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Working Paper
Optimal Monetary Policy in an Open Emerging Market Economy
Iyer, Tara (2016-06-20)
The majority of households across emerging market economies are excluded from the financial markets and cannot smooth consumption. I analyze the implications of this for optimal monetary policy and the corresponding choice of domestic versus external nominal anchor in a small open economy framework with nominal rigidities, aggregate uncertainty and financial exclusion. I find that, if set optimally, monetary policy smooths the consumption of financially excluded agents by stabilizing their income. Even though Consumer Price Index (CPI) inflation targeting approximates optimal monetary policy ...
Working Paper Series , Paper WP-2016-6

Working Paper
Searching for Yield Abroad : Risk-Taking Through Foreign Investment in U.S. Bonds
Ammer, John; Claessens, Stijn; Wroblewski, Caleb; Tabova, Alexandra M. (2018-03-28)
The risk-taking effects of low interest rates, now prevailing in many advanced countries, "search-for-yield," can be hard to analyze due to both a paucity of data and challenges in identification. Unique, security-level data on portfolio investment into the United States allow us to overcome both problems. Analyzing holdings of investors from 36 countries in close to 15,000 unique U.S. corporate bonds between 2003 and 2016, we show that declining home-country interest rates lead investors to shift their portfolios toward riskier U.S. corporate bonds, consistent with "search-for-yield". We ...
International Finance Discussion Papers , Paper 1224

Working Paper
Effect of Ownership Composition on Property Prices and Rents: Evidence from Chinese Investment Boom in US Housing Markets
Sakong, Jung (2021-08-16)
A capital influx into local housing markets would be expected to increase house prices, but the spillover effect onto rental prices is theoretically ambiguous. I estimate both price impacts in U.S. residential housing markets using data from a boom in real estate purchases by buyers from China, which amounted to $200 billion of purchases made between 2010 and 2019. Using a novel method to measure these purchases and an instrumental variable for where purchases are made, I find a large positive house price impact. Consistent with investment q-theory, rents fall as constructions rise, ...
Working Paper Series , Paper WP-2021-12

Journal Article
U.S. international transactions in 2000
Gagnon, Joseph E. (2001-05)
The U.S. current account deficit widened to $435 billion in 2000, a record 4.4 percent of gross domestic product, as the lagged effect of strong growth in the U.S. economy in late 1999 and early 2000 continued to drive up imports of goods and services faster than exports increased. To a lesser extent, a decline in U.S. price competitiveness also contributed to the expansion in the deficit. The $104 billion increase in the current account deficit was entirely accounted for by an equal-sized increase in the goods and services deficit. Other components of the current account moved in small and ...
Federal Reserve Bulletin , Volume 87 , Issue May

Working Paper
Bretton Woods and the Reconstruction of Europe
Restrepo-Echavarria, Paulina; Wright, Mark L. J.; Ohanian, Lee E.; Van Patten, Diana (2019-10-13)
The Bretton Woods international financial system, which was in place from roughly 1949 to 1973, is the most significant modern policy experiment to attempt to simultaneously manage international payments, international capital flows, and international currency values. This paper uses an international macroeconomic accounting methodology to study the Bretton Woods system and finds that it: (1) significantly distorted both international and domestic capital markets and hence the accumulation and allocation of capital; (2) significantly slowed the reconstruction of Europe, albeit while limiting ...
Working Papers , Paper 2019-30

Working Paper
The quantitative role of capital-goods imports in U.S. growth
Cavallo, Michele; Landry, Anthony (2010)
Over the last 40 years, an increasing share of U.S. aggregate E&S investment expenditure has been allocated to capital-goods imports. While capital-goods imports were only 3.5 percent of E&S investment in 1967, by 2008 their share had risen tenfold to 36 percent. The goal of this paper is to measure the contribution of capital-goods imports to growth in U.S. output per hour using a simple growth accounting exercise. We find that capital-goods imports have contributed 20 to 30 percent to growth in U.S. output per hour between 1967 and 2008. More importantly, we find that capital-goods imports ...
Globalization Institute Working Papers , Paper 47

Report
Demography, national savings and international capital flows
Higgins, Matthew (1997-12-01)
This paper addresses the relationship between age distributions, national savings and the current account balance. The results point to substantial demographic effects, with increases in both the youth and old-age dependency ratios associated with lower savings rates. They also point to differential effects on savings and investment, and thus to a role for demography in determining the current account balance. The estimated demographic effect on the current account balance exceeds six percent of GDP over the last three decades for a number of countries and, given expected demographic trends, ...
Staff Reports , Paper 34

Working Paper
The Replacement of Safe Assets: Evidence from the U.S. Bond Portfolio
Tabova, Alexandra M.; Wong, Vivian; Bertaut, Carol C. (2014-10-30)
The expansion in financial sector "safe" assets, largely in the form of structured products from the U.S. and the Caribbean, in the lead-up to the global financial crisis has by now been fairly well documented. Using a unique dataset derived from security-level data on U.S. portfolio holdings of foreign securities, we show that since the crisis, it is mostly the foreign financial sector that appears to have met U.S. demand for safe and liquid investment assets by expanding its supply of debt securities. We also find a strong negative correlation between the foreign share of the U.S. ...
International Finance Discussion Papers , Paper 1123

Working Paper
The Consequences of Bretton Woods’ International Capital Controls and the High Value of Geopolitical Stability
Ohanian, Lee E.; Restrepo-Echavarria, Paulina; Van Patten, Diana; Wright, Mark L. J. (2022-09-28)
This paper quantifies the positive and normative effects of international capital controls on global and regional economic activity under The Bretton Woods international financial system and thereafter. A three region, open economy, DSGE capital flows accounting framework consisting of the U.S., Western Europe, and the Rest of the World, is developed to identify capital controls and quantify their impact. We find these controls had large positive and normative effects by restricting international capital flows. Counterfactual analyses show world output would have been 0.6% higher had there ...
Working Papers , Paper 2020-042

Working Paper
U.S. Monetary Policy and Fluctuations of International Bank Lending
Avdjiev, Stefan; Hale, Galina (2018-01-11)
There is no consensus in the empirical literature on the direction in which U.S. monetary policy affects cross-border bank lending. We find robust evidence that the impact of the U.S. federal funds rate on cross-border bank lending in a given period depends on the prevailing international capital flows regime and on the level of the two main components of the federal funds rate: macro fundamentals and monetary policy stance. During episodes in which bank lending from advanced to emerging economies is booming, the relationship between the federal funds rate and cross-border bank lending is ...
Working Paper Series , Paper 2018-2

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