scholarly journals Risk-Off Episodes and Swiss Franc Appreciation: The Role of Capital Flows

2015 ◽  
Vol 16 (4) ◽  
pp. 439-463 ◽  
Author(s):  
Irineu de Carvalho Filho
Keyword(s):  
Capital Flows ◽  
Foreign Debt ◽  
Capital Controls ◽  
Swiss Franc ◽  
Global Risk ◽  
Flow Management ◽  
Capital Movements ◽  
Management Policies ◽  
The Impact

AbstractDuring episodes of increased global risk aversion, or risk-off episodes, safe haven currencies such as the Swiss franc tend to appreciate. The immediate impact of a risk-off shock is an increase in net private inflows to Switzerland, mostly driven by a reduction in Swiss residents’ net purchases of foreign debt securities and reduced foreign exposure by Swiss banks. Given that the bulk of capital movements related to risk-off episodes is driven by decisions of Swiss residents, capital flow management policies that discriminate based on the residency of the investor (capital controls) are not likely to be effective at reducing the impact of risk-off episodes. However, prudential policies that limit leveraging or foreign exposure by Swiss banks may diminish the volatility of capital flows during risk-off episodes.

scholarly journals The Macroprudential Role of International Reserves

2016 ◽  
Vol 106 (5) ◽  
pp. 570-573 ◽  
Author(s):  
Olivier Jeanne
Keyword(s):  
Financial Crisis ◽  
Capital Flows ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Capital Controls ◽  
International Reserves ◽  
International Banking ◽  
Flow Management ◽  
The Global Financial Crisis

There has been a lot of interest since the global financial crisis in policies allowing emerging market economies to smooth the effects of the global financial cycle. Although the literature has focused mostly on capital controls emerging market governments have relied mostly on international reserves management. This paper discusses the role of reserves in capital flow management based on a simple welfare-based model of capital flows with international banking frictions.

scholarly journals Impact Size and Determinants of Indirect Cost of Financial Distress: Role of Receivable and Inventory Management

2020 ◽  
Vol 16 (2) ◽  
pp. 179-207
Author(s):  
Umar Farooq ◽  
Muhammad Ali Jibran Qamar ◽  
Krishna Reddy
Keyword(s):  
Indirect Cost ◽  
Inventory Management ◽  
Financial Distress ◽  
Multi Stage ◽  
Initial Stage ◽  
Non Linear ◽  
Management Policies ◽  
Internal Operations ◽  
The Impact

This research investigates the opportunity cost as an indirect cost of financial distress from two perspectives. First, indirect cost is estimated using multi-stage financial distress and non-linear proxy of debt. Second, receivable and inventory management are studied as determinants of indirect cost. The sample includes ongoing Pakistani firms that were healthy in the previous year and documenting positive gross profit. Results showed that firms bear opportunity loss primarily due to leverage rather than multistage financial distress. However, a non-linear relationship is found between leverage and indirect cost. Results further explored the impact of multistage financial distress on internal operations, i.e., working capital policies. It is found that firms manage receivable and inventory simultaneously during the multistage financial distress. Results revealed that increasing receivables and decreasing inventory is suitable during the transition of healthy firms to initial stage of financial distress, i.e., profit reduction. However, decreasing receivables, along with holding more inventory, is recommended for healthy firms that face liquidity problems subsequently. It is concluded that managers can reduce the indirect cost after deploying the optimal debt ratio and recommended receivable and inventory management policies.

Dynamics of capital controls: panel evidence from Asia

2020 ◽  
Vol 47 (2) ◽  
pp. 242-263
Author(s):  
Biplab Kumar Guru ◽  
Inder Sekhar Yadav
Keyword(s):  
Capital Flows ◽  
Capital Controls ◽  
Substitution Effect ◽  
Capital Flight ◽  
Empirical Examination ◽  
Content Type ◽  
Asian Economies ◽  
Asset Classes ◽  
The Impact ◽  
Gross Capital Flows

