bluuebunny/crossref_metadata_2025 huggingface dataset:
Predicting Sharp Depreciations in Industrial Country Exchange Rates
Authors: Wright Jonathan H. , Gagnon Joseph E.
Published: August 2019

This paper considers the prediction of large depreciations (both nominal and real) in a panel of industrialized countries using a probit methodology. The current account balance/GDP ratio has a modest but statistically significant effect on the estimated probability of a large depreciation, and gives slight predictive power in an out-of-sample forecasting exercise. The CPI inflation rate also has a modest but statistically significant effect in predicting nominal depreciations and has slight predictive power, but this effect is not present for real exchange rates. The GDP growth rate occasionally has a significant effect. A higher current account balance (surplus) tends to reduce the probability of a sharp depreciation; a higher inflation rate tends to increase the probability of a sharp depreciation; and a higher GDP growth rate perhaps tends to reduce the probability of a sharp depreciation.
Are Antidumping Duties for Sale? Case-Level Evidence on the Grossman-Helpman Protection for Sale Model
Authors: Evans Carolyn L. , Sherlund Shane M.
Published: August 2019

As successive rounds of global trade liberalization have lowered broad industry-level tariffs, antidumping duties have emerged as a WTO-consistent means of protecting certain industries. Using the Grossman-Helpman (GH) &amp;quot;Protection for Sale&amp;quot; model, we examine the extent to which political contributions affect the outcomes of decisions in antidumping cases. We find that antidumping duty rates tend to be higher for politically-active petitioners. The relationship between the import penetration ratio and duties imposed depends on whether or not petitioners in a case are politically active. Consistent with the predictions of the GH model, antidumping duties are positively correlated with the import penetration ratio for politically inactive petitioners, but negatively correlated for politically active petitioners. Thus, our paper supports the predictions of the Grossman-Helpman model using a fresh set of data that allows us to avoid some of the compromises made in previous empirical work.
Optimal Fiscal and Monetary Policy with Costly Wage Bargaining
Authors: Arseneau David M. , Chugh Sanjay K.
Published: August 2019

Costly nominal wage adjustment has received renewed attention in the design of optimal policy. In this paper, we embed costly nominal wage adjustment into the modern theory of frictional labor markets to study optimal fiscal and monetary policy. Our main result is that the optimal rate of price inflation is highly volatile over time despite the presence of sticky nominal wages. This finding contrasts with results obtained using standard sticky-wage models, which employ Walrasian labor markets at their core. The presence of shared rents associated with the formation of long-term employment relationships sets our model apart from previous work on this topic. The existence of rents implies that the optimal policy is willing to tolerate large fluctuations in real wages that would otherwise not be tolerated in a standard model with Walrasian labor markets; as a result, any concern for stabilizing nominal wages does not translate into a concern for stabilizing nominal prices. Our model also predicts that smoothing of labor tax rates over time is a much less quantitatively-important goal of policy than standard models predict. Our results demonstrate that the level at which nominal wage rigidity is modeled -- whether simply lain on top of a Walrasian market or articulated in the context of an explicit relationship between workers and firms -- can matter a great deal for policy recommendations.
Three Great American Disinflations
Authors: Levin Andrew , Michaels Ryan , Bordo M. , Erceg Christopher J.
Published: August 2019

This paper analyzes the role of transparency and credibility in accounting for the widely divergent macroeconomic effects of three episodes of deliberate monetary contraction: the post-Civil War deflation, the post-WWI deflation, and the Volcker disinflation. Using a dynamic general equilibrium model in which private agents use optimal filtering to infer the central bank's nominal anchor, we demonstrate that the salient features of these three historical episodes can be explained by differences in the design and transparency of monetary policy, even without any time variation in economic structure or model parameters. For a policy regime with relatively high credibility, our analysis highlights the benefits of a gradualist approach (as in the 1870s) rather than a sudden change in policy (as in 1920-21). In contrast, for a policy institution with relatively low credibility (such as the Federal Reserve in late 1980), an aggressive policy stance can play an important signalling role by making the policy shift more evident to private agents.
Bargaining, Fairness, and Price Rigidity in a DSGE Environment
Authors: Arseneau David M. , Chugh Sanjay K.
Published: August 2019

A growing body of evidence suggests that an important reason why firms do not change prices nearly as much as standard theory predicts is out of concern for disrupting ongoing customer relationships because price changes may be viewed as "unfair". Existing models that try to capture this concern regarding price-setting are all based on goods markets that are fundamentally Walrasian. In Walrasian goods markets, transactions are spot, making the idea of ongoing customer relationships somewhat difficult to understand. We develop a simple dynamic general equilibrium model of a search-based goods market to make precise the notion of a customer as a repeat buyer at a particular location. In this environment, the transactions price plays a distributive role as well as an allocative role. We exploit this distributive role of prices to explore how concerns for fairness influence price dynamics. Using pricing schemes with bargaining-theoretic foundations, we show that the particular way in which a "fair" outcome is determined matters for price dynamics. The most stark result we find is that complete price stability can arise endogenously. There are issues about which models based on standard Walrasian goods markets are silent.
Testing for Cointegration Using the Johansen Methodology when Variables are Near-Integrated
Authors: Hjalmarsson Erik , Österholm Pär
Published: August 2019

