equilibrium models which can rationalize the contemporaneous response of interest rates output and employment to a money supply shock however a key shortcoming of these models is that they cannot rationalize persistent liquidity effects this paper discusses the basic frictions and mechanisms underlying this new class of models and investigates one avenue for generating persistence we argue that once a simplified version of the model in christiano and eichenbaum 1991 is modified to allow for extremely small costs of adjusting sectoral flow of funds positive money shocks generate long lasting quantitatively significant liquidity effects as well as persistent increases in aggregate economic activity

macroeconomic shocks and banks foreign assets recent developments in international financial markets have highlighted the role of banks in the transmission of shocks across borders we employ dynamic panel methods for a sample of oecd countries to analyze whether banks foreign assets react to macroeconomic shocks at home and abroad we find that banks reduce their foreign assets in response to a relative increase in domestic interest rates and they increase their foreign assets when the growth rate of world energy prices rises the responses are characterized by a temporal overshooting and a dynamic adjustment process that extends over several quarters

trying to explain home bias in equities and consumption investors hold a substantially larger proportion of their wealth portfolios in domestic assets than standard portfolio theory would suggest a phenomenon called equity home bias in the absence of this bias investors would optimally diversify domestic output risk using foreign equities therefore consumption growth rates would tend to co move across countries even when output growth rates do not empirically however consumption growth rates tend to have a lower correlation across countries than do output growth rates a phenomenon i call consumption home bias in this paper i discuss these two biases and their potential relationship as suggested by the literature

oil price shocks economic policy uncertainty and industry stock returns in china asymmetric effects with quantile regression abstract this paper investigates the impact of crude oil shocks and china s economic policy uncertainty on stock returns at different locations on the return distributions based on monthly data from 1995 1 to 2016 3 we address this issue by employing the quantile regression technique this approach enables a more detailed investigation in different market circumstances namely bearish normal and bullish markets empirical results indicate that the effects of oil price shocks and economic policy uncertainty are asymmetric and highly related to stock market conditions moreover both the nexus of oil and economic policy uncertainty stock are changed at the onset of a crisis specially rising oil prices have greater negative effects on stock returns when stock markets are bullish extreme higher quantiles before a crisis whereas the effects are significantly positive under different market conditions after the onset of the crisis falling oil prices lower stock returns when stock markets are bullish and normal before the crisis whereas lower stock returns under different market conditions except extreme bullish after the onset of the crisis these findings might be related to the optimistic or pessimistic investor sentiments and investors might become more frightened after the crisis

energy overview for globalized world economy source supply chain and sink abstract energy use of the globalized world economy is comprehensively overviewed by means of a systems input output analysis based on statistics of 2010 emphases are put on the sources of primary energy exploitation inter regional trade imbalance of energy use via global supply chains and sinks of energy use in final demand the largest final user turns out to be the united states compared with china as the leading energy exploiter the global trade volume of energy use is shown in magnitude up to about 90 of the global primary energy exploited the united states is recognized as the world s biggest energy use importer in contrast to russia as the biggest exporter approximately one third of global primary energy exploited is shown to be embodied in inter regional net trade japan and russia are respectively illustrated to be the world s leading net importer and leading net exporter of energy use for china as the leading energy exploiter about 30 of its exploited energy is for foreign regions final use and 70 for its own final use for the european union as the largest sink region nearly 80 of the energy required in its final use is from foreign regions led by russia as reflected in the results the conventional perspective based only on the direct energy consumption by region inevitably leads to inter regional energy grabbing and carbon leakage which raises a serious concern of regional decrease at the expense of global increase in current context of energy shortage and climate change this global energy overview can provide essential strategic implications at the international national and regional scales for sustainable energy policy making

impacts of oil implied volatility shocks on stock implied volatility in china empirical evidence from a quantile regression approach abstract this paper investigates the impacts of changes in the implied volatility index of the oil market ovx on the changes in the implied volatility index of the chinese stock market vxfxi a quantile regression approach is applied to our empirical analysis as this approach can perform a more detailed investigation under different market conditions moreover we test whether the vxfxi changes would respond with lags and asymmetry to the ovx changes our empirical results show that the impacts of the ovx changes on the vxfxi changes are positive and tend to be stronger in bearish markets furthermore the results of testing lagged effects reveal that strong linkages between the two variables are transient in different market conditions which don t support the gradual information diffusion hypothesis very well finally we find that the ovx changes can asymmetrically affect the vxfxi changes specifically the negative ovx changes have stronger effects under bullish market conditions while the positive ovx changes play a more important role during bearish periods

money new keynesian macroeconomics and the business cycle abstract we show in this paper that the typical modern business cycle cannot be reduced to the real business cycles archetype a monopolistic competition model with price adjustment costs affected by technological and monetary shocks better mimics the economic fluctuations in two countries with very different cyclical properties namely france and the united states in our model monetary shocks are necessary to reproduce the standard deviation of output the money output correlation the labour productivity worked hours relative standard deviation the labour productivity worked hours correlation and the mark up output correlation with two independent shocks one real more specifically defined than the solow residual and one nominal the model gives an answer to some empirical puzzles which were left unexplained by traditional rbc models

