Foreign-currency loans and systemic risk in Europe

Pınar Yeşin 26 November 2013

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Before the onset of the financial crisis, foreign currency loans to the non-banking sector in Europe became remarkably prevalent. In particular, households and non-financial firms were taking bank loans denominated in lower-yielding foreign currencies and investing in high-yielding domestic currencies (e.g., in the form of home mortgages or business investments), even though these agents did not necessarily have a steady income in the foreign currency concerned. Therefore these retail foreign currency loans were usually dubbed 'small men’s carry trade'.

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Topics:  International finance

Tags:  international finance, systemic risk, foreign currency loans

Some pitfalls in global investing

Tatiana Didier, Roberto Rigobon, Sergio Schmukler 12 November 2012

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Since the 1990s, a large proportion of world savings have gone to institutional investors that manage those assets by investing globally. This trend has driven a sharp increase in capital market activity and financial globalisation (cf. Obstfeld and Taylor 2004; Kose, Prasad, Rogoff and Wei 2009). Given this accumulation of resources in professional and sophisticated asset managers, you might expect to see significant international diversification accompanying this process, with many countries and companies benefiting from the influx of foreign capital.

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Topics:  International finance

Tags:  assets, international finance, global funds, fund

Europe’s fiscal union still lacks a blueprint

Nicolas Véron 15 February 2012

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Topics:  EU policies Europe's nations and regions Politics and economics

Tags:  international finance, Eurozone crisis

The finance-trade-growth nexus and lessons from the past

Michael Bordo, Peter L Rousseau 26 May 2011

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Developing and operating a financial system that fosters and sustains growth is one of today’s most pressing policy questions. The correlation between financial development and growth is well established (Levine 2005), and the roles of trade and export orientation in growth are likewise well accepted (e.g., Dollar 1992; Ben-David,1993; Edwards 1998). The finance and trade interaction, however, has been given scant attention as far as its impact on economic outcomes is concerned (e.g. Baltagi et al. 2009).

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Topics:  International finance International trade

Tags:  economic growth, international trade, international finance, Atlantic

Financial globalisation in emerging economies: Myths and reality

Eduardo Levy Yeyati 03 April 2011

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De facto financial globalisation is typically measured a proxy consisting of the ratio of cross-border assets and liabilities (averaged) over GDP. Based on data on cross-border holdings compiled by Lane and Milessi Ferreti (2007), this measure indicates that:

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Topics:  Development International finance

Tags:  development, globalisation, emerging markets, international finance

Mobile money

William Jack, Tavneet Suri 16 March 2011

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Over the last dozen years, mobile telephony has spread through the developing world faster than any other technology in history. As cell phone ownership and network coverage have expanded, access to this means of communication has deepened, and the kinds of messages sent have changed, both in terms of the technology (from analog to digital, from voice to text), and in terms of content, from personal greetings, to healthcare reminders (see Aker and Mbiti 2010 for a survey).

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Topics:  Development Financial markets

Tags:  technology, Kenya, international finance, Mobile money

The first global recession in decades

Jean Imbs 10 November 2010

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The current turmoil is often argued to have had unprecedented global consequences (see Sugawara et al. 2010 for example). It is perhaps the severity of the universal consequences of a US-based shock, rather than the recession itself, that has drawn comparisons with the Great Depression (see also on this site Eichengreen and O’Rourke 2010).

This raises two questions:

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Topics:  Global crisis Global economy International finance International trade

Tags:  international trade, global crisis, global economy, international finance

Lessons in regionalism: What can the WTO teach the IMF?

Kati Suominen 03 November 2010

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The epicentre of financial regionalism is Asia. Emerging East Asian economies, scarred by the IMF’s policy conditionalities during the 1997-98 regional financial crisis, are busily building national reserves and regional financial arrangements so as to wean themselves off the Fund’s influence. During the global crisis of 2008 and 2009, East Asians expanded the regional Chiang Mai swap initiative to $120 billion and multilateralised it into a regional pool.

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Topics:  Global economy International finance

Tags:  WTO, IMF, regionalism, global economy, international finance

Foreign-currency loans in Eastern Europe: Borrower pull or bank push?

Martin Brown, Karolin Kirschenmann, Steven Ongena 13 September 2010

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A large share of firms and households in Eastern Europe borrow in a foreign currency, i.e. the euro or Swiss franc, rather than in their domestic currency (see Figure 1). Unhedged foreign currency (FX) borrowing by the private sector is seen as a major threat to financial stability in the region and has led to a strong response from national authorities.

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Topics:  Europe's nations and regions International finance

Tags:  Eastern Europe, international finance, Europe’s nations and regions, foreign-currency loans

Are macro-prudential policies prudent?

Gianluca Benigno, Huigang Chen, Christopher Otrok , Alessandro Rebucci, Eric Young 16 August 2010

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Economy-wide controls on capital inflows are back in vogue. Concerned with the latest surge in capital inflows, Brazil recently introduced a tax on international portfolio flows, and Taiwan imposed a ban on foreign funds investing in local time-deposits. Other emerging markets are either preparing or considering similar measures.

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Topics:  Global crisis Global governance

Tags:  financial regulation, global crisis, international finance

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