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Time variation in asset price responses to macro announcements
Grisse, Christian; Goldberg, Linda S. (2013-08-01)
Although the effects of economic news announcements on asset prices are well established, these relationships are unlikely to be stable. This paper documents the time variation in the responses of yield curves and exchange rates using high-frequency data from January 2000 through August 2011. Significant time variation in news effects is present for those announcements that have the largest effects on asset prices. The time variation in effects is explained by economic conditions, including the level of policy rates at the time of the news release, and risk conditions: Government bond yields ...
Staff Reports , Paper 626

Working Paper
Financial integration and international business cycle co-movement: the role of balance sheets
Davis, J. Scott (2011)
This paper investigates the effect of international financial integration on international business cycle co-movement. We first show with a reduced form empirical approach how capital market integration (equity) has a negative effect on business cycle co-movement while credit market integration (debt) has a positive effect. We then construct a model that can replicate these empirical results.> ; In the model, capital market integration is modeled as crossborder equity ownership and involves wealth effects. Credit market integration is modeled as cross-border borrowing and lending between ...
Globalization Institute Working Papers , Paper 89

Conference Paper
Crowding out redefined: the role of reserve accumulation
Reinhart, Carmen M.; Tashiro, Takeshi (2013-11)
It is well understood that investment serves as a shock absorber at the time of crisis. The duration of the drag on investment, however, is perplexing. For the nine Asian economies we focus on in this study, average investment/GDP is about 6 percentage points lower during 1998-2012 than its average level in the decade before the crisis; if China and India are excluded, the estimated decline exceeds 9 percent. We document how in the wake of crisis home bias in finance usually increases markedly as public and private sectors look inward when external financing becomes prohibitively costly, ...
Proceedings , Issue Nov , Pages 1-43

Working Paper
A Global Lending Channel Unplugged? Does U.S. Monetary Policy Affect Cross-border and Affiliate Lending by Global U.S. Banks?
Ongena, Steven; Temesvary, Judit; Owen, Ann L. (2018-02-02)
We examine how U.S. monetary policy affects the international activities of U.S. Banks. We access a rarely studied U.S. bank-level regulatory dataset to assess at a quarterly frequency how changes in the U.S. Federal funds rate (before the crisis) and quantitative easing (after the onset of the crisis) affects changes in cross-border claims by U.S. banks across countries, maturities and sectors, and also affects changes in claims by their foreign affiliates. We find robust evidence consistent with the existence of a potent global bank lending channel. In response to changes in U.S. monetary ...
Finance and Economics Discussion Series , Paper 2018-008

Working Paper
Passive Ownership and Short Selling
von Beschwitz, Bastian; Honkanen, Pekka; Schmidt, Daniel (2022-12)
We exploit quasi-exogenous variation in passive ownership around the Russell 1000/2000 cutoff to explore the causal effects of passive ownership on the securities lending market. We find that passive ownership causes an increase in lendable supply and short interest, while lending fees remain largely unchanged. The utilization ratio—i.e., the ratio of short interest over lendable supply—goes up, implying that shorting demand increases more than lendable supply. We argue that this additional demand results from an increase in the quality of lendable supply as passive funds are less likely ...
International Finance Discussion Papers , Paper 1365

Working Paper
Seigniorage and Sovereign Default: The Response of Emerging Markets to COVID-19
Espino, Emilio; Sanchez, Juan M.; Martin, Fernando M.; Kozlowski, Julian (2020-07-10)
Monetary policy affects the tradeoffs faced by governments in sovereign default models. In the absence of lump-sum taxation, governments rely on both disortionary taxes and seigniorage to finance expenditure. Furthermore, monetary policy adds a time-consistency problem in debt choice, which may mitigate or exacerbate the incentives to accumulate debt. A deterioration of the terms-of-trade leads to an increase in sovereign-default risk and inflation, and a reduction in growth, which are consistent with the empirical evidence for emerging economies. An unanticipated shock resembling the ...
Working Papers , Paper 2020-017

Working Paper
International Yield Spillovers
Kim, Don H.; Ochoa, Marcelo (2021-01-11)
This paper investigates spillovers from foreign economies to the U.S. through changes in longterm Treasury yields. We document a decline in the contribution of U.S. domestic news to the variance of long-term Treasury yields and an increased importance of overnight yield changes—a rough proxy for the contribution of foreign shocks to U.S. yields—over the past decades. Using a model that identifies U.S., Euro area, and U.K. shocks that move global yields, we estimate that foreign (non-U.S.) shocks account for at least 20 percent of the daily variation in long-term U.S. yields in recent ...
Finance and Economics Discussion Series , Paper 2021-001

Working Paper
Monetary policy and global banking
Ivashina, Victoria; Bräuning, Falk (2016-12-23)
Global banks use their global balance sheets to respond to local monetary policy. However, sources and uses of funds are often denominated in different currencies. This leads to a foreign exchange (FX) exposure that banks need to hedge. If cross?currency flows are large, the hedging cost increases, diminishing the return on lending in foreign currency. We show that, in response to domestic monetary policy easing, global banks increase their foreign reserves in currency areas with the highest interest rate, while decreasing lending in these markets. We also find an increase in FX hedging ...
Working Papers , Paper 17-5

Working Paper
Innovation, Productivity, and Monetary Policy
Moran, Patrick Donnelly; Queraltó, Albert (2017-11-22)
To what extent can monetary policy impact business innovation and productivity growth? We use a New Keynesian model with endogenous total factor productivity (TFP) to quantify the TFP losses due to the constraints on monetary policy imposed by the zero lower bound (ZLB) and the TFP benefits of tightening monetary policy more slowly than currently anticipated. In the model, monetary policy influences firms incentives to develop and implement innovations. We use evidence on the dynamic effects of R&D and monetary shocks to estimate key parameters and assess model performance. The model suggests ...
International Finance Discussion Papers , Paper 1217

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