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

the structure and degree of dependence a quantile regression approach abstract the copula function defines the degree of dependence and the structure of dependence this paper proposes an alternative framework to decompose the dependence using quantile regression we demonstrate that the methodology provides a detailed picture of dependence including asymmetric and non linear relationships in addition changes in the degree or structure of dependence can be modeled and tested for each quantile of the distribution the empirical part applies the framework to three different sets of financial time series and demonstrates substantial differences in dependence patterns among asset classes and through time the analysis of 54 global equity markets shows that detailed information about the structure of dependence is crucial to adequately assess the benefits of diversification in normal times and crisis times

extreme risk spillovers between crude oil and stock markets abstract this paper investigates the spillovers of extreme risks between crude oil and stock markets using daily data of the s p 500 stock index and west texas intermediate wti crude oil futures returns based on the method of granger causality in risk value at risk var is employed to measure market risk and a class of kernel based tests is used to detect negative and positive risk spillover effects empirical results reveal that there are significant risk spillovers between the two markets extreme movements past or current in one market may have a significant predictive power for those in the other market prior to the recent financial crisis there are positive risk spillovers from stock market to crude oil market and negative spillovers from crude oil market to stock market after the financial crisis bidirectional positive risk spillovers are strengthened markedly the risk spillovers may occur instantaneously and or with a long time delay both positive and negative risk spillover effects exhibit asymmetric correlations

time varying dynamics of the real exchange rate an empirical analysis summary we use a time varying structural vector autoregression to investigate evolving dynamics of the real exchange rate for the uk euro area and canada we show that demand and nominal shocks have a substantially larger impact on the real exchange rate after the mid 1980s real exchange rate volatility relative to fundamentals also shows a marked increase after this point in time however there is some evidence suggesting a closer business cycle co movement of the real exchange rate and fundamentals simulations from an open economy dsge model show that these results are consistent with a decline in exchange rate pass through copyright 2012 john wiley sons ltd

international portfolio nondiversification and exchange rate variability abstract incomplete international portfolio diversification is implied by an equilibrium models of exchange rates with nontraded goods the model can also explain the greater correlation between consumption and income within a country than between consumption across countries nontraded goods make more stringent the elasticity conditions required to explain exchange rate variability resulting from current productivity disturbances though not from disturbances to fiscal policies or the prospective return to investment the model is also consistent with international real interest rate differentials changes over time in the current account and relative wealth across nations and observed time series properties of exchange rates

the currency dimension of the bank lending channel in international monetary transmission abstract we investigate how the use of a currency transmits monetary policy changes in the global banking system we use a newly available rarely accessed dataset on the bilateral cross border lending flows of 27 bis reporting lending banking systems to borrowers in 51 countries broken down by currency denomination usd eur and jpy we have three main findings first we identify a currency dimension of the international bank lending channel monetary changes in a currency significantly affect cross border lending flows in that currency even when neither the lending banking system nor the target country uses that currency as their own second this transmission works mainly through lending to non banks third the currency dimension of the bank lending channel works similarly across the three currencies suggesting that the usd may not be unique in this respect

foreign activities of u s banks since 1997 the roles of regulations and market conditions in crises and normal times abstract using a unique newly constructed dataset on u s banks foreign activities since 1997 this paper examines how bank market and regulatory conditions in the u s and host countries affect u s banks choices of which foreign markets to enter and how much claims and liabilities to take on there using a two stage structural estimation framework the determinants of foreign market entry exit cross border claims and foreign affiliate claims and liabilities choices are examined in 107 host countries around the world it is shown that 1 the health of the balance sheet is the primary driver of foreign market entry exit choices especially so during the subprime crisis while host market and regulatory conditions play important roles in the choice of claims liabilities volumes 2 banks choose their foreign activities during banking and market crises differently than they do in normal times and 3 in addition to bank size previous experience with managing a global lending network significantly increases the intensity of banks foreign involvement structural estimates of the costs of foreign market entry exit and host market regulatory stringency are also derived

financial market integration and macroeconomic volatility the process of financial market integration is modeled in an intertemporal general equilibrium framework as the elimination of trading frictions between financial markets in different countries goods markets are assumed to be imperfectly competitive and goods prices are subject to sluggish adjustment simulation experiments show that increasing financial market integration increases the volatility of a number of variables when shocks originate from the money market but decreases the volatility of most variables when shocks originate from real demand or supply copyright 1996 by the editors of the scandinavian journal of economics

does economic policy uncertainty matter for commodity market in china evidence from quantile regression this paper investigates the effect of economic policy uncertainty epu on china s agricultural and metal commodity futures returns across quantiles we address this issue using the panel quantile

why do stocks and consumption imply such different gains from international risk sharing abstract estimates of the gains to international risk sharing based upon stock returns tend to find dramatically higher gains than do estimates from consumption based models in this paper i examine the reasons for these differences using a common theoretical framework for both approaches i find that the differences are largely due to the much higher variability of stock returns and its implied intertemporal substitution in marginal utility also contrary to conventional wisdom the differences in gains from the two approaches do not arise from treating stock returns as exogenous rather than endogenous

home bias in equity portfolios inflation hedging and international capital market equilibrium we test whether the home bias in equity portfolios is caused by investors trying to hedge inflation risk the empirical evidence is consistent with this motive only if investors have very high levels of risk tolerance and equity returns are negatively correlated with domestic inflation we then develop a model of international portfolio choice and equity market equilibrium that integrates inflation risk and deadweight costs using this model we estimate the levels of costs required to generate the observed home bias in portfolios consistent with different levels of risk aversion for a level of risk aversion consistent with standard estimates of the domestic equity market risk premium these costs are about a few percent per annum greater than observable costs such as withholding taxes thus the home bias cannot be explained by either inflation hedging or direct observable costs of international investment unless investors have very low levels of risk aversion article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