PurposeThis study empirically examines the effect of capital controls on the volume and composition of capital flows at aggregated as well as at disaggregated level by different asset classes such as debt, FDI, equity, and derivatives.Design/methodology/approachSeveral dynamic panel SYS-GMM models are employed on two sets of unique data on cross-border capital flows and capital control index along with control variables at aggregated and disaggregated level by different asset classes during 1995–2015 for a sample of 31 Asian economies.FindingsEconometric findings suggest that higher capital controls effectively reduce gross capital flows. The reduction in gross capital flows is largely found to be on account of effectiveness of controls on equity flows. However, the impact of controls on overall debt and derivative flows is found to be insignificant. Further, it was found that an increase in direct capital controls disaggregated by inflow and outflow categories significantly reduced the inflow of debt and equity + FDI flows and outflow of equity + FDI and derivative flows. Finally, the study did not find any substitution effect (due to indirect controls) and net effect on capital flows.Practical implicationsResults of such empirical examination may enable governments in respective countries to pursue prudent and rational capital controls as a shield against capital flight and shock transmission.Social implicationsPreventing capital flight through effective controls has macroeconomic benefits such as maintaining stability in income, growth, interest rate, exchange rate, and employment levels for the society.Originality/valueThe primary contribution of the study is the analysis of effectiveness of capital controls disaggregated by different asset categories such as debt, equity, FDI, and derivatives using two unique recent data sets for a large sample of Asian economies.

Surviving from garbage: the role of informal waste-pickers in a dynamic model of solid-waste management in developing countries

2006 ◽  
Vol 11 (3) ◽  
pp. 371-391 ◽  
Author(s):  
ROCÍO DEL PILAR MORENO-SÁNCHEZ ◽  
JORGE HIGINIO MALDONADO
Keyword(s):  
Developing Countries ◽  
Waste Management ◽  
Solid Waste ◽  
Dynamic Model ◽  
Solid Waste Management ◽  
Waste Collection ◽  
Management Policies ◽  
The Impact ◽  
Waste Pickers

In developing countries, informal waste-pickers (known as scavengers) play an important role in solid waste management systems, acting in a parallel way to formal waste collection and disposal agents. Scavengers collect, from the streets, dumpsites, or landfills, re-usable and recyclable material that can be reincorporated into the economy's production process. Despite the benefits that they generate to society, waste-pickers are ignored when waste management policies are formulated. The purpose of this paper is to integrate the role of scavengers in a dynamic model of production, consumption, and recovery, and to show that, in an economy producing solid waste, efficiency can be reached using a set of specific and complementary policies: a tax on virgin materials use, a tax on consumption and disposal, and a subsidy to the recovery of material. A numerical simulation is performed to evaluate the impact of these policies on landfill lifetime and natural resource stocks. A discussion on the implementation of these instruments is also included.

The Baring Crisis and the Brazilian Encilhamento, 1889–1891: An Early Example of Contagion Among Emerging Capital Markets

2005 ◽  
Vol 12 (2) ◽  
pp. 199-225 ◽  
Author(s):  
GAIL D. TRINER ◽  
KIRSTEN WANDSCHNEIDER
Keyword(s):  
Financial Crisis ◽  
Capital Markets ◽  
Capital Flows ◽  
International Markets ◽  
Money Markets ◽  
Bond Yield ◽  
History Of ◽  
Emerging Capital Markets ◽  
The Impact

This article assesses the role of international markets in the brazilian financial crisis of 1890/91 (the crash of the encilhamento). It looks for the impact of the argentine financial crisis in 1890 (the baring crisis) on brazilian access to capital markets. The history of bond yield fluctuations in london for brazilian and argentine debt, exchange rates, data on investment flows and archival and journalistic accounts reveal a close congruence between the argentine and brazilian crises. The effects of the argentine experience carried over to brazil because the open capital and money markets of the period easily transmitted crisis from one economy to another and because fundamental conditions in both economies rendered them similarly vulnerable to fluctuations in capital flows. The article raises this case as a precedent for the contagious financial crises that emerging markets faced at the end of the twentieth century.

Restrictive Policy to Curb Capital Flows Volatility

2021 ◽  
pp. 2150010
Author(s):  
Chokri Zehri
Keyword(s):  
Exchange Rate ◽  
Emerging Economies ◽  
Capital Flows ◽  
Capital Controls ◽  
Dynamic Panel Data ◽  
Exchange Rate Shocks ◽  
Local Projections ◽  
Empirical Approaches ◽  
Restrictive Policy

We examine the role of the restrictive policy, through capital controls, in reducing the capital flows volatility. The study highlights the effects of these controls to dampen international financial shocks. Using quarterly data of 28 emerging economies over the period between 1999 and 2019, three empirical approaches are applied, dynamic panel data, ARDL, and local projections models. Four indexes of capital controls have contributed to the finding that a tighter level of capital controls reduces the sensitivity of capital flows to monetary and exchange rate shocks. These findings on the benefits of capital controls are particularly asymmetric according to the differences between controls on inflows and outflows, and the differences between floating and pegged exchange rate regimes.