We investigate the properties of Johansen's (1988, 1991) maximum eigenvalue and trace tests for cointegration under the empirically relevant situation of near-integrated variables. Using Monte Carlo techniques, we show that in a system with near-integrated variables, the probability of reaching an erroneous conclusion regarding the cointegrating rank of the system is generally substantially higher than the nominal size. The risk of concluding that completely unrelated series are cointegrated is therefore non-negligible. The spurious rejection rate can be reduced by performing additional tests of restrictions on the cointegrating vector(s), although it is still substantially larger than the nominal size.
Competitive Search Equilibrium in a DSGE Model
Authors: Arseneau David M. , Chugh Sanjay K.
Published: August 2019

We show how to implement a competitive search equilibrium in a fully-specified DSGE environment. Competitive search, an equilibrium concept well-understood in labor market theory, offers an alternative to the commonly-used Nash bargaining in search-based macro models. Our simulation-based results show that business cycle fluctuations under competitive search equilibrium are virtually identical to those under Nash bargaining for a broad range of calibrations of Nash bargaining power. We also prove that business cycle fluctuations under competitive search equilibrium are exactly identical to those under Nash bargaining restricted to the popularly-used Hosios condition for search efficiency. This latter result extends the efficiency properties of competitive search equilibrium to a DSGE environment. Our results thus provide a foundation for researchers interested in studying business cycle fluctuations using search-based environments to claim that the sometimes-awkward assumption of bargaining per se does not obscure interpretation of results.
Trade Elasticity of Substitution and Equilibrium Dynamics
Authors: Bodenstein Martin
Published: August 2019

The empirical literature provides a wide range of estimates for trade elasticities at the aggregate level. Furthermore, recent contributions in international macroeconomics suggest that low (implied) values of the trade elasticity of substitution may play an important role in understanding the disconnect between international prices and real variables. However, a standard model of the international business cycle displays multiple locally isolated equilibria if the trade elasticity of substitution is sufficiently low. The main contribution of this paper is to compute and characterize some dynamic properties of these equilibria. While multiple steady states clearly signal equilibrium multiplicity in the dynamic setup, this is not a necessary condition. Solutions based on log-linearization around a deterministic steady state are of limited to no help in computing the true dynamics. However, the log-linear solution can hint at the presence of multiple dynamic equilibria.
Simple Monetary Rules Under Fiscal Dominance
Authors: Kumhof Michael
Published: August 2019

This paper asks whether an aggressive monetary policy response to inflation is feasible in countries that suffer from fiscal dominance, as long as monetary policy also responds to fiscal variables. We find that if nominal interest rates are allowed to respond to government debt, even aggressive rules that satisfy the Taylor principle can produce unique equilibria. But following such rules results in extremely volatile inflation. This leads to very frequent violations of the zero lower bound on nominal interest rates that make such rules infeasible. Even within the set of feasible rules the optimal response to inflation is highly negative, and more aggressive inflation fighting is inferior from a welfare point of view. The welfare gain from responding to fiscal variables is minimal compared to the gain from eliminating fiscal dominance.
Expected Consumption Growth from Cross-Country Surveys: Implications for Assessing International Capital Markets
Authors: Engel Charles , Rogers John Harold
Published: August 2019

Survey data show that the expected growth rates of consumption across countries vary widely and are not highly correlated. This data contradicts the simplest of open-economy models in which there is a freely traded non- state-contingent bond and purchasing power parity holds. We explore two alternative explanations for the finding: that households in each country in effect face different ex ante real interest rates or that there are significant credit constraints, so that expected consumption growth rates are driven largely by expected income growth. The empirical evidence strongly supports the latter hypothesis. These findings challenge the modeling of consumption that is at the heart of many, if not most, macroeconomic models.
Assessing the Potential for Further Foreign Demand for U.S. Assets: Has Financing U.S. Current Account Deficits Made Foreign Investors Overweight in U.S. Securities?
Authors: Bertaut Carol C.
Published: August 2019

Since 2001, foreign investors have acquired roughly $5 trillion in U.S. securities--more than doubling their holdings of U.S. equities and bonds--as both official and private inflows have financed record U.S. current account deficits. Although the rapid growth of foreign holdings of U.S. securities raises concerns that foreign investors may have become too heavily weighted in U.S. assets, foreign investors have not in fact materially changed the relative allocations between U.S. and other foreign securities in their portfolios in recent years. Based on data from the most recent comprehensive surveys of foreign portfolio investment, the 2006 IMF Coordinated Portfolio Investment Surveys (CPIS), most foreign investors remain relatively more underweight in both U.S. equities and bonds than they do in foreign securities in general. Although the underweight position suggests that there remains potential for foreign investors to continue to acquire U.S. securities, econometric evidence indicates that the underweight position itself reflects a preference by foreign investors for securities of countries with which they have strong economic or cultural ties, consistent with recent research that suggests "location" or "information" preferences in both domestic and international portfolios. As securities markets abroad continue to deepen, such factors are likely to continue to attract investment from "nearby" markets, especially from European investors.
Fiscal Policy in the European Monetary Union
Authors: Daniel Betty C. , Shiamptanis Christos
Published: August 2019