foreign bank penetration and the lending channel in emerging economies evidence from bank level panel data abstract this paper examines the main implications of recently increasing foreign bank penetration on bank lending as a channel of monetary policy transmission in emerging economies using a dynamic panel model of loan growth we investigate the loan granting behavior of 1273 banks in the emerging economies of asia latin america and central and eastern europe during the period from 1996 to 2003 applying the pooled ols system gmm and panel var estimators we find consistent evidence that foreign banks are less responsive to monetary shocks in host countries as they adjust their outstanding loan portfolios and interest rates to a lesser extent than domestic private banks independent of their liquidity capitalization size efficiency and credit risk and although there exists a bank lending channel in the emerging economies it is declining in strength due to the increased level of foreign bank penetration we also explore possible driving factors for the different responses of foreign and domestic banks to monetary policy shocks by investigating foreign banks different behavior during banking crises and tranquil periods the effects of mode of entry to host countries the home country effects and the response of foreign banks from oecd countries vs all foreign countries including non oecd countries we suggest the access of foreign banks to funding from parent banks through internal capital markets as the most convincing explanation

commodity trade and international risk sharing how much do financial markets matter abstract this paper evaluates the social gains from international risk sharing in some simple general equilibrium models with output uncertainty a simulation model calibrated to selected moments of u s and japanese data estimates the incremental loss from a ban on international portfolio diversification to be on the order of 0 20 percent of output per year even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology the paper argues that the small magnitude of potential trade gains may help explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility

the role of the exchange rate in monetary policy rules for a country that chooses not to permanently fix its exchange rate through a currency board or a common currency or some kind of dollarization the only alternative monetary policy that can work well in the long run is one based on the trinity of i a flexible exchange rate ii an inflation target and iii a monetary policy rule while not often put into this threepart format the desirability of such a monetary policy in an open economy is in my view the clear implication of three corresponding strands of recent monetary research i research on fixed exchange rates regimes including the influential 1995 article the mirage of fixed exchange rates by maurice obstfeld and kenneth rogoff and the many analyses of the breakdown of fixed exchange rate regimes in the late 1990 s ii research on the practical success with inflation targeting by ben bernanke et al 1999 and iii research on the benefits of simple monetary policy rules see e g taylor 1999a this clear policy implication however does not end the debate about how exchange rates should be taken into account in formulating monetary policy even if one excludes capital controls and sterilized exchange market intervention from consideration because they are not effective or attractive ways to de link exchangerate movements from the domestic interest rate a crucial question remains how should the instruments of monetary policy the interest rate or a monetary aggregate react to the exchange rate should policymakers avoid any reaction and focus instead on domestic indicators such as inflation and real gdp or is the rule of thumb that a substantial appreciation of the real exchange rate furnishes a prima facie case for relaxing monetary policy as characterized by obstfeld and rogoff 1995 p 93 a better monetary policy rule or perhaps policymakers should heed the obstfeld rogoff warning that substantial departures from ppp purchasing power parity in the short run and even over decades make such a policy reaction to the exchange rate undesirable more generally if one accepts the trinity concept of monetary policy in an open economy then what is the role of the exchange rate in the monetarypolicy rule

consumption volatility and financial openness economic theory predicts that the integration of financial markets lowers the volatility of consumption in this article we study long term trends in the consumption volatility of the g7 countries using different measures of financial openness we find evidence that greater financial openness has been associated with lower consumption volatility however volatility of consumption relative to output has not declined

the impact of geopolitical risks on travel and leisure stocks abstract the impact of geopolitical risks on tourism has not received scholarly attention in the existing literature previous studies focus on the effects of terrorism which is a subset of geopolitical risks our paper fills this gap and contributes to the literature by analyzing the vulnerability of four regional travel and leisure t l industry stock indices to geopolitical risks employing traditional and quantile regression techniques our results suggest a greater sensitivity of t l stock returns to geopolitical risks at times the industry performs poor except for asia pacific index that is the most resilient to geopolitical events we find that the negative effects of geopolitical risks are mostly driven by the threat of adverse geopolitical events only during period of falling t l stock prices however the realization of adverse geopolitical events significantly influences t l stocks at all times the results provide potential insights and implications for investors and tourism stakeholders

accounting for the east asian crisis a quantitative model of capital outflows in small open economies to what degree can the qualitative and quantitative aspects of the east asian crisis be accounted for within a dynamic general equilibrium model this paper investigates that question using a framework in which the crisis itself is modeled as an exogenous shock to the country risk premium this exercise has empirical discipline because the scale of the shock can be measured by the movement in the reported risk premium we calibrate a quantitative sticky price dynamic general equilibrium model of a small open economy to match the features of three east asian economies thailand korea and malaysia we identify a shock to the country risk premium using published data from international bond markets and identify shortrun monetary policy using observed domestic interest rates we find that the modeled response to the observed increase in external interest rates substantially matches macroeconomic data on prices and quantities at the aggregate and sectoral level however the model has more difficulty explaining the large exchange rate devaluations that occurred in those economies

