The International Diversification Puzzle is Not as Bad as You Think
The International Diversification Puzzle is Not as Bad as You Think

Author: Jonathan Heathcote

Publisher:

Published: 2007

Total Pages: 60

ISBN-13:

DOWNLOAD EBOOK

Abstract : In simple one-good international macro models, the presence of non-diversifiable labor income risk means that country portfoliosshould be heavily biased toward foreign assets. The fact that the opposite pattern of diversification is observed empirically constitutes the international diversification puzzle. We embed a portfolio choice decision in a frictionless two-country, two-good version of the stochastic growth model. In this environment, which is a workhorse for international business cycle research, we derive a closed-form expression for equilibrium country portfolios. These are biased towards domestic assets, as in the data. Home bias arises because endogenous international relative price fluctuations make domestic stocks a good hedge against non-diversifiable labor income risk. We then use our our theory to link openness to trade to the level of diversification, and find that it offers a quantitatively compelling account for the patterns of international diversification observed across developed economies in recent years.

Geoeconomic Fragmentation and International Diversification Benefits
Geoeconomic Fragmentation and International Diversification Benefits

Author: Tatsushi Okuda

Publisher: International Monetary Fund

Published: 2024-03-08

Total Pages: 50

ISBN-13:

DOWNLOAD EBOOK

This paper applies the two-country open-economy model with trade in stocks and bonds of Coeurdacier et al. (2010) to quantify the loss of international diversification benefits for major advanced economies, which have a significant presence in international financial markets, under geoeconomic fragmentation. We perform counterfactual simulations under different hypothetical fragmentation scenarios in which these economies are unable to trade with geopolitically distant countries, as measured by voting disagreement on foreign policy issues at the United Nations General Assembly meetings during 2012-2021. The simulation results imply a potentially significant loss of international diversification benefits of financial openness for the considered advanced economies by limiting trading to partner countries that are geopolitical allies with highly synchronized business cycles.

International Financial Connection and Stock Return Comovement
International Financial Connection and Stock Return Comovement

Author: Mr.Sakai Ando

Publisher: International Monetary Fund

Published: 2019-08-22

Total Pages: 33

ISBN-13: 1513512692

DOWNLOAD EBOOK

This paper studies whether bilateral international financial connection data help predict bilateral stock return comovement. It is shown that, when the United States is chosen as the benchmark, a larger U.S. portfolio investment asset position on the destination economy predicts a stronger stock return comovement between them. For large economies such as the United States and Germany, the portfolio investment position is also the best predictor among other connection variables. The paper discusses with a simple general equilibrium portfolio model that the empirical pattern is consistent with the behavior of index investors who trade in response to risk-on/risk-off shocks.

The Evidence and Impact of Financial Globalization
The Evidence and Impact of Financial Globalization

Author: Gerard Caprio

Publisher: Academic Press

Published: 2012-11-27

Total Pages: 807

ISBN-13: 0123978742

DOWNLOAD EBOOK

The sharp realities of financial globalization become clear during crises, when winners and losers emerge. Crises usher in short- and long-term changes to the status quo, and everyone agrees that learning from crises is a top priority. The Evidence and Impact of Financial Globalization devotes separate articles to specific crises, the conditions that cause them, and the longstanding arrangements devised to address them. While other books and journal articles treat these subjects in isolation, this volume presents a wide-ranging, consistent, yet varied specificity. Substantial, authoritative, and useful, these articles provide material unavailable elsewhere. Substantial articles by top scholars sets this volume apart from other information sources Rapidly developing subjects will interest readers well into the future Reader demand and lack of competitors underline the high value of these reference works

Global Perspectives on Trade Integration and Economies in Transition
Global Perspectives on Trade Integration and Economies in Transition

Author: Erokhin, Vasily

Publisher: IGI Global

Published: 2016-06-16

Total Pages: 434

ISBN-13: 1522504524

DOWNLOAD EBOOK

In the era of globalization, foreign trade has an immense impact upon modern economies. To succeed in the global marketplace, sustainable development in trade practices is an imperative goal for countries to reach. Global Perspectives on Trade Integration and Economies in Transition is an authoritative reference source for the latest research on the dynamics of transitional economies and how certain obstacles can disrupt the effectiveness of the transition process. Highlighting the value of trade incorporation at the national and international levels, this book is ideally designed for researchers, professionals, government officials, policy makers, and upper-level students interested in the intersection of globalization, trade, and international economics.

