Monetary Surprises and Global Financial Flows: A Case Study of Latin America

2020 ◽  
Vol 19 (2) ◽  
pp. 189-225
Author(s):  
Eric Fischer
Keyword(s):  
Latin America ◽  
Term Structure ◽  
Federal Reserve ◽  
Global Financial Crisis ◽  
Jel Classification ◽  
Financial Flows ◽  
Term Structure Model ◽  
Local Currency ◽  
Hard Currency ◽  
Asset Class

This article examines the effect of Federal Reserve announcements on global financial flows to Latin America since the Global Financial Crisis. The Federal Reserve announcements are classified using daily measures of expectations from a shadow rate term structure model as easing (unexpected), tightening (unexpected), easing (expected), and tightening (expected). This classification is then used for an event study on daily global financial flows classified by asset class (debt, equity), currency (all currencies, hard currency, local currency), and region (Latin America, Brazil, and Mexico). The results suggest easing (unexpected) and tightening (unexpected) announcements cause debt outflows but have no effect on equity flows to Latin America. Local currency debt flows to Latin America are more sensitive than the hard currency debt flows and Brazil is the country in Latin America that responds most to these announcements. JEL Classification: F32, G14, G15, N26

Covered interest parity in cross-currency swap bases and demand for US treasuries

2020 ◽  
Vol 07 (02) ◽  
pp. 2050018
Author(s):  
Cho-Hoi Hui ◽  
Chi-Fai Lo ◽  
Chin-To Fung
Keyword(s):  
Term Structure ◽  
Global Financial Crisis ◽  
Yield Curve ◽  
Balance Sheet ◽  
Term Structure Model ◽  
Dynamic Relationship ◽  
The Us ◽  
Covered Interest Parity ◽  
Interest Parity ◽  
Us Dollar

This paper studies the dynamic relationship between demand for the US Treasury yields and cross-currency swap (CCS) bases since the 2008 global financial crisis. Using a three-factor non-Gaussian-term structure model for the US Treasuries, an estimated short-rate premium in the yield curve tends to move in tandem with and lead the euro and Japanese yen CCS bases against the US dollar. The dynamics between the premium and CCS bases are found to be co-integrated, suggesting a long-run equilibrium between them. Empirically, the premium is found to be positively related to demand for Treasuries. This is consistent with recent studies in which factors including the strength of the US dollar, the demand for dollar funding and banks’ balance-sheet structures play important roles in determining the CCS bases. These factors increase demand for US Treasuries (high-quality US dollar assets) by investors searching for safe dollar assets and banks with higher leverages due to increased demand for dollar funding. The findings in this paper contribute to explaining the widespread failure of covered interest parity in foreign exchange swap markets.

Dollar trend to shape EM hard currency corporate debt

2015 ◽  
Keyword(s):  
Emerging Market ◽  
Government Debt ◽  
Corporate Bond ◽  
Corporate Debt ◽  
Content Type ◽  
Local Currency ◽  
Hard Currency ◽  
Property Companies ◽  
Asset Class ◽  
Bond Spreads

Subject Outlook for EM hard currency corporate debt. Significance Recent weakness in the dollar, which is currently trading at a two and half month low against a basket of currencies, is contributing to the strong performance of emerging market (EM) dollar-denominated corporate bonds, whose returns in the first four months of 2015 exceeded those on both EM local currency and dollar-denominated government debt. While improving sentiment is mainly due to the recent tightening in Brazilian and Russian corporate bond spreads, the marked deterioration in the credit quality of this asset class, in which Chinese property companies and Russian banks are the largest borrowers, poses significant risks given the fragility of market conditions. Impacts If sustained, the sell-off in global government debt markets could damage sentiment towards EM external and local currency sovereign bonds. The oil price rebound is contributing to the narrowing of spreads on dollar-denominated bonds issued by EM energy corporates. The measures taken by China's central bank to stimulate the economy will buoy sentiment towards the country's vulnerable property companies.

scholarly journals What does a term structure model imply about very long-term interest rates?

2021 ◽  
Vol 62 ◽  
pp. 202-219
Author(s):  
Anne G. Balter ◽  
Antoon Pelsser ◽  
Peter C. Schotman
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Structure Model ◽  
Term Structure Model

Financial Access of Latin America and Caribbean Firms: What Are the Roles of Institutional, Financial, and Economic Development?

2021 ◽  
pp. 097265272110153
Author(s):  
Lan Khanh Chu
Keyword(s):  
Economic Development ◽  
Latin America ◽  
Jel Classification ◽  
Caribbean Region ◽  
Country Level ◽  
Level Data ◽  
Latin America And Caribbean ◽  
The Impact ◽  
Moderating Role

This article examines the impact of institutional, financial, and economic development on firms’ access to finance in Latin America and Caribbean region. Based on firm- and country-level data from the World Bank databases, we employ an ordered logit model to understand the direct and moderating role of institutional, financial, and economic development in determining firms’ financial obstacles. The results show that older, larger, facing less competition and regulation burden, foreign owned, and affiliated firms report lower obstacles to finance. Second, better macro-fundamentals help to lessen the level of obstacles substantially. Third, the role of institutions in promoting firms’ inclusive finance is quite different to the role of financial development and economic growth. JEL classification: E02; G10; O16; P48

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