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Working Paper
Unconventional Monetary Policy, (A)Synchronicity and the Yield Curve

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

Working Paper
The Global Transmission of Real Economic Uncertainty

Using a sample of 30 countries representing about 65% of the global GDP, we find that real economic uncertainty (REU) has negative long-lasting domestic economic effects and transmits across countries. The international spillover effects of REU are (i) additional to those of domestic REUs, (ii) statistically significant, and (iii) economically meaningful. Trade ties play a key role in explaining why uncertainty generated in one country can affect economic outcomes in other countries. Based on this evidence, we construct a novel index for global REU as the trade-weighted average of all ...
International Finance Discussion Papers , Paper 1317

Working Paper
International Banking and Cross-Border Effects of Regulation : Lessons from the United States

Domestic prudential regulation can have unintended effects across borders and may be less effective in an environment where banks operate globally. Using U.S. micro-banking data for the first quarter of 2000 through the third quarter of 2013, this study shows that some regulatory changes indeed spill over. First, a foreign country's tightening of limits on loan-to-value ratios and local currency reserve requirements increase lending growth in the United States through the U.S. branches and subsidiaries of foreign banks. Second, foreign tightening of capital requirements shifts lending by U.S. ...
International Finance Discussion Papers , Paper 1180

Working Paper
When is Bad News Good News? U.S. Monetary Policy, Macroeconomic News, and Financial Conditions in Emerging Markets

Rises in U.S. interest rates are often thought to generate adverse spillovers to emerging market economies (EMEs). We show that what appears to be bad news for EMEs might actually be good news, or at least not-so-bad news, depending on the source of the rise in U.S. interest rates. We present evidence that higher U.S. interest rates stemming from stronger U.S. growth generate only modest spillovers, while those stemming from a more hawkish Fed policy stance or inflationary pressures can lead to significant tightening of EME financial conditions. Our identification of the sources of U.S. rate ...
International Finance Discussion Papers , Paper 1269

Working Paper
Earnings Inequality and the Minimum Wage: Evidence from Brazil

We show that an increase in the minimum wage can have large effects throughout the earnings distribution, using a combination of theory and evidence. To this end, we develop an equilibrium search model featuring empirically relevant worker and firm heterogeneity. The minimum wage induces firms to adjust their equilibrium wage and vacancy policies, leading to spillovers on higher wages. We use the estimated model to evaluate the effects of a 119 percent increase in the real minimum wage in Brazil from 1996 to 2012. The policy change explains a large decline in earnings inequality, with ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 7

Working Paper
Global Spillovers of a China Hard Landing

China?s economy has become larger and more interconnected with the rest of the world, thus raising the possibility that acute financial stress in China may lead to global financial instability. This paper analyzes the potential spillovers of such an event to the rest of the world with three methodologies: a VAR, an event study, and a DSGE model. We find the sentiment channel to be the primary spillover channel to the United States, affecting global risk aversion and asset prices such as equity prices and the dollar, in addition to modest real effects through the trade channel. In comparison, ...
International Finance Discussion Papers , Paper 1260

Working Paper
Terror Externalities and Trade: An Empirical Analysis

We report robust evidence of adverse cross-border externalities from terrorism on trade for over 160 countries from 1976 to 2014. Terrorism in one country spills over to reduce trade in neighboring nations. These externalities arise from higher trade costs due to trade delays and macroeconomic uncertainty.
Working Papers , Paper 2019-17

Working Paper
Effects of Neighboring Nation Terrorism on Imports

We present a monopolistic competition model to analyze the effects of own nation and neighboring nation terrorism on a nation’s imports. The theoretical analysis shows that own nation terrorism may leave relative price of imports unaffected, but neighboring nation terrorism must raise the relative price, reducing imports. We find that a 10% increase in terrorist attacks in a neighboring nation reduces a country’s imports from the rest of the world by approximately $320 million USD, on average. Mediation analysis shows that trading delays is a potential channel of transmission of trade ...
Working Papers , Paper 2019-017

Working Paper
Differential Treatment in the Bond Market: Sovereign Risk and Mutual Fund Portfolios

How does sovereign risk affect investors' behavior? We answer this question using a novel database that combines sovereign default probabilities for 27 developed and emerging markets with monthly data on the portfolios of individual bond mutual funds. We first show that changes in yields do not fully compensate investors for additional sovereign risk, so that bond funds reduce their exposure to a country's assets when its sovereign default risk increases. However, the magnitude of the response varies widely across countries. Fund managers aggressively reduce their exposure to high-debt ...
International Finance Discussion Papers , Paper 1261


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