The International Diversification Puzzle When Goods Prices Are Sticky
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The International Diversification Puzzle When Goods Prices Are Sticky
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Author : Mr.Charles Engel
language : en
Publisher: International Monetary Fund
Release Date : 2009-01-01
The International Diversification Puzzle When Goods Prices Are Sticky written by Mr.Charles Engel and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-01-01 with Business & Economics categories.
This paper develops a two-country monetary DSGE model in which households choose a portfolio of home and foreign equities, and a forward position in foreign exchange. Some nominal goods prices are sticky. Trade in these assets achieves the same allocations as trade in a complete set of nominal state-contingent claims in our linearized model. When there is a high degree of price stickiness, we show that not much equity diversification is required to replicate the complete-markets equilibrium when agents are able to hedge foreign exchange risk sufficiently. Moreover, temporarily sticky nominal goods prices can have large effects on equity portfolios even when dividend processes are very persistent.
Handbook Of International Economics
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Author : Gita Gopinath
language : en
Publisher: Elsevier
Release Date : 2014-02-22
Handbook Of International Economics written by Gita Gopinath and has been published by Elsevier this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-02-22 with Business & Economics categories.
What conclusions can be drawn from recent advances in international trade and international macroeconomics? New datasets, theoretical models, and empirical studies have resulted in fresh questions about the world trade and payment system. These chapters--six on trade and six on international macroeconomics--reveal the richness that researchers have uncovered in recent years. The chapters on foreign trade present, among other subjects, new integrated multisector analytical frameworks, the use of gravity equations for the estimation of trade flows, the role of domestic institutions in shaping comparative advantage, and international trade agreements. On international macroeconomics, chapters explore the relation between exchange rates and other macroeconomic variables; risk sharing, allocation of capital across countries, and current account dynamics; and sovereign debt and financial crises. By addressing new issues while enabling deeper and sharper analyses of old issues, this volume makes a significant contribution to our understanding of the global economy. Systematically illuminates and interprets recent developments in research on international trade and international macroeconomics Focuses on newly developing questions and opportunities for future research Presents multiple perspectives on ways to understand the global economy
International Financial Connection And Stock Return Comovement
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Author : Mr.Sakai Ando
language : en
Publisher: International Monetary Fund
Release Date : 2019-08-22
International Financial Connection And Stock Return Comovement written by Mr.Sakai Ando and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-08-22 with Business & Economics categories.
This paper studies whether bilateral international financial connection data help predict bilateral stock return comovement. It is shown that, when the United States is chosen as the benchmark, a larger U.S. portfolio investment asset position on the destination economy predicts a stronger stock return comovement between them. For large economies such as the United States and Germany, the portfolio investment position is also the best predictor among other connection variables. The paper discusses with a simple general equilibrium portfolio model that the empirical pattern is consistent with the behavior of index investors who trade in response to risk-on/risk-off shocks.
Equity Home Bias In International Finance
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Author : Kavous Ardalan
language : en
Publisher: Routledge
Release Date : 2019-05-17
Equity Home Bias In International Finance written by Kavous Ardalan and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-05-17 with Business & Economics categories.
This book provides a comprehensive and critical analysis of research outcomes on the equity home bias puzzle – that people overinvest in domestic stocks relative to the theoretically optimal investment portfolio. It introduces place attachment – the bonding that occurs between individuals and their meaningful environments – as a new explanation for equity home bias, and presents a philosophically multi-paradigmatic view of place attachment. For the first time, a comprehensive and up-to-date review of the extant literature is provided, demonstrating that place attachment is a contributing factor to 22 different topics in which variations of home bias are present. The author also analyses the social-psychological underpinnings of place attachment, and considers the effect of multi-culturalism on the future of equity home bias. The book’s unique approach discusses the issues in conceptual terms rather than through data and statistical methods. This multi- and inter-disciplinary book is an invaluable resource for graduate students and researchers interested in economics, finance, philosophy, and/or methodology, introducing them to a new line of research.
The Dynamics Of Asian Financial Integration
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Author : Michael Devereux
language : en
Publisher: Routledge
Release Date : 2011-05-03
The Dynamics Of Asian Financial Integration written by Michael Devereux and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-05-03 with Business & Economics categories.
