Determinants of the time varying risk premia

This paper generates monthly risk premia data using zero coupon government treasury bills for 43 countries over the period of 1994-2006. The measure of risk premia is based on the ARCH-in-Mean (ARCH-M) model introduced by Engle, Lilien and Robins (1987). We show that the risk premia are time varying and also vary considerably across sample countries. Countries with better financial development and higher income generally have lower risk premia of government assets. This study also examines the macroeconomic and political determinants of the risk premia by using cross-section and dynamic panel regression analyses. The results show that the risk premia are significantly affected by macroeconomic circumstances, especially economic growth and the real e¤ective exchange rate. The results are robust across the majority of countries in our study.ARCH-in-Mean, term structure of interest rates, risk premium, dynamic panel regression analysis.

Essays in interest rates, exchange rates and savings

This thesis studies the behaviour of interest rates in government bonds markets, foreign exchange rates and national savings. There are three main chapters in the thesis. The first chapter consists of a comparative study of government securities and risk. It generates monthly interest rate risk premium data and examines their determinants. The results show that the risk premia are time varying and also vary considerably across sample countries. In particular, countries with better financial development and higher income generally have lower risk premia of government assets. Additionally, the risk premia are significantly affected by macroeconomic circumstances, especially economic growth and the real effective exchange rate.EThOS - Electronic Theses Online ServiceGBUnited Kingdo

Dealing with Quantitative Easing Spillovers in East Asia: The Role of Institutions and Macroprudential Policy

This paper explores the impact of advanced countries’ quantitative easing on emerging market economies (EMEs) and how macroprudential policy and good governance play a role in preventing potential financial vulnerabilities. We used confidential locational bank statistics data from the Bank for International Settlements to examine whether quantitative easing has caused an appreciation of EMEs’ currencies and how it has done so, and whether this has in turn boosted foreign-currency borrowing, thus making EMEs vulnerable to balance sheet and maturity mismatch problems. While focusing our analysis on East Asian economies, we compare them with Latin American economies, which were also major recipients of quantitative easing capital inflows. We found that government effectiveness plays an important role in curbing excessive borrowing when the exchange rate is overvalued

The transmission of Euro area interest rate shocks to Asia -- do effects differ when nominal interest rates are negative?

This paper proposes a non-linear factor-augmented vector autoregressive model to evaluate spillovers to Asia from an unexpected rate cut in the euro area. We focus on potential asymmetries in the transmission of the shock that could arise due to prevailing negative interest rates in the euro area. Our findings indicate significant and negative effects on short-and long-term interest rates throughout selected Asian economies. While the cross-country impact on yields is quite homogeneous when the policy rate in the euro area is positive, large heterogeneity emerges when the shock occurs under a negative interest rate environment in the euro area. For several countries, the effects on Asian long-term yields are stronger, this implies that not only relative yield differentials play a role for international investors but also the absolute yield level. In this sense, negative interest rate policies can act as an amplifier of international portfolio rebalancing.(VLID)471800