International Capital Mobility: Evidence from Panel Data

Krol (1996) reports estimates of the saving-investment correlation, based on panel regressions, that are much lower than commonly found in the literature. This note argues that this low estimate is not related to the panel estimation technique, as Krol claims, but largely to the inclusion of Luxembourg in the sample. Panel estimation only reduces the correlation’s estimate by about 0.12.capital mobility, panel estimation, saving investment correlation

Inside the Impossible Triangle: Monetary Policy Autonomy in a Credible Target Zone

This paper examines the trade-off between exchange rate stability and monetary autonomy for a target zone. Using the guilder-mark target zone in the pre-EMU period as a case study, we empirically estimate how much policy discretion the Dutch central bank still enjoyed and how much had been ceded to the German central bank. The sum of these two measures is an estimate of the policy autonomy under a free float. We find that the narrow guilder-mark target zone still permitted a modest degree of policy independence. This result suggests that intermediate exchange rate regimes may offer an attractive trade-off compared to the corner solutions (free float and monetary union), which is consistent with the ‘fear of floating’ phenomenon.exchange rate regimes, monetary union, monetary autonomy, fear of floating, trilemma

Which Survey Indicators Are Useful for Monitoring Consumption? Evidence fron European Countries

This paper assesses the information content of two survey indicators for consumption developments in the near future for eight European countries in the period 1985-1998. Empirical work on this topic typically focuses on consumer confidence, the perceptions of buyers of consumption goods. This paper examines whether perceptions of sellers of consumption goods, measured by retail trade surveys, may also improve short-term monitoring of consumption. We find that both consumer confidence and retailer confidence embody valuable information, when analyzed in isolation. For France, Italy and Spain we conclude that adding retail confidence does not improve the indicator model once consumer confidence has been included. For the UK the reverse case is obtained. For the remaining four countries we show that combining consumer sentiment and retail trade confidence into a composite indicator leads to optimal results. Our results suggest that incorporating information from retail trade surveys may offer significant benefits for the analysis of short-term prospects of consumption.consumption; consumer confidence; retail trade confidence; composite indicators

Comovement in international equity markets: A sectoral view

We investigate shifts in correlation patterns among international equity returns at the market level as well as the industry level. We develop a novel bivariate GARCH model for equity returns with a smoothly time- varying correlation and then derive a Lagrange Multiplier statistic to test the constant-correlation hypothesis directly. Applying the test to weekly data from Germany, Japan, the UK and the US in the period 1980- 2000, we find that correlations among the German, UK and US stock markets have doubled, whereas Japanese correlations have remained the same. Both dates of change and speeds of adjustment vary widely across countries and sectors.stock market linkages; financial integration; smooth transition

Foreign direct investment and international business cycle comovement

This paper investigates the relationship between bilateral FDI positions and cross-country business cycle correlations in the period 1982–2001. We find that countries that have comparatively intensive FDI relations also have more synchronized business cycles during 1995–2001. Before 1995, we also find a positive association between FDI linkages and output comovement, but this may partly reflect the effects of trade relations. Moreover, more intensive FDI links are also associated with a greater vulnerability to lagged output spillovers from abroad, whereas trade links are not. Policy implications of our research are (1) that there is an underlying tendency for business cycles to exhibit greater comovement in the future, and (2) that policy makers need to incorporate the FDI linkage among economies in their models and analytical framework for policy analysis. JEL Classification: E32, F21, J23, J31business cycle synchronization, Foreign Direct Investment, international linkages, spillovers

Has the Emergence of China Hurt Asian Exports?

We investigate whether the exports of manufactured products by the South Asian and South East Asian countries have been negatively affected by the rise of China. Using a panel data approach, we find that increases in world market shares of China are statistically correlated with declines in world market shares for some Asian countries since 1994, but not before 1994.exports, China, Asian crisis

What Do Capital Inflows Do? Dissecting the Transmission Mechanism for Thailand, 1980-96

This paper examines the effects of private financial (non-FDI) capital inflows in Thailand in the pre-crisis period (1980:I–96:IV). Private capital inflows are found to be associated with higher asset prices, lower lending rates, surges in bank lending and domestic spending driven by higher investment, higher output, modest inflation, and modest real exchange rate appreciation. Inflows are also associated with a greater vulnerability to a liquidity crisis, but not with greater external solvency risk. Current account deficits are temporary, thus sustainable, as exports catch up with higher imports within two years. Consequently, the Thai crisis appears to be more of a liquidity crisis than an external solvency crisis.Asian crisis, capital flows, lending boom, investment boom, transmission mechanism

International Rent Sharing and Domestic Labor Markets: A Macroeconomic Analysis

Foreign-owned firms account for a significant part of output in many industrialized countries. However, compared to international trade linkages, relatively little is known about the role of foreign direct investment linkages and multinational firm behavior in the transmission of disturbances from one country to the next. Inspired by the micro- evidence on profit sharing within multinational corporations and within industries, we investigate whether a cross-border rent sharing phenomenom can be identified at the macro-level. The rent sharing hypothesis implies that an increase in foreign profitability should boost wages and/or employment in the domestic economy. Our empirical study provides evidence that international rent sharing might be an important aspect of global economic linkages. In four continental European countries and the UK, labour market conditions (wages and/or employment) are significantly affected by profitability conditions abroad. By contrast, the US labour market does not appear to be sensitive to changes in profitability in other countries, which could be explained by the still relatively modest role of foreign-owned capital in the US economy.foreign direct investment, international rent sharing, labour markets, international linkages, spillovers

Charles S. Rhyne to John D. Feerick

Letter from Charles S. Rhyne, a prominent Washington, D.C. attorney, to Dean John D. Feerick, regarding his scholarly article on presidential inability.https://ir.lawnet.fordham.edu/twentyfifth_amendment_correspondence/1003/thumbnail.jp