From globalization to deglobalization: Zooming into trade. Bruegel Special Report

After decades of increasing globalization both in trade, capital flows but even people to people movements, it seems the trend has turned towards deglobalization. This article shows some evidence of the decrease in merchandise, capital and, to a lesser extent people to people flows. In addition, zooming into trade, the article offers an account of the importance of the strategic competition between the US and China to foster the deglobalization trend further. This is true for trade but even beyond in the tech and finance space. Finally, the demise of the WTO could be one of the most relevant turning points towards deglobalization, especially as far as trade is concerned. This should bring downward pressure to growth globally

Halo-independent tests of dark matter annual modulation signals

I derive new halo-independent lower bounds on the product of the dark matter-nucleon scattering cross section and the local dark matter density that are valid for annual modulations of dark matter direct detection signals. They are obtained by making use of halo-independent bounds based on an expansion of the rate on the Earth's velocity that were derived in previous works. In combination with astrophysical measurements of the local energy density, an observed annual modulation implies a lower bound on the cross section that is independent of the velocity distribution and that must be fulfilled by any particle physics model. In order to illustrate the power of the bounds we apply them to DAMA/LIBRA data and obtain quite strong results when compared to the standard halo model predictions. We also extend the bounds to the case of multi-target detectors.Comment: 23 pages, 5 figures, 1 table. Extended discussion on the phase, one figure added, minor changes, results unchanged. Matches published version in JCA

The young stellar population of IC 1613. III. New O-type stars unveiled by GTC-OSIRIS

Recent findings hint that the winds of massive stars with poorer metallicity than the SMC may be stronger than predicted by theory. Besides calling the paradigm of radiation driven winds into question, this result would impact the predicted evolutionary paths of massive stars, their calculated ionizing radiation and mechanical feedback and the role these objects play at different stages of the Universe. The field needs a systematic study of the winds of a large set of very metal poor massive stars, but the sampling of spectral types is particularly poor in the very early types. This paper's goal is to increase the list of known O-type stars in the dwarf irregular galaxy IC1613, whose metallicity is smaller than the SMC's by roughly a factor 2. Using the reddening-free Q-parameter, evolutionary masses and GALEX photometry, we built a list of very likely O-type stars. We obtained low-resolution R~1000 GTC-OSIRIS spectra for a fraction of them and performed spectral classification, the only way to unequivocally confirm candidate OB-stars. We have discovered 8 new O-type stars in IC1613, increasing the list of 7 known O-type stars in this galaxy by a factor of 2. The best quality spectra were analyzed with the model atmosphere code FASTWIND to derive stellar parameters. We present the first spectral type -- effective temperature scale for O-stars beyond the SMC. The derived effective temperature calibration for IC1613 is about 1000K hotter than the scale at the SMC. The analysis of an increased list of O-type stars will be crucial for the studies of the winds and feedback of massive stars at all ages of the Universe.Comment: A&A accepted. 13 pages, including appendix. 15 figures tota

WHERE IS THE CHINESE BANKING SYSTEM GOING WITH THE ONGOING REFORM?

The Chinese banking system, characterized by a large proportion of state-ownership and low capitalization, has started a reform process based on three main pillars: (i) bank restructuring, with the cleaning- up of non-performing loans and public capital injections, particularly in the four largest state-owned banks; (ii) financial liberalization, with the gradual flexibilizaton of price and quantity controls and the opening-up to foreign competition; and (iii) strengthened financial regulation and supervision, as well as better risk management, corporate governance, disclosure, and the introduction of international standards. Although it is still early to judge on the success of the reform, the available evidence does not offer a very optimistic outlook. The solvency of Chinese banks is still very weak, with a stubbornly high level of non-performing loans, and profitability is poor. Given the commitment of the Chinese authorities to fully open up its banking system to foreign competition by 2006, it seems crucial that financial reform accelerates so that the Chinese banking system can compete at the international level. This is particularly the case for the reduction of NPLs and bank recapitalization as well as for a furthered improvement of bank regulation and supervision.Chinese financial system, financial reform, bank restructuring, financial liberalization, bank regulation and supervision