International Financial Stability
International Financial Stability

Author: Roger Walton Ferguson

Publisher: Centre for Economic Policy Research

Published: 2007

Total Pages: 217

ISBN-13: 1898128979

DOWNLOAD EBOOK

This new Geneva Report examines the main threats to international financial stability, focusing on the implications of major changes that have occurred in the global financial system in the past two decades.

Elasticity Optimism
Elasticity Optimism

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 2009-12-01

Total Pages: 47

ISBN-13: 1451874243

DOWNLOAD EBOOK

In most macroeconomic models, the substitutability between domestic and foreign goods is calibrated using aggregated data. This imposes homogeneous elasticities across goods, and the calibration is only valid under this assumption. If elasticities are heterogeneous, the aggregate substitutability is a weighted average of good-specific elasticities, which in general cannot be inferred from aggregated data. We identify structurally the substitutability in US goods using multilateral trade data. We impose homogeneity, and find an aggregate elasticity similar in value to conventional macroeconomic estimates. It is more than twice larger with sectoral heterogeneity. We discuss the implications in various areas of international economics.

On the Methodology of Financial Economics
On the Methodology of Financial Economics

Author: Kavous Ardalan

Publisher: Edward Elgar Publishing

Published: 2023-06-01

Total Pages: 305

ISBN-13: 1035311992

DOWNLOAD EBOOK

Utilizing a multi-paradigmatic approach in considering the scientific methodology of mainstream financial economics, and suggesting improvements, this book identifies eleven biases of the scientific methodology of mainstream financial economics, namely: intellectual bias, local bias, fad bias, ideological bias, automaticity bias, confirmation bias, cultural bias, stereotyping bias, under-productivity bias, homogeneity bias, and isolation bias.

Handbook of Safeguarding Global Financial Stability
Handbook of Safeguarding Global Financial Stability

Author: Gerard Caprio

Publisher: Academic Press

Published: 2012-11-27

Total Pages: 547

ISBN-13: 0123978750

DOWNLOAD EBOOK

Political and social forces exert pressure on our globalized economy in many forms, from formal and informal policies to financial theories and technical models. Our efforts to shape and direct these forces to preserve financial stability reveal much about the ways we perceive the financial economy. The Handbook of Safeguarding Global Financial Stability examines our political economy, particularly the ways in which these forces inhabit our institutions, strategies, and tactics. As economies expand and contract, these forces also determine the ways we supervise and regulate. This high-level examination of the global political economy includes articles about specific countries, crises, and international systems as well as broad articles about major concepts and trends.. Substantial articles by top scholars sets this volume apart from other information sources Diverse international perspectives result in new opportunities for analysis and research Rapidly developing subjects will interest readers well into the future

Hope Springs Eternal
Hope Springs Eternal

Author: Kim Oosterlinck

Publisher: Yale University Press

Published: 2016-05-28

Total Pages: 261

ISBN-13: 0300220936

DOWNLOAD EBOOK

In 1918, the Soviet revolutionary government repudiated the Tsarist regime’s sovereign debt, triggering one of the biggest sovereign defaults ever. Yet the price of Russian bonds remained high for years. Combing French archival records, Kim Oosterlinck shows that, far from irrational, investors had legitimate reasons to hope for repayment. Soviet debt recognition, a change in government, a bailout by the French government, or French banks, or a seceding country would have guaranteed at least a partial reimbursement. As Greece and other European countries raise the possibility of sovereign default, Oosterlinck’s superbly researched study is more urgent than ever.