A country entering the EMU surrenders its monetary policy, and its debt becomes denominated in terms of a currency over which it has no direct control. A country's promise to uphold the fiscal limits in the Maastricht Treaty and the Stability and Growth Pact is implicitly a promise not to allow its fiscal stance to deteriorate to a position in which it places pressure on the central bank to forgo its price level target to finance fiscal deficits. Violation of these limits has raised questions about potential fiscal encroachment on the monetary authority's freedom to determine the price level. We specify a simple model of fiscal policy in which the fiscal authority faces an upper bound on the size of its primary surplus. Policy is determined by a fiscal rule, specified as an error correction model, in which the primary surplus responds to debt and a target variable. We show that for the monetary authority to have the freedom to control price, the primary surplus must respond strongly enough to lagged debt. Using panel techniques that allow for unit roots and for heterogeneity and cross-sectional dependence across countries, we estimate the coefficients of the error correction model for the primary surplus in a panel of ten EMU countries over the period 1970-2006. The group mean estimate for the coefficient on lagged debt is consistent with the hypothesis that the monetary authority can control the price level in the EMU, independent of fiscal influence.
Pitfalls in Estimating Asymmetric Effects of Energy Price Shocks
Authors: Kilian Lutz , Vigfusson Robert J.
Published: August 2019

A common view in the literature is that the effect of energy price shocks on macroeconomic aggregates is asymmetric in energy price increases and decreases. We show that widely used asymmetric vector autoregressive models of the transmission of energy price shocks are misspecified, resulting in inconsistent parameter estimates, and that the implied impulse responses have been routinely computed incorrectly. As a result, the quantitative importance of unanticipated energy price increases for the U.S. economy has been exaggerated. In response to this problem, we develop alternative regression models and methods of computing responses to energy price shocks that yield consistent estimates regardless of the degree of asymmetry. We also introduce improved tests of the null hypothesis of symmetry in the responses to energy price increases and decreases. An empirical study reveals little evidence against the null hypothesis of symmetry in the responses to energy price shocks. Our analysis also has direct implications for the theoretical literature on the transmission of energy price shocks and for the debate about policy responses to energy price shocks.
On the Solvency of Nations: Are Global Imbalances Consistent with Intertemporal Budget Constraints?
Authors: Durdu Ceyhun Bora , Mendoza Enrique G. , Terrones Marco
Published: August 2019

Theory predicts that a nation's stochastic intertemporal budget constraint is satisfied if net foreign assets (NFA) are integrated of any finite order, or if net exports (NX) and NFA satisfy an error-correction specification with a residual integrated of any finite order. We test these conditions using data for 21 industrial and 29 emerging economies for the 1970-2004 period. The results show that, despite the large global imbalances of recent years, NFA and NX positions are consistent with external solvency. Country-specific unit root tests on NFA-GDP ratios suggest that nearly all of them are integrated of order 1. Pooled Mean Group error-correction estimation yields evidence of a statistically significant, negative response of the NX-GDP ratio to the NFA-GDP ratio that is largely homogeneous across countries.
Decomposing the U.S. External Returns Differential
Authors: Curcuru Stephanie E. , Dvorak Tomas , Warnock Francis E.
Published: August 2019

We decompose the returns differential between U.S. portfolio claims and liabilities into the composition, return, and timing effects. Our most striking and robust finding is that foreigners exhibit poor timing when reallocating between bonds and equities within their U.S. portfolios. The poor timing of foreign investors--caused primarily by deliberate trading, not a lack of portfolio rebalancing--contributes positively to the U.S. external returns differential. We find no evidence that the poor timing is driven by mechanical reserve accumulation by emerging market countries rather, it is driven almost entirely by the poor timing of rich, developed (mainly European) countries. Finally, while poor foreign timing appears to be persistent across subsamples, other terms in our decomposition (the composition and return effects and U.S. timing abroad), as well as the overall differential, are sometimes negative, sometimes positive, and usually indistinguishable from zero.
Characteristic-Based Mean-Variance Portfolio Choice
Authors: Hjalmarsson Erik , Manchev Peter
Published: August 2019