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

time varying rare disaster risks oil returns and volatility abstract this paper provides a novel perspective to the predictive ability of rare disaster risks for west texas intermediate wti oil market returns and volatility using a nonparametric quantile based methodology over the monthly period of 1918 01 2013 12 we show that a nonlinear relationship and structural breaks exists between oil returns and various rare disaster risks hence linear granger causality tests are misspecified and the linear model results of non predictability are unreliable however the quantile causality test shows that rare disaster risks strongly affect both wti returns and volatility with stronger evidence of predictability observed at lower quantiles of the respective conditional distributions our results are robust to alternative specification of volatility based on a garch model and measure of rare disaster risks based on the number of crises

on the effects of barriers to international investment a simple model is presented in which it is costly for domestic investors to hold foreign assets the implications of the model for the composition of optimal portfolios at home and abroad are derived it is shown that all foreign assets with a beta larger than some beta plot on either one of two security market lines some foreign assets with a beta smaller than are not held by domestic investors even if their expected return is increased slightly while it is obviously not true that asset markets are completely segmented between countries there is evidence of barriers to international investment although reality seems to lie in that grey area between complete segmentation and no segmentation at all most international asset pricing models are concerned with the extreme case of no barriers to international investment no effort seems to have been made to study the effect on portfolio choice of such barriers which make it costly to hold foreign securities as opposed to domestic securities but which do not in general render international diversification so onerous that investors avoid foreign securities completely casual empiricism suggests that models without barriers to international investment should be suspect those models cannot explain why it appears that in every country investors on average hold more domestic securities than would be required if they held the world market portfolio 2 this paper constructs a model of international asset pricing in which there is a cost associated with holding either long or short risky foreign securities for the sake of simplicity in most of the paper we assume that while domestic investors face barriers to international investment foreign investors face no such barriers it turns out that nothing significant is lost with such an assumption the main conclusions of this paper for the case in which foreign investors face no barriers to international investment are 1 in the presence of barriers to international investment some risky foreign

finance and consumption volatility evidence from india abstract the main objective of this paper is to explore the determinants of private consumption growth volatility in india focusing on the role of financial sector policies using data for india over the period 1950 2005 the results show that the implementation of financial repressionist policies is strongly associated with lower consumption volatility the results remain robust after controlling for a wide range of macroeconomic shocks and variables the presence of a threshold effect implies that the benefits of financial reforms in reducing consumption volatility can only be reaped when the financial system becomes sufficiently liberalized the results also indicate that the presence of a more open financial system may serve to dampen fluctuations in private consumption

cross border banking credit access and the financial crisis abstract we study the sensitivity of credit supply to bank financial conditions in 16 emerging european countries before and during the financial crisis we use survey data on 10 701 applicant and non applicant firms that enable us to disentangle effects driven by positive and negative shocks to the banking system from demand shocks that may vary across lenders we find strong evidence that firms access to credit was affected by changes in the financial conditions of their banks during the crisis firms were more credit constrained if they were dealing with banks that experienced a decline in equity and tier 1 capital as well as losses on financial assets we also find that access to credit reflects the balance sheet conditions of foreign parent banks the effect of positive and negative shocks to a bank is greater for riskier firms and firms with fewer tangible assets

the drivers of foreign bank lending in central and eastern europe the roles of parent subsidiary and host market traits we analyze the relative roles of subsidiary and parent banking group traits in driving foreign banks lending patterns in the central and eastern european cee region before and during the crisis we use a bank level dataset on western european banking groups and their cee subsidiaries over the 2002 2013 period we find that lower capital to asset ratios and higher non performing loans npl ratios at either the subsidiary or the parent bank level significantly lowered subsidiary lending growth before and during the crisis the onset of the crisis not only lowered subsidiary lending growth in the cee countries but also has altered the relationship between balance sheet conditions and lending growth however we also find strong evidence that this crisis effect is significantly less pronounced for subsidiaries participating in the vienna initiative our results policy implications include purging banks of npls enhanced regulatory coordination and the inclusion of parent bank traits in countercyclical capital buffer calculations

risk spillover of international crude oil to china s firms evidence from granger causality across quantile abstract this paper investigates the extreme risk spillover of international crude oil to stock returns for 529 firms listed on the a share market of the shanghai stock exchange we apply a kernel based nonparametric method to test quantile on quantile granger causality from crude oil to firm returns from the perspective of firm level analysis the findings are outlined as follows first our empirical results provide strong evidence to suggest the asymmetry in the linkage of extreme movements from crude oil to firm returns that is the case of positive risk spillovers are more severe than the case of negative risk spillovers in particular the down to down risk spillover is the most serious case this phenomenon unravels the strong driving force of economic cycles second risk transmission from oil price shocks to firm returns depends on the firm s industry features in addition to the usual focus on inter industry difference we also note the within industry heterogeneity third we confirm that china s refined oil pricing reform of march 27 2013 has had intensifying effects on the negative spillovers from oil prices to firms for investors we emphasize not only the awareness of the predictive power between extreme risks from international crude oil to china s firms but also the existence of heterogeneity in these predictive abilities across firms

does industrial structure explain the benefits of international diversification abstract we examine the influence of industrial structure on the cross sectional volatility and correlation structure of country index returns for 12 european countries between 1978 and 1992 we find that industrial structure explains very little of the cross sectional difference in country return volatility and that the low correlation between country indices is almost completely due to country specific sources of return variation diversification across countries within an industry is a much more effective tool for risk reduction than industry diversification within a country

useful government spending direct crowding out and fiscal policy interdependence this paper introduces perfect substitutability between private and public consumption in a dynamic open economy with imperfect competition and nominal rigidities this implies a direct crowding out effect that generalising to the two country case some well known properties of a closed economy tends to reduce consumption following both domestic and foreign expansions a less expected result is that sub stitutability has a positive effect on the short run output spillover we also show that if we modify the model to allow for home bias in government spending temporary fiscal expansions display a quasi neutrality property