The ongoing global financial crisis has manifested a remarkable degree of global financial integration—and its implications—for emerging Asian financial markets. The current crisis will not and should not deter the progress that the region has made toward financial openness and integration. However, events like this clearly demonstrate that financial liberalization and integration is not without risks. Hence, emerging Asian economies' growing financial ties have motivated us to look closer at the repercussions of increased financial integration and evaluate the benefits of risk sharing and better access to international capital markets against the costs of cross-border financial contagion. The crisis also presents a timely opportunity for the region’s policy makers to rethink their strategies for financial deregulation and liberalization and to reconsider a next step to integrate emerging East Asia’s financial markets further. However, doing so requires deeper understanding of financial market integration. While much has been said in both academic and policy circles about financial globalization and regional financial integration as separate areas of study, existing research has been relatively silent on the dynamics between these two distinctive forces. The book addresses this gap in financial literature and assesses financial integration in emerging East Asia at both regional and global levels. The publication studies the factors driving the progress of regional financial integration in relation to financial globalization and identifies the relevant policy challenges facing emerging market economies in the region. Chapters look into three broad aspects of regional and global financial market integration: (i) measurement of regional and global financial integration, (ii) understanding dynamics of regional financial integration versus global financial integration, and (iii) welfare implications from regional financial market integration amid financial globalization. Against this context, academics, policy makers, and other readers will appreciate the rigorous research contribution provided by the book.
The Valuation Channel Of External Adjustment
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Author : Mr.Fabio Ghironi
language : en
Publisher: International Monetary Fund
Release Date : 2009-12-01
The Valuation Channel Of External Adjustment written by Mr.Fabio Ghironi and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-12-01 with Business & Economics categories.
International financial integration has greatly increased the scope for changes in a country's net foreign asset position through the valuation channel, namely capital gains and losses on external assets and liabilities. We examine this valuation channel in a dynamic equilibrium portfolio model with international trade in equity. By separating asset prices and quantities, we can characterize the first-order dynamics of valuation effects and the current account in macroeconomic dynamics. Specifically, we disentangle the roles of excess returns, capital gains, and portfolio adjustment for consumption risk sharing when financial markets are incomplete.
Studies In Foreign Exchange Economics
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Author : Martin D D Evans
language : en
Publisher: World Scientific Publishing Company
Release Date : 2017-06-28
Studies In Foreign Exchange Economics written by Martin D D Evans and has been published by World Scientific Publishing Company this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-06-28 with Business & Economics categories.
This book collects my scholarly research on the behavior of foreign exchange rates conducted over the past twenty-five years. The collection includes papers that study the behavior of exchange rates from the traditional macroeconomic and newer microstructure perspectives. The former perspective considers the linkages between the macro economy and currency prices in an effort to understand the behavior of exchange rates over quarters, years and decades. By contrast, the microstructure perspective considers how the details of currency trading affect how macroeconomic information becomes embedded in currency prices, a process which drives exchange-rates over intraday horizons. The book also contains papers with a hybrid perspective that consider the details of currency trading and macroeconomic linkages in an effort to understand exchange-rate dynamics across all horizons.
Why Are Countries Asset Portfolios Exposed To Nominal Exchange Rates
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Author : Jonathan J. Adams
language : en
Publisher: International Monetary Fund
Release Date : 2017-12-22
Why Are Countries Asset Portfolios Exposed To Nominal Exchange Rates written by Jonathan J. Adams and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-12-22 with Business & Economics categories.
Most countries hold large gross asset positions, lending in domestic currency and borrowing in foreign. Thus, their balance sheets are exposed to nominal exchange rates. We argue that when asset markets are incomplete, nominal exchange rate exposure allows countries to partially insure against shocks that move real exchange rates. We demonstrate that asset market incompleteness can simultaneously generate realistic gross asset positions and resolve the Backus-Smith puzzle: that relative consumptions and real exchange rates correlate negatively. We also show that local perturbation methods that use stabilizing endogenous discount factors are inaccurate when average and steady state interest rates differ. To address this, we develop a novel global solution method to accurately solve the model.
Exchange Rate Dark Matter
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Author : Mr.Martin D. Evans
language : en
Publisher: International Monetary Fund
Release Date : 2012-03-01
Exchange Rate Dark Matter written by Mr.Martin D. Evans and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-03-01 with Business & Economics categories.
Dark matter accounts for 83 percent of the matter in the universe and plays a central role in cosmology modeling. This paper argues that an analogous form of dark matter plays a similarly important role in international macroeconomics. Exchange-rate dark matter is invisible, but its existence can be inferred from observations on real exchange rates and interest rates. I first show that dark matter is the dominant driver of short- and medium-term changes in real exchange rates for the G-7 countries; accounting for more than 90 percent of the variance at the five-year horizon. I then develop a model in which risk shocks account for dark matter's role as a driver of exchange-rate dynamics and other macro variables.
The International Diversification Puzzle Home Bias In Countries Investment Portfolios
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Author : Helena Kleinert
language : en
Publisher:
Release Date : 2020
The International Diversification Puzzle Home Bias In Countries Investment Portfolios written by Helena Kleinert and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with Business & Economics categories.
This work analyzes determinants of portfolio decisions in the context of cross-country diversification, which cause significant overweighting of the respective domestic market. By amending traditional determinants with cross-cultural variables, this work enhances current insights on the home bias phenomena.In addition, the study sheds light on the capital market anomaly in the context of consumption risk and documents that the increasing importance of foreign positions in international investment portfolios improves international consumption risk sharing among economies.