We study empirical mean-variance optimization when the portfolio weights are restricted to be direct functions of underlying stock characteristics such as value and momentum. The closed-form solution to the portfolio weights estimator shows that the portfolio problem in this case reduces to a mean-variance analysis of assets with returns given by single-characteristic strategies (e.g., momentum or value). In an empirical application to international stock return indexes, we show that the direct approach to estimating portfolio weights clearly beats a naive regression-based approach that models the conditional mean. However, a portfolio based on equal weights of the single-characteristic strategies performs about as well, and sometimes better, than the direct estimation approach, highlighting again the difficulties in beating the equal-weighted case in mean-variance analysis. The empirical results also highlight the potential for 'stock-picking' in international indexes, using characteristics such as value and momentum, with the characteristic-based portfolios obtaining Sharpe ratios approximately three times larger than the world market.
The Effects of Foreign Shocks When Interest Rates are at Zero
Authors: Bodenstein Martin , Erceg Christopher J. , Guerrieri Luca
Published: August 2019

In a two-country DSGE model, the effects of foreign demand shocks on the home country are greatly amplified if the home economy is constrained by the zero lower bound for policy interest rates. This result applies even to countries that are relatively closed to trade such as the United States. The duration of the liquidity trap is determined endogenously. Adverse foreign shocks can extend the duration of the liquidity trap, implying more contractionary effects for the home country conversely, large positive shocks can prompt an early exit, implying effects that are closer to those when the zero bound constraint is not binding.
Portfolio Inertia and the Equity Premium
Authors: Gust Christopher J. , López-Salido J. David
Published: August 2019

We develop a DSGE model in which aggregate shocks induce endogenous movements in risk. The key feature of our model is that households rebalance their financial portfolio allocations infrequently, as they face a fixed cost of transferring cash across accounts. We show that the model can account for the mean returns on equity and the risk-free rate, and generates countercyclical movements in the equity premium that help explain the response of stock prices to monetary shocks. The model is consistent with empirical evidence documenting that unanticipated changes in monetary policy have important effects on equity prices through changes in risk.
Imperfect Credibility and the Zero Lower Bound on the Nominal Interest Rate
Authors: Bodenstein Martin , Hebden James , Nunes Ricardo
Published: August 2019

When the nominal interest rate reaches its zero lower bound, credibility is crucial for conducting forward guidance. We determine optimal policy in a New Keynesian model when the central bank has imperfect credibility and cannot set the nominal interest rate below zero. In our model, an announcement of a low interest rate for an extended period does not necessarily reflect high credibility. Even if the central bank does not face a temptation to act discretionarily in the current period, policy commitments should not be postponed. In reality, central banks are often reluctant to allow a recovery path with output and inflation temporarily above target. From the perspective of our model such a policy reflects a low degree of credibility. We find increased forecast uncertainty in inflation and the output gap at the zero lower bound while interest rate uncertainty is reduced. Furthermore, misalignments between announced interest rate paths and market expectations are found to be best explained by lack of credibility.
Financial Globalization and Monetary Policy
Authors: Kamin Steven
Published: August 2019

This paper reviews the available evidence and previous research on potential effects of financial globalization, that is, the international integration of financial markets. In particular, we address the questions: Has financial globalization materially increased the influence of external developments on domestic monetary conditions? And, has it reduced the influence of central banks over financial and economic conditions in their own country? We find that central banks with floating currencies retain the ability to independently determine short-term interest rates and thus influence broader financial conditions and macroeconomic performance in their economies. However, domestic financial conditions appear to have become more vulnerable to a wide range of external shocks, complicating the task of making appropriate monetary policy decisions. Moreover, the financial crisis has highlighted the importance of cross-border channels for the transmission of liquidity and credit shocks. With financial transactions increasingly being undertaken in vehicle currencies such as dollars and euros, the liquidity provision and the lender-of-last resort functions of many central banks are being challenged. Accordingly, international arrangements for liquidity provision may become increasingly important in the future.
Could Asymmetric Information Alone Have Caused the Collapse of Private-Label Securitization?
Authors: Beltran Daniel O. , Thomas Charles P.
Published: August 2019

A key feature of the 2007-2008 financial crisis is that, for some classes of securities, trade has ceased. And where trade does occur, it appears that market prices are well below what one might believe to be the intrinsic value for that class of security. This seems to be especially true for those securities where the payoff streams are particularly complex (for example, CDOs). One explanation for this is that information about these securities' intrinsic values is asymmetric, with the current holders having better information than potential buyers. We show how the resulting adverse selection problem can help explain why more complex securities trade at significant discounts to their intrinsic values or do not trade at all. To examine whether asymmetric information alone would suffice to shut down portions of the asset-backed securities (ABS) market, we append a simple 'workhorse' model for pricing securities under asymmetric information into a Monte Carlo simulation that generates hypothetical securities backed by residential mortgages. We conduct a type of 'stress test' on the ABS by making the distribution of payoffs to the underlying loans worse, and find that the intrinsic values of the securities further down the securitization chain become dispersed in such a way that the market for them may shut down under asymmetric information. We then consider the role for government intervention, and compare the effectiveness of different policies that aim to unclog these markets.
U.S. International Equity Investment and Past and Prospective Returns
Authors: Curcuru Stephanie E. , Thomas Charles P. , Warnock Francis E. , Wongswan Jon
Published: August 2019