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

foreign banks and credit stability in central and eastern europe a panel data analysis abstract we examine whether foreign and domestic banks in central and eastern europe react differently to business cycles and banking crises our panel dataset comprises data of more than 250 banks for the period 1993 2000 with information on bank ownership and mode of entry during crisis periods domestic banks contracted their credit base whereas greenfield foreign banks did not also home country conditions matter for foreign bank growth as there is a significant negative relationship between home country economic growth and host country credit by greenfields finally greenfield foreign banks credit growth is influenced by the health of the parent bank

nontraded goods nontraded factors and international non diversification abstract can the presence of nontraded consumption goods or nontraded factors of production explain the high degree of home bias displayed by investor portfolios we find that the answer is no so long as individuals have access to free international trade in financial assets in particular it is never optimal to exhibit home bias with respect to domestic traded good equities by contrast holdings of nontraded good equities in an optimal portfolio will depend sensitively on the elasticity of substitution between traded and nontraded goods

business cycles in international historical perspective business cycle models seek to answer the question of why economies go through cycles of recession and recovery or boom and bust any theory of the business cycle makes two sorts of claims what shocks are most important in disturbing the economy and what economic structure is necessary for propagating these shocks for example one common explanation of business cycles begins with monetary shocks and then seeks to explain why monetary shocks are not purely neutral as neoclassical theory would have it and instead have real effects at least in the short term early models in this vein were often implicitly or explicitly based on the proposition that markets do not clear continuously early equilibrium real business cycle theories instead emphasized the importance of real shocks especially to technology which may cause socially efficient fluctuations even when markets are always in equilibrium more recent models have attempted to marry the equilibrium approach to macroeconomics with the substantive keynesian ideas that money is not neutral and that economic fluctuations are costly new keynesian theories of the business cycle admit the possibility of a number of economic shocks including monetary and technology shocks but then focus on explaining how nominal price rigidities within the economy can turn these shocks into recessions or booms other models show that business cycles driven by keynesian animal spirits are consistent with rigorous microfoundations and rational expectations seeking empirical evidence for and against these various approaches we turn business cycle theories loose on perhaps the greatest macroeconomic laboratory

bank reforms foreign ownership and financial stability abstract numerous studies have focused on foreign ownership of banks but instead of linkages to financial stability they typically analyzed other issues and used country level data this article fills the gap in the literature by applying the gmm techniques on dynamic panels using bank level data for asian countries to investigate the impact of foreign ownership on financial stability as well as whether the relation between foreign ownership and stability changes under different conditions of bank reforms in the host country specifically we reach five conclusions first the existence of the home field advantage hypothesis is supported nevertheless when considering the effects of bank reforms the global advantage hypothesis holds second an inverse u shaped relation between foreign ownership and stability is supported third a higher degree of credit control liberalization mitigates the negative effect of foreign ownership on stability fourth liberalization of interest rate control and banking supervision do enhance stability fifth and finally we confirm a significantly negative relation between an explicit deposit and stability

welfare gains from international risksharing abstract this paper uses consumption data to compute yet unexploited welfare gains that can be achieved through risksharing among twenty oecd countries there is both aggregate national consumption risk and nondiversifiable individual specific risk countries engage in an optimal risksharing arrangement to pool risk associated with the aggregate consumption endowment streams welfare gains are associated with reduced consumption variability and with the international pricing of the consumption streams of individual countries the paper considers the standard vnm time additive preferences as well as nonexpected utility and habit formation preferences large unexploited gains are found under all sets of preferences leading to an international risksharing puzzle

international transmission of transitory and persistent monetary shocks under imperfect information abstract we analyze the transmission of monetary shocks in a new open economy macroeconomics model with one period nominal contracts and imperfect information shocks may have transitory and persistent components that can be disentangled only through the accumulation of information over time as a consequence the responses to shocks are significantly altered compared with the case of full information there are persistent effects on international relative prices and delayed exchange rate overshooting is possible following a persistent shock in some cases there are ex post excess returns as a positive interest rate spread is accompanied by an appreciating currency or vice versa lastly it is demonstrated that staggering reinforces persistence

the pass through effects of oil price shocks on china s inflation a time varying analysis abstract using a time varying parameter structural vector autoregression with stochastic volatility tvp svar sv model we decompose the structural shocks of oil price fluctuations into four types oil supply shocks global demand shocks domestic demand shocks and oil specific demand shocks we then analyze the time varying effects of these oil price shocks on china s inflation at the import production and consumption stages using monthly data from january 1999 to december 2016 the results show that the pass through effects of the four types of oil price shocks on china s inflation at each stage are time varying and that there are significant differences at different time horizons and points in time the analysis of the variance decomposition shows that the effects of oil price shocks on china s inflation at each stage are incomplete and decrease along the price chain the increase in oil prices driven by oil specific demand shocks is the most important cause of china s inflation at the import and production stages during the full sample period while china s inflation at the consumption stage is mainly affected by domestic demand shocks in addition the inflationary effects of oil price shocks have been dramatically weaker since the international financial crisis compared with before the crisis

what can explain the apparent lack of international consumption risk sharing recent research in international business cycles finds that international consumption comovements do not match the risk sharing predictions of standard complete markets models in this paper i ask whether two different types of explanations can help explain this result 1 nonseparabilities between tradables and nontradable leisure or goods and 2 the effects of capital market restrictions on consumption risk sharing i find that risk sharing cannot be resolved by either explanation alone however when i allow for both nonseparabilities and certain market restrictions risk sharing among unrestricted countries cannot be rejected this evidence suggests that a combination of these two effects may be necessary to explain consumption risk sharing across countries