INVESTING IN THE FINANCIAL SECTOR OF EMERGING COUNTRIES: POTENTIAL RISK AND HOW TO MANAGE THEM

The purpose of this article is to assess how the changing operations of international banks in emerging countries in the last decades have altered the risks they face as well as their mitigation techniques. The recent expansion of the international banking business through the setup of branches and subsidiaries has increased business potential, but has also changed the nature of the risks faced. Nevertheless, it is hard to determine whether risks, on the whole, are larger now than when cross- border operations were the main instrument for international banks’ activity. In addition, the article describes the various channels through which the risks faced by banks operating in emerging countries increase in times of crisis, especially when operating locally and in highly dollarized host countries, as shown in the latest crisis events. While the financial independence of subsidiaries may be considered an important tool of risk control, the possibilities to mitigate risks in local markets during times of crisis are generally scarce. This could be due to the relatively recent expansion of foreign banks’ local operations in emerging countries, as compared to the cross-border business, together with the relative underdevelopment of local financial markets, or perhaps to the nature of the local business itself.financial, foreign direct investment, emerging countries, risk management

THE ROLE OF GLOBAL RISK AVERSION IN EXPLAINING LATIN AMERICAN SOVEREIGN SPREADS

This paper explores the role of global risk aversion (GRA) and its main determinants, US economic growth and the US government bond yield, in explaining developments in Latin American sovereign spreads. We find that GRA is significant and positively related to Latin American sovereign spreads and that its impact varies across countries and over time. Those countries with the lowest risk, such as Chile, are more affected by GRA. Its relevance has also risen over time, particularly since the sharp change in the perception of risk stemming from the Enron scandal. Finally, an increase in both US economic growth and the US government bond yield are found to reduce sovereign spreads in most Latin American countries, while the opposite is true for US short-term interest rates.GLOBAL RISK AVERSION, SOVEREIGN SPREADS,LATIN AMERICA

Does China have an impact on foreign direct investment to Latin America?

We analyze empirically whether the emergence of China as a large recipient of FDI has affected the amount of FDI received by Latin American countries. For the longest time span possible given data availability (from 1984 to 2001), we do not find a substitution from Latin American inward FDI to China, when other relevant factors are taken into account. However, concentrating on the last few years (from 1995 to 2001), when FDI boomed worldwide and negotiations for China’s WTO membership accelerated, the “Chinese” effect becomes highly significant. Assessing the impact country by country, China’s inward FDI appears to have hampered that of Mexico and Colombia.China, Latin America, FDI

Can the Chinese trade surplus be reduced through exchange rate policy?

This paper shows empirically that China’s trade balance is sensitive to fluctuations in the real effective exchange rate of the renminbi, although the size of the surplus is such that exchange rate policy alone will be unable to address the imbalance. One of the main reasons why the reduction in the trade surplus is limited is that Chinese imports are reduced with a real appreciation of the renminbi. By estimating bilateral import equations, we find that it is imports from other Southeast Asian countries which fall. This result reflects the vertical integration of Southeast Asia with China through the 'Asian production network'. We find, in turn, that imports from Germany – which serve China’s domestic demand – behave as one would expect, ie they increase with renminbi real appreciation. All in all, our results raise concerns on the impact of renminbi appreciation on Southeast Asia even if regional currencies do not follow the renminbi’s upward trajectory.China; trade; exports; real exchange rate

THE ROLE OF GLOBAL RISK AVERSION IN EXPLAINING LATIN AMERICAN SOVEREIGN SPREADS

This paper assesses empirically whether global risk aversion (GRA) and some if its determinants (US economic growth and the US long term interest rates) explain developments in Latin American sovereign spreads. We find that GRA is significant and positively related to Latin American sovereign spreads and that its impact varies across countries and over time. Chile, with a lower sovereign risk, is relatively more affected. The opposite is true for Argentina, Ecuador and Venezuela. In addition, the influence of GRA on spreads has risen since the Enron scandal. Finally, both an increase in US economic growth and US long term interest rates are found to reduce spreads while the opposite is true for US short-term interest rates.global risk aversion, sovereign spreads, Latin America