Counter to extant stylized facts, using newly available data on country allocations in U.S. investors&amp;#x27; foreign equity portfolios we find that (i) U.S. investors do not exhibit returns-chasing behavior, but, consistent with partial portfolio rebalancing, tend to sell past winners and (ii) U.S. investors increase portfolio weights on a country&amp;#x27;s equity market just prior to its strong performance, behavior inconsistent with an informational disadvantage. Over the past two decades, U.S. investors&amp;#x27; foreign equity portfolios outperformed a value-weighted foreign benchmark by 160 basis points per year.
Liquidity and Reserve Requirements in Brazil
Authors: Robitaille Patrice T.
Published: August 2019

The international reform initiative that followed the global financial crisis of 2008-09 has resulted in the introduction of liquidity requirements for banks. Under one requirement, the Liquidity Coverage Ratio (LCR), banks will need to hold enough highly liquid assets to survive for a month in a stress scenario. Banks&amp;#x27; required reserve balances can be used to fulfill this liquidity requirement and this may be seen as an attractive option for emerging market economies, where financial sectors are often underdeveloped. In this paper, I examine the Brazilian experience prior to and during the global crisis as a case study that can shed light into the challenges of using reserve requirements as a liquidity management tool. Brazilian reserve requirements did not ensure adequate liquidity, in part because the smallest banks were exempted from the requirements. Financial innovations were also used by banks to circumvent reserve requirements. In Brazil, the use of reserve requirements as a liquidity management tool is often justified by the argument that reserve requirements fulfilled a critical liquidity provision role in the fall of 2008. I argue that Brazilian reserve requirements did not actually serve well the liquidity provision goal.
Forecasting the Price of Oil
Authors: Alquist Ron , Kilian Lutz , Vigfusson Robert J.
Published: August 2019

We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications? Are real or nominal oil prices predictable based on macroeconomic aggregates? Does this predictability translate into gains in out-of-sample forecast accuracy compared with conventional no-change forecasts? How useful are oil futures markets in forecasting the price of oil? How useful are survey forecasts? How does one evaluate the sensitivity of a baseline oil price forecast to alternative assumptions about future demand and supply conditions? How does one quantify risks associated with oil price forecasts? Can joint forecasts of the price of oil and of U.S. real GDP growth be improved upon by allowing for asymmetries?
Optimal Monetary Policy in an Operational Medium-Sized DSGE Model
Authors: Adolfson Malin , Laséen Stefan , Lindé Jesper , Svensson Lars E.O.
Published: August 2019

We show how to construct optimal policy projections in Ramses, the Riksbank&amp;#x27;s open-economy medium-sized DSGE model for forecasting and policy analysis. Bayesian estimation of the parameters of the model indicates that they are relatively invariant to alternative policy assumptions and supports our view that the model parameters may be regarded as unaffected by the monetary policy specification. We discuss how monetary policy, and in particular the choice of output gap measure, affects the transmission of shocks. Finally, we use the model to assess the recent Great Recession in the world economy and how its impact on the economic development in Sweden depends on the conduct of monetary policy. This provides an illustration on how Rames incorporates large international spillover effects.
Diversification Across Characteristics
Authors: Hjalmarsson Erik
Published: August 2019

I study long-short portfolio strategies formed on seven different stock characteristics representing various measures of past returns, value, and size. Each individual characteristic results in a profitable portfolio strategy, but these single-characteristic strategies are all dominated by a diversified strategy that places equal weight on each of the single-characteristic strategies. The benefits of diversifying across characteristic-based long-short strategies are substantial and can be attributed to the mostly low, and sometimes substantially negative, correlation between the returns on the single-characteristic strategies.
Offshore Production and Business Cycle Dynamics with Heterogeneous Firms
Authors: Zlate Andrei
Published: August 2019

Cross-country variation in production costs encourages the relocation of production facilities to other countries, a process known as offshoring through vertical foreign direct investment. I examine the effect of offshoring on the international transmission of business cycles. Unlike the existing macroeconomic literature, I distinguish between fuctuations in the number of offshoring firms (the extensive margin) and in the value added per offshoring firm (the intensive margin) as separate transmission mechanisms. The firms decision to produce offshore depends on the firm-specific level of labor productivity, on fuctuations in the relative cost of effective labor, and on the fixed and trade costs of offshoring. The model replicates the procyclical pattern of offshoring and the dynamics along its two margins, which I document using data from U.S. manufacturing and Mexico s maquiladora sectors. Offshoring enhances the synchronization of business cycles, and dampens the real exchange rate appreciation generated by aggregate productivity differentials across countries.
News and Sovereign Default Risk in Small Open Economies
Authors: Durdu Ceyhun Bora , Nunes Ricardo , Sapriza Horacio
Published: August 2019

