Growth from international capital flows: The role of volatility regimes

Ashoka Mody, Antu Panini Murshid 27 November 2011

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In a recent survey, Kose et al (2006) find little robust evidence for long-run growth benefits from global capital inflows. Prasad et al (2006) go a step further. They argue that developing countries grow faster when they rely less on foreign capital, as suggested by a positive relationship between current-account surpluses (capital outflows) and average growth (Figure 1).

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Topics:  International finance International trade

Tags:  volatility, capital flows, uncertainty

On the tradeoff between growth and stability: The role of financial markets

Alexander Popov, Frank Smets 03 November 2011

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In the two decades leading to the Great Recession, academics had mostly converged on Schumpeter’s view that well-developed financial systems play a crucial role in stimulating economic growth. A host of academic papers had concluded that deeper domestic financial markets improve economic efficiency, lead to a better allocation of productive capital, and increase long-term economic growth (see Levine 2005 for a recent review).

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Topics:  Financial markets

Tags:  growth, volatility, Finance, macroprudential regulation

The risk in carry trades

Lukas Menkhoff, Lucio Sarno, Maik Schmeling, Andreas Schrimpf 23 March 2011

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The “carry trade” is the most popular trading strategy in currency markets. Traders borrow in currencies with low interest rates (negative forward premium) and invest in currencies with high interest rates (positive forward premium), profiting from the margin. Yet according to the uncovered interest parity this strategy should not work. If investors are both rational and risk-neutral, then exchange-rate changes will eliminate any gain arising from the differential in interest rates across countries.

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Topics:  Exchange rates International finance

Tags:  exchange rates, carry trade, volatility, speculation

Does openness increase volatility? Not if countries are sufficiently diversified

Mona Haddad, Jamus Lim, Christian Saborowski 21 March 2010

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The epicentre of the global economic crisis was the financial markets of the industrialised world, yet developing countries have felt the tremors. Many, including those without close financial ties to the developed world, were driven into recession as global demand plummeted and the largest drop in global trade volumes since the Second World War ensued. Naturally, open economies heavily reliant on export revenues were among those hardest hit by the crisis.

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Topics:  Development International trade

Tags:  volatility, diversification, openness

The oil price and the macroeconomy: What’s going on?

Olivier Blanchard, Marianna Riggi 07 December 2009

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Whereas in the 1970s large increases in the price of oil were associated with sharp decreases in output and large increases in inflation, in the 2000s, and at least until the end of 2007, even larger increases in the price of oil were associated with much milder movements in output and inflation. What has happened to the oil-macroeconomy relationship?

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Topics:  Energy Macroeconomic policy

Tags:  oil shocks, volatility, expectations

Democracy, diversification, and growth reversals

David Cuberes, Michal Jerzmanowski 15 August 2009

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The last twenty-five years have been a period of remarkable stability among developed economies. This stability, termed by some “The Great Moderation”, has been particularly noteworthy in its contrast with the instability experienced by developing economies. Poor countries suffer not only from persistently low incomes but also from large doses of economic volatility. Even the current economic crisis – which originated in financial markets of developed countries and affected their economies very severely – is causing equal if not greater damage in developing countries.

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Topics:  Development

Tags:  democracy, growth, volatility, diversification

Financial factors and the current account: Is volatility a concern?

Rebecca Hellerstein, Cédric Tille 21 August 2008

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The surge in financial globalisation constitutes one of the major developments in the world economy since the mid-1990s, with Lane and Milesi-Ferretti (2007) documenting a large rise in most countries’ holdings of external assets and liabilities.

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Topics:  International finance

Tags:  volatility, financial globalisation, Current account balance

Can we predict exchange rates? Economic evidence against the random walk model

Pasquale Della Corte, Lucio Sarno, Ilias Tsiakas 18 January 2008

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Exchange rates are important to innumerable economic activities. Tourists care about the value of their home currency abroad. Investors care about the effect of exchange rate fluctuations on their international portfolios. Central banks care about the value of their international reserves and open positions in foreign currency as well as about the impact of exchange rate fluctuations on their inflation objectives. Governments care about the prices of exports and imports and the domestic currency value of debt payments.

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Topics:  Exchange rates

Tags:  exchange rates, volatility, random walk, predictions, forward premium

International Financial Stability

Roger W. Ferguson. Jr., Philipp Hartmann, Fabio Panetta, Richard Portes,

Date Published

Thu, 11/15/2007

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URL

http://www.cepr.org/pubs/books/CEPR/booklist.asp?cvno=P183
Tags
global imbalances, subprime crisis, financial stability, hedge funds, volatility

Regulating the international financial system: towards a more balanced, market-based model

Richard Portes 15 November 2007

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The global financial system shows signs of stress, but why should policy-makers care?

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Topics:  Financial markets

Tags:  global imbalances, subprime crisis, financial stability, carry trade, hedge funds, volatility, large complex financial institutions, tail risk, ratings, strutured finance, buy and hold, originate to distribute

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