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Transmission Channels of Global Liquidity in Emerging Market Economies
Full text linkI study the role of banks, exchange rates, and firms in the transmission of global liquidity in emerging market economies. This close examination comprises three chapters.The first chapter investigates the importance of the bank leverage cycle in the propagation of exchange rate fluctuations. Emerging market economies can be sensitive to large currency depreciation because it may increase the default risk of firms that have their liabilities in foreign currency and assets in local currency. Since banks adjust their leverage based on the riskiness of borrowers, bank credit flows should inform us whether corporate balance sheets are affected by exchange rate fluctuations. Using country level differences in the foreign currency decomposition of bank claims, I construct an instrument to disentangle the effect of exchange rate fluctuations on bank loans. I find that a 1\% real depreciation of the local currency causes a 1.36\% reduction in foreign currency loans channeled by domestic banks. This significant response is however absent for direct loans by global banks. I explain this with a model that takes into account balance sheet differences of ultimate borrowers. Firms that borrow from domestic banks are more likely to be local firms subject to currency mismatch while firms that can borrow directly from global banks are multinational corporations with resources to hedge them against foreign currency fluctuations. The results have two major implications. First, the risk sensitive lending behavior of banks plays an important role in the propagation of exchange rate fluctuations. Second, policy makers should enforce domestic banks to monitor the foreign currency exposure of their clients more closely.DSGE models have a shortfall in simulating the sensitive nature of emerging market economies to global financial conditions. The second chapter contributes on that aspect by providing a new theoretical mechanism that amplifies the effect of world interest rates. Moral hazard arises when corporate borrowers prefer investing in riskier projects when interest rates rise, which in turn influences the financial intermediary's willingness to lend. To the extent that world interest rates are transmitted to domestic interest rates, the lending behavior of the financial intermediary amplifies the effect of world interest rates. I empirically investigate this theoretical finding using a structural VAR. Results indicate that a global financial tightening is immediately followed by a drop in domestic bank credit while investment and output also decrease significantly, consistent with the amplification of global financial shocks induced by moral hazard.After the Global Financial Crisis (GFC), three trends highlight international financial markets for emerging market economies, historically low term premium in the yield curve, the emerging corporate bond boom in foreign markets, and the stagnation of emerging market banks cross-border liabilities. The final and third chapter links these post GFC trends to US unconventional monetary policy in a theoretical framework. In addition, I investigate whether firm size matters in terms of sensitivity to this financial spillover. The model shows that, when the term premium of corporate bond yields rise, large firms divert their funding from foreign lenders to domestic banks, crowding small firms out of domestic bank credit markets. The evolution of small firms' share in the total bank credit for a sample of emerging market economies validate the findings of the model. Emerging market policymakers should therefore ease financing for small firms as the Fed and central banks of other advanced economies normalize the size of their balance sheet
Indian Economy During the Era of Quantitative Easing: A Dynamic Stochastic General Equilibrium Perspective
No full textThe effect of external Quantitative Easing (QE) on a small open economy like India is analyzed using a dynamic stochastic general equilibrium (DSGE) model. The modeling is motivated by some broad empirical regularities of the Indian economy during the pre and post-QE periods . QE is modeled as a negative shock to the short term foreign policy rate with a mean reverting pattern. The mean reversion reflects the phasing out of the QE operation. In addition, we analyze the “news” effect of the tapering out phase of QE. Our model has standard real and nominal frictions as in any New Keynesian model. Monetary policy is modeled by the forward looking inflation targeting Taylor rule . We show that the impact and news effects of QE work through this terms of trade via the uncovered interest parity condition. Using our DSGE model, we also compare the effect of a QE shock with a domestic fiscal spending shock. The model impulse response functions qualitatively support some key empirical regularities of the Indian economy during the QE era
Inefficient private renegotiation of sovereign debt
Full text linkThe negotiation of sovereign debt repayments and of new loans after default may yield inefficient outcomes that justify intervention by creditor country governments and international financial institutions. The author analyzes possible distortions arising in renegotiations between private creditors and sovereign borrowers. He argues that legal privileges accorded to existing creditors in their home jurisdictions can distort the flow of resources for capital formation abroad. Seniority privileges for old lenders convey to them some of the social returns from new lending, reducing the potential rewards for those who might provide the new funds. Hence the author urges investigation of official alienation of these privileges, regulatory reform, and introduction of alternative financial instruments that embody opportunities for creditor commitment.Strategic Debt Management,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Financial Intermediation
Going Beyond Counting First Authors in Author Co-citation Analysis
Full text linkThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
Variations on the Author
Full text link“Variations on the Author” discusses two of Eduardo Coutinho’s recent films (Um Dia na Vida, from 2010, and Últimas Conversas, posthumously released in 2015) and their contribution to the general question of documentary authorship. The director’s filmography is characterized by a consistent yet self-effacing form of authorial self-inscription: Coutinho often features as an interviewer that rather than express opinions propels discourses; an interviewer that is good at listening. This mode of self-inscription characterizes him as an author who is not expressive but who is nonetheless markedly present on the screen. In Um Dia na Vida, however, Coutinho is completely absent form the image, while Últimas Conversas, on the contrary, includes a confessional prologue that moves the director from the margins to the center of his films. This article examines the ways in which these works stand out in the filmography of a director who offers new insights into the notion of cinematic authorship
Appropriate Similarity Measures for Author Cocitation Analysis
Full text linkWe provide a number of new insights into the methodological discussion about author cocitation analysis. We first argue that the use of the Pearson correlation for measuring the similarity between authors’ cocitation profiles is not very satisfactory. We then discuss what kind of similarity measures may be used as an alternative to the Pearson correlation. We consider three similarity measures in particular. One is the well-known cosine. The other two similarity measures have not been used before in the bibliometric literature. Finally, we show by means of an example that our findings have a high practical relevance.information science;Pearson correlation;cosine;similarity measure;author cocitation analysis
Dispelling the Myths Behind First-author Citation Counts
Full text linkWe conducted a full-scale evaluative citation analysis study of scholars in the XML research field to explore just how different from each other author rankings resulting from different citation counting methods actually are, and to demonstrate the capability of emerging data and tools on the Web in supporting more realistic citation counting methods. Our results contest some common arguments for the continued
use of first-author citation counts in the evaluation of scholars, such as high correlations between author rankings by first-author citation counts and other citation
counting methods, and high costs of using more realistic citation counting methods that are not well-supported by the ISI databases. It is argued that increasingly available digital full text research papers make it possible for citation analysis studies to go beyond what the ISI databases have directly supported and to employ more
sophisticated methods
The effectiveness of self-protection policies for safeguarding emerging market economies from crises
Full text linkThe recent financial crises in emerging markets have motivated a number of proposed measures
that might regulate or provide protection against readily reversible external capital flows.
Possible reforms include the adoption of self-protection policies by developing countries that
augment traditional macroeconomic and financial sector measures for preventing crises. One
set of proposals seek to enhance the liquidity of governments during a crisis, while other proposals
seek to reduce exposure to short-term external debt. This paper analyzes some major
proposals for self-protection using alternative models of the causes of financial crises in open
economies. The effectiveness of liquidity enhancing measures and of capital controls for crisis
prevention is shown to depend upon the alleged underlying cause of potential crises. It is
also possible that liquidity enhancement could be counterproductive. The economic impact of
recent crises on afflicted countries has led some economists to question whether the benefits
of capital account liberalization outweigh the costs of exposure to greater volatility in real economic
performance. A simple approach for comparing, in simulation, the benefits of capital
account openness to the costs of exposure to financial crises is discussed in the first part of the
paper
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