This paper builds a model of sovereign debt in which default risk, interest rates, and debt depend not only on current fundamentals but also on news about future fundamentals. News shocks affect equilibrium outcomes because they contain information about the future ability of the government to repay its debt. First, in the model with news shocks not all defaults occur in bad times, bringing the model closer to the data. Second, the news shocks help account for key differences between emerging markets and developed economies: as the precision of the news improves the model predicts lower variability of consumption, less countercyclical trade balance and interest rate spreads, as well as a higher level of debt more in line with the characteristics of developed economies. Finally, the model also captures the hump-shaped relationship between default rates and the precision of news obtained from the data.
The Variance Risk Premium Around the World
Authors: Londono Juan M.
Published: August 2019

This paper investigates the variance risk premium in an international setting. First, I provide new evidence on the basic stylized facts traditionally documented for the US. I show that while the variance premiums in several other countries are, on average, positive and display significant time variation, they do not predict local equity returns. Then, I extend the domestic model in Bollerslev, Tauchen and Zhou (2009) to an international setting. In light of the qualitative implications of my model, I provide empirical evidence that the US variance premium outperforms that of all other countries in predicting local and foreign equity returns.
U.S. Real Interest Rates and Default Risk in Emerging Economies
Authors: Foley-Fisher Nathan , Guimarães Bernardo
Published: August 2019

This paper empirically investigates the impact of changes in U.S. real interest rates on sovereign default risk in emerging economies using the method of identification through heteroskedasticity. Policy-induced increases in U.S. interest rates starkly raise default risk in emerging market economies. However, the overall correlation between U.S. real interest rates and the risk of default is negative, demonstrating that the effects of other variables dominate the anterior relationship.
Gauging the Effects of Fiscal Stimulus Packages in the Euro Area
Authors: Coenen Günter , Straub Roland , Trabandt Mathias
Published: August 2019

We seek to quantify the impact on euro area GDP of the European Economic Recovery Plan (EERP) enacted in response to the financial crisis of 2008-09. To do so, we estimate an extended version of the ECB&amp;#x27;s New Area-Wide Model with a richly specified fiscal sector. The estimation results point to the existence of important complementarities between private and government consumption and, to a lesser extent, between private and public capital. We first examine the implied present-value multipliers for seven distinct fiscal instruments and show that the estimated complementarities result in fiscal multipliers larger than one for government consumption and investment. We highlight the importance of monetary accommodation for these findings. We then show that the EERP, if implemented as initially enacted, had a sizeable, although short-lived impact on euro area GDP. Since the EERP comprised both revenue and expenditure-based fiscal stimulus measures, the total multiplier is below unity.
Interest Rates and the Volatility and Correlation of Commodity Prices
Authors: Gruber Joseph W. , Vigfusson Robert J.
Published: August 2019

We propose a novel explanation for the observed increase in the correlation of commodity prices over the past decade. In contrast to theories that rely on the increased influence of financial speculators, we show that price correlation can increase as a result of a decline in interest rates. More generally, we examine the effect of interest rates on the volatility and correlation of commodity prices, theoretically through the framework of Deaton and Laroque (1992) and empirically via a panel GARCH model. In theory, we show that lower interest rates decrease the volatility of prices, as lower inventory costs promote the smoothing of transient shocks, and can increase price correlation if common shocks are more persistent than idiosyncratic shocks. Empirically, as predicted by theory, we find that price volatility attributable to transitory shocks declines with interest rates, while, particularly for metals prices, price correlation increases as interest rates decline.
Sovereign Credit Risk, Banks' Government Support, and Bank Stock Returns Around the World
Authors: Correa Ricardo , Lee Kuan-Hui , Sapriza Horacio , Suarez Gustavo A.
Published: August 2019

We explore the joint effect of expected government support to banks and changes in sovereign credit ratings on bank stock returns using data for banks in 37 countries between 1995 and 2011. We find that sovereign credit rating downgrades have a large negative effect on bank stock returns for those banks that are expected to receive stronger support from their governments. This result is stronger for banks in advanced economies where governments are better-positioned to provide that support. Our results suggest that stock market investors perceive sovereigns and domestic banks as markedly interconnected, partly through government guarantees.
Capital Flows to Emerging Market Economies: A Brave New World?
Authors: Ahmed Shaghil , Zlate Andrei
Published: August 2019

We examine the determinants of net private capital inflows to emerging market economies. These inflows are computed from quarterly balance-of-payments data from 2002:Q1 to 2012:Q2. Our main findings are: First, growth and interest rate differentials between EMEs and advanced economies and global risk appetite are statistically and economically important determinants of net private capital inflows. Second, there have been significant changes in the behavior of net inflows from the period before the recent global financial crisis to the post-crisis period, especially for portfolio inflows, partly explained by the greater sensitivity of such flows to interest rate differentials and risk aversion. Third, capital control measures introduced in recent years do appear to have discouraged both total and portfolio inflows. Fourth, in the pre-crisis period, there is some evidence that greater foreign exchange intervention to curb currency appreciation pressures brought more capital inflows down the line, but we cannot identify such an effect in the post-crisis period. Finally, we do not find statistically significant positive effects of unconventional U.S. monetary expansion on total net EME inflows, although there does seem to be a change in composition toward portfolio flows. Even for portfolio flows, U.S. unconventional policy is only one among several important factors.
Interest Rate Swaps and Corporate Default
Authors: Jermann Urban J. , Yue Vivian Z.
Published: August 2019

