Sovereign debt shadows

All five peripheral EU countries face burdensome public debt and budget deficits, but the causes for uncertainty in each country?s situation differ.Debts, Public ; Budget deficits

Multinationals make the most of IT

Labor productivity ; Information technology

The evolving size distribution of banks

If limiting the size of large banks were considered appropriate to reduce systemic risk, it would be a clear change of direction relative to the long-term evolution of the industry.Bank size

U.S. commercial bank lending through 2008:Q4: new evidence from gross credit flows

How have U.S. commercial banks responded during the current financial crisis? What was hiding behind the dynamics of aggregate commercial bank loans through the end of 2008? We use balance sheet data for the entire population of commercial banks to construct quarterly gross credit flows (credit expansion and credit contraction series) for the U.S. banking system during the period 1999:Q1-2008:Q4 and provide new evidence on changes in lending. We show that credit expansion, as defined in this paper, began declining during the first half of 2008 while credit contraction began steeply increasing only between the third and fourth quarters of 2008. Until then net credit growth was below trend but positive and not dissimilar to the 1980 and 2001 recessions. However, between the third and fourth quarter credit contraction grew larger than credit expansion across all types of loans (real estate, individual, commercial, and industrial loans) and for the largest banks. On the contrary, smaller banks continued to display positive net credit growth. Once we include 2008:Q4 data, the cyclical properties of our series most resemble the beginning of the 1991 recession and the intensification of the Savings and Loan crisis.Financial crises ; Business cycles ; Credit

Gross credit flows of U.S. commercial banks until 2008:Q3

Credit ; Bank loans

The role of financing in international trade during good times and bad

The collapse of trade during the financial crisis can be tied, for the most part, to a drop in demand. Less talked about, however, is the role of financing—or lack thereof.International trade

Net exports' recent (and surprising?) contribution to GDP growth

Exports

The (non-)resiliency of foreign direct investment in the United States during the 2007-2009 financial crisis

We study the contraction of Foreign Direct Investment (FDI) flows in the United States during the recent financial crisis and show their unusual non-resiliency, which depends in part on the global nature of the economic recession, but also on the increases in the cost of financing FDI in the economies in which the flows originate. To formally study the effects of external financial conditions on FDI in the United States, we exploit the three dimensions of a panel of U.S. inward FDI flows organized by recipient U.S. industries, source countries, and years for the recorded flows. Changes in the cost of finance in the source countries have little or no effect on total inward flows (the sum of equity, debt, and reinvested earnings) over the 2006-2010 period. However, U.S. industries characterized by more financial vulnerability experience statistically significant variations in the debt and equity components of inward FDI flows in response to the changes in the cost of capital that occurred in the source countries during the crisis.Capital movements ; Financial crises ; Investments, Foreign

Banking crises around the world: different governments, different responses

Over the past 40 years, there have been more than 120 banking crises around the world. Different governments have responded in different ways. The gross and net costs as a percentage of GDP range wildly, anywhere from less than 1 percent to well beyond 30 percent.Financial crises ; Banks and banking, International

The cyclical properties of disaggregated capital flows

We describe the second-moment properties of the components of international capital flows and their relationship (covariance and correlation) to business cycle variables of 22 emerging and OECD countries. Disaggregated flows have different volatility properties, with debt being the most volatile and FDI the least volatile. We show that (a) inward flows are procyclical, outward and net outward flows are countercyclical for most industrial and emerging countries while, for the G-7, both inward and outward flows are procyclical and net outflows are countercyclical; (b) inward FDI flows are procyclical in industrial countries, countercyclical in emerging countries; and (c) there is no clear pattern for other equity flows and debt. Using formal statistical tests, we document changes in variability, covariance, and correlation of capital flows with a set of macroeconomic variables for G-7 countries. We find mixed evidence of changes over capital account liberalization episodes and breaks in international business cycles, and a clear increase in variance for all types and signs of flows. We estimate breaks at unknown dates in the conditional variance of each capital flow to find that they differ considerably from the breaks associated with capital account liberalization and financial globalization.Capital movements ; Business cycles