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Begin New Search Content Type Commentary and Analysis Publication Year within 25 Years

1851. Risk, Financial Development and Firm Dynamics

Author:
Bernardo Morias
Publication Date:
05-2015
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
I document that the average productivity of firms tends to increase, and its variance to decrease, as they age. These two facts combined suggest that managers learn to reduce their mistakes as they operate. I develop a quantitative framework mimicking these dynamics and find that young firms have substantially higher financing costs due to lower and riskier returns. In this scenario, a reduction in the financial development of an economy raises disproportionately the cost of credit of young-productive firms increasing the input misallocation within this subgroup. To test the validity of the theory, I find that the data confirms some novel predictions on a series of firm-level moments. Finally, I show that introducing these two facts allows the model to better explain the relation between financial and economic development.
Topic:
Development, Economic Theory, Risk, Fiscal Policy, Models, and Productivity
Political Geography:
Global Focus

1852. International Financial Spillovers to Emerging Market Economies: How Important Are Economic Fundamentals?

Author:
Shaghil Ahmed, Brahima Coulibaly, and Andrei Zlate
Publication Date:
05-2015
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We assess the importance of economic fundamentals in the transmission of international shocks to financial markets in various emerging market economies (EMEs). Our analysis covers the so-called taper-tantrum episode of 2013 and six earlier episodes of severe EME-wide financial stress since the mid-1990s. Cross-country regressions lead us to the following results: (1) EMEs with relatively better economic fundamentals suffered less deterioration in financial markets during the 2013 taper-tantrum episode. (2) Differentiation among EMEs set in quite early and persisted throughout this episode. (3) Controlling for economic fundamentals, we also find that, during the taper tantrum, financial conditions deteriorated more in those EMEs that had earlier experienced larger private capital inflows and greater exchange rate appreciation. (4) For earlier episodes, we find little evidence of investor differentiation across EMEs being explained by differences in their relative vulnerabilities during EME crises of the 1990s and early 2000s. (5) That said, differentiation across EMEs based on fundamentals does not appear to be unique to the 2013 episode. Differences in economic fundamentals played a role in explaining the heterogeneous EME financial market responses during the global financial crisis of 2008, and the role of fundamentals appeared to progressively increase through the European crisis in 2011 and subsequently the 2013 taper tantrum.
Topic:
Economics, Emerging Markets, Markets, Exchange Rate Policy, Fiscal Policy, and Economic Crisis
Political Geography:
Global Focus

1853. The Liquidity Effects of Official Bond Market Intervention

Author:
Michiel De Pooter, Robert F Martin, and Seth Pruitt
Publication Date:
07-2015
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
To "ensure depth and liquidity," the European Central Bank in 2010 and 2011 repeatedly intervened in sovereign debt markets through its Securities Markets Programme. These purchases provide a unique natural experiment for testing the effects of large-scale asset purchases on risk premia arising from liquidity concerns. To explore how official intervention influences liquidity premia, we develop a search-based asset-pricing model. Consistent with our model's predictions, we find statistically and economically significant stock and flow effects on sovereign bonds' liquidity premia in response to official purchases.
Topic:
Markets, Bonds, Banking, and Liquidity
Political Geography:
Europe

1854. Realized Bank Risk during the Great Recession

Author:
Yener Altunbas, Simone Manganelli, and David Marques-Ibanez
Publication Date:
08-2015
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In the years preceding the 2007-2009 financial crisis, forward-looking indicators of bank risk concentrated and suggested unusually low expectations of bank default. We assess whether the ex-ante (i.e. prior to the crisis) cross-sectional variability in bank characteristics is related to the ex-post (i.e. during the crisis) materialization of bank risk. Our tailor-made dataset crucially accounts for the different dimensions of realized bank risk including access to central bank liquidity during the crisis. We consistently find that less reliance on deposit funding, more aggressive credit growth, larger size and leverage were associated with larger levels of realized risk. The impact of these characteristics is particularly relevant for capturing the systemic dimensions of bank risk and tends to become stronger for the tail of the riskier banks. The majority of these characteristics also predicted bank risk as materialized before the financial crisis.
Topic:
Global Recession, Financial Crisis, Risk, and Banking
Political Geography:
North America and United States of America

1855. Identifying Foreign Suppliers in U.S. Import Data

Author:
Fariha Kamal and Ryan Monarch
Publication Date:
08-2015
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Relationships between firms and their foreign suppliers are the foundation of international trade, but data limitations and reliability concerns make studying such relationships challenging. We evaluate and enhance supplier information in U.S. import data and present new facts about importer-exporter relationships. Count of foreign exporters from U.S. import data tends to exceed those from source country data, especially from China. The pattern of U.S. imports from origin countries changes substantially by tracing trade back to the supplier's location instead. Related-party relationships trade more, while larger countries have more relationships.
Topic:
International Cooperation, Foreign Direct Investment, Business, Trade, Data, and Imports
Political Geography:
North America and United States of America