This paper studies firms&amp;#x27; usage of interest rate swaps to manage risk in a model economy driven by aggregate productivity shocks, inflation shocks, and counter-cyclical idiosyncratic productivity risk. Consistent with empirical evidence, firms in the model are fixed-rate payers, and swap positions are negatively correlated with the term spread. In the model, swaps affect firms&amp;#x27; investment decisions and debt pricing very moderately, and the availability of swaps generates only small economic gains for the typical firm.
Local Currency Sovereign Risk
Authors: Du Wenxin , Schreger Jesse
Published: August 2019

Do governments default on debt denominated in their own currency? We introduce a new measure of sovereign credit risk, the local currency credit spread, defined as the spread of local currency bonds over the synthetic local currency risk-free rate constructed using cross currency swaps. We find that local currency credit spreads are positive and sizable. Compared with credit spreads on foreign currency denominated debt, local currency credit spreads have lower means, lower cross-country correlations, and are less sensitive to global risk factors. Global risk aversion and liquidity factors can explain more time variation in these credit spread differentials than macroeconomic fundamentals.
A Model of Slow Recoveries from Financial Crises
Authors: Queralto Albert
Published: August 2019

This paper documents highly persistent effects of financial crises on output, labor productivity and employment in a sample of emerging economies. To address these facts, it introduces a quantitative macroeconomic model that includes endogenous TFP growth through firm creation. Firm creators obtain funding from a financial intermediation sector which is subject to frictions. These frictions become especially severe in a financial crisis, increasing the cost of credit for firm creators and thereby lowering the growth rate of aggregate TFP. As a consequence, the model produces medium-run dynamics following crises that are in line with the data.
Bank Ownership, Lending, and Local Economic Performance During the 2008-2010 Financial Crisis
Authors: Coleman Nicholas S. , Feler Leo
Published: August 2019

While the finance literature often equates government banks with political capture and capital misallocation, these banks can help mitigate financial shocks. This paper examines the role of Brazil&amp;#x27;s government banks in preventing a recession during the 2008-2010 financial crisis. Government banks in Brazil provided more credit, which offset declines in lending by private banks. Areas in Brazil with a high share of government banks experienced increases in lending, production, and employment during the crisis compared to areas with a low share of these banks. We find no evidence that lending was politically targeted or that it caused productivity to decline in the short-run.
Uncovered Equity Parity and Rebalancing in International Portfolios
Authors: Curcuru Stephanie E. , Thomas Charles P. , Warnock Francis E. , Wongswan Jon
Published: August 2019

Portfolio rebalancing is a key driver of the Uncovered Equity Parity (UEP) condition. According to UEP, when foreign equity holdings outperform domestic holdings, domestic investors are exposed to higher exchange rate exposure and hence repatriate some of the foreign equity to decrease their exchange rate risk. By doing so, foreign currency is sold, leading to foreign currency depreciation. We examine the relationship between U.S. investors&amp;#x27; portfolio reallocations and returns and find some evidence consistent with UEP: Portfolio shifts are related to past returns in the underlying equity markets. But we argue that a motive other than reducing currency risk exposure is likely behind this rebalancing. In particular, U.S. investors may be exploiting mean reversion in underlying equity markets, rebalancing away from equity markets that recently performed well and moving into equity markets market just prior to relatively strong performance. Such behavior suggests tactical reallocations to increase returns rather than reduce risk.
Employment and Firm Heterogeneity, Capital Allocation, and Countercyclical Labor Market Policies
Authors: Epstein Brendan , Shapiro Alan Finkelstein
Published: August 2019

Many countries have large employment shares in micro and small firms that have limited access to formal financing and therefore rely on input credit. Such countries are mainly emerging and developing economies, whose business cycle dynamics are increasingly important for the global economy in light of the dramatic rise in international linkages and spillovers that have occurred over the last several decades. Emerging and developing economies implemented a host of countercyclical labor market policies amid the global financial crisis, but data limitations on high-frequency labor and job flows prevent a detailed empirical assessment of the effectiveness of these policies. To address this problem, we develop a business cycle model with frictional labor markets that is novel in light of its consistency with the employment and firm structure of emerging and developing economies. We use the model to assess the aggregate impact of key countercyclical labor market policies. We find that hiring subsidies and job intermediation services for large firms are particularly effective in aiding recoveries. Policies targeting smaller firms yield limited aggregate benefits and may even be detrimental to the recovery process. The labor market structure shapes sectoral allocation and explains the economy&amp;#x27;s differential response to policy.
Paris Barış Konferansı’nda (1919) Yunanistan’ın Toprak Talepleri Ve Batı Anadolu’nun İşgal Kararının Alınması
Authors: DEMİRHAN Hasan
Published: August 2019