evaluating risky consumption paths the role of intertemporal substitutability abstract in dynamic stochastic welfare comparisons a failure clearly to distinguish between risk aversion and intertemporal substitutability can result in misleading assessments of the impact of risk aversion on the welfare costs of consumption risk changes the problem arises in any setting in which uncertainty is propagated over time notably but not exclusively in economies with stochastic consumption trends regardless of the preference setup adopted an increase in risk aversion amplifies the per period costs of risks the weights consumers use to cumulate the per period costs of risks with persistent effects should however depend on intertemporal substitutability as well as on risk aversion under time separable expected utility preferences an increase in the period utility function s curvature therefore alters the welfare effect of risk for reasons that are in part unrelated to risk aversion to illustrate these points i reconsider lucas s estimate of the cost of consumption instability for the postwar united states

interaction between oil and us dollar exchange rate nonlinear causality time varying influence and structural breaks in volatility abstractthis article examines the nonlinear granger causality and time varying influence between crude oil prices and the us dollar usd exchange rate using the hiemstra and jones hp test the diks and panchenko dp test and the time varying parameter structural vector autoregression model by applying the iterated cumulative sums of squares icss algorithm and the dcc garch model the effects of structural breaks in volatility of the two markets are also investigated the empirical analysis indicates that first crude oil prices are the nonlinear granger cause of the usd exchange rate but not vice versa second the usd exchange rate exerts a stronger and more stable negative influence on crude oil prices in the short term and the influence gradually weakens after 2012 finally ignoring structural breaks can increase the negative volatility correlation between the oil and usd exchange rate markets which is particularly remarkable during the financial crisis

asset pricing puzzles and incomplete markets the representative agent theory of asset pricing is modified to incorporate heterogeneous agents and incomplete markets the model features two types of agents who differ up to a nontradable idiosyncratic component in their endowment processes numerical solutions indicate that individuals are able to diversify a substantial portion of their idiosyncratic income risk through riskless borrowing and lending alone restrictions on the variability of intertemporal marginal rates of substitution hansen and jagannathan 1991 are used to argue that incomplete markets as modeled here cannot account for the properties of asset returns that are anomalous from the perspective of representative agent theory a large literature in financial economics has investigated the extent to which variants of the lucas 1978 general equilibrium theory of asset pricing can account for the joint behavior of aggregate u s consumption and asset returns by and large this literature has concluded that a theory based upon frictionless arrow debreu markets and or a representative agent makes strongly counterfactual predictions regarding even the simple unconditional properties of this relationship mehra and prescott 1985 for instance show that the theory drastically underpredicts the average excess rate of return on u s stocks the so called equity premium puzzle weil 1989 points out as did mehra and prescott that the magnitude of the average risk free rate is far below that predicted by the theory this has been dubbed the risk free rate puzzle numerous authors including grossman melino and shiller 1987 and backus gregory and zin 1989 show that the theory cannot account for term premia inherent in the yield curve hodrick 1987 surveys a large literature which documents the theory s shortcomings in accounting for excess expected returns in foreign exchange markets the notion that the representative agent model cannot account for excess returns across a wide array of asset markets can be made more precise by using tools developed by hansen and jagannathan 1991 and shiller 1982

international investment restrictions and closed end country fund prices some closed end country funds trade at large premiums relative to their net asset values this paper examines whether international investment restrictions raise country fund price net asset value ratios by segmenting international capital markets we test whether a relation exists between announcements of changes in investment restrictions and changes in these ratios using weekly data from may 1981 to january 1989 the results provide evidence that some foreign markets are at least partially segmented from the u s capital market

foreign banks trends and impact over the past two decades foreign banks have become much more important in domestic financial intermediation heightening the need to understand their behavior we introduce a new comprehensive database made publicly available on bank ownership including the home country of foreign banks for 5 324 banks in 137 countries over the period 1995 2009 we document large increases in foreign bank presence in many countries but with substantial heterogeneity in terms of host and banks home countries bilateral investment patterns and bank characteristics in terms of impact we document that the relation between private credit and foreign bank presence importantly depends on host country and banks characteristics specifically foreign banks only seem to have a negative impact on credit in low income countries in countries where they have a limited market share where enforcing contracts is costly and where credit information is limited available and when they come from distant home countries this shows that accounting for heterogeneity including bilateral ownership is crucial to better understand the implications of foreign bank ownership

efficiency wages financial market integration and the fiscal multiplier abstract we used a new open economy macroeconomic model featuring a labor market friction in the form of efficiency wages to analyze the implications of financial market integration for the fiscal multiplier the fiscal multiplier measures the accumulated effect of fiscal policy on output conventional wisdom based on the basic textbook version of the classic mundell fleming model suggests that the fiscal multiplier should become smaller as financial markets become more integrated we show that a labor market friction in the form of efficiency wages implies that financial market integration should increase the fiscal multiplier

financial integration macroeconomic volatility and welfare this paper studies the effects of financial integration on macroeconomic volatility and welfare we examine a two sector tradable and nontradable twocountry world economy with production in which both stocks and bonds are traded internationally but markets are incomplete the effects of integration are examined by comparing the equilibrium properties of the model under three financial configurations autarky low integration and high integration the model predicts a non monotonic relationship between the degree of financial integration and the volatility of several macroeconomic variables greater integration is initially associated with more volatile consumption and output but as integration proceeds further volatility declines we also find that while increased integration allows for significantly greater risk sharing between countries the improvement in welfare can be very small

