Global liquidity glut or global savings glut? A structural VAR approach

Since the late-1990s, the global economy is characterised by historically low risk premia and an unprecedented widening of external imbalances. This paper explores to what extent these two global trends can be understood as a reaction to three structural shocks in different regions of the global economy: (i) monetary shocks (“excess liquidity” hypothesis), (ii) preference shocks (“savings glut” hypothesis), and (iii) investment shocks (“investment drought” hypothesis). In order to uniquely identify these shocks in an integrated framework, we estimate structural VARs for the two main regions with widening imbalances, the United States and emerging Asia, using sign restrictions that are compatible with standard New Keynesian and Real Business Cycle models. Our results show that monetary shocks potentially explain the largest part of the variation in imbalances and financial market prices. We find that savings shocks and investment shocks explain less of the variation. Hence, a “liquidity glut” may have been a more important driver of real and financial imbalances in the US and emerging Asia than a “savings glut”. JEL Classification: E2, F32, F41, G15current account, global imbalances, global liquidity, investment drought, savings glut, structural VARs

The impact of sovereign wealth funds on global financial markets

This paper analyses the impact of sovereign wealth funds (SWFs) on global financial markets. It presents back-of-the-envelope calculations which simulate the potential impact of a transfer of traditional foreign exchange reserves to SWFs on global capital flows. If SWFs behave as CAPM-type investors and thus allocate foreign assets according to market capitalisation rather than liquidity considerations, official portfolios reduce their “bias” towards the major reserve currencies. As a result, more capital flows “downhill” from rich to less wealthy economies, in line with standard neoclassical predictions. More specifically, it is found that under the assumption of SWFs investing according to market capitalisation weights, the euro area and the United States could be subject to net capital outflows while Japan and the emerging markets would attract net capital inflows. It is also shown that these findings are sensitive to alternative assumptions for the portfolio objectives of SWFs. Finally, the paper discusses whether a change in net capital flows triggered by SWFs could have an impact on stock prices and bond yields. Based on an event study approach, no evidence can be found for a stock price impact of non-commercially motivated stock sales by Norway’s Government Pension Fund. JEL Classification: F30, F40, G15.Sovereign wealth funds, capital flows, foreign exchange reserves, financial markets.

Using the global dimension to identify shocks with sign restrictions

Identification of structural VARs using sign restrictions has become increasingly popular in the academic literature. This paper (i) argues that identification of shocks can benefit from introducing a global dimension, and (ii) shows that summarising information by the median of the available impulse responses—as commonly done in the literature—has some undesired features that can be avoided by using an alternatively proposed summary measure based on a “scaled median” estimate of the structural impulse response. The paper implements this approach in both a small scale model as originally presented in Uhlig (2005) and a large scale model, introducing the sign restrictions approach to the global VAR (GVAR) literature, that allows to explore the global dimension by adding a large number of sign restrictions. We find that the patterns of impulse responses are qualitatively similar though point estimates tend to be quantitatively much larger in the alternatively proposed approach. In addition, our GVAR application in the context of global oil supply shocks documents that oil supply shocks have a stronger impact on emerging economies’ real output as compared to mature economies, a negative impact on real growth in oil-exporting economies as well, and tend to cause an appreciation (depreciation) of oil-exporters’ (oil-importers’) real exchange rates but also lead to an appreciation of the US dollar. One possible explanation would be the recycling of oil-exporters’ increased revenues in US financial markets. JEL Classification: C32, E17, F37, F41, F47Global VAR, Identification of Shocks, oil shocks, sign restrictions, VAR

Noch einmal «Arbor scientiae oder Arbre de sciencia» Zum Verhältnis von lateinischer und katalanischer Fassung der llullschen Enzyklopädie

Auf der Grundlage der kritischen lateinischen Edition der Arbor scientiae wird die kontroverse Frage nach der Erstredaktion dieses Werkes aufgegriffen, d.h. die Frage, ob Llull dieses Werk ursprünglich auf Lateinisch oder Katalanisch redigierte. Zu diesem Zweck werden zunächst die Argumente von Pere Villalba für eine lateinische Erstredaktion mit den entsprechenden Einwänden von Albert Soler konfrontiert und diskutiert. Daraufhin bringt der Verfasser neue Argumente, die eindeutig für den Vorrang der katalanischen gegenüber der lateinischen Version sprechen.Sobre la base de l'edició crítica llatina de l'Arbor scientiae es reprèn la debatuda qüestió de la seva redacció original, a saber, si Llull l'escriví primitivament en llatí o en català. Amb aquest objectiu, primer, s'analitzen els arguments de Pere Villalba a favor d'una redacció primitiva en llatí en el context de la crítica corresponent per part d'Albert Soler. En segon lloc, l'autor avança alguns arguments nous que donen una clara evidència de l'anterioritat de la versió catalana respecte a la llatina

External imbalances and the US current account: how supply-side changes affect an exchange rate adjustment

The influential work of Obstfeld and Rogoff argues that a closing-up of the US current account deficit involves a large exchange rate adjustment. However, the Obstfeld-Rogoff model works exclusively via demand-side channels and abstracts from possible supply-side changes. We extend the framework to allow for endogenous supply-side changes and show that this fundamentally alters the mechanism of the adjustment process. Allowing for such an extension attenuates quite significantly the implied exchange rate adjustment. The paper also provides some empirical evidence of variations in the supply-side structure and correlations with the exchange rate and the current account. The policy implications are that measures to foster a supply-side reaction would facilitate the external adjustment by alleviating an exclusive reliance on demand and exchange rate changes, with the latter being potentially destabilising for the global financial system. JEL Classification: E2, F32, F41dollar adjustment, global imbalances, sectoral adjustment, US current account deficit

Nota sobre els manuscrits lul·lians a l'Abadia St. Georgenberg, Fiecht

Abstract not availabl

Ressenyes

Index de les obres ressenyades: Édouard JEAUNEAU (ed.), Glosae super Platonem, Guillelmi de Conchis Opera omnia III Corpus Christianorum Continuatio Mediaevalis, 203. Turnhout: Brepols, 200

Ressenyes

Obra ressenyada: Robert SPAEMANN ; mit einer Einführung in die großen Gottesbeweise und einem Kommentar zum Gottesbeweis Robert Spaemanns von Rolf SCHÖNBERGER, Der letzte Gottesbeweis. Munic, Pattloch, 2007