Yunanistan,
1919 yılında yapılan Paris Barış Konferansı’na Birinci Dünya Savaşı’nın galip devletlerinden
biri olarak katıldı. Yunanistan’ın lideri Venizelos’un amacı, Paris Barış
Konferansı’nda ülkesinin sınırlarını genişleterek Megali İdea hayalini
gerçekleştirmekti. Paris Barış Konferansı’nda iddialarını kabul ettirmek için
Venizelos yalan yanlış nüfus istatistiklerini, propagandanın gücünü, Avrupa’daki
Yunan dostlarını ve siyasi yeteneklerini kullandı. Talep ettiği topraklarda
Yunan nüfusunun Türk nüfusundan daha fazla olduğunu ve bu bölgelerde Türklerin
Yunanlara zulmettiğini iddia etti. Konferansta, Avrupalı büyük devletlerin onayı
olmadan gerçekleşen İtalyanların Anadolu işgallerini lehinde kullandı ve Yüksek
Konsey üyelerini etkilemeyi başardı. 6 Mayıs günü Venizelos’un diplomatik
çabaları sonuç verdi ve Yüksek Konsey Yunanistan’ın Batı Anadolu’yu işgaline
izin verdi. Yüksek Konsey’in kararını takriben, 15 Mayıs 1919 tarihinde Yunan birlikleri
İzmir’e çıktılar.
Tez Yazım Sürecinde Öğrencinin Danışmanı Tarafından İzlenmesini Sağlayan Zotero'nun Grup Özelliğinin İncelenmesi
Authors: ÖNEY Celal
Published: August 2019

Tez yazım sürecinde öğrenci
ile danışmanı arasındaki iletişim önemlidir. Bu iletişimin yüz yüze ve belli
bir sıklıkta olması tezin kalitesine olumlu katkı sağlar. Ancak tez
öğrencisinin danışmanı tarafından tez sürecindeki faaliyetlerinin uzaktan
izlenmesi de gerekmektedir. Yüz yüze iletişimin bazı nedenlerden dolayı sekteye
uğraması öğrencinin tez sürecinde sorumluluklarını yerine getirmemesine ve
kontrol altında olmadığını hissederek tez planının dışına çıkmasına neden
olabilir. Bu durumun önüne geçmek için danışman ve öğrenci arasında ortak bir
çalışma platformunun olması gerekmektedir. Bu çalışmamızda akademik araştırma
ve yazım süreçlerinde kullanılan programlardan biri olan Zotero’nun grup
özelliğini inceleyerek tez öğrencisi ile danışmanı arasında programın bu
özelliğinin nasıl bir iletişim köprüsü oluşturabileceğini ortaya koyduk.
İnternet üzerinden literatür taraması yapmak, bulunan literatürün künyelerini
kaydetmek ve kaynakları kategorize etmek gibi tez yazım sürecinin önemli
aşamalarında öğrencinin izlenmesini ve katkı almasını sağlayabilen Zotero’nun
Grup özelliği, tez öğrencisinin danışmanı tarafından uzaktan izlenmesini mümkün
kılmaktadır. Araştırmamızda programın bu özelliğinin nasıl aktif edildiğini ve
nasıl kullanıldığının yanı sıra danışmanın bu özelliği kullanarak öğrencisine
ne tür katkı sağlayabileceğini inceledik.
Cumhuriyetin İlk Yıllarında Müzik Alanında Yurt Dışına Gönderilen Öğrenciler ve Çağdaş Türk Müziğine Etkileri: İdil Biret ve Suna Kan Örneği
Authors: ALPASLAN Erhan , GÖKDEMİR Tülay
Published: August 2019

Sanat dar
anlamıyla, duygu ve düşüncelerin farklı biçimlerde dışa vurulması işidir. Her
dönemin kendine has o dönemi yansıtan sanat anlayışları var olmuştur. Değişen
dünya koşulları içerisinde ise sanatçılar, kendini sorgulama gereği duymuş ve
modern sanatlar meydana gelmiştir. 19. yy.da sürecin başını Avrupa çekmiştir.
Türkiye’nin çağdaşlaşma yolunda izlediği yol ise Avrupa’dan başta askeri alanda
olmak üzere ekonomi, sanat gibi alanlarda yararlanmak olmuştur. Müzik ise
toplumların çağdaşlaşma sürecinin kilometre taşı olmuştur. Bu bağlamda Türkiye
yurt dışına öğrenciler göndermiş, bu gençler yurda döndükleri zaman çağdaş Türk
müziğinin oluşmasına katkı sağlamıştır. Müzik başta olmak üzere güzel
sanatlardaki bu gelişmeler ise; hem yeni Türkiye’yi dünyaya tanıtmada, hem de
geleceğin Türkiye’sini şekillendirmede etkili olmuştur. Bu çalışmada
Cumhuriyetin ilk yıllarında çağdaş Türk müziğinin gelişimini sağlama
konusundaki faaliyetler kapsamında yapılan çalışmaların ortaya konulması ve bu
çerçevede rol-model üzerinden bu uygulamaların çağdaş Türk müziğinin gelişimi
üzerindeki etkileri ele alınmıştır.