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Working Paper
Unconventional Monetary Policy, (A)Synchronicity and the Yield Curve
Dilts Stedman, Karlye (2019-10-31)
This paper examines international spillovers from unconventional monetary policy between the United States, the euro area, the United Kingdom and Japan, and assesses the influence of asynchronous policy normalization on the slope of the yield curve. Using high frequency futures data to identify monetary policy surprises and controlling for contemporaneous news, I find that spillovers increase during periods of unconventional monetary policy and strengthen during asynchronous policy normalization. Local projections suggest persistent spillovers from the Federal Reserve, whereas other ...
Research Working Paper , Paper RWP 19-9

Report
Financial Crises and Lending of Last Resort in Open Economies
Lorenzoni, Guido; Bocola, Luigi (2017-10-24)
We study financial panics in a small open economy with floating exchange rates. In our model, bank runs trigger a decline in domestic wealth and a currency depreciation. Runs are more likely when banks have dollar debt. Dollar debt emerges endogenously in response to the precautionary motive of domestic savers: dollar savings provide insurance against crises; so when crises are possible it becomes relatively more expensive for banks to borrow in local currency, which gives them an incentive to issue dollar debt. This feedback between aggregate risk and savers? behavior can generate multiple ...
Staff Report , Paper 557

Working Paper
News, sovereign debt maturity, and default risk
Dvorkin, Maximiliano; Sanchez, Juan M.; Yurdagul, Emircan; Sapriza, Horacio (2018-10-31)
Leading into a debt crisis, interest rate spreads on sovereign debt rise before the economy experiences a decline in productivity, suggesting that news about future economic developments may play an important role in these episodes. In a VAR estimation, a news shock has a larger contemporaneous impact on sovereign credit spreads than a comparable shock to labor productivity. A quantitative model of news and sovereign debt default with endogenous maturity choice generates impulse responses and a variance decomposition similar to the empirical VAR estimates. The dynamics of the economy after a ...
Working Papers , Paper 2018-33

Working Paper
Catalytic IMF? a gross flows approach
Erce, Aitor; Riera-Crichton, Daniel (2015-11-01)
The financial assistance the International Monetary Fund (IMF) provides is assumed to catalyze fresh investment. Such a catalytic effect has, however, proven empirically elusive. This paper deviates from the standard approach based on the net capital inflow to study instead the IMF?s catalytic role in the context of gross capital flows. Using fixed-effects regressions, instrumental variables and local projection methods, we find significant differences in how resident and foreign investors react to IMF programs as well as in inward and outward flows. While IMF lending does not catalyze ...
Globalization Institute Working Papers , Paper 254

Working Paper
A Coherent Framework for Predicting Emerging Market Credit Spreads with Support Vector Regression
Anderson, Gary S.; Audzeyeva, Alena (2019-10-17)
We propose a coherent framework using support vector regression (SRV) for generating and ranking a set of high quality models for predicting emerging market sovereign credit spreads. Our framework adapts a global optimization algorithm employing an hv-block cross-validation metric, pertinent for models with serially correlated economic variables, to produce robust sets of tuning parameters for SRV kernel functions. In contrast to previous approaches identifying a single "best" tuning parameter setting, a task that is pragmatically improbable to achieve in many applications, we proceed with ...
Finance and Economics Discussion Series , Paper 2019-074

Working Paper
The Transmission Mechanisms of International Business Cycles: Output Spillovers through Trade and Financial Linkages
Bräuning, Falk; Sheremirov, Viacheslav (2021-10-01)
We study the transmission channels through which shocks affect the global economy and the cross-country comovement of real economic activity. For this purpose, we collect detailed data on international trade and financial linkages as well as domestic macro and financial variables for a large set of countries. We document significant international output comovement following U.S. monetary shocks, and find that openness to international trade matters more than financial openness in explaining cross-country spillovers. In particular, output in countries with a high share of exports and imports ...
Working Papers , Paper 21-13

Working Paper
Policy Rules and Large Crises in Emerging Markets
Espino, Emilio; Sanchez, Juan M.; Martin, Fernando M.; Kozlowski, Julian (2023-02-21)
Emerging countries have increasingly adopted rules to discipline government policy. The COVID-19 shock lead to widespread suspension and modification of these rules. We study rules and flexibility in a sovereign default model with domestic fiscal and monetary policies and long-term external debt. We find welfare gains from adopting monetary targets and debt limits during normal times. Though government policy cannot itself counteract fundamental shocks hitting the economy, the adoption of rules has a significant impact on policy, macroeconomic outcomes and welfare during large, unexpected ...
Working Papers , Paper 2022-018

Report
Real Consequences of Shocks to Intermediaries Supplying Corporate Hedging Instruments
Jung, Hyeyoon (2021-10-01)
I show that shocks to financial intermediaries that supply hedging instruments to corporations have real effects. I exploit a quasi-natural experiment in South Korea in 2010, where regulations required banks to hold enough capital for taking positions in foreign exchange derivatives (FXD). Using the variation in exposure to this regulation across banks, I find that the regulation caused a reduction in the supply of FXD, leading to a significant decline in exports for firms that held derivatives contracts with more exposed banks. These results indicate the crucial role of intermediaries in ...
Staff Reports , Paper 989

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