dynamic nonlinear impacts of oil price returns and financial uncertainties on credit risks of oil exporting countries abstract this paper investigates the dynamic and nonlinear impact of oil price returns on the sovereign credit default swap cds spreads for the oil rich countries of the gulf cooperation council gcc and other important oil exporting countries namely venezuela mexico and russia we employ the standard quantile regression analysis the rolling quantile regression and finally the quantile on quantile qq approach that allows one to investigate the dependence dynamics of the sovereign cds spreads under different credit market conditions the empirical results show that oil price returns significantly and favorably decrease the sovereign credit risk premium of the non gcc oil exporting countries under consideration however the results also suggest no or little impact on the sovereign credit risk premium of saudi arabia uae and norway which have the most significant sovereign wealth funds in the world the negative i e favorable impact of oil price returns on the sovereign cds spreads where present gradually increases with the quantile level and is the highest during the bullish credit market conditions the results also show that those cds spreads are more sensitive to the global bond market uncertainty factor than to the global equity market uncertainty factor

exchange rate volatility and deviations from unbiasedness in a cash in advance model abstract this paper examines time series properties of exchange rate changes the forward premium and the forward bias in the context of a variant of svensson s cash in advance model the model is solved and simulated using realistic forcing processes whose law of motion is estimated from u s japan data and then approximated by a markov chain although method of moments estimation shows that the over identifying restrictions implied by the model are not rejected it fails dramatically in producing a sufficiently variable risk premium on forward market speculation this result is robust to various pertubations to the model s parameters forcing processes and preference structure the model also fails to match exchange rate and forward premium volatility simultaneously

real exchange rate volatility terms of trade shocks and financial integration in primary commodity exporting economies using a panel of 53 primary commodity exporting countries we show that greater international financial integration reduces the impact of terms of trade shocks on real exchange rate volatility this reduction is larger when we define financial integration as foreign direct investment

bank ownership and lending patterns during the 2008 2009 financial crisis evidence from latin america and eastern europe this paper examines the impact of bank ownership on credit growth in developing countries before and during the 2008 2009 crisis using bank level data for countries in eastern europe and latin america it analyzes the growth of banks total gross loans as well as the growth of corporate consumer and residential mortgage loans although domestic private banks in eastern europe and latin america contracted their loan growth rates during the crisis there are differences in foreign and government owned bank credit growth across regions in eastern europe foreign bank total lending fell by more than domestic private bank credit these results are primarily driven by reductions in corporate loans furthermore government owned banks in eastern europe did not act counter cyclically the opposite was true in latin america where the growth of government owned banks corporate and consumer loans during the crisis exceeded that of domestic and foreign banks contrary to the case of foreign banks in eastern europe those in latin america did not fuel loan growth prior to the crisis and did not contract lending at a faster pace than domestic banks during the crisis

the new open economy macroeconomics a survey since the 1995 publication of obsteld and rogoff s redux model there has been an outpouring of research on open economy dynamic general equilibrium models that incorporate imperfect competition and nominal rigidities this paper offers an interim survey of this recent literature 2001 elsevier science b v all rights reserved

what are the categories of geopolitical risks that could drive oil prices higher acts or threats abstract this study characterizes the oil market as a nonlinear switching phenomenon and examines its dynamics in response to changes in geopolitical risks over low and high risk scenarios we separate the shocks due to geopolitical acts from those due to geopolitical threats to address whether the serious effects of geopolitical risks are mostly due to increased threats of adverse events or to their realization as acts while we find the acts to generate a positive and strong impact on oil price dynamics the effect of threats appears to be moderate or non significant imperfect information in the oil price determination the history of oil supply disruptions emanating from geopolitical events the continued rise in populism in the world oil market volatility multifractility and the time varying degree of weak form efficiency have been advanced to explain the unforeseen responses of oil prices to geopolitical threats to accommodate recent oil related events we construct a composite geopolitical risk indicator by accounting for contemporaneous sources of geopolitical risks namely global trade tensions us china relation risks us iran tensions saudi arabia s uncertainty and venezuela s crisis the combined effects have an outsized impact on oil prices

financial openness and business cycle volatility abstract this paper discusses whether the integration of international financial markets affects business cycle volatility in the framework of a new open economy macro model we show that the link between financial openness and business cycle volatility depends on the nature of the underlying shock empirical evidence supports this conclusion our results also show that the link between business cycle volatility and financial openness has not been stable over time

forecasting the good and bad uncertainties of crude oil prices using a har framework abstract good or bad uncertainty is the volatility that is associated with positive or negative innovations to asset prices this paper proposes new heterogeneous autoregressive type har type models to forecast the good and bad uncertainties of crude oil prices in this paper we investigate the effects of lagged bad and good uncertainties daily positive and negative signed jump variations and leverages on predicting good and bad uncertainties by in sample and out of sample analysis the in sample results show that bad and good uncertainties have long memory property and the predictability of long term good and bad uncertainties is stronger than that of short and mid term good and bad uncertainties the out of sample results indicate that lagged bad or good uncertainties daily positive signed jump variation and daily negative signed jump variation contain incremental out of sample information for forecasting good or bad uncertainties and in most cases lagged leverages also play indispensable roles in forecasting the good and bad uncertainties in the crude oil market moreover the results of out of sample analysis remain robust across using the other estimation window other har type models and the other sample