Group of Twenty - Measures Which are Both Macroprudential and Capital Flow Management Measures

Policy Papers ◽  
2015 ◽  
Vol 2015 (60) ◽  
Author(s):  
Keyword(s):  
Financial Crisis ◽  
Capital Flows ◽  
Global Financial Crisis ◽  
Capital Flow ◽  
Flow Management ◽  
Management Measures ◽  
Policy Frameworks ◽  
Management Policies ◽  
Legal Frameworks ◽  
The Global Financial Crisis

The global financial crisis underscored the costs of systemic instability at both the national and global levels and highlighted the importance of dedicated macroprudential and capital flow management policies. The IMF has been assisting its members with policy advice as well as developing and making operational their policy frameworks. Multilateral aspects of both policies need to be fully considered, including the interaction with other domestic and international legal frameworks. To the extent that capital flows are the source of systemic financial sector risks, the tools used to address those risks can be seen as both capital flow management measures (CFMs) and macroprudential measures (MPMs).

scholarly journals Facing the Global Financial Cycle

2021 ◽  
Vol 21 (34) ◽  
Author(s):  
Nicoletta Batini ◽  
Luigi Durand
Keyword(s):  
Capital Flows ◽  
Global Financial Crisis ◽  
Capital Controls ◽  
Large Degree ◽  
Flow Management ◽  
Policy Choices ◽  
Macroprudential Policies ◽  
Global Factor ◽  
Financial Conditions ◽  
Cross Country

Abstract In this paper we ask whether countries can influence their exposure to changes in global financial conditions. Specifically, we show that even though we can model cross-country capital flows via a global factor that closely tracks changes in global financial conditions, there is a large degree of heterogeneity in the sensitivity of each country to this same global factor. We then evaluate whether this cross-country heterogeneity can be attributed to different policy choices, including measures of capital flow management, such as capital controls and macroprudential policies. In our main results, we show that higher levels of capital controls and macroprudential policies both dampen the sensitivity to the global factor. Furthermore, we show that countries’ monetary and exchange rate policies can also be successfully deployed. Overall, our results have implications that extend beyond the surge that preceded the 2008 global financial crisis, and that closely resonate in light of the financial disruptions that followed the COVID-19 pandemic.

International capital flows with safe assets accumulation

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ly Dai Hung
Keyword(s):  
Economic Growth ◽  
Open Economy ◽  
Capital Flows ◽  
International Capital Flows ◽  
International Capital ◽  
Productivity Level ◽  
Content Type ◽  
Total Capital ◽  
The Impact

PurposeThe author studies the role of safe assets accumulation in shaping the pattern of international capital flows.Design/methodology/approachThe author combines a theoretical model and the empirical analysis. The model is a two-country open economy, while the evidence is based on a fixed-effect regression on a panel of 19 countries of the eurozone.FindingsIn an open two-country economy, a positive productivity shock raises both mean and variance of wealth accumulation rate, then, leading to a greater holding of safe assets for risk-sharing motivation. Upon financial integration, the shock can induce the outflows of net total capital. The evidence of 19 eurozone countries confirms the theory and also uncovers that the safe assets (bonds) are the dominant driver of cross-border capital flows within the eurozone.Research limitations/implicationsThe model can be extended to account for the impact of safe assets on the economic growth, then, analyzes the role of safe assets within financial globalization. Taking into account the impact of safe assets on the open-economy economic growth can be the next step to approach the issue.Practical implicationsThe paper also provides important policy implication. Since a higher productivity level can raise the outflows of net total capital through the accumulation of foreign safe assets, an economy needs to increase its supply of safe asset along with upgrading its domestic productivity level. This combination is important for the long-run capital accumulation and economic growth of an economy with an increasing path of the productivity level.Originality/valueThe paper seeks a balance between theory and evidence on international capital flows. Moreover, the paper bridges the gap between the literature on international capital flows and the literature on safe assets. And the paper also focuses on the economies of the eurozone.

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