1856. Can the Law Help? Debating Security Council Inaction on Syria

Author:
Katja Creutz
Publication Date:
09-2015
Content Type:
Commentary and Analysis
Institution:
Finnish Institute of International Affairs
Abstract:
The inaction of the UN Security Council with respect to the Syrian crisis has generated widespread aversion. Decision-makers and international humanitarian organizations have debated the particular aspects in which the Council has failed to take measures, such as the widespread abuses that civilians are suffering in the war and the prevailing impunity of the violators. International legal scholars have, however, debated whether the Security Council could be legally obliged to act in respect of a mass atrocity crisis. This represents a novel departure from the established idea that the Security Council has the right to act. Although this emerging position is controversial, it shows that the argumentation in connection to Security Council inaction is toughening up through increased resort to hard law. Many, but not all, of the advocates for imposing a duty to act on the Security Council refer to the Responsibility to Protect norm. But the exact measures that fall under the scope of the duty to act remain unclear and context-bound: there can be no specific elaboration of what the Security Council must do. The most concrete discussion has related to the limitation of the veto use of the five permanent members. Yet, the international debate does not shy away from discussing the legal consequences of Security Council inaction for the organ itself, or its member states. Until now, few scholars have sought to analyse if resort to law really can be beneficial to the overall goal of making the Security Council react to mass atrocity situations. This analysis therefore strives to discuss the elements of the debate and to answer the question ‘Can the law help?’ in remedying inaction. It will be posited that the law is no panacea when it comes to resolving when or by what means the Security Council should react when it comes to atrocity crimes. Its main value lies in building a decision-making environment in the Security Council which is open, explanatory and dialogue-based.
Topic:
International Law, United Nations, Syrian War, and UN Security Council
Political Geography:
Middle East and Syria

1857. Syria and the Islamic State

Author:
POMEPS
Publication Date:
10-2014
Content Type:
Commentary and Analysis
Institution:
Project on Middle East Political Science (POMEPS)
Abstract:
Syria’s nearly four year civil war took a dramatic new turn this month as the United States and its coalition partners began bombing militants from the Islamic State group (formerly know as the Islamic State of Iraq and Syria) and al-Qaeda’s Syrian affiliate Jubhat al-Nusra. The U.S. intervention opens up profound uncertainties about the objective and targets of the military action, the responses of the dizzying array of actors on the ground, and the potential for escalation. In December 2013, POMEPS published “The Political Science of Syria’s War,” a collection of original essays by many of the top civil wars and insurgencies scholars, which helped to place the Syrian war into a broad theoretical and comparative perspective. This new collection of articles originally published on “The Monkey Cage” explores the evolution of the conflict, the nature of the Islamic State, and key debates about Syria’s horrific war.
Topic:
War and International Affairs
Political Geography:
Syria

1858. Iraq Between Maliki and the Islamic State

Author:
POMEPS
Publication Date:
07-2014
Content Type:
Commentary and Analysis
Institution:
Project on Middle East Political Science (POMEPS)
Abstract:
Iraq’s long-simmering political conflicts and violence erupted in June with the stunning capture of Mosul and advances toward Baghdad by the Islamic State of Iraq and Syria (ISIS). The collapse of the Iraqi army and the rapid seizure of territory by ISIS took most observers by surprise, but the crisis had been developing for years. This POMEPS Briefing collects more than a dozen recent articles by academics writing for The Monkey Cage and other leading online publications that explore both the immediate crisis and its underlying causes.
Topic:
International Relations and International Affairs
Political Geography:
Iraq

1859. Turkey’s Turmoil

Author:
POMEPS
Publication Date:
01-2014
Content Type:
Commentary and Analysis
Institution:
Project on Middle East Political Science (POMEPS)
Abstract:
Turkey’s Prime Minister Recep Tayyip Erdogan occupied a dominant political position not too long ago. In June 2011, his Justice and Development Party (AKP) won nearly 60 percent of the seats in parliament while expanding its lead over its closest competitor. Turkey seemed well primed to take advantage of the Arab uprisings, with its independent foreign policy and criticism of Israel playing well with Arab audiences. Erdogan even seemed keen to find a resolution to the long-running struggle with the Kurdistan Workers’ Party (PKK) and reconcile with the country’s Kurdish citizens. Those days seem distant indeed. For at least the last six months, Erdogan has struggled to respond to sustained popular protests, a growing corruption scandal, a stalled peace process with the PKK, a deeply unpopular and ineffective Syria policy, and dissent from within his own party. How did Erdogan’s fortunes reverse so quickly? Are his problems primarily the natural decay of a leader too long in power or do they speak to deeper problems with his party’s ideology or the foundations of Turkish democracy? The 14 deeply researched and analytically powerful Foreign Policy Middle East Channel essays collected in this POMEPS Briefing go deeply into the origins, dynamics, and likely implications of Turkey’s new political scene.
Topic:
International Relations and International Affairs
Political Geography:
Turkey

1860. New Vision of Africa's Development: The role of NEPAD and South-South Cooperation

Author:
Ibrahim Assane Mayaki
Publication Date:
03-2014
Content Type:
Commentary and Analysis
Institution:
Argentine Council for International Relations (CARI)
Abstract:
It is a great pleasure for me to be here tonight as the head of the New Partnership for Africa's Development and it is an honor to have this conversation, but because I would like to have it on a conversation's mode, with one of you, in order to identify what are the main characteristics of Africa's evolutions to the last -let us say- fifty years, and how these evolutions have framed a radically differing context from what Africa was 25 or 20 years ago; there is an invisible transformation that is taking place, and there are visible aspects of that transformation that is taking place, and there are visible aspects of that transformation that I would like to highlight.
Topic:
International Relations, Development, and International Cooperation
Political Geography:
Africa