bank business models as a driver of cross border activities abstract much of the post crisis moderation in international banking has been shown to be attributable to euro area banks using a confidential bank level dataset on euro area resident banks this paper sheds light on the type of banks responsible for the decline in cross border lending overall globally systemically important banks g sibs were markedly different from other bank types resident in the euro area as they not only increased their extra euro area positions but also contributed to maintaining cross border flows within the euro area over the past decade in addition we also highlight that banks with initially higher capitalisation more deposit funding and lower non performing loan rates exhibit less cross border retrenchment these findings have clear policy implications for the design of bank regulations appropriate for a deepening european banking union

consumption smoothing and housing capital gains evidence from australia canada and new zealand using regional level panel data of three developed countries comprising australia canada and new zealand the study investigates the response of consumption smoothing to housing capital gains t

multinational banks and the global financial crisis weathering the perfect storm we use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the great recession with lending by a benchmark group of 202 domestic banks contrary to earlier more contained crises parent banks were not a significant source of strength to their subsidiaries during the 2008 09 crisis as a result multinational bank subsidiaries had to slow down credit growth about twice as fast as domestic banks this was particularly the case for subsidiaries of banking groups that relied more on wholesale market funding domestic banks were better equipped to continue lending because of their greater use of deposits a relatively stable funding source during the crisis we conclude that while multinational banks may contribute to financial stability during local bouts of financial turmoil they also increase the risk of importing instability from abroad

gains from international diversification 1968 85 returns on portfolios of stocks and bonds this paper applies the multi period investment model to a universe of international securities on the basis of the simple probability assessment approach our principal findings are 1 the gains from including non u s asset categories in the universe were remarkably large in some cases statistically significant especially for the highly risk averse strategies 2 the gains from removing the no leverage constraint were more substantial than they were in the absence of non u s securities and 3 there is strong evidence of market segmentation in that the optimal levels of investment in u s securities were mostly zero in the presence of the non u s asset categories

staggered wages and output dynamics under disinflation we study the output costs of a reduction in monetary growth in a dynamic general equilibrium model with staggered wages the money wage is fixed for two periods and is chosen according to intertemporal optimisation agents have labour market monopoly power we show that the introduction of microfoundations helps to resolve the puzzle raised by directly postulated models namely that disinflation in staggered pricing models causes a boom in our model disinflation whether unanticipated or anticipated unambiguously causes a slump

international financial remoteness and macroeconomic volatility abstract this paper shows that proximity to major international financial centers seems to reduce business cycle volatility in particular we show that countries that are farther from major locations of international financial activity systematically experience more volatile growth rates in both output and consumption even after accounting for political institutions trade and other controls our results are relatively robust in the sense that more financially remote countries are more volatile though the results are not always statistically significant the comparative strength of this finding is in contrast to the more ambiguous evidence found in the literature

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

asymmetric impacts of oil price uncertainty on chinese stock returns under different market conditions evidence from oil volatility index abstract the crude oil volatility index ovx is a direct and more accurate measure of oil price uncertainty this paper uses this kind of implied volatility index of oil prices to investigate the impacts of oil price uncertainty on the aggregate and sectoral stock returns in china this issue is resolved by using a quantile regression which can provide a more detailed examination under different market conditions meanwhile the asymmetric effects of uncertainty shocks are also examined by using the positive and negative changes of the ovx furthermore we assess whether the reform of march 27 2013 affected the ovx stock nexus since this reform was a major step to relax the control of domestic oil prices in china our results reveal that ovx changes mainly show significantly negative effects on the aggregate and sectoral stock returns in the bearish market in particular these effects depend largely on the positive shocks of the ovx rather than the negative shocks of the ovx moreover the reform of march 27 2013 decreased the impacts of the positive ovx shocks on chinese stock returns

the effects of oil price shocks on asian exchange rates evidence from quantile regression analysis abstract this paper investigates the effects of oil price shocks on asian exchange rates we employ quantile regression analysis and allow for structural breaks and asymmetry our results indicate that positive and negative oil price shocks have asymmetrical effects on exchange rate returns that vary in significance size and sign throughout the distribution of exchange rate returns the impact of oil price shocks is also affected by market conditions bearish and bullish currency markets during bullish markets in domestic currencies at lower quantiles of currency movements in terms of u s dollar exchange rates rising oil prices cause further appreciation for indonesia korea the philippines and thailand currencies during bearish markets in the domestic currencies at higher quantiles of exchange rate movements in terms of u s dollar exchange rates rising falling oil price causes further currency depreciation for indonesia malaysia thus currencies respond differently to oil price shocks under extreme bullish or bearish currency market conditions and the impact of rising or falling oil prices on foreign exchange markets can vary by country and market conditions

asymmetric effects of geopolitical risks on energy returns and volatility under different market conditions abstract based on daily data from 28 june 1990 to 31 october 2018 we investigate the asymmetric effects of geopolitical risks on energy crude oil gas and heating oil returns and volatility under different market conditions by using a quantile regression model the results show that geopolitical risks have significantly negative effects on crude oil returns in the bearish market and on heating oil returns in the normal and bullish markets but have no effects on gas returns meanwhile the impacts of geopolitical risks on crude oil volatility are significantly positive in different market conditions and the impacts on gas and heating oil volatility are mainly negative but not significant in addition we further divide geopolitical risks into geopolitical threats and geopolitical acts and find that geopolitical threats and acts have heterogeneous effects on energy returns and volatility